Growers and traders need to comply with the Horticulture Code when buying and selling horticulture produce.
Protecting growers
If you’re a farmer growing fruit or vegetables and sell through an agent or to a merchant, there’s a law that says you must have a written contract. It’s called the Horticulture Code of Conduct ("Code").
The Code also says that this contract must include certain things, like how price is calculated and when you get paid.
Having a written contract protects you. It details what you and the agent or merchant can and can’t do. This creates transparency around your relationship with the agent or merchant. The Code also sets out a way for the parties to try to resolve disputes.
Key resources for growers:
- How the Horticulture Code helps you
- Enforcement of the Horticulture Code of Conduct
- Example Horticulture Produce Agreement - Merchant
- Example Horticulture Produce Agreement - Agent
The Horticulture Code
The Horticulture Code of Conduct is a mandatory industry code prescribed under the Competition and Consumer Act 2010. The Code aims to improve the clarity and transparency of trading arrangements between growers and traders in the horticulture sector.
Horticulture growers and traders must comply with the Code.
The Code applies to growers and traders. Traders can be either a merchant or an agent.
The following table explains the difference between growers and traders.
| Description | Example |
|---|---|
| Grower | John is a farmer who owns an orange orchard and produces fresh oranges. John is a grower. |
| Agent | John sells his oranges via Fruit Agents Pty Ltd, who takes them to the local fruit market and finds a buyer for John’s oranges. Fruit Agents Pty Ltd is an agent who receives a commission or fee from John. |
| Merchant | Sometimes John sells his oranges directly to Orange Buyers Pty Ltd. Orange Buyers Pty Ltd buys directly from John and then sells the oranges on to Big Supermarket Pty Ltd. Orange Buyers Pty Ltd is a merchant who buys produce for the purpose of resale. |
The Code does not apply to purchasers of horticulture produce who sell directly to consumers.
Horticulture produce is unprocessed fruit, vegetables (including mushrooms and other edible fungi), nuts, herbs and other edible plants, but excludes nursery products.
The Code doesn’t define what ‘unprocessed’ is. Its meaning will vary from case to case. The ordinary meaning of ‘unprocessed’ is produce that has not been converted, altered or modified in some way for the purpose of making it into a new form. Simply washing, grading and packing produce so that it can be assessed and priced for the purpose of trading is unlikely to constitute processing.
Example
The Food Manufacturing Company Pty Ltd buys tomatoes from a grower that it then uses to make tomato soup. The Soup is then on sold to a wholesaler. The arrangement between the grower and the manufacturer would not be subject to the Code, because the manufacturer is not selling horticulture produce, as the tomatoes have been processed.
About the Code
The Code:
- prohibits trading in horticulture produce without a horticulture produce agreement
- specifies a number of record keeping requirements for parties to an agreement
- requires a payment period to be specified and traders to pay growers within the payment period
- introduces an obligation for all parties to act in good faith in their dealings with each other
- introduces financial penalties and infringement notices for breaches of certain provisions of the Code
- allows parties to accept horticulture produce agreements by electronic means including emails confirming an offer or acceptance
- allows traders to pool horticulture produce under an agreement with other produce provided it meets agreed quality standards
- allows merchants and growers to use a method or formula to price horticulture produce under an agreement, as opposed to only a fixed price
- requires horticulture produce agreements to specify the FreshSpecs Produce Specifications or other specifications that will be used to assess the quality of horticulture produce
- has a defined dispute resolution procedure
- allows for ACCC investigations & compliance checks.
Commencement and transition period
On 1 April 2017, the Horticulture Code came into effect. The Code replaces the old Horticulture Code established by the Trade Practices (Horticulture Code of Conduct) Regulations 2006.
The new Code applies from 1 April 2017. If you trade in horticulture produce on or after this date, you must comply with the terms of the Code.
There is a 12-month transition period for parties with existing written agreements. After this transition period ends, all agreements need to comply with the current Code. This includes agreements entered into before 15 December 2006, which were not covered by the earlier code.
During the transition period, the following parts of the Code will not apply:
| If the agreement was entered into... | Then the parts not applicable are... |
|---|---|
| before 15 December 2006 | trader’s terms of trade, horticulture produce agreements and conduct generally |
| between 15 December 2006 and 31 March 2017 | trader’s terms of trade and horticulture produce agreements |
If these agreements are varied before 1 April 2018, the parts of the Code referred to above will apply to the agreements from the date they are varied.
Some parts of the Code apply immediately to all agreements, including those entered into before 15 December 2006. These parts include:
- the obligation to deal in good faith, and
- the dispute resolution procedure.
Horticulture Produce Agreements
The Code prohibits growers and traders from trading in horticulture produce without a Horticulture Produce Agreement that specifies certain matters. Penalties apply for trading without a Horticulture Produce Agreement.
See: Horticulture produce agreements
General obligations
The Code sets out a number of general obligations that the parties must comply with.
- traders and growers must deal with each other in good faith
- a trader cannot act as both an agent and a merchant under the one horticulture produce agreement
- traders must accept horticulture produce delivered under a horticulture produce agreement, except where the horticulture produce agreement permits them to reject it
- if a trader rejects horticulture produce, they must notify the grower that the produce has been rejected within 24 hours of rejecting the produce
- traders must exercise reasonable care and skill in handling and storing the growers horticulture produce that is under their control
- traders must give the grower payment for horticulture produce within the specified payment period
- agents must act in the best interests of the grower when selling horticulture produce and not sell a grower’s horticulture produce, other than on 'an arm’s length basis'
- traders must give a statement to growers setting out the details of transactions.
See also: Horticulture code investigations & compliance checks
Enforcement of the Horticulture Code
The Code now contains penalty provisions. Not complying with a penalty provision could result in the ACCC taking court action seeking a financial penalty for the breach, or issuing an infringement notice.
See: Enforcement of the Horticulture Code of Conduct
Terms of trade
Traders must prepare, publish and make publicly available their terms of trade. Traders have been given a 12-month transition period to comply with the new Code. However, if existing terms of trade are varied before 1 April 2018, the new Code will apply from the date they are varied.
A trader’s terms of trade are the standard terms and conditions under which the trader is prepared to trade with growers. In negotiating an agreement, traders can vary these terms to meet the needs of individual agreements with growers. However, a trader must be prepared to include a term from its terms of trade in an agreement if a grower asks for it.
Terms of trade must comply with the Code and contain certain specific information. Clause 11 of the Code sets out the information that should be included in the terms of trade.
If a trader changes the terms upon which they are prepared to trade, the trader must prepare an updated document that sets out the changes to the terms of trade, and publish and make publicly available the document in the same way as the original terms of trade.
Exclusions
The Code does not apply to:
- nursery products – including trees, shrubs, plants, seeds, bulbs, cut flowers or foliage or propagating material and plant tissue cultures
-
transactions between growers and:
- retailers – businesses buying produce for retail sale
- exporters – businesses buying the produce for export
- processors – businesses buying the produce for processing.
However, if a grower sells horticulture produce through an agent to retailers, exporters, or processors, the agreement between the grower and the agent will be subject to the Code.
Useful resources
Subscribe to the Agriculture Information Network
To keep up with the latest news and events relevant to the horticulture sector, sign up to our Agriculture Information Network.
More information
How the Horticulture Code helps you
Enforcement of the Horticulture Code of Conduct factsheet
Horticulture produce agreements
Horticulture code investigations & compliance checks
Dispute resolution under the Horticulture Code
Horticulture Code FAQ