SOP Library

SOP NO: TS-ES03

Mission: Stabilization

Area: Technical Services (TS)

Activity:

Title: Implementing Guidelines on the NFA Post-Harvest Facility Assistance Program II

Date Approved/Issued: 05/04/92

Date Effective: 06/01/92

Digest:

The program aims to help farmers' organizations acquire post-harvest facilities of their
preferred brand, at reasonable prices and with easy payment terms. The provision of post-
harvest facilities is envisioned to reduce grains losses, lessen post-harvest cost, and
shorten the time period for the various in-farm operations.

1. Application and Evaluation Process

2. Selection of Authorized Suppliers of PHFs
 3. Acceptance of PHF and Payment of Suppliers
4. Terms of Payment by FOs
5. Utilization of PHF
6. Reporting and Monitoring System

1. Policies and Procedures on the Disposition of Locally Manufactured/Assembled Post-

Harvest Facilities.

2. SOP No. TS-ES01 entitled Implementing Guidelines on the NFA Facility Assistance
Program Involving Japanese Grant Facilities issued July 17, 1987 and effective August
15, 1987.

3. SOP No. TS-ES01.A on the Amendments/Addendum to the Implementing Guidelines

on the NFA Facility Assistance Program Involving Japanese Grant Facilities issued May
15, 1989 and effective June 1, 1989.

4. Memorandum EXD-TED-No. C-22 on the Inclusion of Corn Mills under the 2nd
Phase of the NFA-JICA PHF Assistance Program dated March 20, 1992 and
approved by Deputy Administrator Catalan.

A. General Policies

1. The post-harvest facilities that can be availed under the program are portable axial-flow
palay threshers and corn shellers with output capacity of at least 1.5 tons/hour and 2.5
tons/hour respectively, portable/compact ricemills with input capacity of at least 700
kg/hours and grinder-type corn mills with an input capacity of at least 750 kg/hr. Portable
threshers and shellers should cost not more than P80,000 each and should have
engines of not more than 15 horsepower. Compact/portable ricemills should cost not
ore than P180,000 each, should be single pass only, and with engines of not more than
50 horsepower. Corn mills should also cost not more than P180,000 each, and should
be with engines of not more than 50 horsepower. (FOs with substantial CIF deposits or
other funds may be allowed to choose higher capacity and higher priced PHFs, provided
they use their CIF or other funds as part of the total payment). These facilities shall be
supplied by manufacturers or distributors of locally manufactured PHFs selected by
NFA.
2. The intended beneficiaries of the program are farmers' organizations (FOs) which must
meet the following qualifications:

a. FOs who wish to avail of the portable/compact ricemill or cornmill must have
been registered with the Cooperative Development Authority (CDA) or Securites
and Exchange Commission for at least two years prior to their application.
However, for FOs which have been engaged in business for the past two
(2( years as certified by any government supervising agency and/or lending
institution, only one year of registration with SBC or CDA shall be required.

FOs who wish to acquire portable axial flow thresher or corn sheller must have
been registered with SEC or CDA at least one (1) year prior to their application.

b. Farmers' Organizations shall have been engaged in any of the following

economic activities:

b.1 organized rice or corn production

b.2 organized post-harvest handling, processing or transport of grains;

b.3 provision of service by way of credit or inputs availment; or

b.4 grains trading

c. In cases where local chapters of national farmers organizations are qualified,

their national office shall act as guarantor and its national president/head as its
co-signatory tot he contract.

3. The allocation of post-harvest facilities among FO applicants shall be prioritized as

follows:

a. Unmet PHF requirements of FOs applied for under the NFA-JICA PHF
Assistance Program.

b. FOs applying for PHF Assistance for the first time.

c. Approved applications of FOs for availment of two (2) or more units of palay
threshers or portable/compact ricemill under the NFA-JICA PHF Assistance
Program, but were granted only one (1) unit. The payment record of the FO of its
existing facility loan amortization shall be considered.

d. A wider geographical distribution shall also be a priority consideration in the

allocaiton of the PHFs.
 e. FOs which will contribute a substantial sum of their CIF or other funds for the
purchase of the PHFs may also be a priority consideration.

4. The NFA Provincial Office's Extension and Business Development and Promotion
Section (EBDPS) shall negotiate with the suppliers to deliver and install the PHFs to
FO's site for free. The provincial office shall pay the supplier the price of the PHF upon
its final acceptance by the beneficiary FO.

5. Any of the following shall be a sufficient ground for NFA's repossession of facilities being
amortized, without any need for a court action.

a. Failure to pay the amortization for two consecutive payment schedule.

b. Sale and/or transfer of management, possession, control, use or operation of the

PHF/s to a third party.

c. Transfer of the PHF/s to another location (outside of the FO's declared service
area) without written consent of NFA.

d. Dissolution of the organization or any serious organizational failure/break-up as

may be determined by NFA.

e. Technical alteration of the PHF/s (or their parts) without any previous clearance
from NFA.

f. Non-payment of the insurance premium after a period of one month from

insurance policy's expiry date.

g. Other violations of the provisions of the Contract of Sale with Reservation of

Title.

B. Specific Policies

B.1 Filing Evaluation and Approval of Applications

1. Farmers' Organizations who wish to participate in the program submit the

following application requirements:

a. Accomplished Application Form (Exhibit 1). The application of FOs shall

indicate their preferred brand of threshers, corn shellers, ricemills or
cornmills and shall provide information on the nearest
manufacturer/dealer of the preferred PHFs. Prevailing prices,
delivery/test-run and acceptance terms as well as warranty terms shall
also be provided in the application form.
 b. Certified xerox copies of CDA/SEC Registration Certificate, articles of
incorporation and by-laws (Note: Original copies shall be returned to the
applicant immediately after verification by NFA). The articles of
incorporation should specify that the FO is authorized to engage in the
grains business and to enter into contracts for the acquisition of facilities.

c. Notarized/Sworn Statement of Assets and Liabilities (Note: The NFA

Provincial Manager may be the Administering Officer). FOs applying for
availment of ricemills shall be required to submit the notarized/sworn
year-end Statement of Assets and Liabilities for the past two years.

FOs applying for availment of threshers or corn shellers shall submit only
the notarized/sworn Statement of Assets and Liabilities for the
immediately preceding year.

d. Notarized Financial (Income and Expense) Statement (Note: the NFA

Provincial Manager may be the Administering Officer). FOs applying for
availment of ricemills or cornmills shall be required to submit the
notarized/sworn financial statements for the past 2 years. FOs applying
for availment of threshers or corn shellers shall submit only the
notarized/sworn financial statement for the immediately preceding year.

e. Updated masterlist of officers and members and their respective

addresses, location and size of production area.

f. Board Resolution authorizing its representative to negotiate and sign

documents in behalf of the FO.

g. RTC/MTC clearance certifying that the applicant FO and its authorized

representative have no pending case in its courts. (Note: There should be
separate RTC/MTC Clearance for the FO applicant and its authorized
representative).

h. Sketch or location map of the applicant FO's service area, showing the
roads leading to the barangays where the FO has members to be served
by the PHF/s being applied for.

i. Canvass sheet/Quotation for each PHF being applied for as issued and
signed by the prospective supplier/manufacturer. It shall specify the
particular PHF's brand, model, specifications, price, and acceptable and
warranty terms.

2. The Provincial Office's EBDPS Section shall check the completeness of all
required documents submitted by applicant FOs. Only applications with complete
requirements shall be accepted. For applicants with incomplete requirements, a
 list of the deficiencies shall be prepared by the Marketing Development Section.
The list of deficiencies shall be returned to the applicant for completion.

3. For qualified applicants with complete requirements, the EBDPS in coordination

with the Senior Enforcement and Investigation Officer shall conduct initial
evaluation of the following:

a. credit standing of the applicant FO, its authorized representative as well as

its officers.

b. criminal records, if any, of the FO, its authorized representative as well as

its officers.

c. prevailing acquisition cost/price of PHF/s delivery/test-run terms and

warranty as canvassed among different PHF manufacturers/dealers in the
area.

4. The Provincial Office thru the Regional Office shall recommend to the Extension
Directorate only those FOs which have completed the requirements and are of
good moral/credit standing. The results of the initial investigation shall also be
forwarded to the EXD for final evaluation.

5. The Extension Directorate - Technical Extension Division shall be in charge of the

overall evaluation of FO applicants. It shall check the requirements forwarded by
the Provincial Office. It shall create Project Evaluation Teams to assess/evaluate
the management/financial capability of the processed according to their priority.
The Extension Directorate shall issue a monthly situationer on the applications
processed, applications still pending (according to their priority) and funds
availability.

6. Applications for availment of the facilities under the program shall be approved by
the Administrator as recommended by the Asst. Administrator for Marketing
Development and the Director of Extension Directorate.

7. Upon approval of the application by the NFA Administrator, the Extension

Directorate shall advise the NFA Provincial Office to prepare and execute the
Deed of Sale with Reservation of Title (Annex A). The Schedule of PHF
Amortization shall be annexed to, and shall form part of the Deed of Sale with
Reservation of Title. Among others, this Deed of Sale stipulates that the NFA, as
vendor, shall remain the sole owner of the PHF/s until after these have been fully
paid by the FO and after a Certificate of Ownership is issued by the vendor in
favor of the vendee (FO). This Deed of Sale stipulates that during the period of
payment, only the use and possession of the PHFs are deemed conveyed by the
NFA to the FO. However, for purposes of securing the necessary NFA license/s
of business/es, the beneficiary FO shall be considered the owner/licensee.
 7.1 The Regional Director shall approve and sign the Deed of Sale with
Reservation of Title.

7.2 All fees and expenses necessary for the execution and registration of the
Deed of Sale and all other documents executed in connection with said
contract shall be shouldered by the beneficiary FO.

B.2 Selection of Authorized Suppliers of Locally Manufactured PHFs

1. Based on the following criteria, the Extension Directorate shall prepare a list of
authorized suppliers of locally manufactured threshers, shellers, ricemills and
cornmills with provincial branches;

a. The manufacturer/distributor must be duly accredited with the Agriculture

Machinery Manufacturers and Dealers' Association (AMMDA) or are
cooperating manufacturers under the DA-IRRI Industrial Extension
Program for Small Farm Equipment.

b. The models/specifications of the required PHF/s must have been

tested/certified by the Agricultural Machinery Testing and Evaluation
Center (AMTEC) and duly accredited by the Agricultural Machinery
Accreditation Committee (AMAC) as verified by the Extension Directorate.

2. The list, which also contains the PHFs sold by every supplier and the latest
selling prices, shall be disseminated by the Extension Directorate to all provincial
offices nationwide.

3. The NFA provincial office shall reproduce copies of the list and shall disseminate
it to different FOs.

4. The Marketing Development Section, in coordination with the Senior Enforcement

and Investigation Officer shall conduct credit and background investigation on all
manufacturers/distributors included in the list that are available in the area.
Manufacturers/distributors with good credit standing and are proven to be reliable
in after-sales services and spare parts availability shall be highly recommended
to the FOs. FOs shall be informed of any unfavorable findings on a particular
supplier/distributor that they choose.

5. In provinces where there are no PHF manufacturers or dealers, the choice of

manufacturers/dealers outside of the province shall still be left to the applicant
FO. However, NFA provincial offices shall advise such applicant FOs on which
particular manufacturers and/or distributor/s is/are noted for better warranty and
better after-sales service (particularly spare parts availability).
 6. To ensure that the prices quoted by suppliers/distributors chosen by farmers
groups are reasonable, the Provincial Office shall make a survey of prevailing
prices of other distributors of the same of similar PHF/s.

7. Technical evaluation of the facilities offered shall be undertaken by an evaluation

team composed of EXD, TSD and NFA regional/provincial engineers.

B.3 Acceptance of PHF and Payment of Supplier

1. The NFA provincial office shall notify the supplier of the name and address of the
beneficiary FO upon receipt of the information from Extension Directorate that the
FO's application for PHF assistance has already been approved by the
Administrator.

2. After the FO's representative has signed the Deed of Sale with Reservation of
Title, the NFA Provincial Office shall prepare the Deed of Absolute Sale between
NFA and the supplier (Annex B), which shall thereafter be forwarded to the
Regional Office for signature by the Regional Director.

3. Upon signing of Deed of Absolute Sale by the Regional Director, the supplier shall
deliver to, and install the PHF on the FO's site free of any charge.

4. The supplier guarantees the PHF/s to be free from any defect. He shall conduct a
test run of the PHF in the presence of the NFA EXD/TSD/regional/provincial
engineer or MPO.

The FO beneficiary shall make available grain stocks to be used for PHF test run.
If a factory defect is found during the test run, the PHF shall be withdrawn by the
supplier for replacement. Withdrawal expenses shall be for the account of the
supplier.

5. The test-run shall be accomplished by hands-on training for the

ricemill/thresher/sheller/cornmill operators to be conducted for free by the supplier.
The supplier shall also turn-over all accessories/tools and technical manuals to the
FO during the training.

6. After the FO beneficiary is satisfied with the test-run and training, its authorized
representative shall sign the Certificate of of Acceptance (Annex C) of the PHF/s
from the supplier. A NFA provincial representative shall likewise the witness
portion of the certificate.

7. After the Certificate of Acceptance is signed by the FO's authorized

representative, NFA shall pay the supplier in full the purchase price of the PHF.
 8. The supplier warrants that factory defects manifested within a period of two (2)
months from acceptance of the PHF/s shall be replaced/repaired at no cost to the
NFA or to the FO beneficiary.

9. The free repair service warranty period should be at least six months from signing
of the Certificate of Acceptance.

10. The supplier shall shoulder all taxes, stamps, licenses, permits and/or other fees
required by the government in connection with its sale of PHF/s.

11. All the above-conditions shall form part of the Deed of Absolute Sale of the PHF/s
to be executed between the supplier (as vendor) and the NFA (as vendee),
notwithstanding any contrary condition/s in the supplier's invoice/receipt. The
Regional Director shall approve and sign the Deed of Absolute Sale.

12. Payment to the supplier shall be through the usual disbursement voucher system.
The supplier shall attach a true copy of the Certificate of Acceptance.

13. The supplier shall collect payment at the NFA field office where the processing of
the application and installation of the post-harvest facility were made.

B.4 Terms of Payment by FOs

1. The contract price of the PHF shall be equivalent to the acquisition cost plus a ten
percent (10%) mark-up. The beneficiary FO shall pay the NFA through an
amortization scheme. The ricemill and cornmill shall be amortized within eight (8)
years, in sixteen (16) equal semi-annual payments. Threshers and shellers shall
be amortized within four (4) years, in eight (8) equal semi-annual payments.
Payments shall be due every June 30 and December 31.

1.1 The first due date of amortization shall fall not earlier than three (3)
months after issuance of the Certificate of Acceptance by the beneficiary
FO.

Illustration:

If the FO accepts the PHF from the supplier on or before Sept 30

(or three months before December 31), amortization becomes due on
December 31), of the same year. However, if the FO accepts the PHF
from the supplier after Sept. 30 (or less than 3 months before Dec. 31)
then the first amortization falls due on June 30 of the succeeding year.

2. Based on the Contract of Sale with Reservation of Title, the NFA Provincial Office
Marketing Development Sections shall remind t he beneficiary FOs of their
obligations at least one (1) month before the due dates of amortization payments.
 2.1 Failure to pay the installment on the due date shall subject the beneficiary
FO to a penalty of 1% per month or any installation due.

2.2 As an incentive for prompt payment of amortization, a rebate of five

percent (5%) shall be granted if payment is made at least one month
before the due date (i.e not later than the last working day of May or
November).

3. The semi-annual payments maybe in cash or in kind.

a. For cash payments, an Authority to Accept Payment (AAP) containing the

amount to be paid by the beneficiary FO to the NFA Provincial Cashier
shall be prepared by the Senior Grains Operations Officer (SGOO) of the
Marketing Development Section, based on the Deed of Sale with
Reservation of Title.

b. For payment-in-kind (PIK), valuation of stocks shall be based on the NFA

procurement price at the time of payment, and on the procurement
procedures and quality standards set by NFA. Stocks shall be delivered
by the beneficiary FO to the designated warehouse/buying station or to
Mobile Procurement Team (MPT) assigned in the area if any. To
document the receipt of the stocks, "PIK-NFA-PHF Assistance Program II"
shall be indicated in the remarks portion of the WSR and in the PR.

c. The beneficiary FO may use their accumulated Cooperative Incentive Fee

(CIF) as payment for the amortization of PHF under this program (Refer
to the existing SOP on the Cooperative Incentive Program).

4. Failure to pay two consecutive amortizations shall be a ground for repossession of

the facility.

4.1 The beneficiary FO shall be served a Notice of Default (Annex D) one

month after the due date of the amortization.

4.1.1 A monthly notice shall be served thereafter until the FO pays the
amortization.

4.2 If the FO still fails to pay the next amortization a first notice shall be
served fifteen days after the due date of the amortization.

It shall be served a second notice fifteen (15) days after the first notice if it
still fails to settle its account with NFA. The second notice shall remind the
beneficiary FO that non-payment of two consecutive amortization plus the
corresponding penalties shall subject its facility for repossession.
 4.3 NFA shall reposses the facility if payment is not made within fifteen (15)
days after the second notice has been sent.

5. Beneficiary FOs can only claim ownership of the facility uopon full payment of its
price after which a Certificate of Ownership shall immediately be issued in its favor
by NFA.

B.5 Utilization of PHF

1. Upon installation of the PHF, the beneficiary FOshall shoulder the cost for the
recommended proper maintenance and operation of the facility.

1.1 The beneficiary FO shall, at his own expense, provide a shelter/shed to

house the PHF/s in accordance with the minimum requirements of the
plans and specifications of NFA.

2. Immediately upon installation of the PHFs, the beneficiary FO shall secure the
necesssary license/s to engage in the appropriate line/s of business/es from the
NFA Provincial Office.

3. The PHF shall be utilized by the beneficiary FO only for the purpose it was applied
for and issued. Under no circumstances shall any part or accessory be used for
another purpose without prior written consent from NFA.

4. Upon signing of the Deed of Sale with Reservation of Title, the beneficiary FO
shall insure the PHF/s with any insurance company accredited by the NFA,
against loss or damage due to fire, theft orally natural calamity, for the full loan
amount of the period. The beneficiary FO shall deliver to the NFA the
corresponding policy upon execution thereof.

4.1 The insurance policy shall be renewed yearly based on the original PHF
loan. Payment of the annual insurance premiums shall be shouldered by
the beneficiary FO.

4.2 The concerned NFA provincial office shall monitor the expiration date of
each insurance policy.

4.3 The EBDPS shall send three (3) consecutive billing notices to the
beneficiary FO within fifteen days before the expiration oft he insurance
policy. Failure of the beneficiary FO to renew the insurance policy within
five days from the expiration of the coverage shall give right to NFA to
secure the necessary insurance policy. NFA may pay the annual
insurance premium chargeable to the CIF fund of the FO. In case the FO
has no CIF fund, NFA shall pay the annual insurance premium. The
beneficiary FO shall pay NFA the corresponding premium and a penalty
 of 1% per month (or a fraction thereof) and other costs of the insurance
within five (5) days from execution thereof.

4.4 Failure of the beneficiary FO to reimburse the insurance premium within

one (1) month shall give right to NFA reposses the PHF.

4.5 In the settlement of insurance claims, NFA shall collect that portion
corresponding to the unpaid amortization balance, penalties, and other
charges. The check shall be payable to NFA, and the rest of the
proceeds, if any, shall be paid to the beneficiary FO.

5. Training of technicians/operators on the operation and maintenance of the PHF

shall be conducted by the NFA as may be necessary. It shall also assist the
beneficiary FO on the sourcing of needed spare parts.

6. The NFA through its authorized representative shall have the right to inspect the
facilities at any reasonable time without notice to the beneficiary FO, and to
conduct periodic technical and financial audit relative to the PHFs.

7. In case of loss or destruction of the PHF and/or parts or accessories through the
fault or negligence of the beneficiary FO, the FO shall pay the NFA the total cost
of the PHF and/or parts or accessories lost or destroyed.

8. In case of repossession of the PHFs for grounds enumerated in Item II.A.5, NFA
shall pull-out the facility/ies wherever it may be found.

8.1 All previous payments made shall be considered as rental payment for the
use of the facility.

8.2 NFA shall have the right to demand and collect all amounts due and
demandable, including penalties already incurred.

8.3 If the conditions of the PHF/s upon repossession is/are such that its/their
actual or market value is less than the total amount of unpaid
amortization, the beneficiary FO shall be required to pay the difference.

8.4 Beneficiary FOs shall also be liable to the payment of liquidated damages
in an amount equivalent to 25% of the outstanding obligations of the
beneficiary FO to NFA.

8.5 In the event of default, the NFA shall have the option to effect payment of
the obligations of the beneficiary FO out of whatever funds, securities and
properties belonging to the beneficiary FO, which
funds/securities/properties may be in the possession or control of the
NFA, including the accumulated Cooperative Incentive Fee (CIF).
B.6 Reporting and Monitoring System

1. The Provincial Office's EBDPS shall maintain a Post-Harvest Facility Assistance II

Monitoring Logbook (Exhibit 2) to record semi-annual payments made by
beneficiary FOs. The Extension Directorate shall maintain the same logbook to
monitor payments made by all beneficiary FOs.

2. The EBDPS shall provide the Warehouse Supervisor of the designated warehouse
with a list of beneficiary FOs under the NFA Post-Harvest Facility Assistance
Program II and their schedule of semi-annual payments in case the beneficiary
FOs opt to pay in kind.

3. The Warehouse Assistant/Field Clerk, at the end of each harvest season shall
prepare a report (Exhibit 3) on PIK made by beneficiary Fos which shall be
certified correct by the WS. The report shall be submitted to the Finance Section,
and the 3rd copy shall be retained by the WS. The EBDPS shall make the
corresponding entries on the NFA Post Harvest Facility Assistance II Monitoring
Logbook.

4. The EBDPS shall submit to EXD, Technical Extension Division cc: DAB and DTFM
an Amortization Collection Report (Exhibit 4) every January 15 and July 15 of the
year. The report shall reflect the amortizations collected for the period (June or
December) and remittances to Central Office.

5. The Extension Directorate's Technical Extension Division shall prepare a quarterly

accomplishment report (Exhibit 5) to be submitted to the Director cc. the office of
the AAMD on or before the 7th day of the following quarter.