A third-party inspection occurs when the goods manufactured (or shipped) by an exporter are subject to different types (and levels) of verifications by an independent, neutral and technically qualified inspection company, which is chosen by the parties and operates according to internationally accepted standards. A third party may actually target the verification of prototypes, production lots, production processes or shipments and is executed following an inspection protocol, agreed among the parties. The result of the inspection may have a positive or negative result.

 

The leaders in third-party inspections are SGS, Lloyd’s, BV (Bureau Veritas), Cotecna, DNV and, Tuev (at least in the field of project materials).

 

TYPES OF THIRD PARTY INSPECTIONS

There are four main types of third-party inspections:

1. Pre-production inspection: this type of inspection is requested to ascertain the quality of the raw materials, the components and the parts that the manufacturer will use during the actual manufacturing process. This type of inspections is common for large volume supplies, where the risk of low-quality raw materials and parts may generate massive disasters for the end user.

2. “DUPRO inspection” (during production): this type of inspection is used to appraise the average product quality during the manufacturing operations, to make sure it is acceptable and stable. While this type of inspection is expensive, it may help to discover issues before the shipment or the receipt of defective products.

3. Pre-shipment inspection: this is the most common type of inspection, which is executed at the place of departure (shipper warehouse or manufacturing facility) and on a random sample of the products.

4. At container load: in this case, the inspector verifies the goods at containerization (loading benches or forwarder warehouse).

A last type of inspection, less common, is the inspection at the arrival port.

In any of the above types, inspections can be visual or executed by using specific instruments (example: PMI test, to verify the chemical composition of a steel product).

 

TPI AND LETTERS OF CREDIT

Most letters of credit include a third-party inspection certificate as a required document under the terms of the credit. Sellers shall reject letters of credit where the inspection report has to be issued by the buyer, instead of a neutral third party, as this would expose them to severe and obvious payment risks.