BUSINESS PROPOSAL PROPOSED EXPORT TRADING & LOGISTICS OPERATIONS OF COPRA & ITS BY-PRODUCTS TO CHINA & PAKISTAN.

I. BAKGROUND

There have been so many changes in the commercial trade for the past few years. The advancement in the technology, communication and in the transport system improves business efficiency, quality performance of services and the production of quality products that will meet customers’ requirement at optimum cost. However, one of the emerging business trends is the EXPORT trading business opportunity of Copra and its by-products such as Crude Coconut Oil, Copra Expeller Cake/Meal, Copra Solvent Extraction Pellets and Coconut Acid Oil. Our Country is producing more than half of the world’s Crude Coconut Oil according to the Bureau of Export Trade Promotion and ranked no.1 in the Philippine Agribusiness Export. The abundance of Copra supply and the presence of Oil Millers in the country will guarantee and assure steady supply of products. Iligan City and the province of Lanao del Norte have more than 8 million bearing trees (PCA Report as of January 2007). Also, one advantage here in Iligan is the presence of the biggest oil mill, Granexport Manufacturing Corporation & second biggest the San Miguel Corporation now operated by Iligan Bay Milling & Trading Corporation. Currently these two oil mills are supplying both domestic and traditional export markets such as, Canada, USA & Europe with higher market volumes. Medium scale traders with minimal market volumes supply China and other parts of Asia.

II. PRIMARY OBJECTIVE

To source-out related information, evaluate and design at optimum cost the Trading services & Logistics operations of Copra & its related quality by-products such as Crude Coconut Oil, Copra Expeller Cake, Copra Solvent Extraction Pellets and Coconut Acid Oil for the proposed export markets.

III. SECONDARY OBJECTIVES

1. To describe the product, its physical characteristics, chemical composition, quality parameters, product yields, storing & warehousing methods. To determine the governing and regulatory board of the products.

2. To source-out potential supplier of the products, its strategic locations, operating capacities.

3. To identify best-known trading terms, alternatives and concise market information.

4. To determine Government & legal responsibilities, regulatory aspects in the promotion of export trade markets.

5. To plan efficient Logistics operations involving materials management, packaging, handling methods, freight arrangement, measurement, mode of transport & documentation process.

6. To establish cost analysis, cost savings techniques & trading options.

IV. DESCRIPTION OF THE PRODUCT

A. Copra

Is the dried meat, or kernel of the coconut (Cocos nucifera). Copra may be stored at temperature of 0-1.5C with relative humidity of 75% or less for 1-2 months. In storage, they are subject to loss in weight, drying up of nut milk and mold. They may be held for 2 weeks at room temperature without serious loss.

Moisture Content – 6% AVE FFA – Below 3% as lauricInferior Copra – 1.0% max Color – 8 red Dust & Foreign Matter – 0.5% max Aflatoxin – below 20 ppbAflatoxin Related Mold – 1.0% maxOil Content – 64.5% AVE

B. Crude Coconut Oil (CNO)

This is the natural Oil derived from dried meat of the coconut. Crude Coconut oil is extracted from the kernel or meat of matured coconut harvested from the coconut palm (Cocos nucifera). Throughout the tropical world it has provided the primary source of fat in the diets of millions of people for generations. It has various applications in food, medicine, and industry. Coconut oil is very heat stable so it makes an excellent cooking and frying oil. It has a smoke point of about 360°F (180°C). Because of its stability it is slow to oxidize and thus resistant to rancidity, lasting up to two years due to high saturated fat. It is colorless to brownies-yellow in appearance. Crude Coconut oil is stored in cylindrical tanks.

Color – 18 red max.Moisture & Volatile Matter (MVM) – 0.25 % maxFree Fatty Acid as Lauric (FFA) – 4.0 % maxSolid Impurities (SI) – 0.15 % max Iodine Value – 7.5 – 10.5 Specific Gravity at 25 oC- 0.917 -0.919Flash Point – 200 oC / 392 oFOdor – No offensive smell

C. Copra Expeller Cake / Meal

It is produced from the raw material called copra. The copra is reduced to a desired size and cooked at a temperature between 78 oC to 100 oC. The cooked copra is mechanically pressed using expeller machines thereby resulting to the production of crude coconut oil and expeller cake. The cake is then forwarded to the cake warehouse for its storage.

Physical Characteristic – Dry compact flat-shaped round copra meal. Size: 6 to 13 mm in thickness. Color: light brown in color. Odor: distinctive cooked desiccate copra. Residual Oil (RO) – less than 8 %MOISTURE – 12 %PROFAT – 25 %PROTIEN – 18 %FAT – 8 %POP TEST – negativeAflatoxin – 20 ppb to 50 ppbFree From any contamination live weevils and insectsSalmonella – negative. Shelf life – 6 months max.Product temperature – below 40 0C to prevent carbonization.

The product is stored and transported at ambient temperature and kept away from moisture or water and from any source of contamination and ignition.

D. Copra Solvent Extraction Pellets

It is produced from the raw material called copra. The copra is reduced to a desired size and cooked at a temperature between 40 oC to 100 oC. The cooked copra is mechanically pressed using expeller machines. The remaining oil in the expeller cake meal is the chemically extracted using hexane as solvent. The meal that passes through the chemical extraction undergoes desolventizing and toasting process at a maximum temperature of 120 oC to remove any traces of salmonella and solvent. The meal is then forwarded to the pelleting section where these are pelletized.

Residual Oil (RO) – less than 3 %MOISTURE – 12 % maxPROFAT – 20 – 24 %PROTIEN – 18 – 20 %FAT – 8%POP TEST – negativeAflatoxin – 20 ppb to 50 ppbFree From any contamination live weevils and insectsSalmonella – negative. Shelf life – 6 months max.Product temperature – below 40 0C to prevent carbonization.

The product is stored and transported at ambient temperature and kept away from moisture or water and from any source of contamination and ignition.

E. Coconut Acid Oil (CAO)

Is the by-product of RBD oil (Refined, Bleached & Deodorized) or edible oil thru chemical process.

Moisture Content – 2.0 % maxFree Fatty Acid as Lauric 59.0%Free Fatty Acid as Oleic 70.5% minIodine Value 7-16Saponification Value – 240 minPeroxide Value 5.0 maxOdor – Unpleasant acidic odorColor - Black

PRODUCT YIELDS

Concept

Inventory of copra, crude coconut oil (CNO) & copra cake and copra pellets are based on the industry-wide practice on material balance computation of yield or the theoretical method, where the variables such as Moisture Content of copra (MC), Oil Content of copra (OC), Moisture Content of pellets, Residual Oil (RO) & the weight of CNO produced plays an important role in order to obtain the amount of copra crushed, CNO & pellet produced. Moisture Content, Residual Oil & Oil Content are data analyzed by the Quality Control Section & weight of CNO by the Logistics section. The ideal result of this equation would yield an exact amount of CNO & Pellet produced against the input copra. For instance, if the produced CNO is 100 MT at yield 67%, pellet produced should be 53.73 MT and copra crushed is therefore 149.25 MT. The Interrelationship of Copra, CNO & Pellets/Cake

The theoretical method of determining the volume of copra crushed and pellet produced is a versatile and advantage method, because of two reasons, first we can compute the corresponding volume without measuring the actual volume produced or crushed. Second, we can work back inventories during clean-out period of the warehouse by imputing the actual yield of the crude coconut oil. The work-back method can be computed by determining first the net inventory gain or loss of pellet, and then converting the oil content of pellet into copra terms. For instance, for a period of one year, the gain of pellet is 100 metric tons, the average residual oil is 5%, and the oil would also be 5 metric tons added with 62% of copra oil content. The new yield would be more efficient.

Food Safety Hazards in Copra & Copra Cake/Pellets

1. Biological – Refers to any living things big or small capable of growth and reproduction. Biological contaminants may infect or infest the food. It may range from macro to microbiological. Example visible pests, bacteria, fungi, algae, protozoa & virus.

2. Chemical – Refers to organic or in organic chemical residue or contaminants found in food, which may cause food to be unsafe to the customer. Physically, these food safety hazards can not be seen but they can be easily detected through qualitative & quantitative analyses. Example pesticides residues, veterinary residues, non-permissible food additives, excess permissible food additives, cleaning agents.

3. Physical - These are non-living or inanimate hard or sharp objects that are not normally found in food, which cause illness or traumatic injury to the consumer. Example glass chips, metal chips and shards, wood splinters, plastic chips, stones, wires.

Threats in Coconut Industry

Aflatoxin – A toxic compound that is produced by certain molds (aspergillus flavus) and contaminants stored food, which causes cancer.

Product Trading & Governing Organizations

1. PCA – Philippine Coconut Authority. Administrative Order #001 Series of 1990. Helps promote the coconut farmers and producers in the production of quality Copra.

2. NIOP – National Institute of Oil Seeds Products. The governing organization of USA in the trading of coconut oil and other oil-seed products. Established the trading guidelines such as trading rules, contracts, quality specifications and other shipping requirements.

3. FOSFA – Federation of Oil-Seeds and Fats Association, Ltd. The governing organization of Europe in the trading of coconut oil and other oil-seed products. Established the trading guidelines such as trading rules, contracts, quality specifications and other shipping requirements.

4. GAFTA – Grain and Feed Trade Association. The governing organization in the trading of solvent extraction pellets & expeller cake. Established the trading guidelines such as trading rules, contracts, quality specifications and other shipping requirements.

5. PDV – Product Board Animal Feed. Is an organization by public law in the Netherlands. The general board is represented by all trade associations and trade unions involved in the agriculture and industrial production of feed materials and the stock farmers as end users.

6. HACCP – GMP – Hazard Analysis & Critical Control Points – Good Manufacturing Practices. Series of agreements in a branch or sector in which the standard of conduct is laid down often with respect to hygiene, food & feed safety focused on safeguarding of the quality and safety of animal feed. It is also a process control relating to food and feed safety, which identifies hazards and quantifies risk. The risks are controlled using control measures.

7. Standard GMP Animal Feed. A set of requirements, based on ISO-9000 and HACCP (Codex Alimentarius), concerning the quality system and control measures for quality control of animal feed and feed materials and including a set of product specifications.

8. ISO 9000:2000 – A series of standards which sets the basic guidelines for the establishment of quality system. Specifies the requirement for a quality management system where an organization needs to demonstrate its ability to provide products that fulfill customer and applicable regulatory requirements and aims to enhance customer satisfaction.

V. OIL MILLS – Potential Source of Products.

1. SAN MIGUEL CORPORATION – now operated by ILIGAN BAY MILLING & TRADING CORPORATION. Located in Sta. Filomena, Iligan City.San Miguel Corporation’s (SMC) coconut oil mill business began in 1984. From the start, SMC’s coconut oil mill was export-oriented and, therefore, a dollar earner for the country. In 1988, SMC consolidated its coconut oil business operations by closing down its coconut oil plant in Lucena in Luzon and transferring its major equipment to its Iligan plant. ICOM, situated in an area of 5.5 hectares, has a rated copra crushing capacity of 800 MT per day. It sells its products mostly to Europe, Asia and the U.S., through its Trading Group at the SMC Head Office. ICOM is an ISO 9001:2000 – registered company. It obtained its Certificate of Compliance on May 24, 2004, as the first coconut oil mill to be ISO certified in the Far East Asia.Products – Crude Coconut Oil, Copra Expeller Cake, Copra Solvent Extraction Pellets.

2. Granexport Manufacturing Corporation

Located in Kiwalan, Iligan City. Granex was founded in 1954 bearing the name GRANEX Phil., then manned by only three (3) personnel who were engaged in the study of the copra business and the coconut industry as a whole. As an enterprise, it started with copra buying and exporting of copra. The company put up a coconut oil mill in Kiwalan, Iligan City and around 20 copra buying stations in the Philippines. All copra bought from these stations is transported or shipped to its plant in Kiwalan, for milling. Granex produces crude oil and coco pellet. In 1966, the management changed the company name to GRANEX Corporation, which was derived from Grand Export.

In 1979, it expanded the crushing capacity of its Iligan Oil Mill from 500 to 1000 MT, which made Granex as the “Biggest Coconut Oil Mill in the World”.Granex’s products are mainly exported to the USA, Europe & Japan.Products. Minola Cooking Oil, Crude Coconut Oil (Domestic) Copra Pellets, Crude Coconut Oil, Cochin Coconut Oil, Coconut Acid Oil.

3. THIRD MILLENIUM OIL MILLS, INC.

Located in Barangay Tabo-o, Jimenez, Misamis Occidental. The plant was acquired from Jimenez Oil Mills, Inc. It is registered with the Philippine Coconut Authority with a rated capacity of 500 tons per day on a full expeller process. Established on a 37,000 square meters of land area, the plant has enough area for current and future use and expansion. The plant has undergone some rehabilitation and renovation to suit the needs and current standards and requirements on safety and efficient operation. Production is slated to start in June, 2001 and shipment by August, 2001. The crushing facilities consist of 15 units of Anderson Super Duo Expellers and 10 Krupp Expellers. The plant shall initially crush 300 tons per day or 7,500 tons of copra per 25-day-month (4,500 tons of coconut oil, 2,500 tons of copra expeller cake/meal) and build it up to 500 tons per day or 12,500 tons copra per 25-day-month (7,750 tons of coconut oil, 4,250 tons of copra expeller cake/meal).

VI. TRADING

LETTER OF CREDIT

Letters of credit, also known as a Documentary Credit or LC in abbreviation, are often used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer, i.e., the holder of letter of credit by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped. When drafting a letter of credit, a series of the standardized terms and definitions must be used, among which the buyer or import is the "Applicant" and the seller or exporter is the "Beneficiary"; the bank that issues the LC is referred to as the "Issuing Bank" which is generally in the country of the buyer or importer, whereas the bank that advises the LC to the seller is called the "Advising Bank" which is generally in the country of the seller or exporter.

In fact, a Letter of Credit is a bank-to-bank commitment of payment in favor of an exporter or supplier, the Beneficiary, guaranteeing that payment will be made against certain documents that, on presentation, are found to be in compliance with terms set by the buyer or importer, the Applicant. On the other hand, the letter of credit also provides strong protection for the buyer or importer. Like Bills for Collections, Letters of Credit are governed by a set of rules from the International Chamber of Commerce. In this case, the document is called "Uniform Customs and Practice" and the latest

version is document number 600. In short, it is known as UCP600 and over 90% of the world's banks adhere to this document. There are several types of the letters of credit, incorporating different specific terms and conditions for a particular transaction.           

The exporter or supplier and importer and buyer can agree detailed terms, as part of the commercial contract. This can include exactly what documents need to be produced and precisely what detail such documents should quote. Letters of Credit, as well as offering a bank's commitment to pay, also offer benefits in terms of finance. Speak to your bank, or the Advising/Confirming Bank to see how they can help. Additionally, commercial insurers now offer an insurance-backed product that covers the same basic risks as confirmations

Typical Documents Requested in a Letter of Credit

1. Commercial invoice with packing slip, itemizing content of the shipment, prices of the goods and amount.

2. Transport or shipping documents such as a ocean Bill of lading or Airway bill, typically in five duplicates Commercial invoice with packing slip, itemizing content of the shipment, prices of the goods and amount.

3. Transport or shipping documents such as a ocean Bill of lading or Airway bill, typically in five duplicates.

4. Insurance document if such is prearranged to be seller's duty and agreed upon by both the seller and the purchaser.

5. Inspection Certificate , typically provided by a third party inspection agent jointly selected by the both parties.

6. Certificate of Origin stating from what country the shipped goods originate, but "originate" in a "certificates of      Origin" do not mean the country the goods are shipped from, but the country where there goods are actually made.

7. Other documents deemed necessary by the importer or buyer and agreed upon by exporter or seller.

SALES CONTRACT

1. CIF Sales Contract

Cost Insurance Freight or CIF is a term commonly used in international sales contracts. This term is used only when goods are transported by sea or inland waterway. CIF means that the price includes in a lump sum, the cost of the goods, the insurance and freight to the named destination. The seller's delivery and duty is complete when the goods are loaded on the receiving ship while docked in the port of shipment. The risk of loss and other costs then passes to the buyer.

Cost, Insurance and Freight is a trade term that requires the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier. Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery, payment, when the risk of loss shifts from the seller to the buyer and who pays the costs of freight and insurance. The most commonly known trade terms are Incoterms, published by the International Chamber of Commerce. These are often identical in form to domestic terms (such as the American Uniform Commercial Code), but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms. It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. Contact an international trade lawyer before using any trade term.

Cost, Insurance and Freight must also indicate the port of destination, e.g., CIF Shanghai.  When a price is quoted CIF by the supplier or manufacturer, it means that the selling price includes the cost of the goods, the freight or transport costs and also the cost of marine insurance. As mentioned earlier, CIF is an international commerce term (Incoterm).

CIF is identical in most particulars with Cost and Freight (CFR), and the same comments apply, including its applicability only to conventional maritime transport. Risk of loss of, or damage to, the goods is for the buyer, just as with CFR. However, in addition to the CFR responsibilities, the seller under CIF must obtain in transferable form a marine insurance policy to cover the buyer's risks of transit with insurers of repute. The policy must cover the CIF price plus ten percent and where possible be in the currency of the contract. Note that only very basic cover is required equivalent to the Institute "C" clauses, and buyers should normally insist on an "all-risk" type of policy such as that under the Institute "A" clauses. The seller's responsibility for the goods ends when the goods have been delivered on board the

shipping vessel. In the guidelines for CIF published in Incoterms 2000 the term "carrier" does not appear and it clearly states "the seller must deliver the goods on board the vessel at the port of shipment" which makes CIF the incorrect term to use where the seller wishes their responsibility to end when they deliver the goods into the hands of a carrier prior to the goods passing the ship's rail at the port of loading. In the great majority of transactions the more correct term is CIP. This term is only appropriate for conventional maritime transport, not ro/ro or international container movements.

2. FOB Sales Contract

Free On Board, or abbreviated as 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. When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as well as who pays the costs of freight and insurance. The most commonly known trade terms are Incoterms, which are published by the International Chamber of Commerce. These are often identical in form to domestic terms, such as the American Uniform Commercial Code, but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms. It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term. It should be noted that International shipments typically use "FOB" as defined by the Incoterm standards. Domestic shipments within the US or Canada often use a different meaning, specific to North America.

Under the Incoterm standard published by the International Chamber of Commerce, FOB stands for "Free On Board", and is always used in conjunction with a port of loading. Indication of "FOB port" means that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays cost of ocean freight transport, insurance, unloading, and transportation from the landing port to the final destination. The passing of risks occurs when the goods pass the ship's rail at the port of shipment. For example, "FOB Tianjin China" indicates that the seller will pay for transportation of the goods from their factory or warehouse to the port of Tianjin, and the cost of loading the goods on to the cargo ship. The buyer pays for all costs beyond that point including unloading. Responsibility for the goods is with the seller until the goods pass the vessel's rail. Once loaded on to the ship or vessel, the buyer assumes risk. Due to potential confusion with domestic North American usage of "FOB", it is recommended that the use of Incoterms be explicitly specified, along with the edition of the standards set forth in the International Chamber of Commerce's website, e.g., "FOB New York (Incoterms 2000)". Incoterms apply primarily to international trade, not domestic trade within a given country. This use of "FOB" originated in the days of sailing ships. When the ICC first wrote their guidelines for use of the term in 1936, the ship's rail was often still relevant, as goods were often passed over the rail by hand. In the modern era of containerization, the term "ship's rail" is somewhat archaic for trade purposes. The standards have noted this. Incoterms 1990 stated, "When the ship's rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the FCA term is more

appropriate." Incoterms 2000 adopted the wording, "If the parties do not intend to deliver the goods across the ship's rail, the FCA term should be used

The term FOB for "Freight On Board" is commonly used when shipping goods within the United States, to indicate who pays loading and transportation costs, and/or the point at which the responsibility of the goods transfers from shipper to buyer. This usage derives from the now obsolete US "Foreign Trade Definitions" of 1941. "FOB shipping point" or "FOB origin" indicates the buyer pays shipping cost, and takes responsibility for the goods when the goods leave the seller's premises. "FOB destination" designates the seller will pay shipping costs, and remain responsible for the goods until the buyer takes possession. A related but separate term "CAP" ("customer arranged pickup") is used to denote that the buyer will arrange a carrier of their choice to pick the goods up at the seller's premises, and the liability for any damage or loss belongs to the buyer. Note that this usage is inconsistent with the Incoterm standards.

Risk in relation to CIF and FOB contracts

CIF and FOB contracts - Goods in transit are a target for opportunists and thieves. Fire can break out almost anywhere. More rarely, road and rail accidents occur. Goods carried across water are subject to the predictable risks of loss or damage during the course of loading and of discharging, by sinking, stranding, by the ingress of water, by contamination by other goods, sweating and damage through shifting, etc. Perishable goods suffer if delayed. Some cargoes, especially bulk cargoes, suffer a measure of inevitable loss due (for example) to natural shrinkage or to the difficulties of accurately measuring or assessing their true weight on loading and discharge. Cargoes carried by air tend to suffer less damage but as non-perishable air cargo is often of high value, air cargoes are a magnet for thieves. International carriage can involve partial carriage by sea, road and rail with transhipment and consolidation for the purposes of making up full loads. Each operation increases the risk of goods going astray or becoming damaged . So

how do sellers and buyers protect themselves? Who bears the risk? This assignment will critically assess the passing of risk in relation to CIF and FOB contracts and conclude that neither option is preferable and that either type of contract brings with it its own difficulties.

In FOB contract. ” The main obligations of the parties to an FOB contract. The seller must put on board ship goods which conform to the contract an must pay all charges in connection with loading. The seller is not obliged to book shipping space in advance; the buyer must nominate the ship to carry the goods and notify the seller of the nomination in time to allow the seller to deliver the goods on board. The costs of carriage are for the buyer’s account.

(a) B designates a ship on which S is required to load the goods. There is no prior contractual arrangement between B and the carrier. S delivers the goods to the ship and puts them on boar in return for a bill of lading, either in his own name or showing B as consignor. In either case, S forwards the bill of lading to B and makes the contract of carriage and is a party to it.

(b) S may undertake additional duties. Under this type of FOB contract, S undertakes to arrange the carriage, and possibly insurance. S places the goods on board ship and receives a bill of lading in his own name, which he forwards to B in return for payment. S is clearly a party to the contract of carriage in this case, and the contract is very similar to a CIF contract; however, the contract price excludes carriage costs so that if they increase, B must pay extra.

(c) Alternatively, B may take the contract of carriage in advance. In this case S puts the goods on board ship in exchange for a mate’s receipt, which he forwards to S who uses it to obtain a bill of lading.

Even in circumstances where property does not pass to the buyer on loading, risk normally will pass. This will apply even where goods shipped for the buyer form an unascertained part of a larger bulk; once the goods are shipped, the seller has fulfilled his obligation to deliver the goods and nothing remains tot be done by him under the contract. The buyer has an insurable interest in the goods from the time of shipment. If the contract varies the sellers duties, it may therefore vary the point at which risk passes; for instance, if the contract is for the goods to be delivered “free on board stowed”, the sellers duties are not complete until the goods are safely stowed, so that risk may not pass until this point.

Risk of loss may also remain with the seller by virtue of he provisions of s32 of the Sale of Goods Act. Section 32 (3) provides that:

“where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give to the buyer such notice as will enable the buyer to insure them during the sea transit”

If the seller fails to supply such information, the goods are at his risk during the sea transit. It has been argued that s32(3) can have no application to FOB sales because the contract requires the seller to deliver the goods “free on board” and delivery to a carrier is normally deemed to be delivery to the buyer.

The CIF contract is a cost, insurance and freight contract. As Lord Wright observed in 1940: “It is a type of contract which is more widely and more frequently in use than any other contract used for the purposes of sea-borne commerce. ” Under a CIF contract the seller is required to arrange the carriage of the goods and their insurance in transit, and the cost of those arrangements is included in the contract price. The seller obtains a bill of lading ad a policy of insurance and forwards them to the buyer, together with an invoice for the price, and the buyer pays on receipt of the documents.

The CIF has many advantages. The buyer has the advantage of knowing from the date of the contract the exact price he must pay to obtain the goods; the contract price includes freight and insurance. More importantly, the use of documents to perform the contract and represent the goods allows the parties to deal with the goods afloat. Thus the buyer may resell the goods before they arrive. The use of documents facilitates the involvement of financial institutions: the documents can be transferred direct to the buyer’s bank as security for the advance of the price: the bank will be willing to take up and hold documents where it would not be prepared to take possession of the goods themselves and normally, where the payment is to be by the bankers’ documentary credit, this is what happens. This, in turn, allows the seller to be assured of payment and to receive the goods. Indeed, he is assured of payment even if the goods are damages or never arrive at al for he is entitled to be paid on presentation of the documents; the buyer is generally protected against such losses by the bill of lading, giving a contractual right against the carrier, and the policy of insurance, covering most accidental losses.

The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller."

The first sentence of this article, unlike the common law, contemplates the passage of risk at a time when the goods are at sea despite the difficulty of ascertaining the precise moment at which goods were damaged in the course of a long sea voyage. The second sentence contemplates circumstances in which the risk in respect of goods sold in transit may pass retrospectively as from the time the goods were handed over to a carrier. Presumably in such a case there is no requirement of prior identification of the goods to the contract. It may be that the seller is required to cover the goods by transit insurance is a circumstance sufficient to bring a case within the second sentence. In any event the operation of the second sentence is qualified in a case where, at the time of the

conclusion of the contract of sale, the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer.

In conclusion the following comparisons can be made between the two types of contracts. The first is that under a FOB contract the buyer bears the risk of fluctuations in freight rates and insurance premiums and secondly that a CIF contract will always be an export contract. The most salient point must be that since the seller makes the arrangements for carriage and insurance the Sale of Goods can not apply to CIF contracts, and it has been demonstrated this can produce a degree of uncertainty in these contracts, however to conclude in relation to risk neither method is preferable, and it can be said that each type of contract bears with it its own risk

Target Market: International Trade - Export to China - China Import

China is a key market for international trade. There are many channels you may consider when you plan export products into China’s huge market. You may set up a office in China to have your own sales force to handle international trade import export activities. You may also export products to China through partners such as local import export agents, distributors, representatives, retailers and wholesalers. The ideal choice without taking a substantial risk for the companies that are new to Chinese market is to establish close international trade relationships with local Chinese partners. A reliable, trustworthy and capable Chinese partner can be the critical factor in the success of doing international trade export in China. Nevertheless, due to lack of information about potential Chinese partners, significant differences in business and enterprise cultures and language barriers, finding good Chinese partners may not be an easy task. We invite you to consider Amlink International Corp as a candidate for your China import export partners

Amlink’s key strengths in China import export trade include strong international commerce background, large business trade networks in China and thorough understanding of Chinese culture and international trade practices. We are confident in our systematic and effective ways and means in sourcing and screening reliable, trustworthy and capable local agents, distributors, wholesalers and importers. Our China import trade export experiences enable us to quickly and effectively identify the most suitable representation for particular export products to China. As a powerful bridging tool, Amlink can help international exporters to get in-depth understanding of their potential trade partners in China, which is an important step towards the successful entry of your export products into China.

Here the seven steps approach to locate import export trade partners in China for international exporters:

1. Listing major agents and distributors in China that deal with the same categories of products or services.

2. Conducting preliminary evaluation and screening each of those agents and distributors.

3. Identifying prospective trade partners based on our unique criteria that have been applied successfully in the past.

4. Further studying market capability and business alignment of the prospective trade partners and select those that score the highest point as the potential trade partners.

5. Analyzing the credit histories and financial strength of the potential trade partners and choose three with top rankings as the final picks for “export to China” trade partners.

6. Negotiating with the wining trade partners for the most favorable terms and conditions for the exporters.

7. Making arrangement for the exporter to visit China, if necessary, to finalize the import export plan with the import export trade partners in China.

VII. GOVERNMENT & LEGAL RESPONSIBILITIES

1. Department of Agriculutre – Bureau of Plant Quarantine

By virtue of Presidential Decree No. 1433, otherwise known as the Plant Quarantine Law of 1978, the Department of Agriculture (DA), Bureau of Plant Industry (BPI) and Plant Quarantine Service (PQS) are mandated to enforce the plant quarantine rules and regulations to avert introduction of foreign pests and further spread of those already existing in the Philippines.

A. Exportation of Plants, Plant Materials and Small Species of Small Animals

The Phytosanitary Certification of Export Commodities depends upon the requirements of the importing countries. Inspection and treatment should satisfy the importing country regulations to ensure the acceptability of export commodities.

1. Documents and Procedures

Submit a duly accomplished Application for Inspection (BPI Form No. 10) to any Plant Quarantine Service Office or port of origin, together with a certified true copy of the Official Export Declaration issued by the authorized Agent Bank and Permit to Import whenever required by the importing country. Application should be filed at least 48 hours prior to the time of shipment. However, if inspection will be conducted at the exporter’s premise and treatment is required, application must be filed three (3) days to one (1) week before shipment for the schedule of plant quarantine inspectors and exposure time required for treatment.

Secure a Convention for International Trade of Endangered Species (CITES) Permit when exporting wild plants;

The inspection of commodities is done by random sampling at 10 percent of the total exports. In cases where the importing countries have specific sampling requirements for particular crops, the PQS follows their requirements.

2. Prescribed Regulatory Fees

Issuance of Inspection and Phytosanitary Certification of Living Plants for Export

A minimum charge of P4.00 is collected for shipment of 10 pieces or less of living plants. An additional fee of .40 centavos is collected per piece of living plant thereafter.

Community Pots / Similar Packages / Container

A fee of P4.00 per community pot is collected.

Inspection and Phytosanitary Certification for EXPORT of seeds, cuttings, bulbs, corms, scion, and other materials capable of propagation

A fee of P2.00 per metric ton is collected.

2. Department of Finance – Bureau of Customs

The Bureau of Customs (BOC), which is under the auspices of the Department of Finance (DOF), is mandated to implement an effective revenue collection, prevent and suppress smuggling and entry of prohibited imported goods, supervise and control over the entrance and clearance of vessels and aircrafts engaged in foreign commerce, and the enforcement of the Tariff and Customs Code of the Philippines and all other laws, rules and regulations related to tariff and customs administration.

A. Exportation

1. Accreditation Requirements

An exporter has to secure the following documents: City Business Permit, Department of Trade and Industry (DTI) Registration (if possible), affidavit stating why no foreign exchange is involved in the exportation of personal effects, samples, gifts, among others.

2. Pre-Loading Documents Procedures

Documentary Requirements a. Authority to Load b. Special Permit to Load - This is granted under the

following circumstances: (a) authority to load locally transshipped goods to a foreign vessel, (b) shipments where the Export Declaration is not required under the existing Bangko Sentral Ng Pilipinas (BSP) ruling, and (c) partial shipments covered by a monthly General Export Declaration.

Procedures

a. Bank delivers Export Declaration; b. Exporter submits Export Declaration with Commodity

Clearance, and a Certificate of Identification for products with imported contents or raw materials if and when necessary;

c. BOC validates the Export Declaration; d. Exporter pays documentary stamps; e. Processor consolidates and checks Export Declaration and

clearances; f. Signing officer signs Authority to Load; and, g. Releasing clerk perforates entry number on Export

Declaration and attached documents and then releases Authority to Load to exporter or broker.

3. Post –Loading Documents and Procedures

Documentary Requirements a. Certificate of Origin: General (white), GSP (form A),

ASEAN-PTA (Form C), ASEAN-PTA (Form D), and Coffee (Form X).

b. Certificate of Shipment of Short-Shipment of Non-Shipment.

Supporting documents required are: o Commercial Invoices; o Bill of Lading/Airway Bill of Lading; and, o Copy of the processed Export Declaration

Post-Loading Procedures

a. Exporter/broker buys a Certificate of Origin form and accomplishes it accordingly;

b. Exporter/broker files a Certificate of Origin/certification with the supporting documents, amending them, if needed;

c. Exporter/broker pays the customs documentary stamp; d. Processor checks documents and affixes initials on

Certificate of Origin/ certification; e. Signing officer signs Certificate of Origin /certification;

and, f. Releasing clerk assigns control number on Certificate of

Origin/certification and records in the logbook then releases the Certificate of Origin/certification.

3. Department of Trade & Industry – Bureau of Export Trade Promotion

Republic Act (RA) 7844, otherwise known as the Export Development Act (EDA), provides support measures to exporters to encourage investment in the export sector, create a freer trade environment, and motivate exporters to increase export sales and perform competitively in the export market. The Bureau of Internal Revenue (BIR) requires that in order for an exporter to avail of the VAT zero-rating, the exporter should be accredited under EDA.Procedure

1. File accomplished application form together with required documents.

2. Pick up EDA Accreditation Certificate.

VIII. LOGISTICS OPERATIONS

Logistics involves planning, implementing and controlling the efficient flow and storage of copra, CNO & by-products and related information from point of origin to the point of customer for the purpose of conforming to customer requirements.Planning stage provides information and the creation of links to customer. It is the most essential stage, because at this stage parameters and future conditions like forecasting, scheduling and continuous improvement of systems and procedure are established. Like for instance, Trading sends shipping instruction. The shipping instruction contains quality and quantity requirements, shipping schedules and the trading rules. To acknowledge these conditions, Terminal Operations initiates actions such as, planning of movement of raw materials from its origin in accordance to shipping schedule, safekeeping and warehousing of finished products to protect and preserve its quality to support the requirements of Trading. Planning also allows Logistics to forecast the needed resources like hiring of handlers, forwarders, truckers, haulers, vessel chartering and knowledgeable contractors and sourcing of cost-effective and reliable third party service providers. Another important part is the strategic planning to maximize contract terms to generate potential savings against inflation rates.

Implementing the plan is the action established during the planning stage. These actions are systems and procedures (provided in this manual) that will explain to customers the methods employed in achieving and maintaining quality standards. Implementing the plans will also translate objectives into physical reality, like for instance in managing quality of raw materials. One of the factors that affect the efficiency in the production of CNO is the moisture content of raw materials feed to process. Terminal Operations answers this need by providing proper aging of raw material, close monitoring and initiate recycle process in order to accelerate evaporation of moisture content. Another example in the preservation of quality of finished products is the implementation of GMP-HACCP quality standards.

Controlling is the most critical in Logistics operations. At this stage, parameters and procedures shall be assessed and regulated in order to arrive positive results. Performance standards are established by which procedures and results can be measured and evaluated.

Transport System

1. Contract of Affreightment

A long term agreement between a shipowner where the latter undertakes to carry in ships which he owns, or ships he has chartered a specific quantity of cargo, during a specific period of time, in lots of specified maximum or minimum weight of volume and at the option of either the shipowner or the charterer. 2. Containerized - Modes CY/CY, CY/CFS, CFS/CY

Type – 20”, 40”, Closed type, ISO Container Tank

LOGISTICS OPERATIONS FLOW CHART

TRANSACTS EXPORT MARKET CUSTOMERS

RECEIVES QUALITY & QUANTITY PRODUCT

ORDERS

SOURCESPRODUCTS/BOOKS SUPPLIER/ANALYZE SAMPLES

PLANS PURCHASE CONTRACT

TRANSACTS BANKOPENS L/C ACCOUNT

SALES CONTRACT

SOURCE OUT 3RD PARTY BROKER/FORWARDER

ARRANGE INSURANCE / ASSESES FREIGHT

COMPLIES OTHER LEGAL REQUIREMENTS

ARRANGES CUSTOMS PRE LOADING DOXS

UPDATES SHIPPING SCHEDULE & VESSEL ETA

ADVISE

A

A

VESSEL / CONTAINER ARRIVE

CIF

FOB

B

B

NO

INITIATES START OF LOADING OPERATION

YES

MONITORS LOADING UNTIL COMPLETION

DOCUMENTS PRODUCT LOADING

SUBMITS LOADING DOCUMENTS TO

BANK/BUYER

SUBMITS POST LOADING LEGAL REQ

PRODUCT COSTING PER MONTH TRANSACTION

MODE OF SHIPPING - CONTAINERIZED

SALES CONTRACT - FOB PORT OF CAGAYAN

Current Market Price as of june 16, 2010.

php/kg Other Variables Cost php/kgCopra 25.00 HS-S Handling Charge (Sacking,Loading) 0.117Crude Coconut Oil 42.30 PM Packaging Materials (P12/sack w/ liner) 0.240Copra Solvent Pellets 5.60 TC Trucking Cost 0.533 estimated (cdo)

Copra Expeller Cake 5.60 HC-P Handling Charge (Pier) 0.300 estimated (cdo)

Acid Oil 25.40 IC Incidental Cost (P3,000/CV) 0.200

QUANTITY(KG) HS-S PM TC HC-P IC

CLIENT 1 300,000.00 160,000.00 90,000.00 60,000.00

CLIENT 2

CLIENT 3 15,000.00 1,755.00 3,600.00 8,000.00 4,500.00 3,000.00

CLIENT 4 2,000,000.00 1,066,666.67 600,000.00 400,000.00

CLIENT 5 10,000,000.00 1,170,000.00 2,400,000.00 5,333,333.33 3,000,000.00 2,000,000.00

CLIENT 6 4,400,000.00 2,346,666.67 1,320,000.00 880,000.00

CLIENT 7 90,000.00 48,000.00 27,000.00 18,000.00

60,000.00 32,000.00 18,000.00 12,000.00

1,171,755.00 2,403,600.00 8,994,666.67 5,059,500.00 3,373,000.00306,246,000.00

ACID OIL 1,524,000.00

CNO 3,807,000.00

CNO 186,120,000.00

COPRA EXPELLER 56,000,000.00

ACID OIL 50,800,000.00

COPRA 375,000.00

VARIABLE COSTPRODUCTTYPE

ACID OIL

COST OFPRODUCT

7,620,000.00