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The Horticulture Produce Agreement (HPA) is a cornerstone of the Horticulture Code of Conduct in Australia, and plays a critical role in the regulation of commercial transactions between growers and traders within the horticultural industry. This mandatory, legally binding agreement governs the supply of fresh fruit, vegetables, nuts, and other horticultural products, ensuring that both parties engage in fair and transparent dealings.
Foundation of the Code: The Horticulture Code of Conduct, established under the Competition and Consumer Act 2010, specifically mandates the use of a HPA between growers and traders. The Code was introduced to address historical issues of unfair practices, lack of transparency, and power imbalances in the industry. The HPA is the primary tool through which the Code’s objectives are realized.
Mandatory Requirement: It is compulsory for all growers and traders to have a HPA in place before any horticultural produce is supplied. This ensures that all transactions are conducted under a clear legal framework, reducing the risk of disputes and ensuring that both parties are aware of their rights and obligations.
Compliance Monitoring: The Australian Competition and Consumer Commission (ACCC) monitors compliance with the Code, including the proper use of HPAs. Non-compliance can result in enforcement actions, including fines and other penalties. This regulatory oversight ensures that the HPA is not just a formality but a functional document that governs the relationship between growers and traders.
Detailed Agreement Terms: The Horticulture Produce Agreement requires that all key terms of the transaction be explicitly stated in writing. This includes:
Fairness in Negotiation: The HPA must be negotiated freely and fairly, without coercion or undue pressure from either party. This aspect of the HPA is designed to protect growers, who historically may have been at a disadvantage when dealing with larger, more powerful traders. By ensuring that the terms are mutually agreed upon, the HPA promotes equity in the trading relationship.
Clear Dispute Resolution Process: The Horticulture Produce Agreement must include a process for resolving disputes, such as mediation or arbitration. This is a critical feature that provides a structured way to handle disagreements without resorting to costly and time-consuming legal action. It offers a path to amicable resolution, preserving business relationships and minimizing disruptions.
Risk Mitigation: By clearly defining the terms of the transaction, including what happens in the case of unforeseen events (such as produce spoilage or market fluctuations), the HPA helps both parties manage and mitigate risks. This reduces the likelihood of disputes and financial losses, contributing to the stability of the supply chain.
Protection Against Unfair Practices: One of the key reasons for the introduction of the HPA was to protect growers from unfair practices by traders, such as unilaterally changing payment terms, rejecting produce without just cause, or demanding unreasonable discounts. The HPA sets out clear rules that prevent these practices, providing growers with greater financial security.
Ensuring Prompt Payment: Payment security is a critical concern for growers. The HPA’s requirement that payment terms be clearly defined and adhered to ensures that growers are paid on time and in full. This is especially important for small-scale growers who may lack the financial resilience to absorb delayed payments.
Encouraging Investment: When growers can trust that their transactions with traders will be conducted fairly and that they will be paid promptly, they are more likely to invest in their operations. This can lead to increased productivity, higher quality produce, and overall growth in the horticulture sector.
Building Trust: The transparency and fairness promoted by the Horticulture Produce Agreement build trust between growers and traders. Trust is essential for the long-term sustainability of the horticulture industry, as it encourages collaboration and the sharing of market information. When growers and traders trust each other, they are more likely to work together to improve product quality, meet market demands, and adapt to changing conditions.
Promoting a Level Playing Field: The HPA helps level the playing field between growers and traders by ensuring that all parties operate under the same set of rules. This promotes competition based on the quality of produce and the efficiency of operations, rather than on the ability to exploit power imbalances.
Contribution to Market Stability: By reducing the incidence of disputes and ensuring that transactions are conducted fairly, the HPA contributes to the overall stability of the horticulture market. This stability is beneficial for all participants in the supply chain, including retailers and consumers, as it helps ensure a consistent supply of high-quality produce.
Role of the ACCC: The ACCC plays a crucial role in enforcing the Horticulture Code of Conduct and ensuring that HPAs are in place and followed. The ACCC can investigate complaints, conduct audits, and take enforcement action against non-compliant parties. This enforcement capability is essential for maintaining the integrity of the Code and ensuring that the benefits of the HPA are realised across the industry.
Penalties for Non-Compliance: Traders who fail to enter into a proper Horticulture Produce Agreement or who breach the terms of the agreement can face significant penalties, including fines. This serves as a strong deterrent against unfair practices and encourages all parties to comply with the Code.
A horticulture produce agreement must specify:
(a) whether the trader is trading as an agent or a merchant under the agreement; and
(b) any requirements the trader has in respect of delivery of horticulture produce to the trader by the grower; and
(c) any circumstances, for the purposes of paragraph 22(2)(b), in which the trader may reject horticulture produce delivered by the grower; and
(d) the period, for the purposes of subclause 22(4), within which the trader must give the grower reasons for a rejection of horticulture produce delivered by the grower; and
(e) if the trader has insurance for horticulture produce covered by the agreement:
(i) the extent to which the produce is covered by the agreement; and
(ii) the maximum amount of insurance cover provided by the trader’s insurance policy in respect of claims that may be made in relation to the produce; and
(f) the process for varying the agreement; and
(g) if the agreement is only to operate for a limited time—the term of the agreement; and
(h) any quality and quantity requirements relating to horticulture produce covered by the agreement; and
(i) the FreshSpecs Produce Specifications, or other specifications, that will be used to determine the quality of the produce; and
(j) how the trader deals with horticulture produce, provided by the grower under the agreement, that does not meet the quality or quantity requirements (if any) specified in the agreement; and
(k) if the trader intends to pool the horticulture produce with other produce:
(i) the quality requirements relating to the produce to be pooled; and
(ii) the specifications that will be used to determine the quality of the produce to be pooled; and
(l) the payment period, for the purposes of subclause 35(2), for the delivery of horticulture produce under the agreement; and
(m) the reporting period for the agreement; and
(n) the statement period for the agreement; and
(o) the contact details of the person that the grower should contact in the event of a dispute with the trader under the agreement or this code; and
(p) the contact details of the person that the trader should contact in the event of a dispute with the grower under the agreement or this code; and
(q) the process for terminating the agreement.
Are you a horticulture grower or trader that needs a Horticulture Produce Agreement?