May 20th, 2021The Internet has certainly made it much easier for virtually anyone to find appropriate factories in China. The surge of wholesale websites and powerful search engines allow people to find the information they need in seconds, but there is a downside to this. Those buyers purchase substandard products. The solution for a quality product starts before those products leave China: A Pre Shipment Inspections.
International trade means making sure the products ordered and delivered meet the exact qualifications laid out in the sales contract. This is one of the biggest issues that independent businesses face when attempting independent contact, contracts and sales with some manufacturers.
The solution lies in pre shipment inspections. All of the members of the chain: suppliers, importers and sellers are key to maintaining product quality, and this is met with pre shipment inspections, PSI. These inspections are done before the order leaves the docks in China and ensures customer satisfaction on delivery.
What are pre shipment inspections (PSI)?
The World Trade Organization, WTO, defines the PSI as:
Preshipment inspection activities are all activities relating to the verification of the quality, the quantity, the price, including currency exchange rate and financial terms, and/or the customs classification of goods to be exported to the territory of the user Member.
This definition means the PSI is a powerful aid on behalf of the importer that protects their investment. All newly manufactured products prepared for import and export are full inspected. This means the quality of products you order comply with the terms of the sales contract.
WTO regulations on PSI are very defined: PSI should not cause delays in delivery; the entire investigation process must be open and transparent, with photos as evidence; all sensitive business information should be protected during the procedure and customer secrets should not be disclosed. All of these regulations prevent corruption at all levels of production from the time the raw materials arrive at the manufacturer until the finished products are ready for shipment.
For international trade practices, the PSI is often called the Final Random Inspection, FRI. The FRI happens once at least 80 percent of the production and product packaging is done and ready, although some customers can request 100 percent completion for the FRI.
An agency under authorization from the importer will arrive at the factory for the PSI. The inspector ensures all products meet the requirements of the contract. All products discovered defective or damaged will be replaced or repaired.
There is an industry standard, the AQL, acceptable quality limit, that helps determine the total number of units for inspection. After the inspection is complete, the agent will issue an inspection report that will be packed with the order for delivery to the customer.
As a general rule, trade operators, buyers, suppliers and agents, will outsource the PSI to professionals on the ground in China, who can complete the inspection. Most inspection agents follow a set of standards or list of standards of criteria. The agent inspector then follows set procedures and steps during the inspection process. That criteria is applied to the order. If the order meets the standards as lain out in the list, the product is approved and readied for shipment.
This step is vital for the importer. It is the last opportunity to correct any errors with the products before shipment and an effective tool for preventing high import risks. Most factories will not ship products until the entire, full payment is made. A PSI gives the importer information to share with the factory and can resolve problems without taking ownership of the goods or paying for them. Until the report is in hand, most importers withhold the final payment.
Two Types of PSI companies
There are two types of PSI companies:
Privately owned, free market company
This particular PSI company sell their services on the market. Three of the larger, most well-known companies are Intertek, SGS and Bivac. These are large companies with standardized sources and are expensive for small businesses and buyers.
Buyers who look to the exporter and their team to cover inspection costs normally accept smaller companies as a money saving venture. These small companies are often in the back pocket of the exporting company and work for the benefit of the exporter and not the importer. As a buyer and importer, this is very important to recognize.
State-owned inspection company
There are a few companies in the market owned, at least partially, by the state. The shareholding system of government agencies guarantees independence and objectivity, making state-owned inspection companies a solid choice. The most famous of these inspection companies is China Certification & Inspection Group. Referred to as CCIC, the official website is https://www.ccic.com/.
Why do you need pre shipment inspections?
The number one reason – objectivity. Sourcing Nova will explain.
There are millions of manufacturing companies and as many trading companies criss-crossing China. With such a large number of companies producing similar products, each of them will advance themselves as the best. As an overseas buyer, this is difficult to make a fair determination on quality for all levels. A PSI employs a person with objective standards and ensures your products will meet the quality standards, technical specifications and contract requirements set forth initially. All of this is done before your products leave the factory for the shipping docks.
Compliance with WTO
The WTO, World Trade Organization, has an agreement on Customs Valuation. Members of this agreement have mandatory PSI. Those countries who elect not to have PSI have revenue reductions. Performing the PSI ensures WTO compliance and assists in the collection of duty revenue.
Customs requirements
In most countries/regions, customs requires a PSI for all imported goods. This is done to protect health and safety of the consumer base. Exportation or importation both, a PSI not only has a variety of positive benefits, it should have high priority in your procurement process.
Reduce the risk of errors or mistakes
A PSI for fragile and delicate products normally focuses on the product package. This ensures the products are safe, reliable and will make the long journey without damage.
It is important that products arrive in the correct condition. Defective and/or damaged products will certainly alienate customers. One upset or dissatisfied customer is enough to ruin any business.
Ensure buyers get what they ordered
The sheer number of manufacturers and shipping companies mean there is always a chance for mistakes and confusion of orders. A PSI team will visually inspect and count the product order. For the importer, this is the safest guarantee of products. Companies looking to expansion of any sort beyond their current lines and offerings will take the approach and is key to customer satisfaction. After all, what is a more powerful advertising tool than a happy customer?
Lastly, a preshipment inspection reduces risks accompanied with international trade, especially after the importer and manufacturer reach an agreement for an order and are amiable to an inspection. Doing so means the manufacturer are much more careful and attuned to the order. Even buyers with solid relationships with manufacturers should not overlook PSI. An inspection is simply too important to gloss over or ignore.
Benefits of pre-shipment inspection
For the most effective, arbitrary and honest appraisal of a pre-shipment inspection, it is best to select an independent, third party inspection service with extensive experience in quality control to conduct inspections. Doing so is the only way to ensure your products are correctly inspected.
Professionalism and expertise
Most companies who routinely export and import products employ third-party inspection companies. It does not and should not make a difference what the product is, a professional, third-party inspection company is the best choice for a pre-shipment inspection. Having a company and one of their many teams conduct an inspection on your behalf will ensure the standards and qualities of your products meet the terms of your contract.
It is clear – the assistance of a professional is certainly a huge benefit.
These inspectors of the inspection companies are trained in the multiple regulations used by most, if not all, of the major exportation hubs across the globe. These inspectors use the regulations and standards of custom controls from the customer’s country for each PSI. You can be assured the inspectors are familiar with the specifics of your country, and the products you have ordered.
These specifics and customs controls change frequently. Ordinary people without proper training in these changes cannot keep track of the millions of products made and prepared for export in China. Secondly, a pre-shipment inspection helps make your particular order of products comply with the specific regulations of your country.
Next, requirements are dynamic depending on the product and target market. Inspection professionals follow and study these changes for each region receiving products from China. This way, all of your products are in full compliance with the newest quality regulations of your specific region.
The companies employing these inspectors have a process for these inspectors to follow and remain systematic during the audit and inspection. Doing so prevents bias and makes sure all details are covered down to the smallest minutae.
Most inspection companies also update the changes in regulations for each import country/region. The customer can request a specific checklist of standards and requirements for the inspector to review. This creates a process of inspection that is both thorough without missing any important details and completely removes bias and difference. Sourcing Nova will explain this in detail later on.
Avoid expensive repairs and replacements
At the 80 percent completion point, the pre-shipment inspection can help you avoid repairs and replacements of products. This can result in serious delays of your products.
Compliance
Pre-shipment inspections can procure the certificates and reports you may want and avoid the regulatory issues and high fines associated with product importation from China.
Avoid lost
Those companies who elect an early PSI can refuse shipment of inferior products with shoddy manufacturing and raw materials. This will free you from supply chain bottlenecks, fines because of violations of regulations and standards for your region or country. Ultimately, it will protect you from the most condemning of all issues – the dissatisfied customer.
Create a responsible brand image
Pre-shipment inspection places your product and brand image in front of the eyes of regulators and customers. Products featuring an inspection report from a valid inspection company are often more favorably appreciated by a customer base, and those customers are often willing to pay slightly more for the security of inspected products.
Buyers who are secure in their decisions to make purchases from you and your company will only improve your standing in your business niche, website reputation and ranking.
Experience
There is something to be said for experience when it comes to inspections of products prepared for importation from Chinese manufacturers. This means there is value there, and value is vital to business success. Trading companies with extensive experience in niche products often benefit from professional inspections regularly as these find product quality issues and lead to product improvement.
Service area
The majority of professional inspection companies have satellites across all of China and are in the major metropolitan cities. This drastically reduces travel costs associated with inspections.
Sample collection
If necessary, professional inspection companies can collect post-production samples on behalf of customers during the inspection and forward these samples to customers. This is an excellent way to be sure the products are precisely what you are looking for and have paid for.
Reports
The inspection and inspector will forward a PDF report to you. This report will feature everything you will need to know, including: the inspection, pictures and recommendations from the inspection company. This will help you, the importer, decide if the operation process is acceptable and be ready to accept your order.
Speed
In most cases, a PSI can be scheduled within 48 hours of request. This expediency is effective in preventing delivery delays.
Quality Standards
The better inspection companies follow the internationally recognized AQL, acceptable quality tolerance level, for all quality inspections. As a customer, you can request your own AQL if agreed at the outset.
Under special circumstances, a piece by piece, rather than a representative sample, inspection can be requested. Doing so creates a product inspection of 100 percent pass rate as all defected or damaged products are removed and/or repaired.
Reference sample
Sourcing Nova strongly recommends a number of reference samples from the manufacturer. At least one of these samples should go to the inspection company. Manufacturers providing representative samples use the better raw materials and construction methods.
Thus, the inspection company receives the exact product the customer has ordered from the manufacturer. This will give the inspectors a solid look, feel and function of the product based on the specific standards of the customer. The reference samples give assurance to the customer that entire order of product is of the same quality and quality ordered at the outset.
What is the pre-shipment checklist?
The pre-shipment inspection gives the inspector a chance to see and physically touch the products under evaluation and inspection. The checklist features all of the specifications laid out in the sales contract. The checklist includes the production process starting with the buyer. Included on the checklist: the manufacturer, exporters, importers and suppliers.
This checklist makes certain the products are uniform and conforms to the standards requested. The elements of the inspection include: quality, quantity, visible defects, labeling issues and packaging. There are also tests perfomed such as safety and usability. Each test is determined by the product and contract. It is important to understand each item and test is important in the quality control process and should not be overlooked but checked accordingly.
Typically, inspection companies have their own standards for inspection depending on the specific product. This means they have all of the important elements: quantity, appearance, technical specifications, craftsmanship, functions, color, size weight, labels, logos and packaging.
This does not mean as an importer you are limited to only these. You can add the other elements you want inspected on request. The inspection company will add those requirements to the temporary inspection list and make certain those standards of the customer are met.
All of this is important. You can find defective or substandard products before making your final payments to the supplier or manufacturer.
Pre-shipment inspection procedures
Each inspection company has its own way of performing inspections, but the outcome of each inspection is the same.
Everything done by the inspection agency is the same. Coverage includes: function, performance, durability, appearance and size. The PSI will check the quantity and quality of the products, establish the products meet safety requirements and determine there are no unqualified defects.
As the customer, you will receive reports on the inspection that are accurate and correct based on the results. Meeting the core purpose of the inspection means the inspection should pass seven basic steps:
Inspection Visit
The inspector will first make a visit to the manufacturer’s location when the products are 80 to 100 percent complete and prepared for shipping. Any questionable chemicals, particularly those restricted under importation rules and customs, will be sent to an off-site, independent lab for further testing.
Quantity verification
The amount of products, the quantity, is the next step. The inspector will count the total number of cartons – a verification of the correct quantity. This step has a second important element – the inspector makes certain the products have the correct destination level.
Some customers may have multiple locations and countries for deliveries. The inspector can make the determination all the proper quantities are ready for each location based on the customer needs.
Inspectors also check to be sure the packaging is well secured, most common in bulk shipments.
Lastly, the integrity of the packaging and packing materials are important. The inspector checks carefully – this is to be sure that the products have the correct packing labels and are safe for transportation.
Random selection
A random sample is the most important step as it is with pulling a few samples from the entire batch shipment will reveal the quality of the products. There are standards and an acceptable number of defective items allowed. Should the amount of defective products exceed the set amount, the entire shipment is declared defective. Otherwise, the inspection is good, and the products are of the expected quality.
The accepted amount is 8:2. This means for every 10 pieces, two may be defective. Any number of defective products greater than two means the shipment needs reconsideration and possibly declared defective.
The internationally recognized statistical standard sampling procedures are ANSI / ASQC Z1.4 (ISO 2859-1). The Acceptable Quality Limit, AQL, is the acceptable quantity of defective products in a batch. If the defective product number exceeds the AQL, the batch is rejected.
All AQL depend on the specific product under evaluation and provides a fair, unbiased and balanced sample of products.
The ANSI / ASQC Z1.4 (ISO 2859-1) sampling procedure helps determine the overall quality of the product batch. The total quantity of the AQL is defined in the initial contract of the manufacturer or importer and the customer. This process is the international standard for a PSI inspection. Further, the sample size is based on the AQL standard and total number of individual products in the customer’s order.
The AQL defines a set number of defects. Any batch order with a number greater than the AQL will be rejected by the inspector and marked. The customer can then reject the batch.
Appearance and workmanship inspection
The initial visual glance gives the inspector a quick look at the overall workmanship of the finished product sample. This determines if there are any immediate visual defects. The inspector also looks for potential mechanical damage and production defects.
This is when the physical inspection takes place as well. The overall physical state of the product is reviewed. All components are correctly placed, located and intact.
Defects in the product fall under one of three levels: minor, major and critical. Where a defect falls is a consensus decision determined by the manufacturers and suppliers in the product development process.
Small defects can be ignored as a general rule as small defects will not affect functionality of the product. Think a small problem.
Major defects are problematic. And the appearance of the product may be changed or even destroyed. It is imperative these defects be resolved and corrected immediately.
The last defect, critical, means the product has a problem that could pose serious danger to the consumer. A critical defect means Code Red and must be avoided under all circumstances. Those products with certain chemicals or ingredients require an on site visit by professionals. Doing so prevents serious defects will not come into contact with consumers.
Compliance verification
Here, the inspection team will check the order and shipment. The products and shipment must comply with the order and details as set by the buyer. This is a very detail-oriented step. Customer satisfaction is on the line with this particular step and should not be rushed.
Factors checked include: product dimensions, materials, structure, weight, color and appropriate markings. The box – packaging and labeling – is equally important.
Functional Verification
This step is to check that product works at the level it should. No matter the product, there are several stages and steps to review. The product samples are then tested for functional defects.
Again, this is not a step to be rushed. Letting the inspector take their time and review carefully means a higher degree of buyer satisfaction and eventual consumer satisfaction.
Security test
There are a variety of safety tests as a part of the pre-shipment inspection. Certification labels from the target market are closely reviewed and tested. Labels include: UL, CE, BSI, CSA, FDA, etc. All components must meet these specific standards.
The product sample is tested rigorously to determine if it will pass the safety certifications. There may be invisible defects that may hinder the overall function and operation of the product. There are several strategies to employ. The specific product determines which strategies and steps to use. For example, Sourcing Nova covers an example of a quality check for candles. You can read it it here.
Products, before they are certified and marketed, must pass all quality standard tests and receive the country-specific labels for the target market.
Inspection report
At the conclusion of each test, the inspection company will generate a list of failed and successful tests, overview of key findings and complete description of the inspection results. All of this will be compiled into a report and sent to the buyer.
The inspection report includes a certificate from the inspection company that will lay out the unbiased and fair conclusions.
This report provides verification that the products meet the specifications as laid out in the initial contract of the buyer and seller. The buyer will get this report to review and can then determine if the batch representation meets those terms of the contract. If the batch fails the inspection and/or regulations, the inspector will edit the PSI report for detailed instructions and overview of the results.
It is common for some reports to have clear pictures and images to show the buyer where the product fails to meet the appropriate specifications, the inspection points, related findings and optional comments from the inspector (those comments will be bias free and completely objective).
The errors and defects will be accurately detailed, explained and visible for the buyer. This way the buyer will see exactly what the inspector saw and reported. In the case of a dispute with a manufacturer, the report is key in resolution.
A batch order with a few minor defects will continue on for shipping. The report will have a declaration that the goods are approved and ready.
However, if there is a serious defect after a certain point, the report will mark the entire batch as defective. The report will detail these during the inspection process.
How to hire a third-party inspection company?
Like many things, there are steps to follow. Here are the standard steps Sourcing Nova would recommend:
1. The buyer and/or importer contacts the inspection company of the country of origin for the products. There is a fee, paid in advance, based on the value of the entire invoice by the terms of the inspection contract of the buyer/importer’s country.
Inform the inspection company the specific product to inspect, provide the necessary documents and manufacturer information the inspection company will need. If the buyer/importer has special items, the inspection company needs to be aware of this.
The buyer/importer will send products or shipments to the inspection company via standard transmission methods. Once the inspection company receives the goods, provide a detailed list of what you want checked specifically or tolerance numbers of defects in the batch.
2. The form is sent to the office of the inspection company in the country of export. In this case, China is the country of export.
3. The inspection company will contact the manufacturer for a day, time and location to complete the inspection. Included in this inspection are the shipping documents. The exporting company must provide these documents within a reasonable time or face demurrage or similar fines.
4. The inspection takes place.
Precautions for pre-shipment inspection in China
As hard as Sourcing Nova works to ensure compliance and fair inspections, there is always a chance for corruption at some point during the process.
Should the importer require the manufacturer to pay the inspection fees, the manufacturer may find a small inspection company. Many times, this company will come and generate a report that is not conducive to you. A report not conducive to the manufacturer could result in a valued, lost customer.
There is a possibility even large companies may be corrupt. There are cases where these companies will assess service fees against the importer and then accept bribes from the manufacturer, effectively being paid twice.
It is absolutely of the highest importance to find a company with objective views on the products and will represent your interests over that of the manufacturer.
Sourcing Nova is that company. We are the eyes and hands you need in China to be 100 percent certain your product order is correct and of the level you expect. We are 100 percent unbiased and will not be swayed with bribes or asked to do anything illegal.
Unclear inspection plan
You better need to be familiar with your product. If you don’t know where to check, the check will not produce any results. Defects and errors still exist. If you do not provide the correct instructions and detailed information, it is useless to spend money to check. The SourcingNova website has a dedicated section for product research, so that novices can quickly become familiar with the products and the current situation of the industry in China.
Lack of commitment
Before signing the contract, the importer must agree on the terms and details of the inspection with the factory. Otherwise, the supplier may miss an important aspect and make it go unnoticed in the production process. For example, the product specifications, dimensions, and raw materials are inconsistent with expectations. The production date is wrong, causing the inspection company to incur additional costs.
Lack of responsibility
There is no excuse for you not to watch your products, consider possible issues and stay on top of the entire production process. Anything that you perhaps did not consider or overlooked after the PSI is 100 percent on you.
As soon as you confirm the PSI report, the manufacturer will start the shipping process. If you have overlooked something for inspection, the time has passed. This mistake is 100 percent yours and yours alone. Any losses accrued are your responsibility.
Forget to take pictures
A picture is worth 1,000 words. The inspector or supplier needs to take pictures of the loading process for you. Pictures will help sway negotiation in your favor should it be necessary.
Frequently asked questions about PSI
When is the pre-shipment inspection necessary?
A PSI is only necessary when the importing government requires it. Earlier in the blog, Sourcing Nova discussed how some countries require a PSI, and some do not. However, there are risks, substantial ones, that you will assume without a PSI.
Sourcing Nova strongly recommends a PSI. Doing so will help you avoid substandard or contraband products, assure your products meet your country’s quality standards and minimize the risk of counterfeit and illegal products. No one would like to be engrossed in a lawsuit against their government customs agency or importation ministry.
Who conducts the pre-shipment inspection and who pays?
The PSI is done by a company the importer selects. The importer also pays the appropriate fees. Sourcing Nova strongly recommends not allowing the manufacturer to select an inspection agency. These teams may not be unbiased and forthright about your order, leaving you responsible with a subpar order and poor products.
Who is responsible for arranging the pre-shipment inspection, and what is the process?
The importer will make the necessary arrangements for the PSI. The inspection must happen in the country of origin. Any delays in the process can result in shipping problems and/or increased exportation costs.
It is always in the best interest of all involved in the PSI to cooperate, make certain the information is accurate and give the information to the inspection company as soon as the inspection process is announced. Many times, the requirements are laid out in the letter of credit or other documents related to the order.
Therefore, it is in the best interest of the exporter to cooperate with the exporter to ensure that all its information is accurate and provide it to the inspection company immediately after the required inspection is notified. The requirements for pre-shipment inspection are sometimes stated in the letter of credit or other documents.
Once the inspection company has the list in hand from the importing country, the process begins in earnest. The form will lay out the value, names of the importer and exporter, customs code declaration of the supplier country and the importation country.
The inspection company will relay this information to the exporter. Arrangements for the inspection location and time are made.
What should I do if there is a problem or disagreement in the pre-shipment inspection?
Upon the chance of disagreement with the findings, you will need to discuss this with the inspection company.
Final thoughts
Sourcing Nova has tried its best to be thorough in explaining a pre-shipment inspection. We have not discussed specifics covered in the inspections because each product has different requirements. However, we are always interested to know if we left something out in the piece. Can you think of anything in this guide that we did not cover? Perhaps there is something you would like to learn more about? We welcome your thoughts and feedback with a comment below.
