Understanding the Hort code of Conduct

The deadline is looming for ensuring compliant legal agreements are in place between all parties who trade in fresh produce in Australia.  All traders and growers must have compliant horticulture produce agreements (HPA) in place – in writing – before 1 April 2018.  Penalties apply for failure to comply with the Horticulture Code of Conduct for BOTH traders and growers.

What is the Horticulture Code of Conduct (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 both growers and traders. Traders can be either a merchant or an agent.

The Code does not apply to purchasers of horticulture produce who sell directly to consumers.

A trader cannot act as both an agent and a merchant under the one HPA.

What is the difference between a merchant and an agent?

Agent An agent is a person who sells fruit and vegetables on your behalf for a commission or a fee. An agent never has legal ownership (also known as title) of your produce.
Merchant A merchant is a person who buys your fruit and vegetables to resell them. The point at which ownership of the produce passes from grower to merchant depends on the terms specified in your written HPA and is a critically important part of the agreement.

What’s the point of the Code?

If you’re a farmer growing fruit and sell through an agent or to a merchant, the Code is there to improve transparency in dealings between growers and re-sellers.

The Code specifies that there must be a written contract and 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.

Read this leaflet for more information.

What are growers’ obligations under the Code?

The Code:
• requires growers and traders to have a contract called a horticulture produce agreement (HPA) and applies to all HPAs
• obliges all parties to deal in good faith
• obliges merchants to explain how price will be calculated
• includes penalties for breaching certain sections of the Code
• requires you, agents and merchants to keep certain records.

If you have an existing written HPA signed before 1 April 2017, you have until 1 April 2018 to make sure it includes the things the Code says it should include.

This includes all HPAs entered into prior to 15 December 2006 when the original Code was introduced. If a HPA is changed before 1 April 2018, the  whole Code will apply from the date it is changed.

Some parts of the Code will apply to all HPAs from 1 April 2017. These parts include the obligation to deal in good faith and the dispute resolution procedure.

What if I’ve never had a HPA with my agent, but I have been trading with them for years?

Under the new Code all growers and traders must have a compliant, written HPA in place before 1 April 2018 – regardless of whether they have previously had any form of HPA at all.  No trader can fob you off with excuses like “HPA? Oh we don’t do those”.

When does ownership of my produce pass from me to my re-seller in a merchant transaction?

The Code specifies the following:

– on delivery of the fruit and vegetables to the merchant—if the price or a method or formula for calculating the price has been agreed before delivery
– at the time the agreed service is completed— if the price or a method or formula for calculating the price has not been agreed before delivery and the merchant is to perform a service
– at the time the grower and merchant agree on a price—if the price or a method or formula for calculating the price has not been agreed before delivery and the merchant is not providing a service.

Where can I get more information about the HPA?

Review the FAQ section on the ACCC website.

Read the extra resources available through the ACCC website.

Make sure you know what your rights are and do not sign any agreement without thoroughly reviewing the terms and conditions. You can negotiate the terms providing they fall within the boundaries of the new Code.  Review details about HPAs on the ACCC website