Rules on Trading Native/Dark Leaf Tobacco

Policy-making and administrative powers

The NTA Board of Directors shall promulgate native/dark leaf tobacco trading rules and regulations in consultation with management.
The NTA Board of Directors shall promulgate and prescribe native/dark tobacco grade descriptions/classifications and floor prices.
The NTA Administrator shall issue licenses to tobacco buyers to buy native/dark leaf tobacco directly from tobacco farmer-producers and issue Permit to Purchase/Redry, after compliance with the Rules.
The NTA Administrator shall implement the Rules, particularly those on proper classification and grading, accurate weighing, prompt payment, and proper documentation of tobacco acceptances.
The NTA Administrator shall impose administrative sanctions and/or fines for violations by bf/tc operators, field representatives, wholesale tobacco dealers, and redrying plant operators.

Core definitions and covered actors

“NTA” refers to the National Tobacco Administration created and existing by virtue of Executive Order No. 245.
“NTA Board” refers to the NTA Board of Directors as the policy-making body.
“Administrator” refers to the Chief Executive Officer of the NTA.
“Native/Dark Leaf Tobacco Buyer” refers to any person (natural or juridical) licensed by the NTA to buy native/dark leaf tobacco from tobacco farmer-producers.
“Buyer Firm (BF)” refers to a tobacco company licensed by the NTA to buy native/dark leaf tobacco directly from tobacco farmers under a Memorandum of Agreement (MOA).
“Tobacco Trading Center (TC)” refers to a place (building or warehouse) used for buying, selling, baling, grading, weighing, paying and/or storing native/dark leaf tobacco.
“Purchase Commitment” refers to a written commitment of principal buyers to purchase a specific quantity of native/dark leaf tobacco from BF/TC operators during a particular crop year.
“Tobacco Bale Tag” is an accountable form identifying a bale/roll, including farmer-seller name and net weight, serving as a claim stub.
“PIV” refers to the Purchase Invoice Voucher identifying the purchased tobacco, with details on farmer-seller, weight, grade, price per grade, total value, buyer signatures, time of arrival/payment, and bale tag serial numbers.
“COP” refers to the Certificate of Purchase covering tobacco gathered/collected/purchased by a field representative and attached to the PIV.
“Roving Teams” refer to NTA officials/employees designated to oversee enforcement at trading centers, especially on weighing, grading, prompt payment, and documentation.
The Rules define “Native/Dark Leaf Tobacco Trading” as buying/selling, bartering, or exchanging native/dark leaf tobacco from farmer-producers to the trading center and/or principal buyer.

Licensing and authorization to trade

Any person of legal age with legal capacity, a corporation, partnership, company, cooperative, or any juridical entity duly licensed to do business in the Philippines may apply for a License to Buy native/dark leaf tobacco from tobacco farmer-producers, subject to licensing requirements and license fees computed based on average volume of purchases/acceptances for the last three (3) trading seasons.
License processing and licensing fees are computed as follows:
- 0 to 30,000 kilograms: PHP 875.00
- 30,001 to 60,000 kilograms: PHP 1,050.00
- 60,001 to 90,000 kilograms: PHP 1,225.00
- 90,001 kilograms and up: PHP 1,400.00
An application for a License to Buy is filed with the Branch Office where the trading center is located using MDRD Form No. 1.
The licensing application must be supported by the following:
- Information sheet of the trading center operator (MDRD Form No. 2)
- Designation from the principal buyer/corporation as duly authorized operator (MDRD Form No. 3) when applicable
- Endorsement/recommendation by the Branch Office (MDRD Form No. 4)
- Clearance from the Branch Office as to payment of R & R fees and other obligations (MDRD Form No. 5) for renewal
- Photocopy of Articles of Incorporation/By-Laws if the applicant is a corporation
- Photocopy of audited financial statements and/or latest Income Tax Returns of the trading center operator or corporation for the preceding year, and/or financial guarantee issued by a principal buyer
- Vicinity/location and floor plan showing total area, location, and dimensions of service areas for a new applicant
- Photocopy of the Mayor’s Permit for the current trading year
- Photocopy of the NTA Official Receipt showing full payment of processing and license fees
All License to Buy applications must be filed with the Branch Office on or before the date determined by the NTA; late filing triggers a penalty of fifty percent (50%) of the processing and license fees.
A License to Buy is valid for one tobacco trading season unless changed by the NTA Administrator.

Trading operations: time, trading center, and pre-buy requirements

Qualified entities to buy native/dark leaf tobacco include:
- a duly licensed native/dark leaf tobacco TC operator
- a duly licensed native/dark leaf BF qualified to buy all contracted native/dark leaf produce of its farmer-cooperators under a MOA
- a duly licensed wholesale tobacco dealer/buyer authorized to buy leaf tobacco from duly licensed BF/TC operators and/or other wholesale dealers/buyers
Buying at the trading center is conducted from 8:00 a.m. to 5:00 p.m., Monday to Friday, excluding days declared as official holidays.
Buying on trading center days outside regular working days requires a written request by the BF/TC operator and Branch Manager approval issued seven (7) days prior, and overtime pay of NTA personnel assigned thereat is for the BF/TC operator’s account.
A trading center must be located adjacent to a street or thoroughfare for easy access by farmer-producers.
The trading center premises are used solely for native/dark leaf tobacco trading; buying of other types of leaf tobacco may be allowed only if BF/TC operators secure required requirements for such activity.
Prior to buying, a BF/TC operator must:
- Obtain from the NTA a License to Buy, duly approved and signed by the NTA Administrator
- Secure all NTA trading forms including PIV (BIR-registered), purchase books, tobacco bale tags, delivery receipt, and COP, inspected/validated by the Branch Office Manager
- Submit to the NTA Branch Office the names and facsimile signatures of TC operator/manager, grader(s), weigher(s), field representative(s), and any authorized signatory
- Post an outdoor signboard measuring 3 feet x 6 feet containing trading center name/address, NTA license number, and regular business hours/days
- Display inside the trading center the NTA-approved and certified samples of native/dark leaf tobacco in a glass-encased display board visible to the public, and replace them every fifteen (15) days, or earlier upon deterioration or change of quality
- Install at least one (1) weighing scale calibrated and sealed by the NTA Branch Office, with regular inspection and calibration by the Branch Office
- Exhibit the original NTA License in a conspicuous place
- Provide a separate receiving ramp/area for personally delivered tobacco by farmer-producers
- Hire sufficient trading center personnel to accomplish NTA-prescribed trading forms and implement the Rules
- Provide permanent/adequate NTA bulletin/billboard space in a conspicuous place
- Undergo an orientation seminar on the NTA Trading Rules and Regulations conducted by the Branch Offices

Deposits, classification, weighing, and grade rules

Prior to official opening of the trading season, a farmer-producer may deliver tobacco deposits to a trading center if a tobacco deposit form is properly accomplished by the assisting technician/extension worker and the farmer-producer.
All tobacco deposits must be recorded as purchases/acceptances on the day the trading center officially opens and covered by a PIV.
Farmer-producers must bring/sell native/dark leaf tobacco produce properly bundled/baled and classified according to NTA grading standards prescribed for this tobacco type.
Buying/acceptance must follow first come, first serve, attended strictly to personally brought produce, and recorded chronologically in the incoming logbook.
Weighing must be done using calibrated weighing scales installed by the BF/TC operator, and weighing must be done in the presence of the farmer-producer(s).
Net weight is the basis of payment and is determined by deducting baling material weight equivalent to:
- one (1) kilo when gross weight is not more than 30 kilograms
- two (2) kilos when gross weight is over 30 kilograms but not more than 50 kilograms
- three (3) kilos when gross weight is more than 50 kilograms
Grading is done in the presence of the farmer-producer, using NTA-approved sample displays as the basis.
In cases of apparent downgrading by the TC grader, the NTA official/employee or Roving Team shall direct regrading; if regrading fails, the NTA-assigned official/employee or Roving Team determines the appropriate grade binding upon the parties.
Unclassified/in-sticks tobacco is graded by determining the highest possible grade, and that higher/highest possible grade is the official grade.

Floor prices and purchase documentation

Native/dark leaf tobacco must be bought at prices not lower than the prescribed floor price corresponding to each grade as determined and approved by the NTA Board of Directors.
Unclassified/in-sticks tobacco must be bought at the prescribed floor price for a native/dark leaf tobacco grade.
The TC operator must issue tobacco bale tag(s) during the trading season, with the farmer-seller name, weight, and grade written legibly by the BF/TC grader/weigher.
Tobacco bale tag distribution is:
- Segment No. 1: TC’s Copy (attached to the bale/roll)
- Segment No. 2: NTA’s Copy (attached to the PIV copy for MDRD)
- Segment No. 3: Farmer’s Copy (claim stub for farmer payment)
Every purchase from a farmer-producer must be covered by a PIV registered with the BIR and inspected/verified by the NTA.
The PIV must be accomplished within twenty four (24) hours after grading, weighing, and payment of delivered/accepted tobacco.
The PIV is in three (3) copies, distributed as:
- Original — NTA-MDRD
- Duplicate — Buyer
- Triplicate — Farmer-Seller
The PIV must indicate trading center details, BIR registration information, farmer-seller and transaction details, barangay/municipality source, grades, gross weight, deductions, net weight per grade, buying price per grade, total purchase value, operator signature, time of arrival, payment time/date, and serial numbers of bale tag(s) and COP where applicable.
Tobacco bought/gathered/collected by field representatives is covered by COP, properly accomplished, submitted to the BF/TC operator upon delivery, and attached to the PIV.

Payment rules and payment restrictions

Native/dark leaf tobacco purchased by licensed BF/TC operators must be paid in cash.
Payment using personal check, postal check, money order, or other negotiable instruments is allowed only when:
- the amount due is more than PHP 10,000.00
- there is a bank or facility for encashment within the province where the trading center is located
- this mode is acceptable to the farmer-producer
Payment must be made immediately after grading and weighing.
If payment cannot be made promptly due to fortuitous event or circumstances beyond control, payment must be made within forty-eight (48) hours after normal conditions are restored.
Payment must be made at the trading center; payment elsewhere is allowed only when peace and order deterioration or other causes beyond both parties’ control prevent payment at the trading center.
No payment may be effected in any bar/disco house or drinking establishment, gambling or other similar place.

Field representatives and their registration

Any person of legal age, with legal capacity, recognized and authorized by a duly licensed BF/TC operator may apply for a Certificate of Authority to gather/collect/purchase native/dark leaf tobacco from farmer-producers and deliver it to the BF/TC operator.
Field representative registration requires a fee of Seven Hundred Fifty (750.00) Pesos.
The application is filed with the Branch Office where the trading center is located.
If the field representative operates outside the province of operations, a similar certificate is required from the NTA Branch Office concerned.
The application must be supported by an information sheet (MDRD Form FR-1) and a photocopy of the NTA Official Receipt showing full payment of the registration fee.

NTA collection and recording of accountable documents

During trading operations, NTA trading officials/employee and/or Roving Teams gather/collect PIVs, COPs, and tobacco bale tags used by BF/TC operators.
Submitted PIVs/COPs/bale tags are recorded chronologically in the Purchase Book by the Branch Office trading center clerk with:
- name of farmer-producer-seller
- tobacco source (barangay, municipality, province)
- date of transaction
- volume, grade, and value
- serial numbers of PIV(s) and bale tag(s)

Research & Regulation fees and penalties

A Research and Regulation (R & R) fee of PHP 0.80 per kilogram of native/dark leaf tobacco purchased/accepted is paid to the NTA, less three percent (3%) handling loss allowance.
The R & R fee basis is the total monthly acceptances/purchases recorded in the purchase book less three percent (3%) handling loss allowance.
The Branch Office bills and collects R & R fees:
- A billing letter signed by the Branch Manager is delivered to BF/TC operators on or before the 10th day of the month following the purchase/acceptance month.
- If unpaid on the 20th day, another billing letter is sent not later than the 25th day of the same month.
BF/TC operators pay R & R fees to the Branch Office within the month immediately following the month of purchase/acceptance.
Late payment triggers a penalty of three percent (3%) per month, compounded monthly, computed from the day immediately following the due date.
All collections of R & R fees and penalties are deposited by the Branch Office to the NTA Central Office On-Line Bank Account.

Permits for wholesale purchase and redrying

Any natural or juridical person may engage in purchase and redrying of virginia leaf tobacco by securing a Permit to Purchase/Redry from the NTA after complying with requirements.
Permit requirements include:
- a purchase commitment to purchase/redry a specific quantity/volume from duly licensed tobacco BF/trading center operators
- a certified list of duly licensed trading centers operating under the purchase commitment and authorized signatories in trading documents
- a photocopy of NTA official receipt showing full payment of processing and license fees of PHP 5,000.00, unless revised
Applications for a Permit to Purchase/Redry are governed by the filing rule on late application/penalty applicable to License to Buy.
Licensed wholesale tobacco dealers/traders and redrying plant operators are authorized to purchase/receive tobacco deliveries from licensed BF/TC operators and/or other licensed wholesale tobacco dealers/traders for redrying/processing/sale.
Tobacco delivery must be supported by a Delivery Receipt duly signed as “Received,” indicating volume/net weight and date of delivery/purchase.

Visayas and Mindanao trading system rules

Special rules govern trading of specific tobacco leaf types (udlot, tugko, sapod/lulong/barot, pasta, and batek) by viajeros, retailers, and farmer-retailers.
“Authority to Buy” is a written authority issued by the NTA through the Branch Manager to a buyer called a viajero to buy directly from farmer-producers.
Batek/Udlot/Tugko are defined as upper leaf; Sapod/Lulang/Barot are defined as lower leaf.
“Pasta” is defined as lower leaves shredded into three (3) millimeter wide raw material for chewing tobacco and cigarette making.
“Paldo” is defined as a bale containing 50 to 60 kilograms.
“Manos” is defined as a bundle/pack containing 100 leaves.
“Tabo System” is defined as an auction-based leaf tobacco trading system conducted through an auction at a designated place within a municipality.
“Viajero” is a leaf tobacco buyer other than BF/TC operator who buys directly from farmer-producers and sells/transports/ships to other locations.
“Retailer” buys stock from viajeros, TCs, farmer-producers, and co-retailers and sells directly to consumers.
“Farmer-retailer” is a farmer-producer selling directly to consumers.

Visayas/Mindanao permits, limits, and sales timing

Before buying, a viajero, retailer, or farmer-retailer must secure the appropriate authority from NTA by filing the prescribed application form and paying processing and registration fees of:
- Viajero: PHP 500.00
- Retailer: PHP 300.00
- Farmer-retailer: PHP 100.00
Authority to Buy or Authority to Retail is valid for one trading season with the same duration rule used for License to Buy.
Only NTA-registered viajeros and retailers may buy leaf tobacco directly from farmer-producers within the province indicated in the NTA authority.
The Authority to Buy/Authority to Retail must be carried personally at all times while buying/selling/retailing.
Buying may be in manos or paldos, but the equivalent volume in kilos must be indicated in the Certificate of Purchase issued to the farmer-producer.
Farmer-producers must be paid within 24 hours after sale or before delivery/release of tobacco from the seller’s bodega/storage.
Before transporting purchased tobacco to other barangays/municipalities/provinces, a viajero or retailer must secure a Certificate of Inspection from the NTA Branch Office/Field Office showing R & R fees for purchased tobacco are fully paid; the Branch Office issues the official receipt.
A viajero or retailer shall not buy tobacco from a farmer-producer covered by an NTA-supervised tobacco contract growing project unless the contractor-buyer refuses to buy the subject tobacco.

Tabo system trading at auction

Any LGU operating or intending to operate a tabo system must notify the NTA Branch Office concerned and provide:
- location plan of the place(s) where the tabo system is conducted
- floor plan showing total area, location, and dimension of service area(s)
- designated day(s) and time of tabo trading
Farmer-producers and NTA licensed BF/TC buyers may participate in the tabo system.
During designated days and times, NTA officials/employees and/or a Roving Team must oversee the trading activity.
Tobacco purchased/auctioned is weighed on a duly calibrated scale in the presence of the farmer-producer and NTA Roving Team, and then Certificate of Inspection and official receipt for R & R fees are issued.

Integrated farming program marketing agreement trading

Tobacco under the integrated farming and other income generating activities is traded under a marketing agreement where virginia leaf tobacco is delivered personally by the NTA/TC/BF-financed farmer-producer to the trading center operator/buyer firm with whom the marketing agreement is entered.
Each delivery under the marketing agreement must be accompanied by the NTA technician assigned to the area where the farmer-producer resides/produces.
Upon arrival, the farmer-producer presents the farmer’s ID including the ID auxiliary card to the BF/TC operator.
After weighing and grading, the TC operator issues the farmer’s copy (Segment No. 3) of the tobacco bale tag to secure payment of sales proceeds from the TC cashier.
The TC cashier deducts from sales proceeds amounts due corresponding to periodic amortization of the loan as indicated in the marketing agreement, and records and signs deductions in the auxiliary card.
The farmer-producer may sell produce to a field representative affiliated with and authorized by the participating BF/TC operator, after giving prior notice to the NTA technician assigned, indicating intended date/schedule.
The field representative issues a properly accomplished COP indicating the farmer’s ID card number and the amount collected/deducted for loan amortization, signed by the farmer-producer; all collections/deductions are recorded/signed in the auxiliary card.
Authorized field representatives must carry (in addition to Certificate of Authority) a notarized Special Authority issued by the participating TC operator/buyer firm.
The NTA Branch Manager and the NTA/TC/BF-financed farmer-producer must be furnished a copy of the Special Authority prior to operations.
The farmer-producer shall not sell/transfer/deliver to other field representatives without a Special Authority unless all monetary obligations with NTA and/or the BF/TC operator under the marketing agreement are settled as indicated in the auxiliary card.
Field representatives without the required Special Authority are not authorized to buy the produce of a farmer-producer known to have availed financial assistance, nor may they induce such farmer-producer to sell by offering a better price.
If the farmer-producer intends to sell/deliver to other buyers, the farmer-producer must secure a waiver or Certificate of First Refusal from the BF/TC operator with the marketing agreement.
No BF/TC operator or field representative shall accept/buy tobacco from a farmer-producer without the required NTA ID and auxiliary card.
Farmers who availed financial assistance must maintain and carry NTA ID and auxiliary cards at all times for reconciliation and validation.

Marketing agreement violations and sanctions

Any violation of provisions of a marketing agreement or the marketing agreement trading rules constitutes unfair tobacco trading practice subject to administrative sanctions and/or fines.
An NTA/TC/BF-financed farmer-producer who violates marketing agreement provisions or the Rules is blacklisted by the NTA for two (2) years, disqualified as a beneficiary of NTA assistance, and must pay an additional fine of three percent (3%) per month for unpaid loans.
A BF/TC operator who violates the same is denied registration/license to buy/operate for the succeeding two (2) trading seasons and must pay an additional fine of three percent (3%) per month on unpaid loans from the NTA.

Auction system provisions when adopted

If NTA decides to adopt an auction system for tobacco trading in specific native/dark leaf producing areas, NTA must announce it through media.
Qualified participants in the auction system include:
- NTA-registered TC operators within the province where auction is conducted, and field representatives authorized by an affiliated TC operator
- NTA-registered TC operators/buyers in other provinces/Branch Offices operating with an issued License to Buy/Operate in the province where auction is conducted
- cooperative members without marketing tie-up/agreement with NTA and/or any NTA-registered BF/TC operator who may sell/offer for auction
- NTA/TC/BF-financed farmers who secure a waiver and/or a Certificate of First Refusal from the BF/TC operator
- independent native/dark leaf farmer-producer(s)
Auction order of activities requires:
- delivery of classified and bundled tobacco to the designated auction center/place by farmer-producers
- weighing on a duly calibrated scale with weight recorded in a bale tag signed by weigher and grader, with grade predetermined and indicated in the bale tag
- numbering, piling, and opening of bales/rolls to the public for buyer inspection
- issuance of a price quotation form to authorized buyers, quoting bid price per kilo per bale basis
- submission of price quotation forms to the auction officer
- posting of bid prices and determination of winning bidder by the auction officer
- award to winning bidder if no objections or protests
- accomplishment of Certificate of Purchase if winning bidder is a duly authorized field representative, or a PIV if winning bidder is a BF/TC operator
The winning bidder must pay farmer-producer(s) immediately after the award.
NTA assigns competent officials/employees at the auction center to oversee weighing, grading, documentation, and prompt payment.

Trading violations: administrative sanctions and fines

The NTA Administrator imposes administrative sanctions ranging from warning to revocation/cancellation of license/permit and/or fines for violations of the Rules.
Sanctions apply as follows:
- First violation: warning and payment of fine of PHP 10,000.00
- Second violation: suspension/temporary closure of operation for not more than five (5) days or until compliance and payment of fine of PHP 20,000.00
- Third violation: revocation/cancellation of license and payment of penalty of PHP 30,000.00
After a third violation, the violator shall not be issued a license/permit for the native/dark tobacco trading season immediately following the violation.