Overpricing of imported rice baseless – NFA

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State-run National Food Authority (NFA) on Tuesday slammed the charges raised by an activist lawyer and a farmers’ cooperative on the alleged overprizing of rice imported from Vietnam, saying that the accusations are “patently false and baseless.”

NFA Administrator Orlan Calayag said that accusations raised by Lawyer Argee Guevarra, which was corroborated by Ang Gawad Pinoy Consumers Cooperative, about the recent rice importation is mistaken and unfounded, but came just the same as some traders are floating shortage in rice.

“Interestingly, during the periods when we were importing a substantial volume of rice, no question was ever raised against the procedure followed to effect importation,” Calayag said.

“We can only surmise that the media campaign against our importation for this year may be the handiwork of those who have been affected by our efforts to cleanse the NFA,” he added.


News reports quoting Guevarra, who on the basis of unspecified documents, concluded that the agreed purchase price of $459.75 per metric was overpriced.

The NFA chief said that the conclusion derived by Guevarra is mistaken, saying that the lawyer arrived at the same by comparing the Cargo, Insurance, Freight (CIF); Delivered, Duties Unpaid (DDU); and Free on Warehouse (FOW) price with the Freight on Board (FOB) price quoted by Oryza Global Rice price.

“The two are not comparable since the cost of safe delivery of the rice to predetermined NFA warehouses is included in the CIF, DDU price. This cost is in addition to the FOB price,” Calayag said.

He noted that the final acceptance for quantity and quality for CIF, DDU is in the warehouse while in FOB, it is at the loadport.

“Thus, losses brought about by spillage, shrinkage and shortlanding are not imputed. These losses are equivalent to 0.9591 percent of the total volume, per study of our Technical Research and Services Department,” he added.

FOB is a trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship’s rail.

CIF and DDU, on the other hand, means a transaction in international trade where the seller is responsible for making a safe delivery of goods to a named destination (warehouse), paying all necessary expenses, like insurance, transportation expenses, spillages, shrinkages, shortlanded costs, etc., but not the duty.

Calayag explained further that the seller bears the risks and costs associated with supplying the good to the delivery location, where the buyer becomes responsible for paying the duty and other customers clearing expenses.

“The term is synonymous with the term FOW,” he explained.

The NFA chief also said that a consideration of the figures at hand would reveal that Guevarra’s conclusion that our price is way above the prevailing market price in Vietnam is “erroneous.”

The FOB price of the rice procured by NFA from Vietnam is $365.00 per MT, below the FOB reference price offered by Guevarra of P15,480.00 per MT or $376.28 per MT (computed at P41.14 to $1).

“Otherwise stated, the price offered by Guevarra is higher than the NFA FOB price by $11.28 per MT or P95, 132,136,” Calayag said.

“The NFA was judicious in dealing with Vietnam Southern Food Corporation II. In reference to the FOB price of $365.00, the CFR-FO price up to the port of destination was estimated at $459.75 per MT,” he said.

As at the contract with Vetnam is at CIF, DDU terms, Calayag said the estimation included transportation and other attendant costs in the delivery of rice to NFA warehouses for a total cost of $531.66.

Calayag also refuted claims that the NFA inserted, without any authority, an additional 18,700 MT to its government-to-government importation.

“The agreement between the Philippines and Vietnam, contained a 10 percent MOLSO [more or less at supplier’s option]provision, which gave to the latter an option to deliver an additional 10 percent or 18,700 MT of the contracted volume of 187,000 MT,” he said.

The agreement and the MOLSO provision were known to and were confirmed by the members of NFA Council via Resolution No. 682-2013-F.

Also, the Fiscal Incentives Review Board (FIRB) approved the grant of additional tax expenditure subsidy (TES) to cover the additional duties incurred by reason of the increased volume.

“It should be stated that without the TES, the Bureau of Customs would not have allowed our additional volume to leave our ports,” he said.

Vietnam exercised the option and delivered an additional 18,700 MT.

To recall, the NFA has awarded the supply of 187,000 MT of rice to Vietnam under the government-to-government tender, a fact that Guevarra failed to highlight in the reports.

The volume, which will be enough for six days, will form part of the Philippine government’s buffer stock for the lean months of July to September. It will also serve as contingency stocks during natural or man-made calamities.

The rice stock specified under the tender is 10 percent long grain white rice with 25 percent broken.

The Association of Southeast Asian Nations member countries with existing memorandum of agreement for the supply of rice to the Philippine government were invited to submit their sealed offers and quotations, but only Thailand and Vietnam joined the tender held on April 3.

Thailand, through its Department of Foreign Trade, had a price offer of $568/MT with a minimum offered volume of 100,000 MT to a maximum of 187,000MT. For its part, Vietnam Southern Food Corp. had a price offer of $459.75 for the total maximum volume.

Calayag said that Vietnam’s offer was lower by $108.25/MT, noting that the bid offer was lower than the NFA’s 2012 rice import at $470.70/MT.

Vietnam’s quoted offer was significantly lower and therefore advantageous to the Philippine government. JAMES KONSTANTIN GALVEZ

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