Do you have horticulture supply contracts, and are they legal?

If you source fruit or vegetables from growers in Australia and sell them to other businesses, your business activities are likely to be subject to the Horticulture Code of Conduct. If you are covered by this Code, you need to have written contracts called horticulture produce agreements (HPA) in place with each grower as soon as possible in order to comply with the law. The Australian Competition and Consumer Commissioner (ACCC) is responsible for enforcing the Code.

It is in your interest to have valid HPAs in place with growers. By not having an HPA, there is less certainty around important commercial issues such as pricing, delivery, and rejection rights. Therefore there is a greater risk of disputes arising.

What needs to be in an HPA

Your HPA establishes the conditions of your commercial arrangement with the grower and what happens in the event of a dispute. A valid HPA establishes:

• Payment terms
  • how long it will take for the grower to receive payment
  • what fees or commissions you will charge as an agent
  • how you and the grower will agree on a price for the produce
• Quality standards
  • how you will determine whether the produce is of an acceptable standard (this can either be an existing industry standard, or one that you and the grower agree on yourselves)
• Rejection rights
  • in what circumstances you can reject produce
  • how long you have to reject produce
• Termination and renewal
  • when you or the grower can terminate the agreement
  • what rights you and the grower have to extend or renew the agreement.

What do I need to do?

The amount of time you have to ensure you have a valid HPA with each grower will depend on your current arrangements with the growers you deal with.

If you are currently trading under an agreement that was entered into before 15 December 2006 or you have an HPA in place with a grower that complies with the old Code, you have until 1 April 2018 to enter into a new HPA or amend your existing one so that it meets the requirements of the new Code.

However, if you have a written agreement with growers which was not valid under the old Code, or no written trading agreement with growers at all, you may be operating illegally and need to ensure that you have an HPA in place with each grower you trade with immediately.

If you don’t have agreements in place with a grower you deal with, or you believe your agreement may not be compliant, you should talk to growers and advise them that you need to make a new agreement. It may help to let them know that there are advantages for both parties in adhering to the Code.

What happens if I don’t have an HPA with each grower I deal with?

Both you and the grower are not complying with the Code if you trade without an HPA. If you don’t comply with the Code, the ACCC may issue you with an infringement notice specifying that you pay a particular penalty amount (as an alternative to court proceedings). Or a court may order you to pay penalties.

The ACCC can ask traders and growers to provide any documents they are required to make or keep under the Code. This allows the ACCC to check compliance with the Code and take further action if you aren’t doing the right thing.

What is the Horticulture Code?

The Horticulture Code is a mandatory industry code covering the trade in unprocessed horticulture produce, such as fruit, vegetables, edible fungi and nuts. The Code aims to ensure transparency and clarity of trading arrangements in the horticulture industry, and provide a fair and equitable dispute resolution procedure.

The Code first applied to trading arrangements that took place after 15 December 2006. The Code was updated on 1 April 2017 to offer more protections and increased flexibility in trading arrangements. It now applies to all trading arrangements between a grower and a merchant or agent, even if they were initially entered into prior to 15 December 2006.

You are a ‘merchant’ if you buy horticulture produce and then on sell it to another business in Australia. You are an ‘agent’ if you sell horticulture produce on behalf of a grower, and charge a commission or fee for that service. The Code refers to agents and merchants collectively as ‘traders’.
Growers must also comply with the Code when they’re dealing with you.

The ACCC has published guidance material online (www.accc.gov.au/horticulturecode), including example HPAs. Your trader representative body should also be able to assist you to comply with the Code.

This article was provided by the ACCC for Guacamole 1 September 2017.