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Horticulture produce the code applies to
Horticulture produce is unprocessed:
- vegetables, including mushrooms and other edible fungi
- other edible plants.
The Horticulture Code of Conduct doesn't apply to nursery products, including:
- trees, shrubs, plants, seeds and bulbs
- propagating material and plant tissue cultures
- cut flowers or foliage.
The code doesn’t define ‘unprocessed’ and its meaning will vary from case to case. Generally, ‘unprocessed’ is produce that has not been converted, altered or modified in some way to make it into a new form. Simply washing, grading and packing produce to be sold is unlikely to be processing.
Trading relationships the code applies to
The horticulture code applies to the relationship between a grower and an agent or a merchant:
- an agent sells a grower’s produce on the grower’s behalf for a commission or fee. An agent never owns the horticulture produce they are selling
- a merchant purchases horticulture produce from a grower for the purpose of resale. However, the code doesn’t apply to produce that is purchased by a merchant for retail sale or export.
A trader cannot act as both an agent and a merchant with a single horticulture produce agreement.
The horticulture code applies:
- to the relationship between a grower and the agent. It doesn’t apply to the purchaser of this produce through the agent
- to the relationship between a grower and the merchant. It doesn’t apply to the purchaser of this produce from the merchant.
Example of relationships covered by the code
John is a farmer who owns an orange orchard and produces fresh oranges.
Trader - Agent
John sells his oranges via Fruit Agents Pty Ltd, who finds a buyer for John’s oranges. Fruit Agents Pty Ltd is an agent who receives a commission or fee from John. They never own the produce.
Trader - Merchant
Sometimes John sells his oranges directly to Orange Buyers Pty Ltd. Orange Buyers Pty Ltd buys directly from John and then on-sells the oranges to Big Supermarket Pty Ltd. Orange Buyers Pty Ltd is a merchant who buys produce for the purpose of resale.
Ownership of produce
If a trader acts as a merchant, they take ownership of the produce from the grower. The point at which ownership transfers will depend on the circumstances.
- If the price has been agreed before delivery, ownership will pass from the grower to the merchant when the produce is delivered.
- If a method or formula for determining the price has been agreed before delivery, ownership passes from the grower to the merchant when the produce is delivered.
- If the above doesn’t apply and if the merchant is providing an agreed service, such as washing or packing, ownership will transfer from the grower to the merchant when the service is completed.
- In all other cases, ownership will pass to the merchant at the time the merchant and grower agree on a price for the produce.
Examples of when the code applies and doesn't
A grower who supplements their produce with produce sourced from another grower
Whether the horticulture code applies depends on what you do with the other grower’s produce.
If you sell the produce on behalf of the other grower but don’t take ownership of the produce, you are an agent under the code.
If you take ownership of the produce and on-sell it in its unprocessed form, then you are a merchant under the code.
A grower whose produce goes through a packing house
This will depend on the arrangement between you and the packing house, and whether or not the packing house is a different legal entity.
The transaction between a packing house and grower is covered by the code where the packing house acts as a trader, either as:
- an agent (selling the grower’s horticulture produce on behalf of the grower), or
- a merchant (purchasing and then on-selling the horticulture produce).
If you, the grower, have your own packing house and both are the same legal entity, the transaction between you and the packing house won’t be covered by the code. But if the packing house acts as a trader for other growers that aren’t the same entity, the code applies to those transactions.
If the packing house is a related entity to the grower, but not the same entity, you are subject to the code and may need a horticulture produce agreement before you can trade through the packing house.