SOP Library

SOP NO: GM-DL02

Mission: Stabilization

Area: Grains Marketing (GM)

Activity: Dispersal (GM-DL)

Title: SOP on Chartering of Vessels and Barges for Dispersal Operations

Date Approved/Issued: 07/12/90

Date Effective: 08/01/90

Digest:

1. To set up a standard system and procedure in hiring of vessels/barges for use in the
dispersal of NFA stocks to various points within the country.

2. To carry out efficiently the shipping of NFA stocks through proper planning, bidding for an
affreightment contract, implementation of the contract, and processing of freight charges.
 This SOP covers the chartering of vessels/barges thru a Contract of Affreightment (CAF) for
NFA domestic shipping operations. Preparation, awarding and execution of contract; conduct
of bidding; determination of freight, demurrage and despatch rates; and processing of freight
claims are also included in this SOP.

DMO-OCD-L232, dated December 23, 1988. NFA Shipping Standards and Policies proposed
by DMO and approved by NFA Administrator.

A. DISPERSAL PLAN

1. The Directorate for Marketing Operations (DMO) shall draw up a dispersal plan prior to the
start of the succeeding year based on the approved Marketing Plan. The dispersal plan
prior to the start of the succeeding year based on the approved Marketing Plan. The
dispersal plan shall detail the Agency's dispersal and distribution strategies using vessels
and/or barges. The dispersal plan shall include, among others, the following schedules.

1.1 Loadports and corresponding disports;

1.2 Quantity to be loaded/unloaded for each loadport/disport;
1.3 Shipping period for the whole contracted quantity; and
1.4 Shipping period on a per port-to-port movement.

2. The dispersal plan shall be the basis for the Contract(s) of Affreightment (see Annex A for
proforma of CAF) to be entered into by the NFA for the current year's dispersal period.
The dispersal schedules shall be approved by the Assistant Administrator for Stabilization
per recommendation of the DMO Director.

3. The quantity to be transported thru a CAF shall be a maximum of eighty percent (80%) of
the total quantity for dispersal by sea for the current year.

4. The remaining twenty percent (20%) shall be transported thru separate voyage charters,
the scheduling of which shall be determined by DMO as economically advantageous to the
Agency.

B. FREIGHT
 1. The Operations Planning Division (OPD) of DMO shall, upon the approval of the dispersal
plan, furnish the Committee on Bids and Awards II (CBA) with the standard freight rates
(SFR) for all port-to-port movements indicated in the dispersal plan.

2. The standard freight rate shall be the current Conference of Inter-Island Ship Operators
(CISO) rate for basic commodities or the average freight rate canvassed from at least three
(3) tramp vessel operators, whichever is lower.

3. DMO shall support its SFR recommendations with the following:

3.1 Current schedule of shipping/freight rates for basic commodities obtained from the
CISO and approved by the Maritime Industry Authority (MARINA) and

3.2 Result of canvass from at least three (3) tramp vessel operators/companies.

4. Approving authority for the standard freight rates shall be the Asst. Administrator for
Stabilization based on recommendation of the DMO Director.

5. The SFR shall be used by the CBA only as a guide in the acceptance/rejection of bids
under this SOP.

C. BIDDING PROCEDURE

1, Bidding for Contract(s) of Affreightment shall be undertaken by the Committee on Bids and
Awards (CBA) composed of the following:

Chairman : Asst. Administrator for Stabilization

Vice-Chairman : Director, DMO*
Members : Director, DLA
: Director, TSD
Director, IAD
Regional Director's concerned loadports
Observers : Commission on Audit Representative
Office of the Administrator Representative

2. The CBA shall publish a Notice of Pre-Qualification and Bidding on the third week of
January. The Notice shall be published for not less than three (3) consecutive days in
any newspaper of general circularization. The Notice of Pre-Qualification and Bidding
shall state the following:

2.1 Date of bidding, time and venue;

2.2 Expected Quantity in metric tons (MT) to be moved for the year
2.3 Shipping period (s);
2.4 Date of Pre-Bidding Conference
2.5 Other information
 The Notice of Pre-Qualification and Bidding shall be published three (3) weeks from the
date of bidding. A pre-bidding conference shall be conducted by the CBA ten (10)
working days after the notice has come out in the newspaper.

3. A two-week period shall be accorded to the evaluation and determination of qualification

of interest parties starting on the first day the notice of Pre-Qualification and Bidding has
been published.

4. The following pre-qualification requirements shall be the basis for determination of

qualified bidding applicants:

4.1 Certified photocopy of Certificate of MARINA Registration

4.2 List of vessels, he owns, manages or operates with corresponding particulars, which
shall be committed to serve the purpose of the CAF. The vessel particulars shall
indicate, among others: name of vessel, class, date built, deadweight capacity
(DWT), draft, Gross Registered Tonnage (GRT), speed, number of holds/hatches
and available cargo gear, last date of deratization, Philippine Coast Guard
Certification of Inspection.

4.3 Additional documents in case of corporation/partnership:

4.3.1 SEC Registration

4.3.2 Board Registration/Authority (for partnership) authorizing a representative

it in its transactions with NFA.

4.3.3 Articles of Incorporation and By-laws/Articles of Partnership

4.3.4 Certified list of current officers

4.4 Additional documents in case of single proprietorship:

4.4.1 Registration with Department of Trade and Industry of business name

4.4.2 Special Power of Attorney authorizing a representative to represent the firm

in all its transactions with NFA, it applicable.

4.5 Copy of Financial Statements for the last two years of operation certified by a CPA.

4.6 Photocopy of Income Tax Return (ITR) for the previous year

4.7 Payment of an application fee (to be set by the CBA) to pay for pre-qualification and
bidding forms as well as processing cost.
 5. A list of qualified/accredited bidders shall be posted at the NFA at the end of the
accreditation period. All applicants for qualification shall be notified.

6. The CBA shall also call for a pre-bidding conference wherein clarifications on the terms
and conditions related to the CAF shall be conducted. The CBA's instructions to qualified
bidders on bid bond, performance bond and the whole mechanics of the bidding proper
shall be imparted at this conference.

7. The bidding shall be conducted on the fifth (5th) working day after the pre-bidding
conference. Absence at pre-bidding conference of a prospective offeror shall constitute a
waiver and all things agreed upon in the said conference shall be binding upon him.

Moreover, an Authority to attend the pre-bidding conference shall be required from

offerors who opted to send only his representative in the conference.

8. A bidder shall have the option to bid for any or all of the dispersal items for bid.

9. The bid shall be accompanied by a bidder's bond equivalent to five percent (5%) of the
total quantity of cargo in metric tons multiplied by the freight rate offer.

9.1 The bidder's bond shall be in the form of CASH, CASHIER'S CHECK, LETTER OF
CREDIT (LC), MANAGER'S CHECK, COMPANY CHECK (Certified by a bank as to
funds availability) or GSIS BIDDER'S BOND callable on demand. The presence of
the NFA collecting officer shall be required to acknowledge receipt of said bonds
submitted with the offers. A Bidder's Bond Acknowledgment Receipt shall be issued
to document said receipt.

9.2 The Bidder's Bond shall be valid for a reasonable period to be determined by the
CBA as specified in the instruction to bidders at the pre-bidding conference.
However, the period shall in no case exceed 120 calendar days following the
opening of bids.

9.3 Pertinent provisions under the SOP on Bid and Surety (Performance) Bonds shall
apply to this SOP.

10. The schedule of bidding and release of bidding documents (Invitation to Tender Bid,
Abstract of Bids, Tender Form: Exhibits 1, 2 and 3) shall be set by the Chairman of the
CBA who shall accordingly inform its members.

11. Rules and regulations to be followed in the evaluation of bids shall be set by the CBA.

D. AWARDING OF CONTRACT OF AFFREIGHTMENT

1. The contract shall be awarded to the bidder(s) who offered, for each port-to-port
movement, the lowest freight rate not above the standard freight rate approved by the AA
 for Stabilization. The authority to approve the Notice of Award of Contract (Exhibit 4) to
the winning bidder (s) shall be:

Recommending Official : CBA Chairman

Approving Official : Administrator

The winning bidder (s) must secure the Notice of Award within forty eight (48) hours from
announcement of winner(s).

2. All winning bidders shall post thru the GSIS a Surety Bond equivalent to ten percent
(10%) of contract price.

3. The Contract of Affreightment (Annex A) shall be executed and made final within seventy
two (72) hours upon acceptance of the winner(s) of the Notice of Award. Signing
authority to sign the CAF for NFA shall be vested upon the Administrator. Further, the
CAF shall be subject to the approval of the BFA Council if the total contract price involved
is more than P2.0 Million.

E. FAILURE OF BIDDING

1. If none of the bidders for a specific port-to-port movement offer at or below the SFR, the
bidding for said movement shall be considered a failure. Likewise at least two qualified
offerors should bid for ever port-to-port movement.

2. A rebidding shall be scheduled if there are two or more unawarded movements as a result
of bidding failure. The rebidding shall be called for on the next working day after the first
bidding. The conduct of the rebidding shall follow procedures adopted in the first bidding,
starting from publication of a rebidding notice.

3. If a failure of bidding results for only one port-to-port movement, separate applicable
voyage charters shall be adopted by the DMO to transport the affected shipment.

4. If the rebidding fails, the CBA may award the contract thru negotiation, i.e. on one-on-one
basis, or in group, provided that due communication between the offerors and the CBA is
a established to ensure that the NFA gets the most favorable deal.

5. The awarding of CAF thru negotiation shall follow provisions under item D.

F. SUBSTITUTION/CANCELLATION OF VESSELS

1. Substitution of vessels named under the contract shall not be allowed without the written
consent of the AA for Stabilization upon DMO's recommendation. In the event of
substitution of vessel(s), the substitute vessel(s) shall in all respect be comparable to the
contracted vessel(s) and that the registration certificate and authenticated copy of the
Charter Party between the shipowner and the NFA contracted party shall be submitted to
NFA to form as integral part of the CAF.
 2. If the vessel nominated or substituted by the carrier is not ready load (whether in berth or
not) on or before the date scheduled, or if the vessel is expected to be delayed for more
than two (2) days after the date she is stated to be ready to load a scheduled cargo, DMO
shall issue a written notice to the carrier that NFA has opted vessel and plans to substitute
another vessel not belonging to the carrier to transport such scheduled cargo.

In such case, the hiring of the substitute vessel by the NFA shall be thru a voyage charter.

G. VOYAGE CHARTER PARTY

1. Voyage charter shall be adopted when hiring substitute vessels and/or for transporting of
the remaining twenty percent (20%) of the quantity for dispersal. Scheduling of voyage
charter for the remaining 20% shall be set by the source Region/s in consideration of its
economic advantage to the agency.

2. The DMO shall seek confirmation from the AA for Stabilization to charter vessels to be
used as substitute vessels or for transporting of cargo not covered under any Contract of
Affreightment.

3. Likewise, the DMO shall evaluate the prospective carriers endorsed by the Regional
Directors. Evaluation shall be conducted based on the requirements to be submitted by
the carriers to DMO. The requirements/supporting documents shall be the same as those
enumerated under item C.4 except for the list of vessels which shall only include those
which shall be committed under a voyage charter.

4. A canvass of at least three (3) vessel charters shall be conducted by the source Region to
aid evaluation of prospective carriers.

5. The Regional Director shall sign for NFA the Voyage Charter Party.

6. If the contractor is only a disponent owner of the vessel, the contractor shall be required to
submit a letter authority/agreement or charter party between the contractor and owner
regarding the particular vessel to be contracted by the NFA.

H. LAYTIME/DEMURRAGE/DESPATCH

1. Laytime for loading/unloading for every port/disport shall be negotiated by the CBA with the
carrier prior to execution of a CAF/Voyage Charter Party. Negotiation shall be based on
loading/unloading rate established by the DMO/RD for every port/disports concerned.

2. Determination of the loading/unloading rate shall be based on the following factors:

2.1 Type of port per Phil. Ports Authority (PPA) classification;

2.2 Type of cargo (i.e. bulk, bagged);
2.3 Quantity;
 2.4 Vessels facilities;
2.5 Other facilities (e.g. labor, trucks, etc.)

3. Demurrage and despatch rates under the CAF shall be upon agreement between the CBA
and the carrier.

3.1 As a general rule, voyage charters shall follow the customary quick, despatch (CQD)
applicable to the port/disport of concern. Demurrage/despatch incurred/earned must
be agreed upon within three (3) days from date of completion of unloading.

I. INSURANCE

1. Insurance coverages of cargo shall be secured by and for the account of NFA without
prejudice to the obligations and liabilities of the carrier under a CAF/Charter Party and
applicable laws.

2. Insurance coverage shall be secured by the DMO form the GSIS thru GRAINSCOR.

3. Provisions contained in the SOP on Stock Insurance System, specifically marine insurance
shall be adopted in the implementation of this SOP.

J. LOADING/UNLOADING OPERATIONS

1. Upon receipt of instruction from the DMO/RD on loading/unloading of stocks from vessel,
the Provincial Manager shall make arrangement with the hauling and labor contractor, the
carrier and other concerned agencies to facilitate port operations in his province.

2. Upon receipt of the Notice of Readiness (NOR) to load and transport stocks; the Quality
Assurance Officer (QAO) shall conduct and inspection to check if the vessel holds/hatches
are suitable in all respects to receive the cargo.

The vessel should be free from:

2.1 Live insects;

2.2 Objectionable odors, droppings, spillages or residues of the previously transported
cargoes;
2.3 Water;
2.4 Protruding objects which could damage the container (e.g. nails);
2.5 Water/Oil Leakage

The hatch covers shall be sound and provided with efficient gaskets and/or tarpaulin.

3. A vessel found to be not ready to receive cargo shall be rejected, and its Notice of
Readiness shall not be accepted, by the Port Operations Officer (POO) unless the defects
are corrected and necessary repairs have been carried out to place the condition of the
vessel in good order.
 3.1 However, if vessel is not ready to receive the cargo after two (2) days, the NFA-P.O.
shall issue a written notice to the carrier that NFA has opted to cancel the carrier's
vessel and plans to substitute another vessel. Provisions under item F of this SOP
shall apply in this case.

4. Upon completion of loading, all holds/hatches openings shall be properly sealed by the NFA
in the presence of the carrier's representatives.

5. Prior to unloading, the NFA, in the presence of the carrier's representatives, shall inspect
the seal of the vessel, unseal the vessel and conduct visual inspection of the general
condition of the shipment noting down any damage to the same.

6. In case of damage to the stocks or any portion thereof, the POO shall note this down in the
acknowledgment portion of the Bill of Lading (B/L).

7. Loading and unloading operations shall be properly reported in the Daily Status of
Loading/Unloading Operations (Exhibit 5) , which shall cover the start to finish of the
operation. It shall be prepared by the Port Operations Officer. NFA field offices except the
Metro Manila Office shall submit this report in wire format (Exhibit 6) to the Operations
Coordination Division of DMO, cc PM and RD. This report shall state the status and
progress of the loading/unloading operations including therein the rate of loading/unloading;
type of equipment used and problems encountered during the operation (e.g. inefficiency of
equipment/gears, unavailability of shipside/pierside labor, actions taken and all other
significant deviation from the contracts, etc.)

7.1 The NFA-Provincial Office shall immediately file protest/advise the concerned i.e.
carrier's representative/contracted labor, etc. cc. DMO upon notice of conditions
observed/encountered during the operations which do not conform with an outstanding
agreement (e.g., rate of loading/unloading).

Letter of protest shall be properly logged and received by the concerned. It must
explicitly describe the situation and cite actions to be taken by the NFA should the
concerned fail to initiate corrective measures.

7.2 The MMO Port Operations Office and NFA Field Office's counterparts shall coordinate
with shipping agents/concerned agencies (both private and government) and shall
initiate measures to correct ineffectual practices in the actual operations as indicated in
the report.

8, The Statement of Facts (SOF, Exhibit 7) prepared by the shipping agent and countersigned
by the Master of the Vessel and the NFA-POO, shall be the final basis for the laytime
computation.

The SOF must correspond with the terms and conditions stipulated in the Charter
party/CAF;
 8.1 The SOF shall explicitly include remarks on causes of delays and other conditions
observed which may affect the laytime computation.

8.2 For operations incurring demurrage, the actual loading/unloading rate of cargo shall, if
possible, be reflected in the SOF.

A formal communication to this effect shall be transmitted by the NFA to the carrier if
the vessel does not meet loading/unloading rate.

8.3 A reconciliation between NFA's and carrier's records stated in the SOF shall be done
prior to signing of the SOF.

8.4 If the NFA-POO does not agree to the terms of the SOF, the POC shall sign under
protest the SOF, indicating his reasons in the attached letters, the reference numbers
and dates of which shall be specifically cited in the SOF.

8.5 Significant information reported in the Daily Status of Loading/Unloading Operations

shall be reflected in the SOF under 'REMARK" (e.g. defects observed in the vessels
gears, weather condition, etc.)

8.6 NFA's copy of the SOP and the Laytime Statement (Exhibit 8) and all other
communication transmitted between the NFA-PO and other parties concerned related
to the loading/unloading operation, shall be submitted to the NFA Marketing
Operations Section three (3) working days after completion of the loading/unloading
operation.

8.7 Any necessary adjustments in the laytime computation shall be done by the NFA Field
Office who will undertake the payment of freight.

9. All other pertinent provision/policies of MOM No. 07001 on Port Operations Principles and
Procedures not inconsistent with the herein provisions shall still be in force.

K. FREIGHT CLAIMS

1. Payment of freight shall be made by the NFA Provincial Office which issue the stocks for
shipment. Fifty percent (50%) of the freight shall be paid upon completion of loading and
the remaining 50% shall be paid within thirty (30) calendar days upon NFA's receipt of the
carrier's bill subject to completeness of NFA documentary requirements. Should the carrier
fail to submit complete documents, the reckoning date shall be from the date the
documents are completed.

2. The following shall be required from the carrier for payment of his freight claims:

2.1 Bill of Lading;

 2.2 Statement of Account/Bill/Invoice;

2.3 Computation of Freight Payable and Despatch/Demurrage;

The above shall be submitted in three (3) copies, including the original to the NFA office for
preparation of voucher.

3. Documents shall be verified by NFA office and the computation shall be counterchecked for
accuracy per records.

4. Two (2) sets of documents cited under item 2 and two (2) copies each of the CAF/Charter
Party, Bids and Abstract of Bids, Certificate of Loading issued and signed by the NFA-PM,
performance Bond and Official Receipt shall be attached to the voucher and shall be
submitted to the NFA Provincial Accounting Section for processing and payment. Release
of payment shall be undertaken by NFA Provincial Accounting Section subject to NFA and
Commission on Audit accounting and auditing rules and regulations.

L. STIPULATIONS IN THE CAF/CHARTER PARTY NOT EXPLICITLY PROVIDED HEREIN

SHALL FORM PART OF THIS SOP.