Republic of the Philippines

DEPARTMENT OF AGRICULTURE
NATIONAL IRRIGATION ADMINISTRATION
CENTRAL OFFICE

MEMORANDUM CIRCULAR NO. __

Series of 2024

TO : THE SENIOR DEPUTY ADMINISTRATOR, DEPUTY

ADMINISTRATORS, THE REGIONAL/DEPARTMENT/PROJECT
MANAGERS, DIVISION MANAGERS, AND ALL OTHER CONCERNED

SUBJECT : REVISED GUIDELINES ON NIA FARMING SUPPORT PROGRAM

_____________________________________________________________________________________________________

I. INTRODUCTION

Contract farming has been considered one of the potential systems for providing
a way for small-scale and marginal farmers in developing countries to compete in
the market economy under the context of market liberalization, globalization, and
expansion of agribusiness. It can help raise small farmers’ income that is not likely
to be preferred over large-scale farmers by entrepreneurs. This scheme creates
favorable conditions for farmers to access credit providers, inputs, suppliers,
market information, technical knowledge, and advancement, and guarantees
market outlet to farmers with small-scale production.

Aligned with NIA's corporate goals and objectives to uplift the farmer’s quality of
life, the agency performed its role in the advancement of irrigated agriculture.
This involves ensuring top-notch quality rice production by cultivating enabled
and resilient farmers and through the introduction of the Rice Contract Farming
Scheme. The participation of the IAs/FIAs/ISCs could enhance the overall value
chain performance in terms of increasing production, lowering transaction costs,
and boosting the quality of the output product, reducing both input and output
price risk, the IAs/FIAs/ISCs may allocate resources more efficiently.

As of December 2023, the National Irrigation Administration (NIA) has 11,595

organized Irrigators’ Associations (IAs) in the National Irrigation Systems (NIS)
and Communal Irrigation Systems (CIS), with 1.3 million farmer beneficiaries,
covering an area of 1.6 million hectares. A total of 11,111 IAs (96%) are registered
with the Securities and Exchange Commission (SEC).

Further, this guideline is crafted to serve as a roadmap for implementing the Rice
Contract Farming between the NIA and the IAs/FIAs/ISCs. This shall include the
provision of strategic direction for the modernization of irrigated agriculture,
emphasizing objectives like increased competitiveness, enhanced farmer
incomes, poverty reduction, and sustainable development. This document shall
also outline practical strategies, incorporating innovative technologies and
efficient management practices to boost productivity and environmental
sustainability.

II. LEGAL BASES

Pursuant to Section 2(f) of the Presidential Decree No. 552, NIA is mandated to
establish/create such services and facilities and other means of social and
economic assistance to the community which might be adversely and directly
affected by the construction of the National Irrigation Administration projects,
and to do all such other things, and to transact such business, as are directly or
indirectly necessary, incidental or conducive to the attainment of the powers and
National Government Center, EDSA, Diliman, Quezon City, Philippines
Trunk line Nos.: (02) 8 929 6071 to 78 • Telefax No.: (02) 8 928 9343
Website: www.nia.gov.ph • Facebook: www.facebook.com/nia.gov.ph
TIN: 000916415
 objectives.

Further, under General Appropriations Act (GAA) of Fiscal Year (FY) 2024,
Republic Act No. 11975 for NIA (Section XXXVI-Budgetary Support to Government
Corporations, A.3.B Support to Operations), the Contract Farming has a fund
allocation of Php3,400,000,000.00.

III. PURPOSE

The implementing rules and regulations detailed hereunder shall govern and
apply as guidelines for the NIA Rice Farming Support Program. It will be used as
a basis for establishing rice contract farming schemes between the National
Irrigation Administration (NIA) and Irrigators Associations (IAs), Federation of
Irrigators’ Associations (FIAs), or Irrigators Service Cooperatives (ISCs) with a
history of competitive rice production levels.

IV. OBJECTIVES

The NIA’s support for rice farming aims to improve, accelerate, and sustain quality
rice production in support of the government’s program on attaining rice
sufficiency through the provision of irrigation water and necessary agricultural
inputs to enhance farmers’ productivity and competitiveness.

Specifically, this aims to:

a. Increase productivity in irrigated rice agriculture;
b. Improve water management technology application;
c. Increase the level of adoption and application of farm mechanization and
advanced production technologies;
d. Reduce labor costs;
e. Promote farmers/IAs’ access to economical and efficient rice production,
transportation, processing and storage;
f. Reduce losses in the value chain; and
g. Promote market access and opportunities.

V. DEFINITION OF TERMS

Farm Inputs. Refers to seeds, fertilizers, pesticides, fungicides, soil ameliorant,

bio-fertilizer, and other needed inputs.

Federation of Irrigators Association (FIA). The collective group of Irrigators’

Associations duly registered with the Securities and Exchange Commission (SEC),
organized and strengthened through training activities as effective partners of
NIA in irrigation development and management.

Force Majeure Event. An unpredictable, inevitable event that arises after the
contract has been signed, beyond the Parties’ control, and that objectively
prevents one or both of them from performing their obligations, including, but
not limited to, wars, insurrections, civil disturbances, interruption of
transportation or communication services, a major change to agricultural law or
policy in the country of production, blockades, embargoes, strikes, and other
labor conflicts, riots, epidemics, earthquakes, storms, droughts, fires, floods, or
other exceptionally adverse weather conditions, explosions, lightning, or acts of
terrorism.

Irrigation Service Cooperative (ISC). Established cooperatives within a

municipality, duly registered with the Cooperative Development Authority

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 (CDA), covering service areas of irrigation systems to facilitate access to
agriculture support/assistance to farmers from government and non-
government entities. An ISC serves as the business arm of the IAs within its
coverage.

Irrigators’ Association (IA). A non-sectarian, non-stock, and non-profit

organization of farmer-beneficiaries duly registered with the Securities and
Exchange Commission (SEC), organized and strengthened through training
activities as effective partners of NIA in irrigation development and management.

Parties. Refers to NIA and IA/FIA/ISC who enter into binding agreement
accepting obligations, responsibilities, and benefits specified in the agreement.

Production Site. Refers to the area identified as compliant with the criteria set
under Section VI.b of this Guidelines.

Production Site Inspection Team. Refers to the Team composed of trained NIA
staff on production of palay (preferably an Agronomist), O&M personnel and an
IDO established to monitor the farming activities.

VI. PROJECT TARGET IA BENEFICIARY AND PRODUCTION SITE SELECTION

a. TARGET IA BENEFICIARY. The target Memorandum of Agreement (MOA)

Counterpart of this Program are as follows:

Beneficiaries Cropping Season

IA with members who are registered
and non-registered to Registry
3rd
System for Basic Sectors in
Agriculture (RSBSA)
IA with members who are non- Dry
RSBSA registered Wet

The NIA, through its Operations Department (OD) and concerned

Regional/Irrigation Management Offices, shall identify the target beneficiary
for the Program using the following criteria:

1. Beneficiary IA/FIA/ISC must have an outstanding, very satisfactory, and

or at least a satisfactory rating in the functionality survey.
2. IAs/FIAs/ISCs regardless of access to the warehouse, machinery, post-
harvest facilities, and logistics are preferred.
3. IAs/FIAs/ISCs with trading or milling technical know-how or experience
are also preferred.

b. CRITERIA FOR PRODUCTION SITE SELECTION

The NIA, through its Operations Department (OD) and concerned

Regional/Irrigation Management Offices, shall identify the production site for
the Program using the following basic criteria:

1. Sufficient year-round irrigation water supply capable of third cropping;

2. Availability of soil fertility test results; and
3. The area is not prone to flooding or has no record of previous incidents of
inundation;

In addition, the following parameters may be taken into consideration in the

selection process:

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 1. Compact/contiguous area is of great advantage for farm mechanization;
2. Preferably with access to farm machinery (tractors/land preparation
equipment, harvesters, trans planters); or
3. Supportive Local Government Units (LGUs) in terms of technical, financial,
and marketing interventions and others is an advantage.

c. PRODUCTION SITE INSPECTION

A Production Site Inspection Team shall be established at every Irrigation

Management Office (IMO) covering selected production sites. The Operations
Section of the RIO must support the Team.

1. The Production Site Inspection Team must make regular visits to the
Production Sites to advise, supervise, and monitor the production process.
2. Inspection visits shall be carried out in accordance with the production
process or as the need arises.
3. To ensure prompt response to any issue and concerns that may arise in
the production site, the Production Site Inspection Team and the
IA/FIA/ISC designated focal person must be available to act and to keep
all communication lines open and reachable.

VII. SCHEME OF IMPLEMENTATION

a. NIA shall provide and deliver to IA/FIA/ISC PhP50,000.00/ha worth of farm

inputs such as seeds, fertilizers, pesticides, fungicides, soil ameliorant, bio-
fertilizer, and other needed inputs and cash, for the contracted cropping
season.
b. The production target is at least 5 metric tons of fresh palay, per hectare in
the 3rd Crop, Wet, or Dry Season. If the IA member exceeds the maximum
production target, the excess production shall be at the free disposal of the
IA member.
c. The beneficiary IA/FIA/ISC will receive a compensation proportional to the
delivered palay using the following computation:

actual palay∗ delivered, inspected and accepted

IA compensation = 5 metric tons/hectare
(𝑃ℎ𝑝 50,000.00)

*not more than 5 metric tons

VIII. ACTIVITIES TO BE CONDUCTED

The following activities are to be conducted:

1. Identification of initial production areas and beneficiaries by RIO/IMO and

potential IAs/FIAs/ISCs
2. Orientation meeting with the identified beneficiary IA/FIA/ISC leaders of the
identified regions/IMOs/IAs/FIAs/ISCs
3. Contract presentation, dialogue, and negotiations with Beneficiary
IA/FIA/ISC Leaders and Beneficiary IA/FIA/ISC Members
4. Secure IA/FIA/ISC Board Resolution allowing the IA/FIA/ISC
President/Chairperson to sign for and on behalf of the IA/FIA/ISC Members.
5. Signing of the MOA by and between IA/FIA/ISC and NIA
6. Identification of needed Farm Inputs and Assistance

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 7. Implementation of the Program
8. Monitoring and Supervision
9. Review and evaluation of the Program implementation

IX. FUNDING, PROCUREMENT AND DISBURSEMENT

a. FARM INPUTS, CASH SUPPORT AND COMPENSATION

The CY 2024 Contract Farming has a fund allocation of Php3,400,000,000.00

under FY 2024 General Appropriations Act (GAA). The Central Office will
facilitate the release of funds to the Regional Offices (RO) for the farm inputs
and cash assistance upon submission of the Program of Works (POW). The
fund for the compensation to IA/FIA/ISC shall be released to ROs upon
request.

The procurement of the farm inputs (seeds, fertilizers, pesticides, fungicides,

soil ameliorant, bio-fertilizers, and other needed inputs) shall be conducted in
the respective Regional or Irrigation Management Office pursuant to the
Delegated Authority.

b. EQUIPMENT AND MACHINERY

The NIA Central Office is in-charge of convergence with PHILMECH for the
augmentation of farm machineries, post-harvest facilities, and needed services
by the IA/FIA/ISC based on the Inventory of Farm Equipment and Machinery.

X. PRODUCT REQUIREMENT

a. PRODUCT QUANTITY

The IA/FIA/ISC agrees to supply and deliver exclusively to the National

Irrigation Administration the 5 metric tons/hectare fresh palay produced from
the Production Site on the contracted cropping season.

b. PRODUCTION METHODS

To ensure high and quality production, the IA/FIA/ISC shall adopt the
applicable production methods and farming technologies recommended by
PhilRice.

XI. DUTIES AND RESPONSIBILITIES

a. NIA

1. NIA shall provide and deliver to the IA/FIA/ISC PhP50,000/ha worth of

farm inputs such as seeds, fertilizers, pesticides, fungicides, soil
ameliorant, bio-fertilizer, and other needed inputs, and cash. The
Equipment Management Section/Unit of the IMO with support from the
RIO shall determine the cost of transportation of the inputs from the
concerned NIA Office to the production site including the
arrangements/scheduling of the delivery with the transporter/hauler.

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 2. All palay delivered by IA shall be collected from the assigned delivery point
to the designated warehouse/storage facility.

3. The Production Site Inspection Team shall determine the total harvested
and delivered palay.

4. The NIA shall provide the IA/FIA/ISC with a written delivery receipt
specifying the time, date, unit/quantity, and detailed description of the
farm inputs delivered. The written delivery receipt shall be duly signed by
the IA Representative with the date of receipt indicated.

5. The NIA may provide training or technical assistance if necessary for the
use of farm inputs and machinery/equipment

b. IA/FIA/ISC

1. Upon delivery, the IA/FIA/ISC shall verify the Farm Inputs and indicate in
the delivery receipt any apparent defects duly signed by the IA/FIA/ISC
authorized representative.

2. Acceptance of delivered Farm Inputs shall also be done in writing.

Necessary information such as the items delivered, unit/quantity, and
date of delivery, among others, shall be indicated in the letter of
acceptance duly signed by the IA/FIA/ISC representative.

3. The IA shall be responsible for the production of palay (land preparation,

crop maintenance, harvesting, and other farming activities). The
IA/FIA/ISC shall utilize NIA-delivered farm inputs.

4. The IA shall be responsible for any loss or damage to the NIA inputs from
the time of delivery and acceptance and throughout their inclusion in the
production and post-production process.

5. Any loss or damage to the NIA’s Farm Inputs shall be immediately

reported to the NIA in writing specifying the farm inputs’ information, date
of loss or damage, and details.

6. The IA shall apply for the following insurance:

a. Crop insurance, if available, against diseases, natural disasters such as
floods, droughts, or hail, and loss of revenue as a result of a decline in
commodity prices.
b. Liability insurance, specifying the minimum limits of guarantee.
c. Other necessary insurance.

7. The IA shall allow NIA and Commission on Audit (COA) to access their
records relative to the contract farming activities/transactions.

8. The IA shall open a special bank account for this Program, preferably with
the same bank of NIA.

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XII. DELIVERY OF INPUTS

a. SUBMISSION OF REQUEST

The IA/FIA/ISC, upon the execution of the agreement shall submit a formal
request to the Office of the Manager of the Irrigation Management Office, for
the payment/release of farm inputs along with the following supporting
documents:

1. FARM INPUTS
a. Detailed list of needed farm inputs duly certified by the IA/FIA/ISC
authorized representative;
b. The schedule of implementation and/or expected time needed to
accomplish the program;
c. List of farmer beneficiaries as identified and officially endorsed by both
NIA and IA/FIA/ISC; and
d. All other necessary documents that may be required by the NIA,
complying with the usual accounting and auditing rules and
regulations.

2. CASH ASSISTANCE

a. 1st tranche

Upon the execution of the agreement, seventy percent (70%) of the cash
support shall be released to IA in the form of Check. This fund shall be
allocated for land preparation tasks (harrowing, plowing, leveling, and
other related activities) and crop maintenance.

Upon receipt, the IA/FIA/ISC shall issue a letter of acceptance/written

acknowledgment/acknowledgment receipt, and/or official receipt to
NIA.

b. 2nd tranche

The remaining thirty percent (30%) of the cash support for harvesting,
hauling and other related activities shall be released upon the start of
terminal irrigation and submission of the following documents:

1. General payroll, turn over documents and/or any other

documents/reports, duly signed by each individual farmer-
beneficiaries as proof of full release/transfer of the 1st tranche cash
assistance;
2. List of farmer-beneficiaries as identified and officially endorsed by
both NIA and IA/FIA/ISC, eligible for the 2nd tranche of cash
assistance;
3. The copy of the Report of the Production Site Inspection Team
showing the completion of the land preparation and crop
maintenance activities; and
4. All other necessary documents that may be required by the NIA,
complying with the usual accounting and auditing rules and
regulations.

Upon receipt of 2nd tranche of cash assistance, the IA/FIA/ISC shall

issue a letter of acceptance/ written acknowledgment/
acknowledgment receipt, and/or official receipt to NIA.

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 b. DELIVERY OF FARM INPUTS

The NIA, upon receipt of the formal request with complete supporting
documents, shall provide and deliver the inputs at the place specified in the
agreement.

XIII. DELIVERY AND ACCEPTANCE OF PALAY

a. DELIVERY OF PALAY
1. The IA/FIA/ISC shall deliver the harvested fresh palay to the delivery
point in accordance with the delivery schedule.
2. The NIA shall collect the palay from the delivery point in accordance with
the delivery schedule.

b. INSPECTION OF THE PALAY

1. The NIA shall inspect and weigh the palay delivered by the IA/FIA/ISC at
the agreed delivery point.
2. The IA/FIA/ISC may be present during the inspection and weighing of the
palay. The NIA shall issue a written document evidencing the specification
of the palay as inspected. Where the IA/FIA/ISC objects to the specification
of the palay as determined by the NIA, the Parties shall seek a resolution
in accordance with the Article below (Dispute Resolution).
3. The NIA shall cover the costs associated with the inspection.

c. ACCEPTANCE OF GOODS AFTER INSPECTION

1. The Parties’ agreement on the quantity and quality of the received palay
constitutes acceptance of the same.
2. The NIA shall provide the IA/FIA/ISC with a written receipt specifying the
time, date, quantity, and quality of palay. The written receipt shall be duly
signed by the IA/FIA/ISC Representative.

XIV. GRANT OF CASH COMPENSATION

a. The IA/FIA/ISC, upon approval of the inspection and acceptance report, shall
request from the Manager of IMO, for the payment of the compensation based
on the prescribed amount per production target.

b. The NIA IMO, upon receipt of request mentioned above, shall endorse the
request for payment to its NIA Finance Section/Unit.

XV. DRYING, PROCESSING/MILLING, STORAGE AND MARKETING OF PALAY

a. In the case that the NIA has no warehouse for the storage of palay, the
IA/FIA/ISC may provide their warehouse to the NIA with a corresponding
storage/rental fee subject to negotiation by both parties. Likewise, the NIA
may also utilize the available post-harvest facilities of the National
Government Agencies, Non-Government Organizations, and other Private
Institutions subject to negotiation.
b. The NIA will coordinate and converge with the National Food Authority (NFA)
to access their post-harvest facilities, if necessary.
c. The drying, processing/milling of the palay may be administered by the
IA/FIA/ISC with compensations form part of their labor services.
d. The NIA may market/sell the palay in partnership with the NFA and other
institutional buyers.

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XVI. FORCE MAJEURE

a. As soon as reasonably practicable after the start of the Force Majeure Event,
the Affected Party shall notify the other Party in writing of the Force Majeure
Event, the date on which it started, its likely or potential duration, and the
effect of the Force Majeure Event on its ability to perform any of its obligations
under the Agreement, and any relevant evidence of the Force Majeure Event
issued by the concerned government agency.
b. The Affected Party shall use all reasonable endeavors to mitigate the effect of
the Force Majeure Event on the performance of its obligations.
c. Provided the Affected Party has complied with Articles XVI.a and XVI.b above,
the Affected Party shall not be held liable for any failure or delay in the
performance of any of its obligations under the Contract.
d. Where it is feasible in all the circumstances, those obligations may be
suspended by the agreement of the Parties during the continuance of such
Force Majeure Event, and no damages or penalties for delay in performance
shall be due to the Affected Party.
e. If an obligation is suspended by reason of Force Majeure for more than 15 - 30
days from the Notice of the Force Majeure Event from the Affected Party, or if
suspension is not feasible in all the circumstances, the other Party may
terminate the contract and shall not be held liable for all outstanding payments
relating to the Inputs supplied for the production, and the Parties shall enter
into good faith negotiations to enter into a new Agreement for the supply of
the farm inputs, depending on its availability.

XVII. REMEDIES

The Parties shall cooperate in the application of the remedies provided for in this
Article and shall apply those remedies in a manner that is commensurate to the
breach in question, with a view of preserving, as much as possible, the Parties’
ongoing relationship and the attainment of the objectives.

Unless a Force Majeure Event takes place, a party failing to comply with any
obligation in the Contract Agreement (the Breaching Party) is in breach of the
Contract Agreement.

A. MITIGATION AND RIGHT TO CURE BREACH

1. Where a party (the Aggrieved Party) becomes aware that the Breaching Party
is or will be in breach of its obligations, it shall immediately notify the
Breaching Party, and shall take all reasonable measures to minimize and
mitigate the effects of the breach whenever possible. Any reasonable
expenses or difference in value incurred by the Aggrieved Party should be
compensated by the Breaching Party.

2. Where the Breaching Party has been notified or otherwise becomes aware
that it is or will be in breach of its obligations, it shall immediately take all
reasonable measures at its own cost to prevent or cure the breach within 15
days, including by completing any partial delivery, or taking delivery as the
case may be, within the time frame agreed between the Parties.

B. RIGHT TO TAKE CORRECTIVE ACTION

Where the Breaching Party does not or cannot cure the breach in accordance
with the Article above, the Aggrieved Party may take corrective action/s in
accordance with the Articles below.

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 C. CORRECTIVE ACTION: NON-CONFORMING GOODS OR INPUTS

Where the non-conforming Goods or Inputs are hazardous, dangerous, or

unsafe, the Aggrieved Party may require the Breaching Party to safely
dispose of those Goods or Inputs at the expense of the Breaching Party.

XVIII. TERMINATION OF CONTRACT AGREEMENT UPON FUNDAMENTAL BREACH

Where the Breaching Party commits a Fundamental Breach of the Agreement, the
Aggrieved Party may terminate the Agreement within 15 days’ notice in writing
to the Breaching Party. The following events are deemed to be a Fundamental
Breach:

a. The NIA failing to take delivery of conforming Goods or significantly delaying

in taking delivery, on at least 5 occasions.
b. The IA entering into any marketing arrangement with any other buyer for the
Goods produced on the Production Site using the NIAs Inputs.
c. The IA failing to deliver conforming Goods in accordance with the delivery
Schedule, or significantly delaying making delivery on at least 5 occasions.

XIX. DAMAGES

Without limiting any other rights or remedies available under the Agreement, the
Aggrieved Party may claim damages for any cost, loss, or expense that are
attributable to the Breaching Party’s breach of the Agreement in accordance with
the applicable laws.

XX. DURATION AND TERMINATION

a. DURATION

The Contract Agreement shall be valid for one (1) cropping season.

b. TERMINATION

The Agreement may be terminated:

1. Following a breach of the Agreement in accordance with the approved

Guidelines
2. By mutual agreement of the Parties; and
3. By either Party by giving 15 days written notice to the other Party.

XXI. AMENDMENTS/MODIFICATIONS

The parties, as the need arises, and upon mutual consent, may amend or modify
this agreement by an addendum duly signed by them and notarized by a notary
public. Hence, the Regional Office through the Technical Working Group (TWG)
can make supplemental guidelines to the MC 04 s. 2024 and NIA-IA Contract
Agreement.

XXII. DISPUTE RESOLUTION

The Parties under the Agreement shall provide notice to each other in the event
of any disputes arising out of the Agreement and shall seek to amicably resolve

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 within 15 days, through negotiation and cooperation, any such dispute
concerning the application or interpretation of the Agreement.

XXIII. PENALTY CLAUSE

All funds are subject to accounting and auditing laws, IA are accountable to justify
and to pay or return undisbursed funds, and failure to submit reports required
shall be subject to the provisions of Section 57, Chapter 6, Book VI of Executive
Order No. 292 (Administrative Code of 1987).

XXIV. EFFECTIVITY

This MOA shall take effect upon the signing of the parties.

This Memorandum Circular shall take effect immediately upon issuance. All existing
Memorandum Circulars, Office Circulars and other prior issuance contrary hereto including
MC No. 04 s. 2024 are deemed amended, modified, repealed or superseded accordingly.

For guidance and strict compliance.

ENGR. EDUARDO EDDIE G. GUILLEN

Administrator
RCS –
RCS - JBS – RVGS –
J ESV – MBC – RAI –
LSM – MTT – MGG – WST – HTL – JAT –
ERS – MMDR – MTJ – CCC – MLJG – MGF –
Date: ________________________ HRE –

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