Questions and answers - Horticulture Code of Conduct

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About the code

What is the Horticulture Code of Conduct?
It is a mandatory code formed by regulations under the Australian Competition and Consumer Act 2010 and, as such, has the force of law. The code’s aim is to improve the transparency and clarity of transactions between growers and wholesalers of fresh fruit and vegetables. The code also provides for independent assessment of transactions and mediation of disputes.

Why was it developed?
The code was developed following concerns expressed over many years about the lack of commercial transparency and the lack of clear rules and responsibilities of trading in the wholesale sector.

When did it start?
The code came into effect on 14 May 2007.

What are its key requirements?
The key requirements of the code are that:

  • wholesalers publish their preferred terms of trade
  • growers and wholesalers use written agreements
  • wholesalers are clearly identify as either agents or merchants
  • price is agreed in writing under merchant transactions
  • wholesalers provide written transaction information to growers
  • independent assessment is available on transactions
  • low cost mediation is available if disputes arise.

How do I find out more about the code?
To find out more about the code, visit the ACCC website or call the ACCC infocentre on 1300 302 502.

How is it be enforced?
The code is enforced by the Australian Competition and Consumer Commission (ACCC). For more information on enforcement, please refer to the ACCC website or call the ACCC Infocentre on 1300 302 502.

Application of the code

Who is covered by the code?
The code is transactions based. It covers those transactions between a person who grows horticulture produce and someone who:

  • buys that produce for resale (a merchant) or
  • sells that produce on behalf of the grower for a commission or fee (an agent).

This definition applies to wholesalers and intermediaries operating both inside and outside Australia’s central wholesale markets.

Who is not covered by the code?
The code does not cover transactions between a person who grows horticulture produce and those who buy the produce for processing, retailing or exporting.

The voluntary Produce and Grocery Industry Code of Conduct may apply to these trading arrangements. Information about the voluntary code can be found on the Produce and Grocery Industry Code of Conduct website.

The code also does not cover those trading under written agreements that were entered into before the code was registered on 14 December 2006. However, if the agreement is varied after the registration day then the parties are subject to the code.

The code does not apply to growers and wholesalers trading under a statutory marketing scheme.

Documentation requirements in the code

What are the ‘terms of trade’?
The ‘terms of trade’ sets out basic details on how wholesalers intend to do business with growers. Under the code, wholesalers are required to prepare their terms of trade and make them publicly available. They are also required to provide copies, on request, to growers.

There are a number of items that must be included in the terms of trade PDF PDF Icon [74 KB, 1 page]. The terms of trade can include other additional information, so long as it is consistent with the code’s requirements.

What are Horticulture Produce Agreements?
They are written agreements between growers and wholesalers that describe how produce will be traded.

Agreements can cover specific terms or can be issued on a transaction-by-transaction basis.

The agreements cover a number of specified items PDF PDF Icon [83 KB, 2 pages]. Growers and wholesalers may agree to include any additional details in the Horticulture Produce Agreement, so long as the details are consistent with the code’s requirements.

A wholesaler cannot be both an agent and a merchant under the one agreement.

The terms of trade can be used as the foundation of a Horticulture Produce Agreement, or an agreement may be tailored to meet the particular needs of the trading parties and include different conditions to those in the terms of trade. If this is the case, the conditions in the agreement would take precedence over those in the terms of trade.

Do I need to get legal advice when signing agreements?
Growers and wholesalers should consider their own commercial position when signing agreements and if in doubt, seek independent advice.

There is no requirement in the code to obtain legal advice but if an agreement is for more than 90 days then a grower must acknowledge that they have chosen not to obtain legal advice.

Merchant trading arrangements in the code

What is a merchant trading arrangement?
A merchant trading arrangement is where a wholesaler buys the grower’s produce for an agreed price.

The code specifies that the price be agreed to in writing either before the produce is delivered or immediately upon delivery of the produce to the merchant. The grower and wholesaler must agree in their written agreement when the price will be set.

When does ownership transfer under a merchant trading arrangement?
Ownership of the produce passes from the grower to the merchant either when:

  • produce is delivered to the merchant – if the price is set at the farm gate (ie. price was agreed before delivery), or
  • the price is agreed – if the price is agreed on delivery of the produce.

What are the reporting requirements under a merchant trading arrangement?
A merchant is required to provide a report to the grower specifying the quantity and quality of the produce, the price paid, the date of purchase and the delivery date and time. The statement can be for a single delivery or for a set period of time as agreed in the written agreement.

A merchant must provide the grower with a statement within a set time period that is also set out in the agreement.

What happens if the grower and merchant can not agree on a price?
The code does not specifically regulate for disagreements over price. However, the code does provide for independent assessment and mediation which may be used to help resolve disagreements.

Growers and wholesalers may choose to specify in their written agreements how disagreements over price will be resolved. For example, a written agreement may say that if there is a price disagreement:

  1. an independent party will be brought in to establish the price
  2. a dispute will be initiated under the code’s dispute resolution process
  3. the grower can arrange for another wholesaler to purchase the produce
  4. an agreement can be altered or terminated, or
  5. any other mechanism the grower and wholesaler consider appropriate.

Agent trading arrangements in the code

What is an agent trading arrangement?
An agent trading arrangement is where the wholesaler sells the grower’s produce for a commission or fee. Ownership of the produce does not transfer to the agent.

The code requires the agent to act in the grower’s best interests when selling the grower’s produce, and that the sale takes place on an ‘arm’s length’ basis. An agent is required to pay the grower the proceeds from a sale less any commissions, fees and extra amounts specified in the Horticulture Produce Agreement.

What are the reporting requirements under an agent trading arrangement?
An agent must provide a grower with a statement specifying: the type and quantity of the produce sold, the date of sale, the price received, details of the amounts the agent has deducted from the sale price, the details of any amounts not sold, the reasons why it was not sold and whether it has been destroyed or is still held by the agent.

Agents are not required to provide growers with the names and contact details of the people who buy their produce, but are free to do so subject to any legal restrictions imposed on the agent in relation to the provision of that information to the grower.

As with merchant trading arrangements, a trader must provide the grower with a statement within a set time period, agreed to in their written agreement.

What rights does the grower have to inspect an agent’s sales records?
A grower can ask an agent to make available the records relating to the sale of their produce. An agent, however, can choose whether or not to provide the names and contact details of the people who bought the produce.

How are bad debts dealt with under the agent trading arrangements?
Growers and agents must set out in their Horticulture Produce Agreement how bad debts will be dealt with. For example, they can agree that the agent will take full responsibility for any bad debts or, alternatively, that the grower will be responsible, after a certain amount of time, for any debts that have not been paid.

However, if a grower has a role in pursuing bad debts, the agent must provide them with the relevant names and contact details in order to pursue a debt.

Other trading issues under the code

How would the code apply if a grower sends produce to a wholesaler who then stores it for a period of time before agreeing to purchase it?
If a grower and wholesaler have an agreement about storage of the produce that is separate to an agreement to sell the produce then the agreement for storage would not come under the code.

How would the code apply if a grower sends produce to a wholesaler who then washes, grade and packs the produce before agreeing to purchase it?
If a grower and wholesaler have an agreement for washing, grading and packing of the produce that is separate to an agreement to sell the produce than the agreement for washing, grading and packing would not come under the code.

How are rejections of grower’s produce treated under the code?
If a wholesaler rejects a grower’s produce because it does not meet the requirements specified in the agreement, he or she must make a reasonable attempt to contact the grower immediately. This will give the grower the opportunity to deliver the produce to another wholesaler or get an independent assessment.

A wholesaler must also provide written notification to the grower that they have rejected produce and the reasons for that rejection, within the time frame specified in the agreement.

Voluntary code

What about the existing voluntary code?
The voluntary Produce and Grocery Industry Code of Conduct applies broadly across the agriculture and food sector. It will continue to play an important role in promoting good commercial relationships between trading parties.

The Produce and Grocery Industry Code’s four key areas of focus are:

  1. produce standards and specifications
  2. contracts
  3. labelling, packaging and preparation
  4. dispute resolution.

A dispute resolution service is funded by the Australian Government and is available for trading parties outside the scope of the mandatory horticulture code. The service provider is the same under the mandatory and voluntary code providing a single point of contact for the horticulture industry.

Further information about the voluntary code can be found on the Produce and Grocery Industry Code of Conduct website.

Dispute resolution