Penalties for breaching trade agreements and requiring growers and traders to keep records of transactions are just some of the recommendations taken on board by the Australian government’s after reviewing the Horticulture Code of Conduct.
The mandatory code was established in 2006 to regulate trade between growers and traders of fresh fruit and vegetables, with an independent review conducted in November 2015 following calls the code was largely outdated and ineffective.
The review focused on whether there was a need to provide clarity as to when a wholesaler is trading as an agent or a merchant, the need for written trade agreements, and the effectiveness of the code's dispute resolution process, offering 13 recommendations to improve the code.
The government has rejected two recommendations and accepted six recommendations in full while noting two recommendations, accepting two in part, and accepting one recommendation in principle.
“The Horticulture Code of Conduct is important for the industry because it provides a framework for the transactions between growers and traders to occur in a mutually beneficial and fair manner," said Anne Ruston, assistant minister for agriculture and water resources. "Our response demonstrates an appropriate balance between the need for transparency in the trading relationship and the need for the code to ensure that trade is not tied up in red tape."
The government has rejected the recommendation to remove the distinction between agents and merchants, but called for a method or formula to provide transparency on the prices paid to growers, with traders to provide information on when the growers’ produce was sold, the gross sale price, details of the produce not sold and details of produce destroyed by the trader or merchant.
Other changes include using Freshspecs as the default for quality specifications where no standard for specification has been identified in the trade agreement, while written record of transactions are expected to be kept by both growers and traders so that the Australian Competition and Consumer Commission (ACCC) can assess compliance with the code.
Contracts entered into before 15 December 2006, which were previously exempt, will now be covered by the code to ensure that as many transactions between growers and traders adhere to the Horticulture Code of Conduct as possible.
One of the contentious recommendations of the review was to introduce fines for breaches of the code, which the government has accepted. The code will be amended to include civil penalties for breaches, to be enforced by the ACCC, and
Peak industry body for Australian vegetable growers, Ausveg, welcomed the proposed reform.
“The announcement of civil penalties means there are now greater recourses available for all parties who have suffered from behaviour which breaches the obligations laid out by the code,” Ausveg CEO James Whiteside said.
Fresh Markets Australia, the industry representative body for wholesalers, said it sees ongoing concerns over monetary penalties. Executive director Andrew Young told Fruitnet that fines could be detrimental to the sector’s competitiveness.
“Monetary penalties should only be used in last case scenarios where there has been blatant and repetitive breaches of the code,” Young said. “There are 12m transactions between growers and wholesalers each year, but there are low levels of complaints.
“Growers face the same risks when dealing with retailers, the food service sector, exporters and secondary wholesalers, yet they do not face monetary penalties under other voluntary codes [like the Food & Grocery Code of Conduct]. If monetary penalties are introduced just for wholesalers, then there’s good cause to be concerned as it hasn’t been fully justified.”
Overall, the industry has welcomed the move to reform the code, which had been found to be outdated and ineffective.
“Industry codes should be a tool to raise the bar in how transactions are conducted,” Young said. “We’ve had a decade of an unworkable and inflexible code, and it’s certainly a breathe of fresh air to see the government working towards a workable and commercial code.”
Ausveg added that the reforms would strengthen the transparency of trading relationships under the code.
“This code of conduct has been in need of reform for many years to make it more relevant to growers, and it’s great to see the government taking the review’s key recommendations on board and committing to increasing transparency and accountability under the code,” Whiteside said.
In coming weeks, the government is expected to release its re-written code and publish it for statutory consultation, with the current code to expire by April 2017 unless re-written by the Australian government.