FIFTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

HOUSE BILL No. ak 77 2

Introduced by the Honorable Agapito H. Guanlao

EXPLANATORY NOTE

‘The current rice crisis has brought to fore the need to review the government
policy on food security. Rice, being the national staple food, deserves a special policy
consideration. There is a need to ensure steady rice production by involving as many
stakeholders in the agricultural sector as possible. The Philippines cannot rely solely
on importation to augment its food needs. The government must find a lasting
solution to the recurring rice supply shortage.

The attached measure envisions a solution to the perennial problem on rice
supply. Currently, the supply of food staples from overseas sources are erratic and
therefore unreliable; our farmers should then be encouraged to produce more to
meet our domestic food needs, and what better encouragement for our farmers than
4 better profit margin for their everyday toils in the farm, The government can make
this possible by providing, enough support for the small farmers through irrigation,
improved rice seedling and genetic stock, improved farm mechanization, and
affordable and accessible agricultural credit.

It is proposed as well to review the mandate and operations of a few
government agencies involved with rice and corn production and distribution to
improve synergy and cooperation pursuant to the mandate of this proposal.

BUTIL Farmers Party has long upheld that farmers’ security is synonymous to

food security. This measure aims to fulfill that into reality. Your full support on this
measure is therefore highly sought.

nO! APITO PAGUANLAO.


FIFTEENTH CONGRESS OF THE )

HOUSE OF NYATIVES,

HOUSE BILL No. 17°72

Introduced by the Honorable Agapito HL. Guanlao

“AN ACT INSTITUTIONALIZING THE STATE POLICY ON FOOD PRODUCTION
AND SECURIT ‘STABLISHING THE NATIONAL FOOD SECURITY COUNCIL,
APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES"

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Title. - This Act shall be known as the “National Food Security
Act of 2010.”

SECTION 2. Declaration of Policy. - It is the policy of the State to ensure the
adequate and continuous supply of rice, corn, grains, and other key food products
generated principally from domestic land-based agricultural activity at reasonable
and affordable prices at all times especially in times of calamities and/or
emergencies. Towards this end, the State hereby recognizes the private sector as
having the lead role to provide the resources, organization, planning, marketing and
control systems to maximize agricultural production with the government providing
the technical support, regulatory and monetary climate while progressively
minimizing its active participation in roles assigned to the private sector.

SECTION 3. Statement of Goals and Objectives. - To carry out the foregoing
policy, the government shall focus its programs towards the immediate attainment
of the following goals and objectives:

1, To maximize the production of key food products to make it accessible
and sufficient at all times at affordable prices;

2. To maintain strategic reserves of key agricultural products throughout the
year and a buffer stock of these food essentials during the lean production
months;



3. To encourage and enable the private sector to engage and maximize their
participation in producing these key food products;

4, To promo provide a stem of government guarantees to enable private
nectar to access funding from capital markets for the purpose of engaging
in food production;

5, To establish a National Food Security Council consisting of representatives
from the government, the academe, the agri-financing sector, the
agribusiness sector, the consumers and the farmers to implement the
policies and objectives of this Act;

6. To provide a safeguard to protect local farmers from the impact of
globalization to enable them to take advantage of the same through
enhanced production, post-harvest facilities and transport;

7. To encourage the adoption of innovative and proven systems and
technologies that will reduce costs and improve the quality of key food
products,

8. To promote developmental regulations aimed at _ enhancing
competitiveness, transparency, and responsibility in the food industry;

9. To institute measures to fully establish the integrity and negotiability of
warehouse receipts or the quedan system;

10. To strengthen the efficiency of the food supply chain;

11. To promote and organize inter-relationships and linkages among, key
food products industry stakeholders; and

12. To improve income for the farmers and agricultural communities by
providing them with the necessary production support and subsidies.

SECTION 4. Definition of T
the following terms shall be used:

rms. ~ Yor purposes of this Act, the definition of

1. Calamities - refer to natural calamities such as typhoons, floods, droughts,
earthquakes, volcanic eruptions, lahar flows, man-made calamities such as
political and/or civil disturbances, and widespread civil unrest;

2. Diversion ~ refers to any of the following circumstances:
(a) unreasonable depletion of stock:
(b) selling or lending government stocks to another private party;



8.

¢) selling or offering to sell government stocks of food grains beyond the
maximum quantity or price allowed by the National Food Authority
(NFA),

(a) storing and/or selling the government stocks in other places/stalls, not
duly authorized by law;

(e) unreasonable, intentional, or undue delay in the delivery or unloading,

of NFA stocks to any NFA authorized warehouses, stores or places for

storing key food products;

Farmers ~ refer to producers of agricultural food products. They can be
tillers of the land themselves or administrators or supervisors of the
process;

Food Security - refers to the policy objective, plan and strategy of meeting,
the food requirements of the present and future generations of Filipinos in
substantial quantity, ensuring the availability and affordability of food to
all, either through local production or importation, or both, based on the
country's existing and potential resource endowment and_ related
production advantages, and consistent with the overall national
development objectives and policies. However, sufficiency in rice and
white corn should be primarily and actively pursued;

Fooilgraius ~ refers to palay, rice, white corn, and corngrits;

Government Rice Buffer Stock ~ refers to the Government's inventory of rice
equivalent to at least thirty (30) days national rice consumption by July 1
of every year inclusive of the fifteen (15) day Strategic Rice Reserve
particularly in deficit areas and during lean production periods;

Hoarding ~ the undue accumulation by any person or a combination of
persons of any basic necessity or prime commodity beyond his or their
normal inventory levels or the unreasonable limitation or refusal to the
unjustified taking out of any basic necessity or prime commodity from the
channels of production, trade, commerce and industry. There shall be
prima facie evidence of hoarding when a person has stocks of any basic
necessity or prime commodity fifty percent (50%) higher than the usual
inventory and unreasonably, limits, refuses, or fails to sell the same to the
general public at the same time of discovery of the stocks;

Key Food Products - refers to foodgrains and meat and meat products;

Price Manipulation ~ refers to the act of causing, prices of foodgrains to fall
or rise for one's own profit by changing or falsifying figures, accounts and
other related information;


10. Price Stabilization - refers to measures which ensure that realize
fluctuations of foodgrains prices conform to peoples’ expectations of such
price movements;

U1. Strategic Rice Reserve — refers to the minimum inventory of rice equivalent
to at least fifteen (15) days national rice consumption to be maintained all
year round under government control as a matter of national policy to
ensure food security during times of calamities/emergencies whether
natural or man made.

SECTION 5. Policy Implementation. ~ To execute the foregoing, policy, there is
hereby created the National Food Security Council, hereinafter referred to as the
Council, The Council shall have the overall responsibility for formulating and
coordinating a nprehensive program for the implementation of these policies and
objectives. The Council shall be composed of the following:

Chairman: Secretary, Department of Agriculture (DA)

Members: Secretary, Department of Finance (DOF)
Secretary, Department of Trade é& Industry (DT)
Administrator, National Food Authority (NFA)
President, Land Bank of the Philippines (LBP)
President, Quedan and Rural Credit Guarantee Corporation
(Quedancor)
Chancellor, University of the Philippines-Los Banos (UPLB)
President, Central Luzon State University (CLSU)
President, Mindanao State University (MSU)
Representative, Consumer Sector

Farmers Sector
Representatives of Congress from three (3) dominant Farmers’
Party List

‘The representatives of the consumers, grains and farmers sectors shall be
Filipino citizens, not less than thirty-five (35) years of age, with sufficient education,
proven honesty, integrity and recognized competence. They shall be appointed by
the President of the Philippines to hold office for a term of four years unless sooner
removed for cause or until its successors have been appointed and qualified.

The Council shall meet regularly at least once a month on any date to be
determined by the Chairman. Provided, that the Chairman may convene special
meetings to discuss matters needing immediate action. The Council members shall
be entitled to a per diem for each meeting actually attended by them and as may be
determined by the Council in accordance with existing policies but not to exceed two
(2) meetings per month. The Council memnber, in his or her absence, may designate
a permanent representative, provided however, in case of a government official, said



representative should at least be a third ranking official of his/her department or
office.

The Council shall adopt its own rules and regulations to govern its
proceedings. It shall determine its official location and address and likewise organize
a Secretariat to support its work.

| SECTION 6. Powers, Functions and Responsibilities of the Council - To pursue the
food security policy of the State, the Council shall have the following powers,
functions and responsibilities: :

1. To establish ideal levels of inventory annually based on the calendar year
for key food products for the purpose of meeting the policies and
objectives in this law and indicating at the minimum, the folowing:

a) the ideal inventory levels for a given quarter within the year giving
due consideration to the interaction and relations of the supply and
availability of particular key food products to each other;

b) the report shall indicate the strategic reserves for key food product, if
not provided here, shall be appropriate for said item and industry as
determined by the Council;

©) the report shall identify the regions or provinces where these
productions are expected if programmed to be produced domestically
or the foreign sources if these are to be imported; and

d) that such production levels shall not only consider the ideal levels to
keep farmers’ income improving while keeping the prices for these key
food products stable.

To establish rules and regulations governing the importation of key food
products in the context of the annual ideal inventory level report,
licensing, and prescribe penalties and fines for non-compliance with
established rules and procedures;

3. To monitor supply and demand indicators of key food products including
the imports and exports of the private sector in coordination with the
Bureau of Agricultural Statistics (BAS) and the Bureau of Customs (BOC)
and monitor the impact of activities in the agricultural sector on farmers!
income, standards of living and consumer prices through the Department
of Trade and Industry (DTI) and the National Statistics Office (NSO);

4. To identify the locations and encourage the establishment by the private
sector of food terminal markets throughout the country. Trading Centers
shall be established to serve as central trading facilities for key food
products in the regions to provide ready market for farmers! produce and
promote efficiency of distribution to consumers under a transparent
marketing system which enhances the interest of farmers and consumers
alike;


&

6.

‘To authorize the inspection by appropriate agencies of key food products
stored in private warehouses for the purpose of taking inventory and
monitoring commercial stock, prices and stocks movement;

To order the appropriate agencies to effect . seizure whenever there is
cornering, hoarding or improper acquisition of key food products,
particularly, stocks of rice, corn, other grains and substitutes and/or their
by-products / end-products, including facilities and equipment used in
said activities; and

To establish and enforce, through the appropriate agencies, standards in
storage, milling, distribution, shipping, drying, handling, hauling,
grading, sampling and inspection, test and analysis, specification,
nomenclature, units of measurement, code of practice and packaging,
conservation, and transport of key food products.

SECTION 7. Additional Responsibilities and Authorities of the National Food

Autority (NFA). ~The National Food Authos

ty (NFA) shall continue to be the key

agency ensuring that the supply of food gains are always adequate and their prices
competitive and within the reach of the consumers and industrial users. For this
purpose, the NFA is by mandated to do the following:

To maintain and manage throughout the year a Strategic Rice Reserve
equivalent. to at least fifteen (15) days national rice consumption for food
security purposes, and a Government Rice Buffer Stock equivalent to at
least thirty (30) days national rice consumption by July 1 of each year for
supply and rice stabilization purposes. In the event there is a surplus, the
President may reduce the thirty (30) days buffer stock;

‘To undertake tariff free importation of rice in order to maintain the
appropriate volume of Strategic Rice Reserve and Government Rice Buffer
Stock;

To encourage rice importation by the private sector through reduction of
lariff at a rate that would give protection to both consumers and farmer-
producers to compensate for the high world market prices during
calamities;

To make arrests for violation of any offenses enumerated in this Act and
other pertinent rules and regulation, circulars, orders, and directives
which may be promulgated hereafter by the Council through the NF.

To create a fund from revenues and fees generated to finance reward and
incentive systems for programs such as but not limited to anti-hoarding
and anti- smuggling and to support agricultural development programs;


6. To importiexport or cause the importation/exportation of food
products/commodities and/or raw materials, equipment and facilities
needed in the manufacture/processing of food commodities as may be
determined by the NEA and as approved by the Council; and

7. To engage in the production, manufacturing, processing and/or
packaging of food" products/commodities as may be necessary to
effectively carry out its functions and as approved by the Council.

SECTION 8. Compliance with Agri-Agra Law. — Section 6 of Republic Act
10000 or ‘The Agri-Agra Reform Credit Act of 2009’ mandates all banking
institutions, whether public or private, to reserve 25% of their total loanable amount
for agriculture and fisheries credit. To pursue the spirit and intent of the law, the
Council shall require banking institutions to deposit 25% of their total loanable
amount to cooperative banks for re-lending to the agriculture and agrarian reform
sectors.

Bank loans intended for grain inventories deposited in the warehouses of the
NFA, Trading Centers and franchised private bonded warehouse operators shall
also be deemed as compliance with the Agri-Agra Law.

Furthermore, private bank investment in the authorized capital stock of
Quedancor, the Philippine Crop Insurance Corporation (PCIC), cooperative banks
and rural banks shall also be considered compliance with RA 10000.

SECTION 9. Sovereign Guarantee Funding of Agri-Businesses and Projects:
Qualified Financing - The Council shall be empowered to cause the issuance by the
Department of Finance (DOF) of sovereign guarantees over a period of five (5) years
after approval of this Act for qualified agribusiness projects for production of key
food products and for the establishment of food terminals or wholesale/ retail
markets for these products. These qualified funding shall beat these government
guarantees: For the first P100 billion funding — eighty percent (80%) guarantee;
Second P100 Billion- seventy percent (70%) guarantee; Third P100 Billion — sixty
percent (60%) guarantee; Fourth P100 Billion — fifty percent (50%) guarantee; Fifth
P100 Billion - forty percent (40%) guarantee.

For this purpose, the Council, with the assistance of the DOF, shall prepare,
approve and publish within 90 days from approval hereof of the Terms of Reference
(TOR) for the availment of this guarantee.

This guarantee shall be available for funds sourced from the capital market ~
both and abroad. Such funds maybe availed of in the form of loans, direct
investments, investments in securities or asset participation certificates (APCs)
issued by entities in support of projects, whether these are floated by corporations,


cooperatives, special purpose vehicles (SPVs), trustees or asset pool trusts (APT)
created for these projects.

SECTION 10. Agricultural Marketing Assistance System - Section 40 of Republic
Act 8435 or the “The Agriculture and Fisheries Modernization Act’ states that the
Department of Agriculture (DA) shall establish a National Marketing Assistance
Program that will immediately lead to the creation of the national marketing
umbrella body in order to ensure the generation of the highest possible income for
the farmers and fisherfolk or groups of farmers or fisherfolk matching supply and
demand in both domestic foreign markets.

For the effective implementation of the policy enunciated in this Act, the
Bureau of Agricultural Statistics (BAS) shall be strengthened. It shall provide the
agricultural data and key information requirements of the NFA, to include, but not
limited to the following:

Supply -data;

Demand data;

Price and price trends;

Product standards for both fresh and processed agricultural and fisheries

products;

5. Directory of, but not limited to, cooperatives, traders, key market centers,
processors and business institutions concerned with agriculture and
fisheries at the provincial and municipal levels;

6. Research information and technology generated from research institutions
involved in agriculture and fisheries;

7. International, regional, local market forecasts; and

8. Resource accounting data.

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SECTION 11. Responsibility for Credit Assistance and Guarantee Cover. ~ ‘The
vision of credit assistance and guarantee cover on inventories owned and deposited
by farmers and traders in the NFA warehouses, Trading Centers and franchised
private bonded warehouses shall be the responsibility of the NFA and the
Quedancor.

SECTION 12, Operating Guidelines. - The Quedancor shall adhere to the
following, rating guidelines:

1. provide production loans to farmers/fishers through their primary
cooperatives or federations by direct lending, co-financing scheme,
providing fending banks with special time deposit, rediscounting, lending
banks' production loan receivables and similar mechanisms so as to reach
out to as many rural clients as possible;

2. encourage lending institutions to extend project loans for production,
warehouses, post-harvest machineries and equipment, land transportation


4,

o

and shipping, bulk handling facilities, silos, port handling infrastructures
and the like by providing a guarantee cover on such loans;

provide guarantee cover on inventory loans for grain or food (
commodities owned and deposited by farmers, consumers and traders in
the NFA warehouses, Trading Centers and franchised private bonded
warehouses;

extend loans directly for the aforementioned projects and food inventory
when and where no lending banks are available or willing to provide the
foans; and

submit for the Council's approval, a Credit Plan and Budget for the
undertakings envisioned in paragraphs (a) and (d) above, detailing therein
the per region loan volume targets, expected beneficiaries, repayments,
arrearages and defaults on previous loans. Likewise, a separate Plan shall
be submitted in regard to the guarantee operation.

To enhance credit assistance to farmers/ fishers, cooperatives/ federations and
other icultural enterprises envisioned in this Act, the national government throught
the Secretary of Finance shall guarantee Quedancor's borrowings, duly approved
and endorsed by the Council, from government or private financial institutions.

SECTION 13. Offenses and Penalties. - For purposes of carrying, out the
provisions of this Act, the following acts or omissions are hereby considered as

s

ous, less serious, and light offenses and the corresponding penalties are

prescribed herein:

1

‘The offender shall, upon conviction, be pu

Serious Offenses - any of the following acts or omissions shall constitute a

serious offense:

a) Hoarding of foodgrains as defined in this Act;

b) Any act of diversion as defined in this Act;

©) The act of manipulating the prices of foodgrains as defined in this Act;

d) Printing, issuing, or knowingly using, possessing or negotiating a
canceled, unauthorized, illegal, counterfeit or falsified warehouse
receipt;

e) Failure or refusal of foodgrains bonded warehouseman, without any
lawful excuse, to deliver foodgrains deposited with him: Provided,
however, that the warehouseman shall be entitled to the allowance
authorized for depreciation of the foodgrains deposited,

ished by imprisonment of not less

than four (4) years and one (1) day or more than six (6) years, or a fine of not less
than two hundred thousand pesos (P200,000 00) or more than one million pesos
(P1,000,000.00) or both at the discretion of the Court.


Less Serious Offense- Any of the following acts or omissions shall stitute

a less serious offense:

a) Connivance in the concealment of a stock shortage in a foodgrains
warehouse;

b) Knowingly submitting any report to the NFA containing false
information or data

©) Misrepresentation in connection with any application for license to
engage in foodgrains business;

d) Failure or refusal of a warehouseman to allow the NFA or his duly
authorized representative to inspect or examine their foodgrain stocks
to conceal shortages or to misrepresent the quantity or quality of his
foodgrain stocks, including the impeding of such inspection and
examination by abandonment, absence or otherwise; and

e) Engaging in the business of foodgrains retailing, wholesaling,
threshing, shelling, warehousing, milling, exporting, importing,
trading, growing and selling of high yielding certified seeds / hybrid
seeds, manufacturing or processing without a valid license.

‘The offender shall, upon conviction, be punished by imprisonment of not less
than six (6) months and one (1) day or more than four (4) years, or by a fine of not
fess than Fifty Thousand Pesos (50,000.00), or more than Two Hundred Thousand
Pesos (P200,000.00), or both at the discretion of the Court.

3, Light Offenses - Any of the following acts or omissions shall constitute a
light offense:

a) Non-compliance with the rules, regulations, decisions, orders, circulars
or directives lawfully issued by the Council, provided noncompliance
does not constitute a higher offense as provided above;

b) Connivance in the selling or buying of foodgrains. Selling or offering, to
sell palay or corn or other foodgrains other than that directly produced
by him as farmer or shared by him as tenant or landlord to the NFA;

©) Any other violation of the provision of this Act for which no specific
penalty is prescribed and which is not punished under any other
existing law.

‘The offender shall, upon conviction, be punished by imprisonment of not less
than (1) month and one (1) day or more than six (6) months, or a fine of not less than
Five ,usand Pesos (P5,000.00) or more than Fifty thousand Pesos (P50,000.00) or both
at the discretion of the Court.

SECTION 14, Apropriation, - The amount determined by the Council as
necessary for the initial implementation of this Act shall be charged under the
current appropriations of the Department of Agriculture (DA). Thereafter, such
amounts necessary for the continuous implementation of this Act, to include the
maintenance and/or increase of rice reserves, shall be automatically appropriated in
the General Appropriations Act.

10


SECTION 15. Repealing Clause. - All laws, decrees, executive issuances, rules
and reguations inconsistent with this Act are hereby repealed or modified
accordingly.

SECTION 16. Separability Clause. - The provisions of this Act are hereby
declared to be separable, and in the event one or more of such provisions are held
unconstitutional, the validity of the other provisions shall not be affected thereby.

SECTION 17. Effectivity. - This Act shall take effect thirty days from the date
of its fication in the Official Gazette or in at least two (2) newspapers of general
circulation,

Approved,