Bureaucracy must meet GATT standards

PUBLISHED : Wednesday, 03 March, 1993, 12:00am
UPDATED : Wednesday, 03 March, 1993, 12:00am

CHINA'S public commitment to work towards full conformity with the provisions of the General Agreement on Tariffs and Trade (GATT) is welcomed by those both within and outside the country; rightly, they see benefits on both sides.

In theory, a change should facilitate China's integration into the world economy and provide fuel for its continued growth.

In moving towards compliance with the GATT, China says that, among other things, it will reduce government controls, cut tariff duties, reduce the scope of import licences and make the foreign trade management system more ''transparent''.

But GATT requirements will also have to be understood in detail by those actually operating the foreign trade system.

And there must be a commitment to fulfilling those requirements on the part of the bureaucracies and sub-bureaucracies charged with implementing them.

So far, that commitment is lacking. Here is an example.

A United States trader signed a contract for a large volume of frozen shrimps with a seller in Liaoning Province. The shrimps were to be imported into the US for resale.

Frozen shrimp sold in the US must meet a specific quality standard required by the Food and Drug Administration (FDA). The buyer and seller agreed the contract would stipulate the product must meet the FDA standard.

When it came to negotiating the ''inspection'' clause, the mainland seller said: ''Since the Chinese inspection authorities are required by our government to perform export inspections on frozen shrimp, we may as well stipulate that their inspection certificate would be accepted by us [by both buyer and seller] as proof of conformity to the technical specifications and standards as stipulated in the contract. This would have the additional benefit of avoiding the expense of a commercial inspection agency.'' The American buyer agreed.

It is a standard practice in international commerce for contracts to stipulate the inspection of products by an independent third party.

Because Beijing-mandated inspections by government authorities are applied to so many products, many Chinese importers and exporters believe it unnecessary to call for an impartial inspection.

What the buyer apparently did not know was that the Chinese inspection authorities could not be required by a mere commercial contract to inspect to the standards stipulated in the contract.

The Chinese inspection authorities in Dalian issued a report stating that the goods conformed to the requisite standard.

However, when the shrimps arrived in America, the buyer's clients refused to accept (or pay for) them because re-inspection revealed they did not meet the FDA standard.

By then, of course, the PRC seller had cashed the trader's letter of credit.

The trader learned that the Chinese inspection authorities had inspected to a Chinese standard, not to the FDA standard as stipulated in the contract.

He asked for a copy of the Chinese standard so that he could compare it with that of the FDA.

He was told that since there was as yet no Guo Biao (Chinese National Standard) for frozen shrimp, the inspectors used a standard of their own.

And because this export standard for frozen shrimp was only provisional, they were not at liberty to release a copy to a foreigner.

As well as the ''lack of transparency'' in the refusal to reveal the standard, the use of a standard different to that required to complete the transaction was a technical barrier to trade.

The authorities in charge of government-mandated inspections should no longer engage in activities such as the one cited.

Unfortunately, this same bureaucracy continues to act contrary to the requirements of the GATT Standards Code.

M. Ward Wilson has worked as a trader and part-time trade consultant in the Asia-Pacific region since the 1980s.