A reminder that the revised Horticulture Code of Conduct applies from 1 April, 2018 and requires that all sales of produce between growers and traders – including in some cases grower-packhouse arrangements – are covered by a written contract. Make sure you understand whether and how it applies to you.
The Horticulture Code of Conduct is a mandatory code that aims to protect growers by requiring a written contract between growers and traders covering the sale of fresh fruit or vegetables and sets out a way for the parties to try to resolve disputes.
The Code requires that this written contract – called a Horticulture Produce Agreement (HPA) – must include certain things like how price is calculated, delivery requirements, quality requirements, when and if produce will be pooled, when deliveries can be rejected and when the grower will be paid.
The Code applies to the trade of fresh fruit and vegetables in all cases except where produce is traded directly to a retailer, processor or exporter. In cases where a packhouse buys and on-sells fruit or acts as an agent for the grower, an HPA is required between the packhouse and the grower.
All HPAs are negotiable provided they contain the elements required by the Code and growers do not need to sign or accept an HPA template which does not meet the needs of their business.
The Q&A below addresses the key aspects of the code as it applies to growers and packhouses. Please note that this is not intended as legal advice and you may wish to obtain independent legal advice. Also included are a number of useful resources from the Australian Competition and Consumer Commission (ACCC).
The code was established in late 2006 but following industry consultation was updated to strengthen grower protection in 2017. It is enforced by the ACCC.
From 1 April 2018 an HPA is a legal requirement and penalties for those who do not have one where it is required will apply.
Should you have any questions regarding this, please contact APAL on 03 9329 5311.
Horticulture Code Q&A
10 Questions Answered on the Horticulture Code of Conduct.
- Who does it apply to?
If you are an Australian commercial apple or pear grower, the Horticulture Code of Conduct (Code) will apply to you. Under the Code you must enter into a contract called a Horticulture Product Agreement (HPA) with each business that buys or sells your produce.
The HPA must be in writing and a grower can accept one either by signing it or by written acceptance of the notice of offer (including by email).
- What’s the difference between a Grower and a Trader and can I be both?
The Code and the requirement to have an HPA applies to both growers and traders. Traders include merchants (who buy produce directly from growers for wholesale in Australia) and agents (who sell produce on behalf of growers).
Accordingly, the definition of a trader could cover a ‘grower’ buying produce from other growers to fill wholesaler and supermarket orders.
- Does a packhouse require an HPA with growers?
An HPA is required between a packhouse and a grower where the packhouse acts as a merchant by purchasing and then on selling the produce or as an agent by selling the grower’s produce on behalf of the grower.
However, an HPA may not be necessary where a packhouse is only being paid for the packing service, and a separate entity, such as, a supermarket or wholesaler pays the grower for their produce. Nor will an HPA generally be required when a grower uses their own packing house, and it is the same legal entity, unless the packing house also has business arrangements with other growers.
If a grower and their packhouse are separate entities, the Code may apply as outlined above.
It is advisable that those growers operating packhouses that consolidate fruit for other growers contact the ACCC for advice specific to their business.
- Are there any exemptions to the Code?
The Code does not apply to nursery products (trees, shrubs, plants, seeds etc.) or produce for export, retail sale or for processing, except if a grower sells produce through an agent to retailers, exporters or a processer.
- By what date do I need to be compliant?
The revised Code applied from 1 April 2017 but there is a 12-month transition period for parties with existing written agreements. Growers and traders must have a compliant HPA in place by 1 April 2018.
- Do I need to accept a trader’s terms of trade?
A trader’s terms of trade are its standard terms and conditions for trading with growers and must be published. Terms of trade can be varied through negotiations between a trader and grower. In conducting negotiations all parties must act in good faith.
- In what circumstances can a trader reject my fruit?
An HPA must make clear the specifications that will be used to assess the quality of the fruit and can include a minimum or maximum quantity of produce to be supplied. The HPA must also set out any requirements the trader has for the delivery of produce.
The HPA must state the circumstances under which the trader can reject produce and a trader must notify the grower of the rejection within the time frame set out in the HPA. A trader is required to exercise reasonable care and skill in handling and storing the fruit.
In some circumstances, a trader may have a right to a refund from a grower, for produce which is on sold to a third party, but which can subsequently be shown not to comply with the quality specifications or is different from what was described by the grower provided such provisions were clearly set out in the HPA.
The Code allows traders to pool produce under an HPA with other produce provided it meets the quality standards and is with the permission of the grower.
- When and what do I get paid?
In addition to determining pricing at or on delivery for produce, a grower and merchant can alternatively agree on a method or formula set out in the HPA to determine a price. But note that growers are still prohibited from coming together to discuss price.
If the merchant chooses to use a method or formula to calculate the price, the grower must be provided with the final sale price of that produce to the third party. This is a requirement under the Code.
An HPA must also specify when a grower will get paid. If a trader does not pay a grower within the timeframe set out in an HPA, a grower can, after giving written notice, stop deliveries or terminate the HPA or refer the trader to the Horticulture Mediation Advisor.
An HPA between a grower and an agent must specify whether the agent will charge a commission, fees or extra costs, the amount, and whether it is contingent on the sale of the produce, or another event.
The Code also sets out a way for the parties to resolve disputes.
- What should an HPA look like and where can I find an example?
An HPA must be written and should be signed by both parties. However it can take the form of a written offer and emailed – or texted – acceptance, but must be compliant with the code requirements and all documents must be kept for six years.
It is recommended that growers familiarise themselves with the requirements in the Code. A good place to start are the resources found on the ACCC website.
An HPA can have additional terms and conditions as agreed by both parties, provided they do not conflict with the Code.
The ACCC has templates online and Growcom has also produced specific HPA templates for growers (see below).
In addition to the requirements of the Code, an HPA could also be subject to the business-to-business unfair contract terms law and must not contain terms that would be considered unfair.
- Do I need to keep records?
An HPA must be retained by a grower for a minimum of 6 years and a grower must keep a written record of all traders they deal with, as well as comply with other record keeping requirements.
Growers and traders that are not compliant with the Code can face penalties imposed by the ACCC or a court.
ACCC – Horticulture Code of Conduct
Disclaimer: The templates linked here are provided as examples only. APAL does not warrant their compliance with the code. All HPAs should be reviewed closely to ensure they meet the needs of your business and cover the requirements of the code.
ACCC – Sample Merchant HPA
ACCC – Sample Agent HPA