THE “B-1” SUGAR ALLOCATED TO FOOD PROCESSORS/EXPORTERS THROUGH PHILFOODEX

Pursuant to Sugar Order No. 1, Series of 2003-2004, and for the
information and guidance of eligible food processors/exporters, the
following guidelines concerning the allocation of “B-1” sugar for Crop
Year 2003-2004 are hereby promulgated:

I. Submission to SRA of “B-1” Quedan-Permits

1. All sugar mills shall submit weekly to the SRA the photocopies
   of “B-1” quedan-permits issued by them in a consolidated form for every
   planters’ association/cooperative (mills as assignees) transmitted
   directly to the Production Control and Regulation Office (PCRO), SRA,
   Diliman, Quezon City (Fax Nos. 926-4337/927-0928) not later than 12 noon
   of Tuesday after the week-end cut-off.

II. Dissemination of the Holders of the “B-1” Quedan-Permits to Philfoodex

1. The SRA-PCRO shall generate every week the following:

   a. List of “B-1” quedan-permits with their numbers and sugar production of a given week-ending
   b. List of “B-1” sugar stock-on-hand (sugar balance) as of a given week-ending

2. The foregoing information shall be generated by mill companies (mills share and planters share)
3. The aforementioned list shall be made available every Wednesday to PHILFOODEX

III. Criteria for Allocation to be Prepared by Philfoodex and submitted to SRA

1. The PHILFOODEX shall prepare and submit to the SRA for approval
   the allocation criteria of “B-1” sugar for eligible food
   processors/exporters.
2. The allocation shall take into consideration all factors deemed
   by PHILFOODEX to be relevant which shall include the weekly or monthly
   volume of sugar required by each eligible allocatee, including the
   business location of such allocatee.
3. No change in the allocation criteria shall take effect until change is submitted to and approved by the SRA.

IV. Eligible for Allocation of the “B-1” Sugar

1. Only small and medium-sized enterprises principally engaged in
   the business of processing sugar-based food products for export shall be
   eligible for this grant.
2. All interested parties who are non-member of the PHILFOODEX
   shall inform the SRA in writing about their intention to participate in
   this “B-1” program on or before 31 October 2003, after which the SRA
   shall endorse to PHILFOODEX, for information, the list of interested
   processors/exporters.
3. The PHILFOODEX shall furnish the SRA the list of qualified
   processors/exporters so that the SRA shall advise the same of the status
   of their applications for “B-1” allocation.

V. Allocation of Available “B-1” Sugar to Eligible Food Processors/Exporters.

1. The PHILFOODEX shall be responsible for applying and implementing the approved allocation criteria.
2. Every Wednesday, the SRA shall inform PHILFOODEX about the
   details of “B-1” sugar production during the preceding week and the
   corresponding quantity available for allocation.

VI. Payment for and Withdrawal of “B-1” Sugar

1. The SRA shall provide the PHILFOODEX a list of all operating sugar mills and their corresponding bank savings account numbers.
2. The “B-1” quedan-permits (planters’ and mill’s shares) shall be
   subject to payment within nine (9) weeks (63 days) from date of
   production at a liquidation price of P700.00/LKg.-Bag pursuant to
   Section 3 of sugar Order No. 2, Series of 2002-2003.

3. Using as basis the available “B-1” quedans, as provided by the
   SRA to PHILFOODEX every Wednesday, PHILFOODEX shall remit payment of
   said quedan to the mills through the online banking system. The mill
   shall remit payment of the planters’ “B-1”, through their respective
   associations, within thirty (30) days from the date of the PHILFOODEX
   remittance.

4. Upon presentation to SRA-PCRO by PHILFOODEX of proof of payment
   of the “B-1” quedans, the SRA shall issue the Letter Authority
   addressed to the concerned mill authorizing the withdrawal of certain
   volume of “B-1” sugar corresponding to the amount paid for it.

   The Sugar Production Control and Regulation Officer (SPCRO) assigned
   thereat shall be furnished with the said Letter Authority.

5. Only authorized PHILFOODEX personnel shall be allowed to
   withdraw the “B-1” sugar upon presentation to the mill of the Letter
   Authority to withdraw.

   The SPCRO assigned thereat, after withdrawal, shall cause the stamping of the covering “B-1” quedans as “served”.

6. In case PHILFOODEX shall not withdraw the “B-1” sugar from the
   mill and instead have it swapped with a “B” or Domestic sugar,
   PHILFOODEX shall demand/claim from the mill the “B-1” quedans already
   paid by them.

VII. Reporting of the Distribution of the “B-1” sugar and Maturing “B-1” Quedan-Permits

The PHILFOODEX shall report at the end of every month to the SRA the
distribution of the “B-1” sugar among the Processors/Exporters with
their corresponding volume of sugar.

The SRA-PCRO shall generate
from these monthly reports a consolidated report on the distribution of
the “B-1” sugar, by Processors/Exporters with their volume of sugar
received as of a given date.

The SRA shall provide the planters’
association with the list of maturing “B-1” or quedan-permits due for
conversion every Wednesday through the fastest available means.

VIII. Swapping of the “B-1” Sugar into “B” or Domestic Sugar

In order to facilitate the transport of the “B-1” sugar (to achieve the
objective of making available “B-1” sugar to eligible food processors
for export) to where it will be used (or refined), the “B-1” sugar shall
be allowed swapping with the “B” or Domestic sugar pursuant to Section 4
of Sugar Order No. 2, Series of 2003-2004, said swapping shall be
subject to the requirements of Circular Letter No. 31, Series of
1997-1998.

The swapping fee of P1.50/LKg. – Bag pursuant to
General Administrative Order No. 1, series of 2003-2003, is hereby
waived for the crop year 2003-2004.

IX. Verification and Surcharging of the “B-1” Quedan-Permits into “B”

If PHILFOODEX fails to pay for the “B-1” within nine (9) weeks (63
days) from date of production, the subject “B-1” shall be eligible for
reclassification into “B” or domestic sugar pursuant to Section 2 of
sugar Order No. 3, Series of 2003-2004. The subject “B-1” quedan-permits
shall be applied for sucharging into “B” sugar with the PCRO, SRA,
Quezon City and shall be verified from the masterlist of “B-1”
quedan-permits to determine whether subject “B-1” quedan permits have
been previously submitted to the SRA in the form of photocopies.

If the said “B-1” quedan-permits are found to be in the masterlist of
“B-1” quedan-permits and have already matured, the said quedan-permits
shall be surcharged into “B” or domestic sugar. Otherwise it shall
remain as “B-1” sugar, pursuant also, to said Sugar Order No. 3.

A reclassification fee of P1.20/LKg. Shall be paid to SRA pursuant to General Administrative Order No. 2, Series of 1999-2000.

X. Letter Authority

After the “B-1” quedan-permits have been surcharged into “B” or Domestic sugar, the SRA shall issue:

a) Letter-Authority – addressed to the mill (copy furnished the
SRA SPCRO assigned thereat) authorizing the release of the sugar covered
by the surcharged/reclassified “B-1” quedans to individual planters’
association/cooperative (which includes the unaffiliated planters).

The concerned planter association/cooperative shall be furnished with a copy of the Letter-Authority.

XI. This Circular shall take effect immediately.

XII.
Provisions of Sugar Orders, Circular Letters, rules and regulations
inconsistent with or contrary to this Circular Letter are hereby
amended, modified or revoked.

Adopted: 01 Sept. 2003

(SGD.) JAMES C. LEDESMA
Administrator