ALL FRONTIER GLOBAL NEXUS

FAQ SUPPLEMENT

PRE-SHIPMENT INSPECTION (PSI)

Frequently Asked Questions — India-EU Export Context

This FAQ supplement answers the most commonly asked questions about pre-shipment inspection (PSI) in India-EU export transactions — covering when PSI is required, how it works, what happens when it fails, who pays, and how to manage the PSI process efficiently as part of the shipment coordination protocol.

SECTION 1 — FUNDAMENTALS

Q1. What is a pre-shipment inspection (PSI)?

A pre-shipment inspection (PSI) is a third-party inspection of goods before they are loaded onto the vessel — conducted by an independent inspection agency appointed by the buyer, the seller, or required by the Letter of Credit. The inspection verifies that the goods conform to the purchase order specification in terms of quantity, quality, packaging, labelling, and (in some cases) price. The PSI report or certificate is issued by the inspection agency and may be required as a document under the LC or the supply agreement.

Q2. Is PSI mandatory for all India-EU exports?

No — PSI is not universally mandatory. It is required in the following situations: (a) the Letter of Credit requires a pre-shipment inspection certificate as a document for negotiation; (b) the supply agreement or purchase order specifically requires PSI as a condition of shipment; (c) the EU buyer requests PSI as part of their supplier qualification process; (d) the importing EU member state requires PSI for specific products as a national import requirement (rare in EU trade but applicable for some third-country trade routes). For many India-EU shipments — particularly between established trading partners on open account — PSI is optional or not required.

Q3. Who are the main PSI agencies used for India-EU trade?

The major internationally accredited inspection agencies operating in India for export PSI are: SGS (Société Générale de Surveillance) — the world's largest testing, inspection, and certification company; Bureau Veritas — French-headquartered, strong in industrial goods and agro-food; Intertek — strong in consumer goods, textiles, and food; TÜV SÜD and TÜV Rheinland — strong in engineering, automotive, and industrial goods; QCAL (under APEDA) — for agro-food product inspection for APEDA-scheduled exports; EIC (Export Inspection Council of India) — government body, provides inspection and certification services, particularly for seafood and food exports to the EU. NABL-accredited laboratories provide analytical test services (MRL, aflatoxin, chemical analysis) that may accompany or substitute for physical PSI in certain product categories.

Q4. What does a PSI inspector check?

A typical PSI covers: Quantity — count of units, cartons, or weight against the purchase order. Quality — comparison of samples drawn from the production batch against the agreed specification or buyer-approved sample. AQL (Acceptable Quality Level) sampling — critical, major, and minor defect counts against the agreed AQL table. Packaging — condition, strength, and marking of outer cartons; ISPM-15 mark on wooden packaging. Labelling — product labels checked against EU labelling requirements and buyer's label specification. Loading condition — if the inspection occurs at the point of stuffing, the inspector may check the container condition. Documentary check — the inspector may verify that the commercial invoice, packing list, and test reports are consistent with the goods.

SECTION 2 — THE PSI PROCESS

Q5. How do I book a PSI?

Contact the chosen inspection agency (SGS, Bureau Veritas, Intertek, etc.) and place a booking request — minimum 3–5 working days before the required inspection date. Provide: the purchase order or contract reference; the inspection location (factory or warehouse address); the product description and quantity; the specification against which goods should be inspected; the AQL level required (usually specified in the LC or supply agreement — typically AQL 1.0 for critical defects, AQL 2.5 for major, AQL 4.0 for minor); any specific labelling or packaging requirements. The agency will issue an inspection booking confirmation with the scheduled date, inspector name, and any pre-inspection documentation requirements.

Q6. Where does the PSI take place?

PSI typically takes place at the Indian exporter's production facility, warehouse, or the CFS (Container Freight Station) where goods are staged before stuffing. The inspector visits the location where the goods are available for sampling. Where goods are already stuffed in a container at an ICD or port, a tailgate inspection at the sealed container is also possible — but this limits the inspector's ability to draw representative samples from the cargo. Pre-stuffing inspection at the factory or warehouse is strongly preferred for thoroughness.

Q7. How long does a PSI take?

Inspection duration depends on the product type, quantity, and complexity. Simple consumer goods: 2–4 hours. Textile and garment inspection (AQL sampling of multiple SKUs): 4–8 hours, sometimes 2 days for large orders. Industrial or engineering goods: 1–2 days (including dimensional checks, functional tests, and document review). Food products requiring laboratory testing: PSI is the physical inspection (1–2 hours) — the laboratory tests (MRL, aflatoxin) take 3–10 working days depending on the test and the lab's turnaround. Always book the inspection well before the vessel cut-off date to allow time for re-inspection if the first inspection fails.

Q8. When should I receive the PSI certificate?

The PSI certificate is typically issued within 1–3 working days of the inspection date for straightforward inspections. For complex inspections requiring laboratory confirmation, the PSI certificate may reference the laboratory test results — which may take longer. Discuss turnaround time with the agency at the time of booking, and factor this into the shipment schedule. The PSI certificate must be available before the vessel cuts off — so inspection, any re-inspection, and certificate issuance must all be completed before the VGM and document cut-off dates.

SECTION 3 — PSI OUTCOMES

Q9. What happens if the inspection fails (Fail result)?

If the PSI result is Fail, the goods do not meet the agreed specification or AQL standard. The inspection agency issues a non-conformance report (NCR) detailing the defects found. The exporter must: (a) segregate non-conforming units; (b) rework or replace defective goods; (c) once rework is complete, request a re-inspection. The re-inspection is at the exporter's cost and must be scheduled before the vessel cut-off date. If the timeline does not permit re-inspection before the cut-off, the shipment may be deferred to the next available vessel — which may cause an LC amendment request if the LC has a latest shipment date. A Fail result on the first shipment is commercially damaging — communicate immediately with the EU buyer and agree the rework plan in writing.

Q10. What is a Conditional Pass?

A Conditional Pass (or Pass with Remarks) is issued when the inspection agency finds minor deviations that do not constitute an outright failure but which require corrective action before or during shipment. Examples: carton labelling requires correction (e.g. a missing batch number); a small percentage of units are below specification but within an agreed tolerance; packaging is correct but a few cartons have surface damage (if outer carton damage only, may not affect contents). The exporter must complete the required corrective actions — with evidence submitted to the agency — before the certificate is upgraded to a full Pass. If the LC requires a "clean" PSI certificate, a Conditional Pass may not be acceptable — check with the bank.

Q11. Can the exporter refuse to allow an inspection?

If the PSI is required under the LC, the exporter cannot refuse — refusal would prevent document negotiation and payment under the LC. If the PSI is a buyer requirement under the supply agreement, refusal would be a breach of contract. In practice, the inspection is in the exporter's interest as much as the buyer's — a clean PSI certificate demonstrates quality and reduces the risk of EU border inspection issues, buyer rejection, and commercial disputes. The only scenario where an exporter might decline a PSI is if the goods are clearly not ready — in which case the correct action is to delay the booking, complete production, and then invite the inspector.

SECTION 4 — COSTS AND RESPONSIBILITY

Q12. Who pays for the PSI?

The party that requires the PSI typically pays for it. If the LC requires a PSI certificate — the cost is usually borne by the applicant (the buyer who opened the LC). If the buyer contractually requires PSI as part of the purchase terms — the supply agreement should specify who bears the cost; typically the seller pays for the first inspection, and the buyer pays for any additional inspections they request beyond the contractual requirement. If the PSI is voluntarily commissioned by the exporter for quality assurance purposes — the exporter pays. Re-inspection costs after a Fail result are invariably borne by the exporter. Typical PSI cost: USD 150–500 per inspection day for routine consumer goods inspection in India; higher for specialist technical inspection.

Q13. Are PSI costs eligible for RoDTEP or duty drawback?

PSI costs are part of the cost of production or export preparation — they may be reflected in the FOB value of the goods (as they are incurred before the goods are placed on board). However, PSI costs as a standalone fee are not directly refunded under RoDTEP (which covers embedded domestic taxes and levies, not third-party service fees). Duty drawback covers customs duty on imported inputs — not PSI costs. PSI costs are a business expense deductible for income tax purposes.

SECTION 5 — PSI AND EU BORDER INSPECTION

Q14. Does a passed PSI certificate guarantee EU customs release?

No — a PSI certificate verifies that the goods met specification at the time and place of inspection in India. It does not guarantee EU customs release, which is subject to a separate EU border inspection (at Border Inspection Posts — BIPs) for regulated products. EU border inspections are risk-based and can occur regardless of whether a PSI was conducted. However, a clean PSI certificate — especially one accompanied by test reports from accredited laboratories — significantly strengthens the EU importer's import declaration and reduces the risk of border inspection queries. For food products with enhanced border check status (e.g. sesame seeds, certain spices under Regulation (EU) 2019/1793), the pre-shipment test report is a mandatory element of the TRACES NT pre-notification, not just a supporting document.

Q15. If goods are rejected at the EU border, can the PSI agency be held responsible?

Generally no — inspection agencies limit their liability in their standard terms and conditions. An inspection agency certifies conformity at the time and place of inspection; they are not responsible for changes in the goods' condition during transit, for compliance with EU regulatory requirements not included in the inspection scope, or for subsequent EU regulatory decisions. The commercial risk of EU border rejection falls on the EU importer (who may in turn have a contractual claim against the Indian exporter under the supply agreement). This is why the scope of the PSI should be agreed carefully — if MRL compliance is a concern, a pre-shipment laboratory test should be explicitly included in the PSI scope, not left as an assumption.

RELATED DOCUMENTS IN THIS LIBRARY

Doc 102 — FAQ Supplement: Pre-Shipment Inspection — All Frontier Global Nexus