The Horticulture Code of Conduct is now in full effect
WHO SHOULD READ THIS
- Growers and traders (including agents and merchants) of horticulture produce.
THINGS YOU NEED TO KNOW
- The Code imposes a number of mandatory obligations on growers and traders, including the obligation to enter into a written Horticulture Produce Agreement prior to trading.
WHAT YOU NEED TO DO
- Review all operations in relation to the trade of horticulture produce to ensure you are in compliance with the provisions of the Code.
The Horticulture Code of Conduct (the Code) is a mandatory industry code prescribed under the Competition and Consumer Act 2010 (Cth) which came into effect on 1 April 2017. The Code replaces the Trade Practices (Horticulture Code of Conduct) Regulations 2006 (Cth) and mandates compulsory written horticulture produce agreements between growers, merchants and agents (traders) and introduces civil penalties for both growers and traders for non-compliance.
Terms in this article are references to definitions contained in the Code as per the below:
|grower||a person who grows horticulture produce for sale|
|agent||a person who sells horticulture produce on behalf of a grower to a person for a commission or fee|
|merchant||a person who purchases horticulture produce from a grower for the purpose of resale of that horticulture produce, but does not include:
|trader||an agent or merchant|
|horticulture produce||unprocessed fruit, vegetables (including mushrooms and other edible fungi), nuts, herbs and other edible plants. The Code does not specifically define the term ‘unprocessed’, although the ACCC suggests the ordinary meaning of ‘unprocessed’ should be used (i.e. produce which has not been converted, altered or modified in some way for the purpose of making it into a new form)|
Terms of Trade
Traders must prepare, publish and make publicly available the terms and conditions on which they are prepared to trade with a grower (Terms of Trade), including any updates to the Terms of Trade. The Terms of Trade must comply with the specifications in Part 2 of the Code, which include terms in relation to the Trader’s position as an agent or merchant (or both), the delivery, quality (including instances where a trader can reject horticulture produce) and payment timeframes for horticulture produce, and any insurance for the horticulture produce under the trader’s control. Agents also have additional disclosure obligations in relation to the commissions, fees and charges applicable to the sale of the horticulture produce on behalf of growers.
Horticulture Produce Agreements
Before a grower and trader can trade in horticulture produce, they must enter into a written Horticulture Produce Agreement (HPA). The HPA must comply with the specifications in Part 3 of the Code, including terms in relation to:
- the trader’s position as an agent or merchant (a trader cannot act as an agent and merchant under a single HPA)
- the quantity, quality (including relevant specifications) and delivery requirements of the horticulture produce (including instances and timeframes in which a trader can reject horticulture produce)
- any insurance for the horticulture produce under the trader’s control
- the term (if it is fixed), variation and termination processes under the HPA
- the relevant reporting and statement periods for the trader (in accordance with Part 4 of the Code)
- payment structure and timeframes for payment to the grower, including:
- in the case of agents, the rate of and manner in which commissions, fees and extra costs (charges) are charged by an agent and whether the payment of the charges are contingent on any event (i.e. the sale of the horticulture produce), and
- in the case of merchants, the mechanism used to calculate the price payable by the merchant to the grower for the horticulture produce, whether by way of a method or formula or to be determined before or at the time of delivery.
- the relevant contact details of the parties in the case of a dispute under the HPA.
HPAs with a term of more than 90 days are also subject to a ‘cooling off’ period in accordance with section 20 of the Code.
Part 4 of the Code further regulates the manner in which growers and traders can trade, including minimum standards which should ideally be reflected in the HPA, in relation to the acceptance of the delivery of horticulture produce by the trader, the pooling of horticulture produce and a trader’s obligation to exercise due care and skill in handling the horticulture produce.
Where traders are acting as agents, they are required to pay growers the proceeds of sale received for the horticulture produce (less only such amounts agreed under the HPA), act in the best interests of the grower and on an arms length basis in the sale of the horticulture produce, and pursue the grower’s bad debts as per the HPA. The agent must also report on its sale of the horticulture produce to the grower in accordance with Part 4 of the Code (including the date the horticulture produce was delivered to and subsequently sold by the agent, the type and quantity of the horticulture produce and price received for its sale, details of amounts deducted by the agent from the sale proceeds, and details of any horticulture produce not sold) within the period agreed under the HPA.
Where traders are acting as merchants, they must not charge growers any other amounts for services than as agreed in the HPA. They must pay the agreed amount in the time period agreed under the HPA or growers may elect to suspend any further deliveries to the merchant until payment is received or terminate the HPA (despite the terms of the HPA). The merchant must also report on the horticulture produce it purchases from the grower in accordance with Part 4 of the Code (including the date the horticulture produce was purchased and subsequently received by the merchant, the quality, quantity and price paid for the horticulture produce, and the gross sale price, details of produce not sold or destroyed (and the reason for such destruction) where the price paid is determined by a method or formula in the HPA) within the period agreed under the HPA.
Failure to comply with the Code may result in civil penalties of up to $63,000 per breach for growers and traders.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.