On 1 April 2017, the new Horticulture Code comes into effect. If you trade in horticulture produce on or after this date, you must comply with the terms of the new Code.
Why do we need a Horticulture Code of Conduct?
The purpose of the Code is to ensure there is transparency in the relationship between growers and traders so that they each have a clear understanding of the terms they are trading under.
It requires traders to prepare and publish their terms of trade which must contain certain information up front about how they will deal with growers, including when traders can reject produce and how long traders will take to pay growers. The Code also requires growers and traders to have in place a horticulture produce agreement before they trade that sets out certain minimum terms.
In addition to transparency, the Code also:
- requires all parties to deal with each other in good faith, which aims to deter parties from undermining each other’s rights under the horticulture produce agreement
- sets out a way for parties to resolve disputes without going to court.
I have an existing horticulture produce agreement - do I need to comply with the new Code?
If your horticulture produce agreement was entered into prior to 15 December 2006, you have until 1 April 2018 to vary it so that it is compliant with the Code. However, if you vary the agreement before 1 April 2018, the Code will apply to the agreement from the date it is varied.
If your horticulture produce agreement was entered into between 15 December 2006 and 31 March 2017 and complied with the old Code, you also have until 1 April 2018 to vary it so that it is compliant with the new Code. However, if you vary the agreement before 1 April 2018, the Code will apply to the agreement from the date it is varied.
You should be aware that some parts of the Code will apply from 1 April 2017 irrespective of the date on which existing agreements were entered into. These parts include the obligation to deal in good faith and the dispute resolution procedure.
What happens if I don’t have a written agreement?
The Code provides that traders and growers must not trade in horticulture produce without a horticulture produce agreement. If you trade without an agreement, you will be in breach of the Code and may be subject to a civil penalty or an infringement notice penalty.
My current horticulture produce agreement was exempt from the old Code because it was made before 15 December 2006. Do I still need to comply with the new Code?
Yes, but you will have 12 months to update your agreements in line with the new Code. From 1 April 2018, your existing agreement must be compliant with the new Code. If you vary your existing agreement before 1 April 2018, the Code will apply to the agreement from the date it is varied. If you make a new agreement before 1 April 2018, it must be compliant with the new code immediately.
Can I agree to a horticulture produce agreement in a text message?
Yes. You need to accept a horticulture produce agreement in writing, but it doesn’t require your signature. This means you can use text messages or emails to accept the agreement.
Remember to keep a record of the written acceptance, as well as details of the party you are dealing with – you need to keep this information for six years.
Do I have to obtain legal advice before entering a horticulture produce agreement?
No. Under the old Code, traders needed to suggest that growers get legal advice before entering the agreement. This requirement is not in the new Code. But we recommend you seek legal advice if you are entering a horticulture produce agreement for the first time or are unsure about an aspect of the agreement.
I’m a grower and my horticulture produce is exported after I sell it. Am I covered by the Code?
It depends. If you sell your produce directly to a buyer who exports the produce, you will not be covered by the Code.
If you use an agent to sell your produce to the exporter, your dealings with the agent will be subject to the Code. This means you will need to have a Code-compliant horticulture produce agreement with that agent. The agent will also need to comply with their obligations under the Code.
My produce goes through a packing house before being on sold to the market. How does the Code apply to me?
This will depend on the arrangement between you and the packing house, and whether or not the packing house is a different legal entity.
A transaction between a packing house and a grower will be covered by the Code where the packing house acts as either:
- a merchant (purchasing and then on selling the horticulture produce); or
- an agent (selling the grower’s horticulture produce on behalf of the grower).
If you have your own packing house( that is, the growing business and the packing house is the same legal entity), the transaction between you and the packing house won’t be covered by the Code. But if the packing house also transacts with other growers that aren’t the same entity, the Code would apply to those trading arrangements.
If the packing house is a related entity to the grower, but not the same entity, you would be subject to the Code, and as such may need a horticulture produce agreement in order to trade through the packing house.
Transactions between the packing house and another merchant will not be subject to the Code.
I am an agent who sells a grower’s horticulture produce on their behalf to a retailer. Do I have to comply with the Code?
Yes. While transactions between growers and retailers are exempt from the Code, arrangements between growers and their agents will still be covered, provided the agent is selling the grower’s horticulture produce.
I supplement my produce with produce sourced from other growers. What does that mean for me?
If you supply horticulture produce sourced from others alongside your own, you are what’s known as a consolidator or aggregator. How the Code applies to these arrangements will depend on what you do with the other grower’s produce.
If you sell the produce on their behalf and don’t take ownership, you would be an agent, and as such the Code would apply to your arrangement.
If you take ownership of the produce and on sell it in its unprocessed form, then you would be a merchant and would also need to comply with the Code.
Are potatoes considered horticulture produce?
Yes, potatoes are edible tubers and are considered horticulture produce. If you are a grower or trader selling unprocessed potatoes for human consumption, you must comply with the Code.
However, arrangements relating to seed potatoes will not be subject to the Code. Seed potatoes are potatoes that are planted to grow additional potatoes.
Does the Code apply if, for example, I’m a grape grower and I sell my grapes to X Wine Buyers Pty Ltd (the purchasing arm of a winemaking business) who and then on-sells my grapes to my related company, Winemakers Pty Ltd, to make Wine?
Yes, X Buyers Pty Ltd is likely to be a merchant under the Code in this situation and therefore the Code would apply when you supply it with horticulture produce. The Code doesn’t exempt merchants that on-sell horticulture produce simply because they only sell to a related business.
However, the Code would not apply if X Wine Buyers Pty Ltd was acting as an agent for X Winemakers. In other words if X Wine Buyers Pty Ltd was buying the grapes on behalf of X Winemakers, there would technically be no resale of the grapes, and therefore X Buyers wouldn’t be a merchant under the Code. An agent transaction is one where the business dealing directly with the supplier is simply representing another business, and does not take ownership of the goods themselves.
I sell seedlings to nurseries– does the code apply to me?
No. The Code only applies to the trade of horticulture produce between growers (and their agents) and wholesalers. Horticulture produce is unprocessed:
- vegetables (including edible fungi)
- other edible plants
Horticulture produce does not include nursery products, such as:
- shrubs and plants
- seeds or bulbs
- cut flowers or foliage, or
- propagating material and plant tissue cultures.
I buy horticulture produce from a farmer and sell it directly to consumers. Do I have to comply?
No. If you buy horticulture produce from a grower, you will only be subject to the Code if you are supplying it to another business that plans to resell it. If you purchase the horticulture produce to sell directly to end-consumers, you won’t have to comply with the Code. Similarly, if you purchase horticulture produce for the purpose of processing, you won’t have to comply with the Code.
Do supermarkets have to comply with the Horticulture Code?
No. However, supermarkets will have other obligations to the growers under the Food and Grocery Code in this situation if they are a signatory to that code.
What are the ‘terms of trade’?
The ‘terms of trade’ set out basic details on how traders intend to do business with growers. Under the Code, traders are required to prepare, publish and make public their terms of trade.
The Code sets out what information needs to be in the terms of trade at a minimum. But a trader can include other additional information, so long as it’s consistent with the Code’s requirements.
Where must I publish my Terms of Trade?
It is up to each trader to determine how they will comply with the requirement to publish their terms of trade and make them publicly available. This requirement could be satisfied by displaying the terms of trade document at their business premises or on their website.
If a trader changes their terms of trade in any way, they 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 document that set out the terms of trade.
Who does the obligation to act in good faith apply to?
The obligation to act in good faith extends to all parties to a horticulture produce agreement. It applies to pre contractual negotiations between the parties, and can even apply after an agreement has ended.
What are the FreshSpecs, and how do they relate to my horticulture produce?
FreshSpecs are a set of uniform standards for fresh produce, created by Fresh Markets Australia. The FreshSpecs can be used to determine the quality of horticulture produce. They allow evaluation of produce quality based on appearance criteria, as well as major and minor defects.
Horticulture produce agreements must state what specifications will be used to determine the quality of horticulture produce. Parties to an agreement can choose to use FreshSpecs, or any other produce specifications to determine horticulture produce quality under the agreement.
I’m a merchant. Can I charge a grower for additional services (such as washing, packing etc.)?
Yes, but only if your horticulture produce agreement specifies:
- details of the service you are performing
- the fee the grower needs to pay you for the provision of the service.
How do I decide what pricing method or formula to use for my horticulture produce?
Growers and merchants can use any pricing method or formula they choose, including a fixed price. Regardless of the pricing method chosen, they must agree on it and their horticulture produce agreement must specify what it is.
If you need help deciding which pricing method is best for you, you should seek professional advice.
At what point is my produce ‘delivered’ to the buyer?
The Code doesn’t define delivery. The point where your produce is delivered to the buyer will depend on the circumstances in each situation and your agreement with the trader.
To give both parties a clear and consistent understanding of what delivery means, you can specify it in your horticulture produce agreement. You should seek legal advice if you want to explore this option to make sure your agreement is compliant with the Code.
As a merchant, can I take commissions from growers under a horticulture produce agreement?
No, merchants cannot charge growers commission under horticulture produce agreements. As a merchant, you are purchasing the horticulture produce from the grower. You can only charge growers for any extra services that you provide, as long as these services and prices are specified in the agreement.
Agents can charge growers commissions and other fees for selling horticulture produce on their behalf under a horticulture produce agreement, however these must be specified in the agreement.
Are traders able to reject my horticulture produce?
Yes, but a trader can only reject your produce if the reason for rejection is in your horticulture produce agreement. They can also only reject your produce within the timeframe allowed for rejection under your agreement.
If a trader decides to reject your produce, they need to tell you no more than 24 hours after they decide to reject it. A trader must also let you know in writing of the rejection and the reasons for rejecting your produce within the time set out in your agreement. You can dispute the rejection of your produce by using the dispute resolution procedure outlined in the Code.
I am having trouble resolving an issue related to my horticulture produce agreement. Where can I go for help?
If you cannot resolve a dispute with the other party, you can use the dispute resolution procedure outlined in the Code. This involves a mediator appointed by the Horticulture Mediation Advisor. If you choose this process, you must follow it as outlined in the Code.
See: Dispute resolution
You may also be able to get assistance from the Australian Small Business and Family Enterprise Ombudsman, or a Small Business Commissioner in your state.
What is a ‘horticulture produce assessor’?
A horticulture produce assessor is an expert who can investigate and report on any issues arising under a horticulture produce agreement, including whether:
- produce has been rejected in accordance with the horticulture produce agreement
- the amount paid by a trader to a grower was calculated in accordance with the horticulture produce agreement
- the grower has been paid on time
- an agent has adequately reported their sales to the grower
The Minister appoints a mediation adviser who must prepare and publish a list of horticulture produce assessors under the Code. You can appoint an assessor if both parties agree to the appointment. If you can’t agree to the appointment, the mediation adviser or a mediator appointed by the mediation adviser can appoint one for you through the dispute resolution process under the Code.
What are the penalties under the new Code?
Courts can impose penalties if they find a party has breached certain provisions of the Code. Breaches of the Code attracting penalties include:
- a party failing to deal with another party in good faith
- a trader failing to disclose necessary information. For example, a trader not publishing a terms of trade document or refusing to report to the grower as required
- trading in horticulture produce without entering a horticulture produce agreement
- a party failing to return a payment within 14 days after an agreement is terminated where the payment was received for the purposes of trade that would have occurred under an agreement terminated within a cooling off period under an agreement
- a trader failing to advise the grower that they reject produce within 24 hours after rejecting the produce
- an agent selling a grower’s horticulture produce other than on an arm’s length basis without the grower’s consent
- refusing to attend mediation
- failing to keep records as required by the Code.
The ACCC can also issue infringement notices where it has reasonable grounds to believe that a person has breached certain provisions of the Code.
If the ACCC issues you an infringement notice, you may decide to contest it rather than pay the fine. In such cases, the matter will normally be decided in a court of law.
See: Fines & penalties
Your industry association may be able to help you understand how the Code affects you in your industry.