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forewordcontentsIn 1965 SGS pioneered Pre-shipmentInspection (PSI) programmes. OriginallyPSI only covered inpection of quality,quantity and export market price in orderto safeguard the client government’sforeign exchange reserves. In time thishas evolved into a more comprehensiveoffering to include tariff classification,import eligibility (compliance withimport regulations) and the provisionof valuation information for customspurposes. Recent PSI programmeshave implemented risk assessment andselective inspections, permitting thusto accelerate the verification process.A. introductionPSI programmes continue to play asignificant role in facilitating tradenot only in the speed of customs’clearance, but also in minimising unfaircompetition between importers andthe local industry. This has encouragedexports and contributed to theexpansion of foreign investment.This brochure is intended to provideexporters with a general overviewof the Pre-shipment Inspection (PSI)programme which SGS is mandatedto implement on behalf of governmentsto verify their country’s imports.The information contained herein isbased on that prevailing at the time ofpublication and does not cover everysituation which might arise. Since someof the procedures vary according to thespecific requirements of the countryof importation, SGS has also prepared“Data Sheets for the Trade” available fromthe SGS website at: AgreementsInternational Federation of Inspection Agencies (IFIA)SGS Code of Integrity and Professional ConductInspection Fees333333B. general administrative procedures1. Initial notification2. Preliminary price verification3. Customs Classification4. Compliance with contractual specifications5. Import Eligibility6. Physical Inspection7. Final price verification and classification8. Shipment of the goods9. The Report of Findings10. Complaints and Appeals11. Independent Reviews55555666667C. physical inspection procedures1. for physical inspectionPresentation of goods for inspectionInspection standardsLaboratory analysis and testingSamplesInspection and sealing of FCLCapital projectsSecond-hand goodsPhysical inspection results888888888D. price verification1. Purpose2. Value for Customs Purposes3. Export Market Price101014ANNEX – PSI Internal Appeal Form17-18NOTES/GLOSSARY OF ABBREVIATIONS19

A. Introduction1. ScopeDepending upon the requirementsof the user government, the scope ofinspection may include the verification ofthe goods in respect of quality, quantity,export market price, value for Customspurposes, Customs classification andimport eligibility.The quality and quantity inspectionmay be for the purpose of verifying: a)that the goods conform to contractualspecifications, and/or b) the valueand Customs tariff code for Customspurposes.The result of the inspection is confirmedin a Report of Findings.2. ObjectivesThe main objectives of PSI include:2.1. Correct assessment of importduties and taxes(based on SGS technical advice/opinions relatingto value and classification of goods)2.2. Trade facilitation to: Enhance Customs clearanceprocedures (in speed and efficiency); Minimise unfair competition to localindustry and between other importersor exporters (by uniform applicationof import regulations, Customs valueand classification); Encourage foreign investment(by transparency and predictabilityof procedures).2.3. Foreign exchange conservationand/or protection of importers’interests(by minimisation of overinvoicing and detection ofquality and quantity discrepancies and/or noncompliance with health/safety regulations).3. WTO Agreements3.1. WTO Agreement on Pre-shipmentInspectionThe World Trade Organisation (WTO)Agreement on Pre-shipment Inspectionrequires inspection companies engagedin Pre-shipment inspection activities,contracted or mandated by Governments,to follow certain procedures wheninspecting goods in the WTO Membercountries which are destined to WTOMember countries.SGS is committed to carrying out inspection in accordance with this Agreementwhich relates to: execution of inspectionsin a non-discriminatory and transparentmanner, site of inspection, inspection standards, protection of confidential businessinformation, avoidance of conflicts of interest, avoidance of delays, price verificationprocedures for establishing the exportmarket price and appeals procedures.Exporters who feel that SGS has notcomplied with this Agreement areinvited to complain or appeal to the SGSoffice which carried out the inspection.After appeal to SGS, the exporter isalso entitled to refer the matter to anIndependent Review. Further informationmay be found in Section B.11.3.2. WTO Agreement on CustomsValuationWTO Member countries are requiredto implement the WTO Agreement onCustoms Valuation, “ACV”, (officially entitled the Agreement on Implementationof Article VII of GATT 1994), althoughdeveloping country members may postpone implementation for the first fewyears after becoming a WTO member.Whenever the importing country hasimplemented ACV, SGS carries out itsprice verification for Customs purposesbased on the ACV methodology outlinedin detail under Section D of this brochure.For information on whether ACV, oranother valuation method, is in force ina particular country, please refer to theSGS country Data Sheets for the Trade.4. International Federationof Inspection Agencies (IFIA)SGS is a member of the InternationalFederation of Inspection Agencies (IFIA)and abides by the IFIA Code of Practicefor Government Mandated Pre-shipmentInspections which is based on the WTOAgreement on PSI. A copy of the IFIACode of Practice is available on the IFIAwebsite ( orupon request from the SGS office inyour country.5. SGS Code of INTEGRITYAND PROFESSIONAL CONDUCTTo assure the integrity of SGS servicesand practices, which is the cornerstone ofthe reputation of SGS, all employees arerequired to comply with the SGS Code ofIntegrity and Professional Conduct whichstipulates rules of professional behaviourin all dealings for the SGS Group.Details are available at the SGS websitewww.sgs.com6. Inspection feesSGS’ fees for carrying out the inspectionare borne either by the Government ofthe importing country or the importeror the exporter. Nevertheless, SGSreserves the right to invoice the sellerin the following situations:a. in the event of abortive inspectionvisits, idle time or prolonged durationof inspection due to non standardprocess of container vanning; orb. if, by agreement with the seller, SGScarries out inspection but does notsubsequently receive a valid ServiceRequest/Import Licence from thecountry of importation orc. if the exporter agrees to settle theinspection fee on behalf of theimporter and obtain subsequentreimbursement.3

pre-shipment inspection programme123454SGS Receives Service Request from importing country Sends Request for Detailed Information to seller Commences preliminary price verificationSELLER Completes Request for Detailed Information and returns to SGS togetherwith relevant documents.SGS Reviews documents As applicable:– Fixes inspection date or confirm no of inspection required– Carries out physical inspection– Provides supplier and/or seller with the physical inspection result.SELLER If the inspection result is satisfactory (or if no inspection is required) seller mayproceed with shipment (may check with SGS if any doubts concerning issuance ofClean Report of Findings) Submits to SGS the final documents required (see SGS Country Data Sheets forthe Trade).SGS Finalises price verification, customs classification and verification of import eligibility Prepares Clean Report of Findings, provided documents and all aspects of inspectionare satisfactory Issues Clean Report of Findings and, where applicable, Security Label to seller.

B. general administrative procedures1. Initial notification2. Preliminary price verification3. customs classificationPre-shipment inspection is initiated bySGS when it receives notice either fromthe importing country, or the seller, thatan export needs to be inspected.a. After receipt of initial notification,SGS undertakes, where possible,a preliminary price verification, basedupon the SR and/or other contractualdocuments received. SGS may, wherenecessary, contact the seller to obtainadditional information or explanationto facilitate price verification or tosupport the seller’s price. Dependingupon the regulations of the importingcountry, (for guidance please referto the SGS country Data Sheets forthe Trade on the SGS website) priceverification is undertaken to establishan opinion of: (I) an export marketprice and/or (II) a value for customspurposes. Details under Section D.When required by the government ofthe importing country, SGS forms anopinion of the Customs ClassificationCode based upon the Customs TariffBook and Rules of Classification of thecountry of importation. The CustomsClassification Code determines the tariffrate on the basis of which the importerwill be required to pay import duties.1.1. Notice from the importingcountrySGS normally receives directly fromthe importing country a copy of aService Request (SR) which may also bethe Import Licence or Foreign ExchangeAllocation Licence. The SR states, whereapplicable: the description and value ofthe goods, the name and address ofthe seller and importer, the country ofsupply of the goods and the importer’sdeclaration of customs code.In such cases, SGS automatically advisesthe seller by sending a Request forDetailed Information (RDI) form whichshould be completed and returned toSGS. The RDI form requests, whereapplicable: copies of the documentsrelating to the export transaction;valuation information; product datasheets; packing list; test certificates;price lists; information on location ofgoods and date available for inspection.This form also lists the publications,relating to the inspection process,available to exporters.A specimen of the RDI form is tobe found on the SGS website rdi1.2. Notice from the sellerFailing to receive a RDI Form fromSGS, the seller may contact the SGSoffice in the country of supply to arrangeinspection by providing a copy of the SRand/or Letter of Credit, if available, andthe information and documents as perthe RDI Form. For convenience, the RDIForm on the SGS website may be used.SGS will check that a Service Requestis registered, so that an inspection maybe scheduled. However, subject to priorauthorisation from the importer, andprovision of sufficient guarantee coveringthe inspection fee, an inspection maybe carried out prior to the arrival of theoriginal SR.b. Upon request of the seller, prior tophysical inspection, SGS will issue anAdvice of Preliminary Price Verificationindicating, where applicable: (I)Theseller’s price and/or exchange ratewill be accepted, provided the goodspresented to SGS inspection conformwith the documents on which thepreliminary price verification wascarried out. (II) the SGS opinion of valuefor Customs purposes. Such Advicewill be subject to receipt by SGS ofthe relevant documents such as thesales contract, proforma invoice andService Request.It should be noted that: (I) An acceptanceof the seller’s price and/or exchangerate will not be withdrawn providedthe goods presented to SGS inspectionconform with the documents on whichthe preliminary price verification wascarried out; (II) An SGS opinion for theguidance of the Customs Authorities isnot necessarily the value which will beaccepted for Customs duty purposesin the country of importation.4. COMPLIANCE with contractualspecificationsWhen required by the government of theimporting country, SGS will check that thespecifications of the goods presented forinspection conform with the contract and/orproforma invoice and/or Service Request.However, in some cases, the regulationsof the importing country may prescribethat the goods comply with certain productstandards or requirements. NeverthelessSGS inspection does not relieve sellersfrom their contractual obligations.5. Import eligibilityMost countries require SGS to checkthat the importation conforms with theirimport regulations. For example:a. Product labelling: SGS will check thatthe goods conform to any specialrequirements for the labelling of certainproducts, especially pharmaceuticalsand foodstuffs. Further informationavailable in the SGS country DataSheets for the Trade.b. Expiry dates and shelf-life: SGS willverify expiry dates and remainingshelf-life according to the regulationsor government requirements of thecountry of importation. For example,government requirements oftenprescribe that the minimum remainingshelf-life should be at least 50 percentof the manufacturer’s recommendedshelf-life in respect of pharmaceuticalproducts, and 75 percent in respectof vaccines and biological products.5

6. Physical inspectionPSI programmes generally includephysical inspection for the purpose ofverifying that the goods correspondto the documents provided in respectof: goods description, quantity andspecification and, where applicable,the import regulations of the importingcountry (e.g. labelling, health, safety,etc.). The physical inspection mayalso provide additional information tosupport price verification and customsclassification.Traditionally, this inspection is performedon every shipment. Nevertheless,depending on the requirements ofthe importing country, the necessityto examine every shipment maybe reduced by using risk profilingtechniques. These are either determinedby the user government, or based on aquality assurance inspection programmeunder which SGS carries out qualityassurance audits of the manufacturer’spremises and/or distribution centres.SGS systematically informs the seller,after receipt of the RDI Form, of thephysical inspection requirements.Further details are to be found underSection C. Specific country requirementsare contained in the SGS country DataSheets for the Trade.7. Final price verificationand classificationBased on the results of inspectionand appropriate final documents, SGSfinalises the price verification and the SGSopinion of Customs classification code.When the preliminary price verificationhas not resulted in any unresolvedquestions, and the inspection result andother documents received are consistentwith the preliminary documentation, SGSwill not normally require any additionalinformation. The main exception wouldbe if the terms of sale require referenceto prices at the date of shipment.If unsatisfactory, the results are eitherconditional or rejected. In both instancesthe seller should endeavor to solve theproblem with SGS.9. The Report of Findings9.1. Types of Reports of FindingsUpon completion of the PSI inspectionSGS’ opinion is expressed in a Report ofFindings which falls into two categories:a. Satisfactory result. SGS issues: A Clean Report of Findings (CRF)which, where applicable, iscomplemented by A Security Label Confirmation ofIssuance of CRF: for seller’s L/Cnegotiation/payment purposes.b. Discrepancy result. SGS issues: A Discrepancy Report or A Non-Negotiable Report of Findings(NNRF).9.2. Clean Report of Findings (CRF) Issuance: The CRF, or equivalent,is normally issued within 2 workingdays (1 day for airfreight or exports toneighbouring countries) of receipt of thenecessary correct final documents anda satisfactory result in all aspects ofthe inspection. Requirements: The final documentsrequired vary according to the importrequirements of each country, butalways include a copy of the seller’sfinal Commercial Invoice and, frequently,may require a copy of the Bill of Ladingor Air Waybill. Details are containedin the SGS country Data Sheets forthe Trade which also advise whetherthe documents may be sent by theexporter to the SGS office handlingthe inspection, or by the importer tothe SGS Liaison Office in the countryof importation. In order to avoid delaysin the issuance of the CRF it is recommended that the documents be submitted to SGS as soon as available.8. Shipment of the goods Despatch: The original CRF is generallyprovided to the importer for Customsclearance purposes.The seller is advised to check withSGS prior to shipment if the physicalinspection results have been satisfactory.Upon request, SGS will issue to the seller,for information purposes, a copy of the CRF.69.3. Security Label Confirmationof Issuance of CRFWhen required for L/C negotiation/payment purposes, SGS returns to theseller a copy of the seller’s final invoice onwhich has been affixed a Security Labelconfirming that a CRF has been issued.9.4. Discrepancy ReportIf an inspection results in discrepancieswhich cannot be promptly rectified,thereby preventing a CRF from beingissued, SGS will issue a “DiscrepancyReport”, giving reasons for non-issuanceof the CRF, normally within either 2working days of receipt of final documentsor 1 month of the inspection, whichever issooner. In such cases, SGS will be happyto advise exporters of the steps whichneed to be taken, where applicable, inorder for a CRF to be issued.9.5. Non-Negotiable Reportof Findings (NNRF)The regulations of some importingcountries require SGS to issue a NonNegotiable Report of Findings” (NNRF)instead of a Discrepancy Report. TheNNRF cannot be used for paymentpurposes without the approval of theauthorities of the importing country.10. Complaints and appealsSGS is committed to execute Preshipment inspections, on behalf ofgovernments, in accordance withthe procedures outlined in these“Guidelines for Exporters” and theWTO Agreement on Pre-shipmentInspection. Any exporter who feelsthat these procedures have not beencomplied with is invited to contactthe SGS office which performedthe inspection as per the followingprocedure:

10.1. Complaintsa. In the first instance, exporters with complaints about Pre-shipment inspection activitiesshould contact the Managing Director, Governments and Institutions Services (GIS) atthe SGS office concerned.b. The GIS Manager undertakes to investigate the complaint and respond promptly.c. If the exporter is dissatisfied with the response, he may proceed to an Appeal asper point 10.2 below.10.2. Appealsa. Exporters with grievances that have not been resolved by discussion with the GISManager, under the complaints procedure of point 10.1 above, may appeal to theManaging Director of the SGS affiliate in the country concerned, by completing andsubmitting a “Pre-shipment Inspection Internal Appeal Form”. A specimen of thisform is to be found in the Annex to this brochure. For convenience, this specimenmay be photocopied and filled out or, alternatively, may be obtained from the SGSwebsite: The SGS Managing Director undertakes to investigate the grievance and responds tothe exporter, normally within two working days of receipt of a completed “Pre-shipmentInspection Internal Appeal Form”, by either: (I) giving the result of the appeal, or (II)advising that further investigation is required and that the result will follow as soon aspossible, but within 10 working days.11. Independent ReviewsIn accordance with the WTO Agreement on Pre-shipment Inspection, Article 4,exporters who are of the opinion that SGS has not carried out the Pre-shipmentinspection in compliance with its obligations under the provisions of the Agreementmay, at least two working days after submission to SGS of a completed “Pre-shipmentInspection Appeal Form”, as per point 10.2a) above, refer the dispute to an IndependentReview. Details are contained in a separate publication available upon request from theSGS Office in your country.7

C. physical inspection procedures1. Arrangements forphysical inspection1.1. Inspection requestfrom the sellerUpon receipt from the seller of the RDIform or advice providing details of thelocation of the goods and date on whichthe inspection is required, SGS contactsthe person indicated by the seller in orderto finalise the inspection arrangements.If the SGS office receiving the RDI formor inspection request is not the countryof inspection of the goods, it will betransferred to the office in the countryof inspection.Note: Some importing countries appoint different inspectioncompanies for different geographical areas. In such cases itmay be necessary to transfer the file to another inspectioncompany responsible for the country in which the goods willbe inspected.1.2. Place of inspectionThe physical inspection is normally carriedout by the SGS office in the Countryof exportation/supply of the goods and,whenever possible, in the manufacturer’sor supplier’s premises. Inspection of bulkcargoes is usually undertaken at time ofloading of the ocean vessel. Occasionally,it may be necessary for SGS to carry outinspections during production or witnesstests at the manufacturer’s premises.Sellers should liaise with SGS in advance ifthere is any doubt concerning the suitabilityof the proposed inspection location.1.3. Date of inspectionIn order to facilitate inspection planningSGS normally requests sellers to give,whenever possible, 3 working days’advance notice of the date on which theywish the inspection to be carried out.Nevertheless, in cases of emergencies,every effort will be made by SGS toundertake the inspection earlier.Once an inspection date has been agreedby SGS and the seller, SGS undertakes tocarry out the inspection on that date unlessthe inspection is rescheduled by mutualagreement, or the inspector is preventedfrom carrying out the inspection by theseller/inspection site, or by force majeure.82. Presentation of goodsfor inspectionSellers are responsible for ensuring that:a. The goods are presented to SGS in asatisfactory location to facilitate a properinspection and, where applicable,sampling or testing. Goods should bepresented in operational conditionwhere functional testing is relevant.b. Reasonable facilities and assistanceare provided to the SGS inspector(s),where applicable, such as sufficientlabour to handle the goods includingunpacking or repacking, facilitiesto weigh the goods, witnessmanufacturer’s tests, conductSGS tests, etc.3. Inspection standardsUnless the government of the importingcountry stipulates to the contrary, SGS willexecute quality and quantity inspections inaccordance with the standards defined bythe seller and the buyer in the purchaseagreement or, in the absence of suchstandards, relevant international standards.4. Laboratory analysis and testingIn addition to witnessing manufacturer’stests, where applicable, SGS may requestfrom sellers copies of the manufacturer’sor independent test/laboratory analysiscertificates. SGS may also, whereappropriate, submit samples to a SGSor independent laboratory for analysisor testing.5. SamplesSamples will only be taken and retainedin accordance with customary qualitycontrol procedures, it being the seller’sresponsibility to replace any samplesdrawn. SGS will store samples for threemonths; thereafter they will be disposedof unless the seller requests in writingthat they be returned.6. Inspection and sealing of“Full Container Loads” (FCL)The authorities of some countries requirethat SGS witness the stuffing and carry outthe sealing of “Full Container Loads” (FCL).In such cases, sellers may be required togive advance notice to SGS of containerstuffing arrangements. Where appropriate,the date of inspection will be scheduledto coincide with the container stuffing. Foradvice on applicability, please consult theSGS country Data Sheets for the Trade.7. Capital projectsFor capital projects, it may be necessaryfor SGS to carry out inspections duringproduction and to witness the manufacturer’s tests. In such cases, SGS will liaisewith sellers so that the inspections can beplanned to fit-in with the manufacturer’sschedules.8. Second-hand goodsSome countries do not allow imports ofsecond-hand goods, reconditioned goodsor goods which are in a “not new” condition without a special licence or permission: please refer to the SGS countryData Sheets for the Trade for further information. In any case, SGS cannot acceptgoods in a not new condition unless indicated in the Service Request and/orproforma invoice and/or contract, or unlessthe importer subsequently confirmsin writing his acceptance of the goods.Where appropriate, SGS may berequired to see the goods in runningcondition and, consequently, sellersare advised to check with SGS, whereapplicable, before dismantling andpacking.9. Physical inspection resultsWhen the physical inspection iscompleted, the inspector submits hisreport to the SGS office, then the resultof inspection will be communicated tothe seller and, where applicable, at theplace of inspection.The result will state: satisfactory,conditional or unsatisfactory. The selleris welcome to present his views inwriting to SGS, in the event of any queryregarding the issuance of a conditionalor unsatisfactory inspection result.

9.1. SatisfactoryThis confirms that the result of physical inspection is satisfactory provided the sellerproceeds with shipment within 2 months of the date of inspection, unless a shortervalidity period is stipulated. Nevertheless, the seller is advised to check with SGS ifthere are any doubts concerning the acceptance of the consignment in respect ofprice or import eligibility.9.2. ConditionalThis implies that the result is acceptable, subject to certain conditions such as a satisfactorylaboratory test/analysis, or the submission of an acceptance test certificate or other relevantdocument. In all other respects, the conditions as per a satisfactory result apply (9.1 above).9.3. UnsatisfactoryAn unsatisfactory result implies that a Clean Report of Findings cannot be issued withouta rectification of the discrepancy or advice of acceptance from the country of importation.The two main types of unsatisfactory results are:9.3.1. Quality and quantitya. Any discrepancies identified by the inspector with regard to quantity and/or qualitywill be indicated. Such discrepancies may be resolved either by: (I) the seller rectifyingthe discrepancies, or (II) SGS receiving, usually via the SGS Liaison Office in thecountry of importation, the importer’s confirmation of acceptance subject to thisbeing in conformity with the import regulations. In some cases, an amendmentto the Service Request may also be required.b. If re-inspection is required at a later date, the seller should make arrangementsfor another inspection. If the seller is in disagreement with the inspector’sfindings he may immediately contact the SGS office.9.3.2. EligibilityIn those cases where the government of the importing country requires SGS to checkthat the consignment conforms with certain import regulations, such as labelling,health requirements, etc., SGS will advise the seller for appropriate action if theinspection reveals a discrepancy.9

D. price verification1. PurposeSGS undertakes price verification ofthe goods in order to provide technicaladvice or opinions to the governmentof the importing country on either:a. A Value for Customs Purposes tofacilitate the assessment by Customsof the dutiable value, which will beused as a basis for the payment ofimport duties and taxes by theimporter, and/orb. An Export Market Price which is usedfor foreign exchange or governmentinformation purposes.2. Value for Customs Purposes2.1. Valuation MethodologiesSGS follows the Customs Valuationmethodologies and requirements ofthe importing countries (as per WTOAgreement on PSI, Article 2.20, footnote4) which are normally based on either:a. The WTO Agreement on CustomsValuation (ACV) orb. The Brussels Definition of Value (BDV).A few countries require SGS to givean opinion based on the export marketprice (see 3.3). The SGS countryData Sheets for the Trade advisethe particular valuation methodologyfor each country concerned.Although these authoritative publications, may be consulted for full detailsat, the following textserves as a guideline based on SGSinterpretation.2.2.2. Methodology OverviewThe ACV sets forth six different methodsof valuation in order of preference. Thefirst method should be used unless certainconditions are not complied with; in suchcase one proceeds to the other methods(2 to 6) in hierarchical order of preference.acv valuation methodsMethod 1: Transaction Valueof the Imported Goods:the Customs Value should be theTransaction Value, i.e. the priceactually paid or payable when soldfor export but subject to: Compliance with the TransactionValuation Conditions (see 2.2.4)and Adjustment, where applicable byAdjusting Factors (see 2.2.8) Customs being satisfied with thetruth or accuracy of the declaredTransaction Value (as per the WTOMinisterial Decision).This method is not applicable if : There is no export sale and henceno transaction value (e.g. goodssent free of charge, goods senton a consignment basis, goodson hire)goods sold for exportation to thecountry of importation at or aboutthe same time taking into account,where applicable, differences incommercial level, quantity and costof transport.Method 3: Transaction Valueof Similar Goods:based on customs values, previouslyaccepted in conformity with Method 1,of other transactions of similar goodssold for exportation to the country ofimportation at or about the same timetaking into account, where applicable,differences in commercial level, quantity and cost of transport.Method 4: Deductivebased on the unit price at which theimported goods or identical or similarimported goods are sold in the greatest aggregate quantity, at or aboutthe same time, to unrelated personswith deductions (e.g. transport costsin country of importation, commissionsor profit and expenses, customs duties,etc.) to arrive at the CFR price at pointof entry.The provision by SGS of a technical adviceon a Value for Customs Purposes doesnot interfere with the price contractedbetween buyer and seller: no revisionto the commer

Details are available at the SGS website 6. INSPECTION FEES SGS’ fees for carrying out the inspection are borne either by the Government of the importing country or the importer or the exporter. Nevertheless, SGS reserves the right to invoice the seller in the following situations: a. in the event of abortive inspection

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