Inspection Certificate – Meaning, Benefits, Types, and Substitutes

An Inspection certificate is a document that one would come across in case of international trade. This document basically specifies the fitness or condition of the items to be shipped. The document signifies that the items have been inspected and conform (or do not conform) to the terms of the sales agreement.

We can also say that the document certifies that the items were in good condition at the time of the inspection. Moreover, it certifies that the inspection work was carried out by a competent authority and whether or not the items conform to the quality, quantity, import, tariffs, and other specifications. 

Usually, the inspection takes place immediately before the shipment. This certificate is known by several names like Certificate of Inspection, Inspection Report or Report on the findings of the Inspection, etc. 

A point to note is that inspection requirement is usually for specific items, such as perishable items, meat, and more. Also, some countries mandate pre-shipment inspection for all the goods (or some specific items) entering the country. Some of these countries are Malawi, Mali, Mauritania, Cambodia, Cameroon, Kuwait, Liberia, Bangladesh, Burkina Faso, Uzbekistan, and more.

Also, the certificate may be a mandatory document in the case of the LOC (letter of credit). In such a case, it is crucial to provide the name and details of the party providing the inspection certificate and their credentials.

Who Issues Inspection Certificate?

There are specific companies that carry out an inspection at the ports, such as the Swiss SGS, French Bureau Veritas, Cotecna, and Intertek. Big inspection companies usually have offices in big exporting nations. Moreover, there are also inspection companies that cater to specific countries.

The inspectors working for independent inspection companies (like above) issue the certificate. The inspection inspector must issue the certificate on the inspection company’s official letterhead.

Nowadays, most inspection companies publish inspection reports or certificates online. This makes it easy for the buyer and other concerned parties to access the certificate.

Substitutes of Inspection Certificate

There are many other documents that can work in place of the certificate of inspection, depending on the laws of specific countries.

For instance, in the case of agricultural products, the document could be a federal phytosanitary inspection certificate. This document certifies that the U.S. shipment of agricultural products does not have any toxic chemicals and is fit for humans and animals. The U.S. Agricultural Department (USDA) issues such a certificate.

Another similar certificate is the Certificate of Quality and Condition. The USDA’s Processed Product Branch issues this certificate. Such a certificate usually concerns frozen and dehydrated fruits, canned fruits, vegetables, and more.

Types of Inspection Certificates

Inspection Certificates or Reports are usually of two types:

Official Inspection Certificate

In some nations, the customs authorities require such a certificate so as to clear the shipment. Such a certificate allows the authorities to check if the goods meet the specifications of the sales agreement or not, as well as if the goods meet the specific requirements of the exporting and importing countries.

Commercial Inspection Certificate

It is a pre-shipment inspection that is done before the completion of the production or shipment of a lot of cargo. The report or certificate of this inspection is sent to the buyer to determine if the items match the specifications of the sales agreement and other regulations. And if so, the shipment or production may continue.

Dispute: What to Do?              

If the buyer or seller disputes the details of the inspection certificate or its process, then the parties need to negotiate a resolution with the inspection company. Also, the parties can work together to address the issue.

And, if the items fail in the inspection, then the buyer is free to take any action before the shipment leaves the seller’s factory. And, if the items pass the inspection, then it is proof that the items are of good quality and meet all the requirements. In such a situation, the buyer has to comply with the agreement terms. 

Details in Inspection Certificate

Usually, an inspection certificate carries the following details:

  1. Date of issue;
  2. Date and place of inspection;
  3. Description of the goods;
  4. Details of the applicant;
  5. Country of origin;
  6. The number of packages;
  7. Insurance policy number;
  8. Date of the pro forma invoice;
  9. Gross weight;
  10. Port of discharge;
  11. Details of the supplier;
  12. Type of packing;
  13. Insurance policy number;
  14. Name and Signature of the authorized person or inspector, etc.

Who Arranges and Who Pays?

Mainly, it is the importer who has the responsibility to arrange for the pre-shipment inspection. The responsibility of the exporter is to make available the cargo for inspection. Also, the importer has to coordinate with the freight forwarder to ensure all the details, documents, and cargo are available for inspection.

Usually, it is the importer or the importing nation government who bears the inspection cost. However, there are cases, such as supplementary inspection visits, when the inspection company charges the exporter.

Additionally, there are some inspection-related expenses with regard to making the cargo available for inspection. The seller remains responsible for all such expenses. These expenses include unpacking, testing, sampling, repackaging, and more.

This is the process when the agreement is silent about these costs and responsibilities. Otherwise, the costs and responsibilities will be in line with the agreement or contract of the transaction.

Benefits of Inspection Certificate

The Inspection Certificate has several benefits. A few of them are listed below: 

  • For importers, the benefit is that it lowers the chances of receiving cargo that does not meet the set standards and specifications.
  • Regular inspection allows exporters to ensure the production is going as per the sales agreement. It also allows exporters to take corrective actions before the completion of production if there is a need. This will avoid unnecessary issues regarding rejection, return and costs, and time involved in that process.
  • The inspection also gives exporters and importers a good idea of the production timelines.
  • Most importantly, an inspection certificate assists in removing worries over the quality of the cargo. If the importer gets low-quality items despite a positive inspection report, then the importer can claim damages from the inspection company.

Final Words

An inspection certificate is among the most vital documents in international trade. It helps in facilitating the shipment, as well as payment to the exporter.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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