SOP Library

SOP NO: GM.DL05

Mission: Stabilization

Area: Grains Marketing (GM)

Activity: Dispersal (GM-DL)

Title: SOP on the Hiring of Vessels for Domestic Operations Through Voyage Charter

Date Approved/Issued: 01/01/99

Date Effective: 12/22/98

Digest:

I. TERMS OF REFERENCE

A. OBJECTIVE

1. To set up a standard system 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 scheduling,
setting of freight rates, ensuring availability of vessels, implementation of
voyage charter parties and processing and payment of freight.

B. SCOPE

This SOP covers the chartering of vessels and barges through a Voyage Charter
for NFA domestic shipping operations; preparation, awarding and execution of a
voyage charter party, determination of freight rates and payment of freight.

C. BASIS

Approved Operational Guidelines on the Hiring of Vessels Through Voyage

Charter (DMO-OCD-C-050) dated March 2, 1998
II. IMPLEMENTING GUIDELINES

A. Accreditation of Ship Owners/ Charterers/Vessel Contractors

1. A Committee on Vessel Chartering (CVC) shall be created by the

Regional Offices concerned to handle the evaluation and accreditation of
all applicants who wish to enter into voyage charter with NFA.

2. The CVC shall be composed of the following members:

Chairman : Assistant Regional Manager

Vice-Chairman : Regional Operations Officer
Members : Regional Quality Assurance Officer
: Regional Investigator
: Regional Accountant
: Regional Economist
Observer : Commission on Audit

3. For economy measures, the Department for Marketing Operations (DMO)

shall publish, at the outset of the implementation of this program, a
Notice of Simultaneous Accreditation in NFA Regional Offices in at
least two newspapers of general circulation for three consecutive
days. The notice shall specify the scheduled date of meeting to discuss
the accreditation policies, procedures and accreditation proper.

4. The accreditation shall be opened to all interested shipping

companies/vessel owners/operators who are registered/licensed by
MARINA . Application for and processing of accreditation shall be a
continuing activity of the Regional Offices.

5. The applicant shall submit to CVC an accomplished application for

accreditation for vessel chartering. This shall be accompanied by a
formal letter indicating their intention to be accredited as NFA carrier of
grains, corn, feed grains, empty sacks, by-products, sugar and other
commodities.

6. Interested parties shall also submit the following documentary

requirements to CVC:

6.1 Certified Photo Copy of Certificate of Marina

Registration/License.

6.2 List of vessels owned, managed or operated, with their

corresponding capacities, which shall be committed to serve the
 hauling/dispersal requirements of NFA together with the following
documents:

6.2.1 Latest Certificate of Inspection/Seaworthiness

6.2.2 Coastwise License

6.2.3 For Chartered Vessels - Bare Boat /Time Charter Contract

which states that the liability of the vessel owner does not
diminish on any shortage /damage that may be incurred
while the cargoes of NFA are under his vessel's custody.
Moreover, a certificate from the Registry of Deeds and / or
MARINA stating that the vessel is not mortgaged twice shall
also be submitted.

6.3 For Single Proprietorship

6.3.1 Registration of Business Name with the Department of Trade

and Industry ; and

6.3.2 Special Power of Attorney authorizing a representative to

represent the firm in all its transactions with NFA and to sign
all documents relative thereto.

6.4 For Corporations/Partnerships/Cooperatives

6.4.1 SEC Registration or DTI Registration or

CDA Registration;

6.4.2 Articles of Incorporation and By-Laws/or

Articles of Partnership/By-Laws and Constitution; and

6.4.3 Board Resolution/Authority authorizing a representative to

sign documents in all its transactions with NFA.

6.5 List of clients for the past two years of the firm’s operations

7. Upon receipt of the application and supporting documents, the CVC

shall verify the submitted documents. It shall conduct a background
check on the industry standing of the applicant.

8. The process of accreditation shall include the examination and evaluation

of corporate records/documents as well as inquiring into the reputation
and performance of the company.
 9. A Certificate of Accreditation (Exhibit 1) shall be issued to accredited
shipping companies/shipowners/operators. It shall be approved and
signed by the Regional Manager and shall remain valid unless canceled
in the event of a default by the shipping company /contractor. Shipping
companies/ ship owners/operators with negative performance /records
may be blacklisted by the CVC upon the recommendation of the
Provincial Office.

10. The CVC shall submit to the Central Office-DMO the list of
accredited applicants for reference/information of top management
and for dissemination to other Regional Offices.

11. Only accredited shipping companies / vessel owners / operators shall be

qualified to enter into a voyage charter with the NFA.

12. Shipowners of Liner Vessels need not be accredited by NFA

considering that liner vessels have specific/regular routes and uniform
freight rates as authorized/approved by MARINA/Philippine Ports
Authority.

B. DISPERSAL AUTHORITY

The dispersal authority shall be the basis of the source province for the
movement of stocks.

C. CONDUCT OF CANVASS

1. Upon receipt of the official dispersal schedule of the Province, the

Provincial Office shall conduct a canvass of offers/request for
quotation from all NFA accredited vessel owners/operators operating in its
area, following the format of Exhibit 2.

2. The Provincial Manager shall evaluate and prepare the summary of

offers/quotations and recommend for the approval of the Regional
Manager the most favorable freight rate offer/quotation.

3. Based on the approved freight rate, the Regional Manager shall also
issue a Freight Rate Bulletin (Exhibit 3 ), which shall be the basis of the
source province for hiring of vessel and payment of freight claim.

4. Approved freight rate for the same route shall be considered valid for
three (3) months and can be utilized by the region /province as long as it
is still applicable/acceptable to the accredited shipowners/operators and
to the NFA. If the freight rate is not anymore applicable/acceptable
to the ship owners/operators or if the market situation warrants a
decrease in freight, the source province shall conduct a re-canvass of
 offers /request for quotation for new freight rate approval. In case an
accredited ship owner / operator offers a lower rate than the existing
approved freight rate, the source province shall conduct another re-
canvass of freight rates to be used as the basis for the approval of a new
freight rate.

5. If the contractor is represented only by an authorized person, he shall be

required to submit a Special Power of Attorney (SPA) authorizing him to
transact with the NFA and to sign all documents relative thereto.

6. Upon receipt of the Notice of Readiness (NOR) to load and transport the
stocks, a team composed of the Port Operations staff together with the
Quality Assurance Officer (QAO), shall conduct an inspection to check if
the vessel holds/hatches are suitable in all respects to receive the cargo.

The vessel should be free from:

6.1 Live insects;
6.2 Objectionable odors, droppings, spillages or
residues of the previously transported cargoes;
6.3 Water;
6.4 Protruding objects which could damage the
container (e.g. nails); and
6.5 Water/oil Leakage.

The hatch covers should be in good condition and provided with

efficient gaskets and/or tarpaulin.

7. A vessel found 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 / fumigation have
been carried out to put the condition of the vessel in good order. However,
if vessel is not ready to receive the cargo within the laydays agreed upon
in the voyage charter, the NFA - P.O. shall issue a written notice to the
carrier that NFA has opted to cancel the carrier's vessel. If a substitute
vessel shall be provided by a carrier, the substitute vessel should be
available within the same laydays allowed for the original vessel.

D. LETTER OF AGREEMENT FOR VOYAGE CHARTER

1. The Provincial Office shall ensure that all documents pertaining to the
vessel to be contracted are in good order and that the vessel is free from
any encumbrances that may compromise NFA’s cargo.

2. Upon completion of inspection, signing of the Letter of Agreement for the

Hiring of Vessel /Barge (Exhibit 4) shall be set by the source province
 with the vessel owner or his duly authorized representative and the NFA
Regional Manager as the signing authority for the NFA.

3. If the supply situation of vessels in the area is tight, the Letter of

Agreement may be executed between the NFA and the ship owner/
operator, even if the vessel is not at berth for inspection. However, the
source province shall ensure that the vessel provided for loading is the
same as the one specified in the voyage charter contract and pre-
inspection was conducted prior to its loading.

C. INSURANCE

Insurance coverage of NFA cargo shall be secured by the NFA through the
Special Project Office (SPO) for the account of NFA without prejudice to the
obligations and liabilities of the carrier under the Letter of Agreement and
applicable laws.

D. FREIGHT CLAIMS/PAYMENTS

1. Freight payments shall be based on the vessel intake of cargo at loadport,

in bags of 50 kg and net of NFA claims for losses / damages conformed to
by the vessel owner / contractor.

2. Payment of freight shall be made by the NFA Provincial Office which

issued 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. If the carrier
fails to submit the complete set of documents, the reckoning date shall be
from the date the documents were completed.

3. Payment of losses / damaged stocks:

3.1 If the seal is broken / tampered, the contractor shall be liable for
any shortage both in the number of bags and in weight.
Payment shall be based on NFA’s replacement cost.

3.2 If the seal is not broken or tampered, the contractor shall only be
liable as to the number of bags lost which may be accounted in the
course of loading and unloading period wherein vessel hatches are
not sealed. Payment shall be based on NFA’s consumer price.

4. Payment of losses shall be made through the following schemes,

according to hereunder order of prioritization, depending on the amount
vis-s-vis collectible freight from NFA:
 4.1 Deduction from the freight claim voucher;
4.2 Cash payment; and
4.3 Payment-in-kind or replacement with good or better quality stocks of
the same type and specifications based on NFA consumer price or
replacement cost, whichever is applicable.

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

5.1 Bill of Lading; and

5.2 Statement of Account/Bill/Invoice.

The above shall be submitted in three (3) copies, including the original, to
the NFA Provincial Office for the voucher preparation by the Marketing
Operations Unit.

6. Documents shall be verified by the NFA Provincial Office and shall be

counterchecked for authenticity/ accuracy per records.

7. Two (2) copies of the following documents shall be attached to the

voucher and shall be submitted to the NFA Provincial Accounting Section
for processing and payment:

7.1 Bill of Lading

7.2 Statement of Account/Bill / Invoice
7.3 Letter of Agreement for The Hiring of Vessel / Barge
7.4 Abstract of Offers/Proposals
7.5 Certificate of Loading issued and signed by the NFA-PM
7.6. Unloading Report of receiving province indicating volume received,
quantity damaged, etc.

Payment shall be released by the NFA Provincial Accounting Section in

accordance with
NFA’s and Commission on Audit’s accounting and auditing rules and
regulations.

E. ACCOUNTING TREATMENT

1. To set-up accrual of freight expense:

DR: B-TCV-II-Inter-island Vessel xxx
CR: Acrued Expense Payable-Inter-island Vessel xxx

2. To record dispersal of stocks (Issuing Province)

CR: ROCA/HOCA (at STC) (xxx)
DR: B-Operating expense-TCV-I
 (Difference bet. STC &BV) xxx
CR: Items for Sale Inventory (at BV) xxx

3. To record transfer-in ( Receiving Province)

a) Shortage/losses within tolerable allowance:

DR: Inventory Items for Sale (QTY. received x

STC of Issuing Province) xxx
DR: OE-Spillages / Losses ( within TOLA) xxx
CR: ROCA / HOCA xxx

b) If shortlanded stocks:

DR: Inventory Items for sale (Qty. received x STC) xxx

DR: OE-Spillages/Losses (TOLA) xxx
CR: ROCA/HOCA (Losses in excess of TOLA
chargeable to Issuing Province x STC) (xxx)
CR: ROCA/HOCA ( Total volume per WSI of
issuing province x STC ) xxx

4. Upon payment of freight , shortlanded to be deducted from claims

( Issuing Province):

DR: Accrued Expense Payable (previous set - up) xxx

DR: B-TCV-II-Inter-island Vessel (Adjustment) (xxx)
CR: ROCA/HOCA (Shortage charged by
Receiving Province) xxx
CR: Misc. Income-Difference bet. RC & STC xxx
CR: Vouchers Payable xxx

DR: Vouchers Payable xxx

CR: Cash In Bank xxx

Accounting for Marine Damaged Stocks:

5. Receiving Province - Upon receipt of stocks based on WSR:

DR: Items for Sale Inventory (at STC) xxx

CR: ROCA / HOCA
xxx

To reclassify to Miscellaneous Inventory:

DR: Misc. Inventory - Damaged Stocks xxx
DR: Inventory Items for Sale (xxx)
 6. Upon Withdrawal by the GSIS:

CR: HOA (xxx)

CR: Miscellaneous Inventory-Damaged Stocks
xxx

7. Central Office Books - Upon Billing:

DR: Miscellaneous Receivable-GSIS xxx

CR: FOA xxx

8. Upon Collection - C.O.

DR: Cash w/ Collecting Officer xxx

CR: FOA (Adjustment: Amount collected against set-up) (xxx)
CR: Miscellaneous Receivable - GSIS
xxx

9. Field Office Books - Upon receipt of Advice:

CR: HOA (xxx)

DR/CR: Losses/Income xxx xxx

H. REPORTING

The Regional Office shall submit to DMO on a monthly basis a Summary of

Approved Freight Rates and Vessel Utilization Report following the
prescribed format (Exhibit 5).