Definition and Usage :
I have explained couple of times so far on this website that letter of credit transaction follows the documents not the actual goods or services in circulation. Which means that banks reach payment or non-payment decision under a letter of credit only by controling the documents presented by the beneficiary. Banks have no connection with the actual goods or the services.
Above explanation left importers into a serious source of fraud risk such as non-delivery, goods received with inferior quality etc... Pre-shipment inspection, also called preshipment inspection or PSI, is a part of supply chain management and an important and reliable quality control method for checking goods' quality while clients buy from the suppliers. Place of inspection can be set either in the country of origin (at the time of loading) or in the country of destination (at the time of unloading or at the warehouses where the imported goods are received).