All the transactions related to international trading possess a huge challenge for importers worldwide to ship good quality products. Moreover, the shipped products should be according to the guidelines mentioned in the sales contract.
Importers should take important steps before buying high-quality products from supplier companies. They are as follows:
- Before starting any kind of business relationship you should audit all the supplier companies you want to work with.
- The payment to the supplier company should only be made if the quality of the products shipped is according to the standards mentioned in the sales contract.
However, none of these measures should be ignored to get a good quality product. Because it is a fact that most exporters are not ready to work with terms related to open account payments. As they need a letter of bank guarantee or credit from the importers.
In addition, auditing a supplier company might not be as effective for shipping the particular batch, as it might be possible that you can get a poor quality product from a reputed supplier company due to various factors.
PSI (Pre-Shipment Inspection) is a type of security tool, which is either used by the importer companies or some government organizations, that needs to verify whether the product shipped is according to the specifications of the buyer company or not.
In this post, we will discuss some of the important roles of pre-shipment inspection in international trading.
What is PSI (Pre-Shipment Inspection)
PSI can be defined as the checking of the sample of products in a systematic manner which are selected randomly from the slot of orders given the importer company.
When You Should Conduct PSI?
PSI should be conducted before the product shipment is dispatched from the supplier’s factory. Moreover, multiple numbers of PSI can be conducted throughout the manufacturing process of the product.
However, the PSI is conducted when the 80% manufacturing of the product is completed but the product is yet to ship.
Benefits of PSI
Some of the benefits of PSI are as follows:
- Export companies can reduce the risks to get poor quality and non-compliant products
- Export companies can follow all the manufacturing processes and take correct decisions before the end of the production and products are packaged
- Export companies should make sure when the manufacturing in finished and when will the product be available for shipment
- Exporters should get the certification from PSI once the inception of the shipment is completed. Most of the countries demand shipment inspection at the time of import procedures.
Cost of PSI
The cost of pre-shipment is different from one factory audit company to another. Moreover, the location of the inspection is also an important factor for the cost. For instance, audits in supplier companies taking place in China, Germany, or Australia may differ even when the auditing is being performed by the same company.
Qualifications of PSI Inspector
All the PSI activities should be performed by the qualified inspector, who works independently of the PSI company. Inspectors should possess all the related qualification combined with a good job experience within that related industry.
Procedure on How PSI Works?
PSI process changes from one audit company to another. However, given below are the steps on how PSI inspection works:
- Importers or exporters will be called as applicant company. After that, the same thing would be applied to the PSI company for booking PSI inspection
- The company has to fill the application form either in hard copy or online for getting the quotation of price needed for inspection
- Once the information is received by the PSI inspection company, they will prepare a report by outlining the borders of inspection
- If the offer is suitable, the supplier company needs to pay for the inspection and confirms the inspection
- After that, the inspection company will call the export company to find out the place and date of inspection
- The PSI company will send the qualified inspector for inspection, who will go the factory of the export company for the inspection on that particular date
- The inspector will then collect the sample of the product for inspection. Under PSI the entire product is not inspected, but only the sample product is tested.
- After the inspection process is completed, the inspector is going to write a report. The report will display whether the product is manufactured according to the standards mentioned in the sales contract or not.