CARE Food Manual (CARE , 1998, 355 p.) Chapter 9 - Loses and Claims (introduction...) I. Care's Loss Policy II. Liability of Care for Losses III. Categories of Losses (introduction...) A. Marine Losses B. Internal Losses IV. Minimizing Losses A. Marine Losses B. Internal Losses V. Types of Losses VI. Documenting Losses A. Marine Losses - Discharge (Ex-tackle) Survey (introduction...) 1. Costs of Surveys 2. Reimbursement of Fees 3. Other Documentation B. Internal Losses - Delivery Surveys C. Loss and Adjustment Reports (introduction...) 1. Guidelines for Preparing Reports 2. Printing and Distribution 3. Preparation 4. Authorization 5. Routing D. Monthly Loss Reports E. Quarterly Loss Reports - Dates for Preparation and Submission F. Reporting Criminal Activity VII. Repackaging (introduction...) A. Definition B. Procedures C. Minimizing the Need to Repackage D. Repackaging Costs E. Approval for Repackaging (introduction...) 1. Packages Damaged in Transit 2. Packages Damaged in Warehouses 3. Submission to CARE USA Headquarters VIII. Food Unfit for Human Consumption A. Documenting Unfit Food B. Lab or Other Analysis C. Timeliness of Documentation Regarding Fitness D. Certification of Commodities Unfit for Human Consumption E. Donor Notification Requirements 1. Marine Losses 2. Internal Losses 3. Delays in Notification F. Disposition of Food Unfit for Human Consumption (introduction...) 1. Sale of Unfit Food (introduction...) a. Solicitation and Receipt of Bids b. Precautions c. Proceeds from Sale of Unfit Food 2. Donation of Unfit Food 3. Destruction of Food Unfit for Human or Animal Consumption 4. Use of Waybills to Remove Food from CARE Inventories IX. Filing Claims for Marine Losses A. Australia, Canada and Great Britain B. European Union through Euronaid (introduction...) 1. Uses of Claims Settlements 2. Reporting on Insurance Claims C. United States 1. Transfer of Title to CARE 2. Exceptions to Filing Claims for Marine Losses 3. Marine Losses Valued at less than US$300 4. Filing Claims for Marine Losses in Excess of $300 5. Computation of Ocean Carrier Claims 6. Assignment of Claim Numbers 7. Notice of Protest 8. Submission of Discharge Survery Reports 9. Loss Advice 10. Claims Progress Memo 11. Summary of Required Claims Documentation X. Pursuing Claims for Internal Losses A. General B. Coordination between CARE Finance and Logistics Staff C. Valuing Claims D. Pursuing Claims E. Monitoring the Status of Claims F. Reporting Claims Information to the Donor G. Claims Proceeds

CARE Food Manual (CARE , 1998, 355 p.)

Chapter 9 - Loses and Claims

Figure

I. Care's Loss Policy

Each country office must minimize losses of food resources to the extent possible. Management is responsible for detecting thefts, embezzlement, misappropriations, and other irregularities, and for having competent staff systems of internal control in place to reduce the risk of loss of all food resources. If systems are not in place, food may not reach intended beneficiaries, and CARE may be held liable by donors for the value of the loss, even though someone else is responsible.

CARE must assure that the maximum amount of high quality food reaches the beneficiaries; establish generally accepted practices for managing food inventories; maintain the highest degree of accountability to donors and avoid compromising its reputation.

Reference Attachment, ALMIS #4351, October 10, 1984 - Policy on Losses and Fraudulent Acts.

Systems should be designed to reveal or protect against the following types of activities.

· Any dishonest or fraudulent act which compromises the security of warehouses where food is stored

· Thefts of food from warehouses, in-transit between ports, warehouses and/or distribution sites, or at distribution sites

· Establishment of fraudulent lists of beneficiaries, or inclusion of unauthorized individuals on beneficiary lists

· Forgery or alteration of any document or account belonging to CARE or its counterpart relating to the management of food, and any required reporting including but not limited to agreements and contracts, distribution plans, stack cards, waybills, Loss and Adjustment Reports, warehouse and commodity financial ledgers, commodity status reports and end-use monitoring reports

· Forgery or alteration of a check, bank draft, or any other financial document relating to the sale or other disposition of unfit food, empty containers or the collection of contributions from beneficiaries

· Misappropriation of funds, food, securities, supplies, spare parts, project materials and equipment, or other assets related to the implementation of projects using food resources

· Impropriety in the handling and reporting of money, financial transactions, or bidding procedures

· Accepting or seeking anything of material value from vendors or persons providing services/materials to CARE

· Destruction or misappropriation of records, furniture, fixtures, or equipment

· Failure of CARE or counterpart staff to follow established rules and procedures for managing food assets.

Reporting to the CARE USA Director of Internal Audit

In addition to and notwithstanding any donor reporting requirements, all losses of food shall be reported, in writing, by the country director or his/her designee, as soon as detected, to CARE USA Headquarters, Director of Internal Audit. The Director will coordinate all required investigations into all losses, with Headquarters and country office staff. To satisfy this CARE reporting requirement, country offices should submit a copy of every Loss and Adjustment Report and other documents as required to the Director of Internal Audit.

II. Liability of Care for Losses

A loss of food may occur due to any act or omission by CARE unless such loss was beyond CARE's control. To determine whether CARE exercised its responsibilities properly, country offices must examine the capacity of counterparts to carry out program activities, the operating environment of the country (infrastructure, security), and usual commercial practices of contractors for services.

While there may be many constraints to carrying out programs using food resources, country offices must assume responsibility for:

· Establishing proper warehouse inventory and commodity accounting systems including procedures that account for losses, pursue claims, and require taking physical inventories

· Establishing proper storage and handling procedures

· Establishing procedures to minimize losses and to detect them on a timely basis

· Routinely inspecting food and storage facilities and remedying deficiencies

· Entering into contracts for services with reputable individuals and/or companies

· Including provisions in agreements and contracts with counterparts or contractors for services that define responsibilities and payment of penalties

· Providing training for all staff managing or monitoring food resources

· Properly transporting food

· Establishing procedures to register beneficiaries eligible to receive food and assure distributions to beneficiaries

· Having in place adequate systems to monitor the activities of CARE and counterpart staff who receive, store and dispatch food from their warehouses and distribute food to beneficiaries

· Notifying donors of losses and taking action, on a timely basis, to pursue claims against responsible parties

· Notifying local police and other appropriate authorities about suspected or known thefts of food and requesting their assistance to prosecute responsible parties

· Closing out audit recommendations (internal and external) on a timely basis.

III. Categories of Losses

Two broad categories of losses can take place from the time the food leaves the donor country to the time it is distributed to the intended recipient - marine losses and internal losses. The main distinctions between the two are the parties liable for the loss and the method of collecting claims.

A. Marine Losses

After food has been loaded onto a ship in a donor country, a Bill of Lading or Through Bill of Lading is signed by the ship's Master or other duly authorized person on behalf of the shipping company. The Bill of Lading is the receipt for the goods shipped and certifies the quantity and condition of the goods when loaded onto the ship. Marine losses are those losses that occur from the time the Bill of Lading is issued to the shipping company up to the time the shipping company turns over custody and control of the food to CARE, its designated agent (e.g., clearing and forwarding agent) or its counterparts, at the port or a designated warehouse on a Through Bill of Lading.

The amount of loss is the difference between 1) the stated quantity on the Bill of Lading, and 2) the quantity and condition of the food at the time the shipping company discharges the food and turns over custody and control to CARE.

B. Internal Losses

Internal losses are those that occur after CARE takes custody and control of the food from the shipping company, usually at a port, until the time of distribution to beneficiaries. For example, internal losses may occur while food is under the control of:

· A port authority (movement from the dock to port warehouse, or a in port warehouse)
· A CARE, contracted, or counterpart transporter
· A CARE, contracted, or counterpart warehouse
· CARE or counterpart staff responsible for distributing food to beneficiaries.

IV. Minimizing Losses

A. Marine Losses

Although marine losses occur before the food is in CARE's control, CARE can take the following steps to minimize marine losses:

Planning:

· Receive food whenever possible in containers. The use of containers minimizes handling-related losses by circumventing the use of port labor, and reducing the amount of times the cargo is handled. Containers also provide better protection from moisture and moisture-related damage.

· If food is received breakbulk, minimize handling losses through discharge of the food from the ship's hold directly onto trucks or other vehicles at dockside for onward transport. This minimizes port handling and storage.

Pre-Shipment:

· Minimize delays in obtaining official documentation, such as the Bill of Lading and other exemption certificates required for port clearances.

Bagging Bulk Cargo at Port:

· If labor is done by piece-rate, ensure that there are mechanisms in place to control the quality of the work performed, such as penalties for unacceptable work practices. For example, workers are often paid by the piece, which means they fill, stitch and move bags as quickly as possible with minimal care. This results in poorly stitched bags that leak and the use of stevedores' hooks.

· Take necessary steps to detect and correct shortweight and faulty packaging. Variation in bag weight, combined with poor bag stitching can result in large-scale theft, in particular at later stages of the delivery chain.

· Ensure that adequate materials, space and labor are available for prompt segregation and reconstitution of damaged food so that as much good food can be saved as possible.

Claims:

· Take necessary steps to submit claims promptly, with complete documentation to donors.

B. Internal Losses

Internal losses can be minimized through the following activities:

Internal Controls:

· Segregation of duties and responsibilities of managers and staff receiving, storing and dispatching food to reduce the risk of collusion.

Warehouse Storage:

· Regular inspection of food and storage facilities
· Proper warehouse and warehouse inventory accounting procedures
· Carrying out physical inventories on a regular basis

Transportation:

· Have clear agreements and contracts.
· Use reliable transporters.

Claims:

· Processes and remedies for any deficiencies discovered
· Sanction policies which hold liable those who have possession of food when a loss occurs.

V. Types of Losses

When food leaves the custody of one party and is received by another, there may be four results:

· Food arrives in the same amount and same condition that it left the sending party.
· Less food arrives than documented.
· More food arrives than documented.
· Food arrives damaged, including infested, wet or contaminated.

This chapter discusses the last three results. See Port and Storage and Handling for more information on damages and types of losses, evidence of damage, methods of control, and actions that can be taken to prevent or minimize their occurrence.

VI. Documenting Losses

A. Marine Losses - Discharge (Ex-tackle) Survey

At the time the shipping company transfers custody and control of food to CARE, its agent or counterpart, most donors require that an independent surveyor be contracted to determine the amount and condition of food received against the Bill of Lading. See Agreements and Contracts for areas to be covered when entering into contracts with independent surveyors, and Port for detailed information on carrying out Discharge Surveys.

Internal Control

Even if not specifically required by a donor, a country office must contract the services of an independent agent for a discharge survey. The discharge survey is the most important document used to fix responsibility for marine losses on the shipping company.

1. Costs of Surveys

CARE or its counterpart must determine if fees are equitable for the services prior to contracting a surveyor. Most donors require and pay for the discharge survey.

For Euronaid food, Euronaid will arrange for a surveyor for both vessel discharge and at the final destination.

For U.S. Government food, CARE is required to engage the service of an independent surveyor for the ex-tackle survey, unless:

· USAID or the diplomatic post determines, and communicates in writing, that such surveys are not feasible in the specific port area.

· Commodity Credit Corporation (CCC) has made other provisions for such examinations and reports.

The country office should contact the local USAID mission or agricultural attaché to determine if surveys are necessary. Discharge surveys are almost always required as they are needed to pursue claims for losses against the ocean carrier.

2. Reimbursement of Fees

If not paid in advance by the donor, discharge survey fees are reimbursable through the CI Headquarters office procuring the food. The country office must submit:

· Claims statement or advice that no claim will be filed, and the monetary amount of the loss

· Original or signed duplicate copy of the survey report and invoices or certified statements showing the amount already paid by CARE. See Attachments for an example of an invoice.

The costs of the surveys should be written directly into the project proposals, agreements and budgets if the donor does not have a reimbursement policy.

3. Other Documentation

Donors may require other documentation to support marine claims against shipping companies. See Port for a discussion of other reports that may have to be filed along with independent discharge survey report.

B. Internal Losses - Delivery Surveys

For food that is dispatched from port warehouses to a designated inland warehouse, donors and country offices often arrange for the independent surveyor to carry out a Delivery Survey at the time the food arrives inland. The survey is important in fixing responsibilities for losses of food while in the custody of a port authority and during transport. See Port for further information. Donors may reimburse for the costs of delivery surveys in addition to the discharge survey. Costs should be written into project proposal budgets, and included in agreements with the donor.

C. Loss and Adjustment Reports

In addition to Discharge and Delivery Survery Reports filed by independent surveyors, CARE or counterpart port officers, clearing and forwarding agents, and warehouse managers or storekeepers are all required to prepare Loss and Adjustment Reports for receipt of more or less food than stated on Bills of Lading and waybills. See Food Receipt and Dispatch, Inventory Accounting and Reporting and Almis #4496 - Commodity Accounting Manual.

Internal Control

The Loss and Adjustment Report is the supporting document to authorize the increase or decrease of balances in CARE food inventory ledgers (commodity and warehouse), and the dispatch of unfit food.

1. Guidelines for Preparing Reports

Loss and Adjustment Reports are for:

· Marine losses - with discharge survery as supporting document
· Marine excess landed - with discharge survey as supporting document.

Internal Losses

· At port warehouses and during dispatch to inland warehouses with the delivery survey and waybills as the supporting documents

· Transport losses - with waybill as supporting document

· Warehouse - with physical inventory reports and documents for dispatching unfit food

· Unfit food - with Declaration of Unfit Food as supporting document

· Internal excess deliveries to warehouses - with waybill as supporting document.

The following provides guidance on how to prepare Loss and Adjustment Reports by way of example. The examples are taken from Chapter 8 - Food Receipt and Dispatch and Chapter 10 - Inventory Accounting and Reporting. The Reports have been coded to allow country offices to more easily set up data bases that can be used to prepare Monthly Loss Reports (see section D below).

Example 1 - Loss and Adjustment Report 14 Discharge from ship · 27 October, 1994 -- A ship with Bill of Lading #576 carrying 6,000 bags of U.S.D.A. wheat arrives at port. Shipment #3054 is assigned to the shipment by the CARE country office. · A total of 5,900 bags are discharged from the ship, including 30 torn and leaking bags and five bags which are stained and appear unfit for human consumption. · The 30 torn and leaking bags are repackaged into 25 bags of food. · 28 October -- Four of the five stained bags are declared unfit for human consumption by an official of the Health Ministry. One bag is declared fit for human consumption. · Loss and Adjustment Report #14 is prepared for the repackaged and unfit food and submitted to a designated manager for approval. · 29 October -- the sub-office administrator authorizes Loss and Adjustment Report #14, documenting marine losses of 109 bags (100 short, five lost after repackaging and four unfit), and the disposal of four (4) bags of unfit food by donation.

Example 2 - Loss and Adjustment Report 100 · 29 October -- 1,000 bags are dispatched from port warehouse to warehouse #1 via Waybill # 850. · 29 October -- The truck carrying Waybill #850 from the port warehouse arrives at warehouse #1. A total of 975 bags of food are unloaded, of which five bags are torn and leaking, and two are stained and appear to be unfit for human consumption. · The five torn and leaking bags are repackaged into 4 ½ bags. A public health official declares the two stained bags to be unfit for human consumption. The repackaged and unfit bags as well as the bags that were not delivered (short) are documented on Loss and Adjustment Report #100. · 30 October -- The suboffice administrator authorizes Loss and Adjustment Report #100 documenting the internal transit losses of 27 bags and 25 kilos.

Example 3 - Loss and Adjustment Report 101 · 31 October -- 1,000 bags are dispatched to warehouse #1 via Waybill #853. · 31 October -- The truck carrying Waybill #853 arrives at Warehouse #1 and unloads 1,010 bags, of which five are torn and leaking, three are moldy, and ten are underweight by five kilos each. · 31 October -- The five torn and leaking bags are repackaged into four, and the ten underweight bags are repackaged into nine. A public health official declares that three other moldy bags contain food which is unfit for human consumption. The repackaged and unfit bags as well as the ten excess bags are documented on Loss and Adjustment Report #101. · 31 October -- The suboffice administrator authorizes the Loss and Adjustment Report documenting the transit loss of five bags and the excess receipt of ten bags.

CARE LOSS & ADJUSTMENT REPORT

14

Prepare separate Loss & Adjustment Reports for each type of commodity and each shipment.

Storage Location: ______PORT________________	Date: __________28/10_____________
Shipment #: _____3054______________________	B/L / Waybill #: _576_________________
Date Loss Discovered: ___27/10 _______________	Commodity Type: ___WHEAT__________
Truck/Trailer #: ____NAME OF SHIP____________	Unit (bag/carton/drum): _BAG________
Donor: ____CIDA___________________________	Unit Weight: ____50 KG_____________
Contract ID #: ____Donor #__________________	Preparer (name): _Port Officer_____
	Preparer (signature): ________________

		Units	Kgs	Total kgs
1. Excess receipts
LOSSES
	2. Qty Short (Missing -- In delivery and/or Whse.)	100		5000
	3. Qty damaged packages (slack/torn/wet/stained)	30		1500
	4. Qty repackaged	25		1250
	5. Qty lost (3-4)	5		750
	6. Qty declared unfit for human consumption	4		200
7. Total loss (2 + 5 + 6)		109	0	5950

Person and/or organization possessing commodities at time of loss or misuse: NAME OF SHIPPING CO.

Location of loss or misuse:
x Marine
Internal Þ Port Transit Warehouse: CARE Counterpart Contract

Description of packages received: Underweight x Slack/Torn Wet x Stained Infested Other

Details of circumstances under which loss or misuse took place: SHORT LANDING UPON DISCHARGE
AND DAMAGE TO BAGS AND STAINING -- CIRCUMSTANCES UNKNOWN -- REF. DISCHARGE SURVEY

Action taken to recover: __DAMAGED BAGS REPACKAGED, UNFIT FOOD CERTIFIED______

Claim information: CLAIM AGAINST SHIPPING COMPANY____________________________

This is to certify that the above commodity is unfit for human consumption. (Attach official report)
		HEALTH OFFICIAL	28/10
Authorized by (name)	Signature	Title	Date
This authorizes the removal of __109____ units / _5450_____ kgs of __WHEAT____________ from inventory and the disposal of _4__ units/ 200 kgs of unfit food by donation/destruction/burial.
		SUBOFFICE ADMINISTRATOR	29/10
Authorized by (name)	Signature	Title	Date

Original Commodity Accountant Finance section

Copy 1 Commodity Logistics Section

Copy 2 CARE USA Internal Audit

Copy 3 Preparer

Copy 4 Preparer

CARE LOSS & ADJUSTMENT REPORT

100

Prepare separate Loss & Adjustment Reports for each type of commodity and each shipment.

Storage Location: __WAREHOUSE #1____________	Date: ______29/10_________________
Shipment #: ___3054________________________	B/L / Waybill #: _850_______________
Date Loss Discovered: __29/10________________	Commodity Type: _____WHEAT______
Truck/Trailer #: ___fill in___________________	Unit (bag/carton/drum): __BAG________
Donor: _________CIDA______________________	Unit Weight: _____50_KG____________
Contract ID #: _____Donor #_________________	Preparer (name): _Storekeeper_________
	Preparer (signature): ________________

		Units	Kgs	Total kgs
1. Excess receipts
LOSSES
	2. Qty Short (Missing -- In delivery and/or Whse.)	25		1250
	3. Qty damaged packages (slack/torn/wet/stained)	5		250
	4. Qty repackaged	4	25	225
	5. Qty lost (3-4)		25	25
	6. Qty declared unfit for human consumption	2		100
7. Total loss (2 + 5 + 6)		27	25	1375

Person and/or organization possessing commodities at time of loss or misuse: TRANSPORTER

Location of loss or misuse:

Marine
x Internal Þ Port x Transit Warehouse: CARE Counterpart Contract

Description of packages received: Underweight x Slack/Torn Wet x Stained Infested Other

Details of circumstances under which loss or misuse took place: 25 BAGS NOT DELIVERED, 5 BAGS DELIVERED, TORN AND LEAKING BAGS DUE TO POOR HANDLING AND TWO BAGS STAINED AND APPEARED UNFIT STAINED BAGS HAD MOTOR OIL SPILLED ON THEM

Action taken to recover: _REPACKAGING -- CERTIFICATION OF 2 BAGS UNFIT_______

Claim information: _CLAIM TO BE FILED -- DEDUCT VALUE FROM INVOICE____

This is to certify that the above commodity is unfit for human consumption. (Attach official report)
		HEALTH OFFICIAL	29/10
Authorized by (name)	Signature	Title	Date
This authorizes the removal of __27_______ units / __1375________ kgs of __WHEAT_________________ from inventory and the disposal of 2 units/ 100 kgs of unfit food by donation/destruction/burial.
		SUBOFFICE ADMINISTRATOR	30/10
Authorized by (name)	Signature	Title	Date

Original Commodity Accountant Finance section

Copy 1 Commodity Logistics Section

Copy 2 CARE USA Internal Audit

Copy 3 Preparer

Copy 4 Preparer

CARE LOSS & ADJUSTMENT REPORT

101

Prepare separate Loss & Adjustment Reports for each type of commodity and each shipment.

Storage Location: ___WAREHOUSE #1________	Date: ______31/10_________________
Shipment #: _____3054______________________	B/L / Waybill #: __853_______________
Date Loss Discovered: ____31/10______________	Commodity Type: ___WHEAT__________
Truck/Trailer #: __FILL IN___________________	Unit (bag/carton/drum): __BAG________
Donor: _____CIDA__________________________	Unit Weight: __50KG________________
Contract ID #: ___Donor #__________________	Preparer (name): __Storekeeper________
	Preparer (signature): ________________

		Units	Kgs	Total kgs
1. Excess receipts		10		500
LOSSES
	2. Qty Short (Missing -- In delivery and/or Whse.)
	3. Qty damaged packages (slack/torn/wet/stained)	15		750
	4. Qty repackaged	13		650
	5. Qty lost (3-4)	2		100
	6. Qty declared unfit for human consumption	3		150
7. Total loss (2 + 5 + 6)		5	0	250

Person and/or organization possessing commodities at time of loss or misuse: TRANSPORTER__

Location of loss or misuse:

Marine
x Internal Þ Port x Transit Warehouse: CARE Counterpart Contract

Description of packages received: x Underweight x Slack/Torn Wet x Stained Infested x Other

Details of circumstances under which loss or misuse took place: _10 EXCESS BAGS DELIVERED BY TRANSPORTER; 5 BAGS TORN AND LEAKING; 10 BAGS UNDERWEIGHT; 3 BAGS MOLDY/STAINED

Action taken to recover: __REPACKAGE 13 BAGS_____________________

Claim information: ____FILE CLAIM AGAINST TRANSPORTER_________________

This is to certify that the above commodity is unfit for human consumption. (Attach official report)
		HEALTH OFFICIAL	31/10
Authorized by (name)	Signature	Title	Date
This authorizes the increase/removal of ___10____ units / __500_____ kgs of ___WHEAT___________ from inventory and the disposal of 3 units / 150 kgs of unfit food by donation/destruction/burial.
		SUBOFFICE ADMINISTRATOR	31/10
Authorized by (name)	Signature	Title	Date

Original Commodity Accountant Finance section

Copy 1 Commodity Logistics Section

Copy 2 CARE USA Internal Audit

Copy 3 Preparer

Copy 4 Preparer

2. Printing and Distribution

Loss and Adjustment Reports must be pre-printed and pre-numbered. Distribution of blank reports should be controlled by the same procedures used to distribute blank checks or blank waybills. For waybills, See Food Receipt and Dispatch.

3. Preparation

Staff who are responsible for warehouses or other areas where food is prepared prepare Loss and Adjustment Reports. For example, a warehouse storekeeper prepares the report for losses occurring in a warehouse during receipt and dispatch of food and for any losses discovered during repackaging or when reconciling physical inventories with warehouse inventory ledgers. A commodity accountant in the finance section prepares the report when there are differences between what was dispatched from a warehouse and what was received at a distribution center.

Example

200 cartons of oil were dispatched to a distribution site by a regional warehouse, but only 175 cartons were delivered. The loss was discovered when the transport company submited the waybill with its invoice for payment. The Receipt Information section of the waybill showed that only 175 cartons were delivered to the site. The commodity accountant then prepared the Loss and Adjustment Report and recorded the transaction in the commodity inventory ledgers.

4. Authorization

Every Loss and Adjustment Report must be authorized. Other than waybills, this is the only support document used to increase or decrease food balances in commodity and warehouse inventory ledgers. Given the importance of this transaction, persons who prepare the reports should not be the same persons who authorize changes in inventory. To satisfy the principles of internal control, there must be a segregation of responsibilities.

Internal Control

Loss and Adjustment Reports should be authorized by someone outside the logistics section of a country or counterpart office. For example, a project manager or office administrator could authorize reports. This segregation of responsibilities is necessary because the person responsible for managing food inventories has an obligation to report increases or losses to management. Approving the report shows that management is aware of the losses and adjustments and approves changes in inventory balances.

5. Routing

An original and four copies of the Loss and Adjustment Report are prepared and submitted to the person authorized to approve it. Once approved, the person authorizing the report is responsible for assuring that all copies are routed to the appropriate persons or departments for further action. The table below summarizes routing and shows how the copies are used.

Routing of Loss and Adjustment Reports

Copy	Routed to	Used for
Original	Commodity Accountant in Finance, Country or Regional Office	Adjusting the financial inventory accounting records
Copy 1	Food Logistics section - Country or Regional Office	Preparing CARE and donor commodity and loss reports
Copy 2	CARE USA Internal Audit Department	Monitoring level of food losses worldwide
Copy 3	Person who originally prepared the report, after authorization.	Documenting excess receipts and removing losses in warehouse inventory records.
Copy 4	Remains with person who prepared report	To insure an approved and authorized report is returned. Copy 3 attached to Copy 4.

Because of distance and communication problems, there may be delays in authorizing Loss and Adjustment Reports, returning them to warehouses, and adjusting inventory records. However, the importance of controlling adjustments to inventories outweighs the inconvenience caused by any delays.

D. Monthly Loss Reports

The Monthly Loss Report is a summary of all Loss and Adjustment Reports for the month by donor. If there is more than one region, each region should submit its Monthly Loss Report to the country office's Food and Logistics section or other authorized managers who then will aggregate the regional reports into a country-wide Quarterly Loss Report.

The report provides managers with more detailed information on losses than are reported on Commodity Status and Quarterly Consolidated Reports. See Inventory Accounting and Reporting for information on the preparation and submission of those two reports.

Preparation of Monthly Loss Reports should coincide with closure of warehouse inventory ledgers and preparation of Commodity Status and Quarterly Consolidated Reports. See Inventory Accounting and Reporting for details.

The Montlhy Loss Report is adapted from a similar report required by AID'S Bureau of Humanitarian Affairs, Office of Food for Peace for PL 480 Title II programs. The format can be used for all donors, with additional columns inserted for codes required by AID. (See Attachment - Codes for Commodity Type, Loss Location and Loss Type.)

Monthly Loss Report

Country Office: ______________	Date Entered: ____________
Donor: _____________________	Sheet _____ of ______

CARE Ship. #	Loss & Adjust. Rpt.#	Commodity	Donor Contract #	Loss Location Code*	Quantity Lost		Potential Loss but Recovered
					Kgs	MTs	Kgs	MTs
TOTAL

Loss Location Codes

1 - Lost in ocean transport (includes transits lost with through bill of lading)
2 - Lost during in-country transport
3 - Losses in port warehouse
4 - Losses in CARE warehouse
5 - Losses in counterpart warehouse
6 - Losses in contracted warehouses

E. Quarterly Loss Reports - Dates for Preparation and Submission

Quarterly Loss Reports should be prepared by CARE country offices no later than forty-five (45) days after the end of each quarter and submitted to CARE USA, other CI members and donors by numbered, transmittal letter. The report should accompany Quarterly Commodity and Recipient Status Reports. In emergencies, reports may be required more frequently, weekly or even daily. See Inventory Accounting and Reporting for more on reporting and who should receive reports.

The following table provides specific donor reporting requirements, however, country offices should submit quarterly loss reports in addition to the requirements set out in the table. See also Inventory Accounting and Reporting.

Internal Loss Donor Reporting Timetable

Donor	Date
AIDAB (submit to CARE Australia)	· Semiannual
CIDA - Bilateral (submit to CARE Canada) CIDA - Other (submit to CARE Canada)	· Shipping report - 31 days after shipment has arrived · Interim report - when 50% of food has been distributed · Final report - no later than 60 days following the final distribution
Euronaid (submit to CI member who signed agreement)	Final report on completion. If a project lasts more than 6 months, submit an interim report.
ODA (submit to CARE Britain)	· Every 6 months and within 3 months of project completion · As negotiated in agreement
USAID	Quarterly · 1st Qtr. - 15 April · 2nd Qtr. - 15 July · 3rd Qtr. - 15 October · 4th Qtr. - 15 January
USDA	Semiannual - Annual
WFP	As negotiated by agreement

F. Reporting Criminal Activity

If country offices suspect or discover losses due to criminal activity, they must promptly notify, in writing, their regional managers and the Food Security Unit CARE USA, CI members for non-U.S. donated food, and donors. All parties must be kept regularly informed of all efforts to recover the lost food or an equivalent monetary value. Country offices should also contact local government authorities for assistance.

VII. Repackaging

Food that arrives in damaged bags, cartons or containers, or appears infested by insects or other matter should be repackaged. Repackaging insures that food is stored and dispatched in good condition and in standardized weights. In this manual the terms repackaging and reconstitution are used interchangeably.

A. Definition

Repackaging involves taking food from damaged packages (bags, cartons or containers) and filling new ones to the standard weight specified on the Bill of Lading. Any food (grains, processed cereals or liquid) spilled on the floor or on the ground during reconstitution which may be unfit for human consumption must be disposed of as described below.

Losses after repackaging are calculated by subtracting the weight of the reconstituted bags, cartons or containers from the original weight of all the packages if no damages had occurred. After repackaging, warehouse managers, storekeepers or others must prepare Loss and Adjustment Reports.

B. Procedures

Repackaging needs to take place as soon as possible after the damage has been discovered. Otherwise, the quality of the food could be affected and further losses could result. Also, delays in repackaging food could make it more difficult to pursue damage claims against responsible parties.

· Ensure that adequate space is available for prompt segregation of damaged and/or infested packages of food. Maintain a supply of empty bags, cartons or containers either purchased locally or obtained from the donor at the time the food is shipped. Materials for stitching or taping and adequate labor must also be available.

· New bags, cartons or containers should have the same donor markings as the original, including the name of the donor and the information that the food was provided as a donation and is not to be sold or exchanged. If marking the new bags or containers will be costly, request the donor to waive this requirement.

· Repackage bagged food by stitching or taping torn bags, placing the damaged bag inside a new bag, or rebagging the food entirely.

· Supervise laborers to insure that work is done well, with penalties for unacceptable work practices and incentives for high quality work. If laborers are paid by the piece, they may fill, stitch and move bags quickly, with minimal care.

· Food infested with insects or other matter can be passed through a sieve to separate the dust and partially consumed grain from the good food. The food is then rebagged. In cases where large amounts of food are infested with insects or other matter, food may be sent to processors, millers or others who have equipment to efficiently separate out the matter. In these cases, warehouse managers, storekeepers or others must assure that all damaged bags, cartons or containers are fully accounted for before they are dispatched to the processor. A full inventory must be taken upon the return of the reconstituted food. Supporting waybills must be kept on file.

· Repackage oil by emptying the contents of damaged tins into clean containers (often plastic gerry cans).

· Weigh all repackaged food to insure that the new bags, cartons or containers have been filled to the standard weight of the original package. The standard weight is based on the original Bill of Lading.

· Closely monitor repackaging activities to detect and correct shortweight and faulty packaging, and be be vigilant against possible thefts of food during the process.

Internal Control

Maintain a full and complete inventory of all damaged bags, cartons or containers. Losses can only be determined if all original packages are accounted for. Food that is reconstituted, as noted above, will be weighed against the total weight of the food contained in the original bags, cartons or containers. Any differences will be the loss. Storage and inventory recordkeeping requirements for these damaged packages must be the same as those for undamaged food.

Example

A warehouse received 200 fifty kilogram bags of corn from another warehouse. Fifty bags were damaged during transport and could not be thrown away or otherwise disposed of before the repackaging of the food was complete. They were kept to assure that losses were accurately determined during reconstitution. Once the repackaging was complete, losses were calculated and documented. The warehouse manager then disposed of the bags in accordance with established policies.

C. Minimizing the Need to Repackage

All steps must be taken to insure there is no act, omission or failure to provide proper storage, care and handling of food. Failure to do so may result in donors not reimbursing for costs of repackaging. If there is a likelihood of damage or infestation which is beyond the control of CARE or its counterparts, donors should be notified.

The following are some examples of proper and improper steps taken to reduce the need to repackage food:

Example 1 - Marine

An ocean carrier discharged 300 bags of CSB in damaged condition on November 18, 1994. At discharge, the surveyor estimated that the damaged bags were missing 1/6 of their contents. The CSB was not contaminated with foreign substances and was not suspected to be unfit for human consumption. The CSB was repackaged into 230 bags on November 20, 1994.

Damages in this situation were properly minimized. The loss of 70 bags of food is is well documented and collection of the claim should not be a problem.

Example 2 - Marine

An ocean carrier discharged 300 bags of CSB in damaged condition on November 18, 1994. At discharge, the surveyor estimated that the damaged bags were missing 1/6 of their contents. The CSB was not contaminated with foreign substances and was not suspected to be unfit for human consumption. The CSB was repackaged into 200 bags on December 20.

Damages in this situation were not properly minimized as 33 days elapsed between the time the shipping company's liability ended and the time the food was repackaged. The loss of 100 bags will be claimed and pursued against the ocean carrier. However, such a claim will likely be compromised as much of the loss is likely to have taken place while the food was in the possession of the port authority.

Example 3 - Internal

A transporter delivered 150 bags of CSB in damaged condition on November 16, 1994 to warehouse A. Upon arrival, the storekeeper and driver agreed that the bags were missing about 1/6 of their contents. The damaged bags could only be repackaged after the driver left. Notice of the damage was written in the Remarks section of the waybill. At the time of the delivery none of the damaged bags appeared to contain unfit food. Around December 22, the storekeeper called in a health official because he suspected that some of the CSB was unfit. The health official found 50 bags unfit, and the remaining 100 bags were repackaged into 75 bags on December 28.

Claims against the transporter for the 25 bag loss can not likely be pursued, however, as too much time was taken to repackage the food and determine its fitness, it is not likely the transporter is liable for the 50 bags of unfit food.

D. Repackaging Costs

Repackaging expenses incurred because of damages to bags or infestation caused during ocean transport must be paid for by the shipping company. In some countries, the shipping companies make all arrangements and pay for all reconstitution expenses related to marine damages at the time of the reconstitution. In others, the donor makes arrangements for reconstitution through a contracted agent. In still other countries, CARE arranges for the reconstitution and costs are included as a separate item with claims filed against the shipping company.

Repackaging expenses not related to marine losses should be written into budgets of project proposals and agreements.

Labor and materials must be made available before the arrival of the shipment to ensure that constitution is done promptly and losses are minimized. Repackaging costs include the following:

· Labor to fill, stitch and stack repackaged bags cartons or containers. Country offices may pay per unit or per day.

· Materials purchased for repackaging such as bags, cartons or containers, and stitching material (thread and needles).

If CARE seeks reimbursement from donors for the costs of repackaging, CARE must follow the donor's guidance:

Euronaid

Euronaid will reimburse for all repackaging expenses up to CARE's main warehouse. These expenses should be specified on the Statement of Inland Transport Form (ITSH) together with the original or certified invoices to Euronaid.

U. S. Government

Country offices must clearly distinguish between repackaging costs incurred because of damage related to marine losses and costs incurred after custody and control of the food has been transferred by the shipping company to CARE, its agents or counterparts. Invoices and other documents supporting repackaging costs should be forwarded to the Procurement Office at CARE USA Headquarters. In accordance with AID Regulation 11, the Procurement Office will submit requests for reimbursement of costs to the CCC in the U.S. Department of Agriculture.

Other Donors

For donors who do not specifically provide for the reimbursement of repackaging costs, costs should be estimated based on past experience and included in the project proposal budget for approval by the donor. The donor should be contacted if the costs appear to exceed the amount budgeted.

E. Approval for Repackaging

Each country office must establish a policy specifying who can approve the repackaging of damaged or infested food. For reconstitution of small amounts, it may be the warehouse manager or storekeeper. However, when costs exceed US$200, the country office may require the project manager or someone higher to approve repackaging. If there is any question regarding the allowability of reconstitution costs, contact the local donor representative directly and obtain approval in writing.

Euronaid

No prior approval required for repackaging costs.

US Government

The U.S. Government provides for the reimbursement of costs if reconstitution is not due to any act, omission or failure on the part of CARE to provide proper storage, care and handling.

If repackaging costs are US$ 500 or less, no prior approval is required. Invoices and other documents to support repackaging costs should be forwarded to CARE USA Headquarters with other marine claims documentation.

If costs are US$ 500 or more, prior approval must be obtained from the U.S. Agricultural Counselor or Attaché (for Section 416 food) or from USAID or the Diplomatic Post (for PL-480 Title II & III food). To avoid delays in repackaging infested food that may damage other food, CARE may request a waiver from USAID or USDA of the prior approval requirement. The written waiver authorization must be forwarded with the reimbursement request.

1. Packages Damaged in Transit

For damage that occurs while the food is in transit, the US$500 limitation applies to all food that is shipped on the same voyage of the same vessel to the same port of destination, irrespective of the types of food shipped or the number of bills of lading issued.

2. Packages Damaged in Warehouses

For damage that occurs while the food is in storage, the US$500 limitation applies to each damage situation., e.g., if 700 bags of wheat are damaged in a warehouse due to an earthquake, the US$500 limit applies to the total cost of repackaging the 700 bags, regardless of whether the food was from different shipments.

3. Submission to CARE USA Headquarters

For U.S. Government food, a Certificate of Marine Reconstitution Costs (See Attachment) should be prepared for costs incurred due to reconstitution of marine damages. The certificate should be submitted to the Procurement Office with the survey reports and other marine claims documentation. See Filing Claims for Marine Losses). The Procurement Office will include the costs of reconstitution in its claim against the shipping company.

The certificate should contain the following information:

· Date of reconstitution
· Shipment number
· Donor
· Description of food (wheat, peas, oil)
· Packaging unit (bags, cartons, pails)
· Number of units reconstituted
· Nature of damage causing reconstitution
· Costs paid (labor, materials)
· Payment reference number

Other Donors

Country offices should contact individual donor representatives to see if approval is required for reconstitution.

VIII. Food Unfit for Human Consumption

A. Documenting Unfit Food

If food is declared unfit for human consumption, it is considered a loss which is recorded in CARE's warehouse and commodity inventory records and reported to donors in the same way as other losses. For marine losses, the amount of unfit food must be reported in the independent discharge survey report and Loss and Adjustment Reports. For internal losses, the amounts must be reported on the Loss and Adjustment Report. and, as appropriate, the Independent Delivery Survey Report.

Warehouse managers, storekeepers or others who suspect food may be unfit must promptly notify a government official and request a review and analysis of food.

B. Lab or Other Analysis

For both internal and marine losses, normally only a public health official or an authorized laboratory can declare food to be unfit for human consumption. If no health official is available, an independent chemist or private laboratory may be employed by either CARE or a surveyor to analyze the suspect food.

Samples for marine losses must be:

· Representative of the total suspect cargo
· Drawn jointly by CARE (or the surveyor) and the shipping company agent
· Identified as to which samples came from which cargo
· Sealed to protect the integrity of the sample
· Forwarded to the laboratory or chemist.

Samples for internal losses must be:

· Representative of the total
· Segregated from any food that is in good condition
· Identified as to which samples came from which shipments
· Sealed to protect the integrity of the sample
· Made available to the health inspector or other person for analysis.

C. Timeliness of Documentation Regarding Fitness

If the surveyor notes food was damaged onboard the vessel and the food is later declared to be unfit for human consumption, a cause-effect relationship must be established between damage and declaration of unfitness. The key to establishing this relationship is timing.

· If cargo is damaged on November 20 and the same cargo is declared unfit for human consumption on November 25, the cause-effect relationship is strong and claims can normally be collected for such losses against the shipping company with minimal difficulty.

· If the same cargo is declared unfit on December 15, the cause-effect relationship is less strong as the losses arguably may have occurred while the food was in CARE or its counterpart's custody; the possibility of claims collection consequently decreases considerably.

· If the damaged cargo is not declared unfit until January 15 and is in CARE's or its counterpart's custody, the cause-effect relationship is likely to be gone and there is little hope of claims collection.

In the latter two cases, CARE has not promptly or properly minimized damages and must submit a narrative statement explaining why damaged food was not properly analyzed and/or repackaged on a timely basis.

D. Certification of Commodities Unfit for Human Consumption

Once the food has been inspected and declared unfit, a Certification of Commodities Unfit for Human Consumption (see Attachment) must be completed by the Health Authority or the private laboratory. The form must be signed, including the title of the signer.

The written statement or certification should include but need not be limited to the following information:

· Name of the vessel, warehouse, or distribution site
· Date of discharge from the vessel, arrival in warehouse, or first suspected to be unfit in warehouse
· Date of examination of suspect food
· Place of examination
· Amount (bags, cartons, weight) of food examined
· Amount of food fit for human consumption
· Amount of food unfit for human consumption
· Reason(s) why the food is unfit for human consumption
· Advice as to whether food is fit for animal consumption
· Advice as to whether food should be destroyed.

E. Donor Notification Requirements

1. Marine Losses

For marine losses the certification along with other marine loss documentation should be submitted to the Procurement Office CARE USA for U.S. Governement donated food and to CARE Britain or Euronaid, or other donors for non-U.S. Government food.

2. Internal Losses

For internal losses, the certification must be kept on file. Notice and requests for approval to dispose or destroy unfit food must be obtained as required by donors.

Summary - Donor Notification Requirements - Unfit Food

U.S. Section 416 Food	U.S. Title II & III Food	Other Donor's Food
Notify Agricultural Counselor or Attaché in writing of proposed method of disposition. If the donor does not respond within 15 days, dispose of the food as notified and inform the donor of the action.	Notify USAID if unfit food valued at more than US$500 will be destroyed. Include the type and amount of food; manner of destruction; local authorities who will witness the destruction; and date when food will be destroyed. If the donor does not respond within 15 days, dispose of the food as notified and inform the donor of the action.	Notify donors on submissions of quarterly loss reports.

3. Delays in Notification

Often food is declared unfit at remote warehouses or distribution sites Unfit food can be sitting in warehouses for long periods of time while inspections take place and Loss and Adjustment Reports are prepared and authorized. Country offices should discuss this issue with donors and request approval to dispose of unfit food as soon as Loss and Adjustment Reports have been authorized by CARE. Donors can be notified of the disposition of unfit food in Commodity Status, Quarterly Consolidated and Quarterly Loss Reports.

F. Disposition of Food Unfit for Human Consumption

Once food is certified unfit for human consumption and donor approval has been obtained, unfit food should be disposed of in the order of priority shown in the following table:

Disposition of Food Unfit for Human Consumption

U.S. Section 416	U.S. Title II & III	Other Donors
Transfer to an approved section 416(b) program for use as livestock feed.	Sale for the most appropriate use (animal feed, fertilizer, or industrial use) at the highest obtainable price. When the food is sold, all donor markings shall be obliterated, removed or crossed out.	Sale for the most appropriate use (animal feed, fertilizer, or industrial use) at the highest obtainable price. When the food is sold, all donor markings shall be obliterated, removed or crossed out.
Sale for the most appropriate use (animal feed, fertilizer, or industrial use) at the highest obtainable price. When the food is sold, all donor markings shall be obliterated, removed or crossed out.	Transfer to an approved Food for Peace program for use as livestock feed. The Office of Food for Peace AID/W should be advised so that shipments from the U.S. to the livestock feeding program can be reduced by an equivalent amount.	Donation to a governmental or charitable organization for use as animal feed or for other non-food use.
Donation to a governmental or charitable organization for use as animal feed or for other non-food use.	Donation to a governmental or charitable organization for use as animal feed or for other non-food use.	Destruction in a manner preventing use for any purpose.
Destruction in a manner preventing use for any purpose.	Destruction in a manner preventing use for any purpose.

1. Sale of Unfit Food

Rules and procedures set forth in CARE USA's Procurement Manual for Overseas Operations shall be applicable to all sales of unfit food.

a. Solicitation and Receipt of Bids

To minimize the possibility of impropriety and to maximize proceeds of the sale, a public tender should be issued whenever unfit food with a value greater than or equal to US$500 is sold. A tender involves soliciting sealed bids, usually through public advertisement (often through a newspaper or the posting of handbills in public places). If the offer cannot be publicly advertised, a sufficient number of parties known to buy damaged food for animal feed or fertilizer must be contacted to obtain the highest price.

In general, notice of tenders should contain:

· Description and amount of unfit food
· Location and date to submit offers
· Date bids to be opened and whether they will be opened in public or private
· Deposit, if required.

It is advisable to establish a committee of at least three persons to open the bids in the presence of the others. Ideally, members of the committee should come from offices separate from those involved in managing food resources. For example, a committee may consist of a project manager, financial controller and the assistant country director for administration and finance.

b. Precautions

When food is sold as animal feed or fertilizer, country offices must take measures to ensure that the local organizations do not re-sell the food for human consumption. Some suggestions for ensuring that unfit food is not re-sold include:

· Inform the local police of the names of the organizations, dates and amounts of food purchased. Police enforcement, combined with clear instructions regarding punishment for those found selling unfit food for human consumption , may ensure that the food is not re-sold.

· Begin a "public relations" campaign which informs the public of the dangers of humans consuming the food.

· Have staff periodically go to the market to see if unfit food is being sold.

c. Proceeds from Sale of Unfit Food

All requirements set forth in the CARE Overseas Financial Manual, July 1992 must be followed when receiving and disbursing proceeds received from the sale of unfit food. See Agreements and Contracts regarding counterparts.

Proceeds from the sale of unfit food must also comply with established donor requirements. Most donors allow CARE to retain a percentage of the sales proceeds for administrative and other costs related to the sale. Other donors reimburse for actual expenses incurred. This should be negotiated locally with the donor. In order to ensure that food is not purposely destroyed, most donors will only pay expenses for damages when proper efforts have been made to minimize or prevent damage. Examples of improper exercise of responsibility include storing food in a leaking warehouse without taking steps to stop the leaks, not fumigating as required, or transporting food without a tarpaulin during the rainy season.

Accounting For Proceeds Received From Sale Of Unfit Food

Monetized Food	U.S. Section 416	U.S. Title II & III	Other Donor's
Net proceeds deposited in monetization account and used for approved program purposes.	Net proceeds deposited with Disbursing Officer, U.S. Embassy, with instructions to credit an appropriate CCC account.	Net proceeds deposited with U.S. Disbursing Officer, U.S. Embassy with instructions to credit to CCC A/C 20FT401.	Net proceeds held in a CARE bank account pending instructions from donor.

2. Donation of Unfit Food

There are no specific guidelines by donors on the donation of unfit food to local governments, individuals or organizations, other than food used for animal feed. Country offices need to keep up-to-date information on programs which use unfit food and be satisfied that they are using the unfit food only for animal feed or fertilizer.

Files should be kept of all communications relating to the donation of the unfit food along with copies of waybills which show dispatches to the organizations receiving the unfit food.

3. Destruction of Food Unfit for Human or Animal Consumption

Any food certified as unfit may be destroyed by burning or burying. Local populations may not understand or be aware that the food is unfit for humans and animals. Thus, it could be perceived that CARE is destroying food intended for project participants. If food is buried, there is also a risk that people may later dig it up.

In destroying food, CARE must:

· Make every effort to ensure that the local population understands that the food cannot be consumed by animals or humans

· Make every effort to dispose of the unfit food as discretely as possible.

Once food has been destroyed, a Certificate of Destruction (see Attachment) must be completed. The attached Certificate can be used as one example. The warehouse manager or storekeeper should keep a copy of the Certificate of Destruction on file with the related Loss and Adjustment Report and a copy shoud be sent to the Country or regional office commodity financial accountant and the Food and Logistics section for filing with their copy of the Loss and Adjustment Report.

4. Use of Waybills to Remove Food from CARE Inventories

The waybill and the authorized Loss and Adjustment Report are the support documents for removing the unfit food from warehouse inventories. See Food Receipt and Dispatch and Inventory Accounting and Reporting. In cases of sale or donation of unfit food, the Receipt Information section of the waybill would be signed by the person purchasing or receiving the unfit food. When food is destroyed, the warehouse manager, storekeeper and independent person/s witnessing the destruction should fill out the Receipt Information section of the waybill.

IX. Filing Claims for Marine Losses

A. Australia, Canada and Great Britain

Submit the original and three copies of the survey report to the Headquarters Office of the CI member who procured the food within 45 days of discharge. The CI member should forward the survey report to the donor.

B. European Union through Euronaid

Euronaid insures all goods from the moment they are taken over by Euronaid, up to the moment of delivery of the goods to CARE's main warehouse facility. The purpose of Euronaid insurance is to protect NGOs against financial consequences of shortages, damages or other misfortunes during the transport of goods. CARE will receive an insurance certificate (see Attachment) which states the conditions of the insurance. The CARE country office should review the insurance certificate in order to understand the coverage terms. Country offices are expected to cooperate with underwriters when taking custody of the food.

Country offices must:

· Notify the surveyor (appointed by Euronaid) when cargo is ready for inspection at the port named on the original Bill of Lading, or at the designated warehouse on a Through Bill of Lading or at CARE's main inland warehouse.

· Provide adequate documentation to hold the shipping company responsible for the shortages/damages in the survey report. This must be done in writing not later than three days after completion of discharge from the vessel.

· Arrange for a survey of the goods upon delivery at CARE's main warehouse.

· Sign a Letter of Subrogation to the Insurance Underwriters.

· Submit two copies of a Landing Report (see Attachment) as soon as the food is delivered. The report certifies that the survey has been completed and a certain quantity and quality of food has been received at the discharge destination.

Upon receipt of the survey report and the claim lodged by CARE, the insurance company will assess the amount of the damages and/or losses sustained. Euronaid double checks the calculations and a small recovery fee is deducted for the insurer.

Following acceptance of the assessment by Euronaid, the settlement amount will be credited to the Euronaid Finance Division. Euronaid will then transfer any amounts due CARE to the country office. Claims are usually settled quarterly, however, approval of the claims by insurers can more than a year.

1. Uses of Claims Settlements

It is a requirement of the CEC that the funds obtained from claims collection are utilized for the purchase of food for the same program. Deviation from this must be authorized by the CEC.

2. Reporting on Insurance Claims

When Euronaid transfers the amount received in settlement of the claim to the CARE country office, the following documents are provided: a payment slip, a claim advice and a report on "Use of Refunds from Underwriters for Losses/Shortweights/Damages of Food Aid Supplied by the CEC."

Country offices are also required to submit to the CEC a report specifying the use of claim amounts, to be received no later than six months after the amount has been credited to the account.

C. United States

1. Transfer of Title to CARE

Title to U.S. government food passes to CARE, unless agreed otherwise, as follows:

Program	Cooperating Sponsor	Title Passes
Title II	Non-governmental	f.a.s. or f.o.b. vessel at U.S. port
Section 416	Non-governmental or governmental	f.a.s. or f.o.b. vessel at U.S. port
Food for Progress	Non-governmental or governmental	f.a.s. or f.o.b. vessel at U.S. port

Claims against shipping companies may be initiated for Title II, Section 416 and Food for Progress food once title passes to CARE and the shipping company is issued the Bill of Lading.

2. Exceptions to Filing Claims for Marine Losses

Claims must be filed against a shipping company for every marine loss EXCEPT:

· When general average has been declared, i.e., a shipping company causes a deliberate loss or damage to goods in the face of an immenent peril to save a ship or other goods on board. The cost of the lost goods is shared by the owners of the saved goods. (Food Aid Lexicon, FAM, November 1993.)

· When the loss is US$100 or less; or the loss is between US$100 and US$300 and CARE determines the cost of pursuing the claim would exceed the amount of the claim.

3. Marine Losses Valued at less than US$300

The CARE country office submits the original plus two copies of the Independent Survey Report to the HQ Procurement office within 30 days of discharge.

4. Filing Claims for Marine Losses in Excess of $300

Once a discharge survey report is submitted to a country office that establishes there are marine losses, country offices must begin the process of filing, pursuing and collecting claims against shipping companies. See Port for additional information on files and ledgers that must be kept for arrivals of food. As CARE may be reimbursed for administrative expenses for claims filed against shipping companies, CARE Finance has established procedures which country offices must follow as claims are being pursued. See Chapter 8 of the Overseas Finance Manual. Also, see Almis #3616 - Marine Claims Procedures for Both CARE Missions and CARE NY, January 4, 1990 for specific information examples of documents needed for filing marine claims.

The Procurement Office and CARE USA's shipping agent are primarily responsible for pursing marine claims against shipping companies and filing all reports and documents related to marine claims with AID and USDA. They are also responsible for all communications with country offices regarding additional documentation required for the handling, processing and settlement of marine claims. See Attachments for an example of a cover memorandum that can accompany all marine claims correspondence.

One claim should be filed for each voyage of the same vessel to the same port of discharge. If different types of food are shipped on the same ship and there is more than one Bill of Lading, still file only one claim against the shipping company. The claim will take into account the entire shipment.

5. Computation of Ocean Carrier Claims

Unless otherwise required by the donor, the monetary value of ocean claims can be computed using the following calculation:

· Determine the local market value of food at the time and place the loss occurred or the FAS value of the shipment from the Bill of Lading.

· Add freight and insurance for ocean transport as stated on the Bill of Lading.

· Divide the sum by the net number of kgs in the shipment, to get the price per kg delivered.

· Multiply the price per kg delivered by the number of kgs lost or damaged.

The following are additional costs to CARE which may be included in the claim:

· Special charges authorized by donor regulations.

· Any costs incurred by CARE or the donor to reconstitute cargo damaged by the ocean carrier. Include as separate item.

· If food is damaged and determined by a competent authority to be unfit for human consumption and then sold or otherwise disposed of pursuant to donor regulations, credit the claim by the monetary equivalent of the NET proceeds of the sale. If the unfit food is donated for some useful purpose, the donor may allow for a credit to the carrier per kg for the amount donated.

· Salvage credits for unfit food which is destroyed, if allowable by the donor.

6. Assignment of Claim Numbers

As specified in the CARE Overseas Finance Manual, CARE must assign all marine losses relating to food a claim number in order to track them. Claim numbers are to be assigned as follows: MA - two digit country number - four digit sequential number starting with 0001 for each claim. For example, the 41st claim for CARE-Haiti would be MA - 46 - 0041.

7. Notice of Protest

For losses in excess of US$300, a Notice of Protest (see Attachment) must be filed with the shipping company within 72 hours after completion of discharge of short or damaged shipments indicating that a loss has been determined and that the company is being held responsible. This requirement is set forth in Overseas Finance Manual.

The notice should include:

· Date of notification
· Name of the vessel
· Description of the cargo
· Estimate of quantity lost or damaged.

8. Submission of Discharge Survery Reports

Country offices must submit the original and three copies of the discharge survey report by numbered, transmittal letter to the Procurement Office at CARE USA Headquarters within 45 days of discharge. The Procurement Office and CARE's shipping agent will forward the report along with other documentation (see below) to AID and USDA. See Port for information about the content of the survey.

9. Loss Advice

Along with the Discharge Survey Report, country offices must also submit a Loss Advice (see Attachment) in quadruplicate to the Procurement Office. This is required by CARE Finance in the Overseas Financial Manual.

The report must contain:

Loss Advice Information

Type	Required information
Shipment information, such as	· Discharge port · Vessel/Voyage No. · Bill of Lading No: · Discharge Date · Shipping Company · Shipment No.
Quantity lost, such as	· Food · Quantity per bill of lading · Quantity received · Quantity short · Quantity damaged
Description of loss and circumstances	· Unfit · Destroyed · Donated · Salvaged · Reconstituted

10. Claims Progress Memo

The Claims Progress Memo is a report of progress being made in the settlement of marine claims (see Attachment). It must be submitted to the Procurement Office, in quadruplicate, by numbered letter, after any event which relates to a previously reported loss. Upon receipt of the Claims Progress Memo the amount of food previously reported in the Loss Advice will be adjusted based on the new information.

Claims Progress Memos are to be numbered consecutively, by country, in serial number sequence.

11. Summary of Required Claims Documentation

The following Table summarizes the documents that must be submitted to the Procurement Office. There should be an original and three copies, and any documents not in English must be accompanied by English translations.

Submitting Claims for Marine Losses Valued in Excess of US$ 300

Responsibility	Report/Document	Submission To	Date
CARE country office	Discharge survey report pertaining to the shipment	Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Notice of protest letter	Shipping company or its agent Copy to CARE-USA HQ Procurement	Within 3 days after discharge of short or damaged commodity
CARE country office	Loss advice	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Outturn reports (tally sheets of the surveyor, see Port Chapter), if available	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Shortlanding certificates signed by the port authority, if available	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Unfitness certificate or chemical analysis report issued by Ministry of Health, if applicable	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Disposition certificate, if applicable	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Invoice of survey fee	CARE-USA HQ Procurement	Within 45 days of discharge
CARE country office	Invoice or other documents for reimbursement for reconstitution	CARE-USA HQ Procurement	Monthly - 10th of each month Within 45 days of discharge
CARE country office	Disbursing Officer's receipt for net proceeds of sale of unfit commodities	CARE-USA HQ Procurement	Within 45 days of discharge
CARE country office	Resolution of excess landed quantities	CARE-USA HQ Procurement	Within 45 days of discharge
CARE country office	Copy of bill of lading	CARE-USA HQ Procurement	Within 45 days of discharge

All marine claims records must be retained by CARE for a full six years after settlement.

X. Pursuing Claims for Internal Losses

A. General

Claims may be filed by country offices for the loss or misuse of food against CARE employees, counterpart staff, transporters, owners of commercial warehouses or others. CARE may be liable to the donor for the value of the food unless the donor determines the loss could not be prevented considering normal commercial practice in the country and the difficulties associated with carrying out programs using food resources.

Unless otherwise approved by a donor in writing, CARE must undertake all necessary efforts to recover the food or its value from the person responsible for the food when the loss occurred.

CARE may elect not to pursue claims in the following two instances:

· The loss on which the claim is based is caused by force majeure. In other words, the events causing the loss were beyond the control of the parties responsible and could not have been avoided by the exercise of due care. An example would be a flash flood which damages food stored in a community distribution center, assuming the distribution center is not located in a flood plain.

· The value of the claim is less than US$500, failure to pursue the claim would not be detrimental to the program, or costs of collecting this claim would exceed $500.

The US$500 limit on filing claims applies to each contract under which the losses occur. For example, if bags of U.S. Government wheat are lost by a trucking company contracted by CARE, the amount of the loss is based on the transport of the entire shipment under the transport contract and not the loss attributable to each individual truck.

B. Coordination between CARE Finance and Logistics Staff

CARE Logistics and Finance staff are usually involved in pursuing claims. Logistics staff may keep the internal claim files and ledgers, and finance will be responsible for receiving payments or deducting claims from invoices or disbursing monies to donors or others. Country offices must establish procedures for regular up-to-date communications between these offices to assure that all necessary steps are being taken to pursue and close out claims.

C. Valuing Claims

Generally, claims should be valued higher than the market price of the food at the time and place of the loss, or the cost of food, insurance and ocean freight (C.I.F.) as stated on the Bill of Lading. All decisions on valuing claims should be agreed to by donors' local representatives.

Many country offices value the food 10% higher than market price. This serves as a penalty against those responsible for the loss.

D. Pursuing Claims

A claim letter must be prepared and sent to the person or organization responsible for the loss (see Attachment). CARE must make reasonable attempts to collect claims. "Reasonable attempts" shall not be less than the follow-up of the original claim letter with three progressively stronger demands at not more than 30-day intervals. If such action does not achieve a satisfactory result, legal action must be pursued in the country where the loss occurred unless:

· Liability of the third party is not provable.

· Costs of pursuing the claim would exceed the amount of the claim.

· The third party would not have sufficient assets to satisfy the claim.

· Maintaining legal action in the country's judicial system would seriously impair CARE's ability to conduct an effective program in the country.

· It is inappropriate for reasons relating to the judicial system of the country.

Donors must be provided with copies of all claim letters and other relevant claim information, if requested. If CARE decides not to pursue legal action, the reasons must be submitted to the donor and/or the appropriate CARE International member. Likewise, any settlement for less than the claim value must be approved by the donor.

E. Monitoring the Status of Claims

An internal claims ledger is used to monitor the status of all losses and claims. Below is one format that could be used to keep track claims. The information in this ledger is taken from the Loss and Adjustment Report and the claims letter. It allows management to monitor the status of all internal losses. Prepare a separate ledger and file by donor and by shipment.

Country offices should establish an internal claim numbering system similar to that used for marine claims.

Internal Claims Ledger

Date:
Reporting Period:	Donor:

Loss adjustment report #
Date of loss ad report
Shipment #
Type of Food
Organization / Person Responsible
1st claim letter: Date Ref. No.
2nd claim letter: Date Ref. No.
3rd claim letter: Date Ref. No.
4th claim letter: Date Ref. No.
Date legal action commenced
Amount collected
Amount reimbursed to donor
Date Claim closed
Remarks

F. Reporting Claims Information to the Donor

Provide the donor with copies of claim information. This can best be done by providing a copy of the claims ledger and submitting additional information, as requested.

G. Claims Proceeds

See CARE's Overseas Financial Manual and Almis #4496 Inventory - Food Commodities with the attached Commodity Accounting Manual for information regarding the financial accounting entries required when claims are established and collected.

For U.S. Government food, deduct collection costs such as reasonable legal fees and other collection costs from the proceeds. Remit net proceeds to U.S. Disbursing Officer, American Embassy. For all other donors, report the amounts collected less collection costs. Request permission to use net proceeds for programming activities within the country.