GENERAL

1. It is expected of every member of the Forum that he shall conduct himself in the practice of the business of exporter in such a manner that his conduct does not bring, or is not likely to bring, the Forum into disrepute.
2. The Forum expects all members, whether same act as agents on behalf of others or themselves purchase fruit from suppliers in terms of a contract of purchase and sale, to act in a manner which is consistent with their membership of the Forum, and in accordance with what may be described as "honest and lawful business practices". Without limiting the general ambit of this general intention, the following non-exclusive guidelines may be of assistance in determining conduct which is improper and/or inconsistent with membership of the Forum:

3.1 The making of false and/or derogatory statements concerning the Forum, its office bearers, or fellow members of the Forum, in circumstances where the maker is aware of the falsity of the statements or has no reasonable grounds for believing same to be true;

3.2 The member's conviction of a crime of dishonesty which either relates to, or is relevant to, his business as exporter;

3.3 The estate of a member being sequestrated, or an export company or close corporation of which he is director or member being wound up, in circumstances which it can be shown that such sequestration or winding up was occasioned by the improper or unlawful conducting of the business of exporter;

3.4 The conducting of business as an exporter, whether as an agent or otherwise, in the course of which the member makes use of a company or close corporation for the purpose of conducting such business, and in his dealings with his principal and/or suppliers of the produce, as the case may be, failing at all times to comply with the requirements of Section 50 of the Companies Act, or similar provisions of the Close Corporations Act, which relates, inter alia, to disclosure on stationery of the full name of the legal entity, registration number and directors and/or members.

3.5 A member failing to pay its membership fees within 30 (thirty) days of receiving a statement of account.

3.6 A member not registering with all sub-committees or chambers that the Forum establishes that are relevant to their business. By way of example, members who export citrus are accordingly required to register (and pay any fees democratically determined) with the Citrus Exporters' Forum.

3.7 A member not supplying industry information requested by the FPEF secretariat for the generic compilation of industry statistics, when all individual exporter information will be treated confidentially.

3.8 A member revealing his username and/or password to anyone other than an employee of his own company for restricted access to the FPEF website.

C. SPECIFIC RULES OF CONDUCT

(a) Exporters who act as agents on behalf of others

1. Whilst the Forum does not intend to prescribe how individual members may structure their business, or to limit the general freedom of individual members to establish contractual relationships with clients, the following general Rules of Conduct shall at all times apply to an exporter who acts as an agent on behalf of the supplier of the product:

4.1 The member must take all reasonable steps to:

4.1.1 Acquaint himself with the structure and working of the South African Fresh Fruit Industry, and in particular the PPECB, the relevant Phytosanitary Protocols and Disciplines, and other regulations applicable to the country to which the member intends to despatch fruit;

4.1.2 Establish a non-statutory, producer trust banking account through which agency monies are channelled and on which there is a clear audit trail (see Addendum A)

4.1.3 Record in writing (either by way of contract, letter or facsimile) to the supplier that he is acting as agent and record the nature and extent of his remuneration (see Addendum B – Checklist for Agency);

4.1.4 Display the utmost good faith to his principal and avoid placing himself in a position where his own interests are in conflict with those of his principal;

4.1.5 Disclose to his principal all advantages or benefits received by him in the performance of his mandate, and in particular refrain from making secret profits, or receiving any benefit or commission not disclosed to his principal;

4.1.6 Act with due care and diligence, and display the same care in the performance of his mandate as he would display in the conduct of his own affairs.

4.2 An agent is generally required in terms of South African common law to account to his principal with regard to all material aspects of the performance of his mandate. Every member (except where the obligation to account has been limited by way of an express provision which has been reduced to writing and signed by both principal and agent) is therefore expected:

4.2.1 To maintain proper books of account which enable him to account to his principal relating to the performance of his mandate;

4.2.2 Within a reasonable time of having been called upon to do so by his principal, to account to his principal to the extent required by the South African common law, (as interpreted from time to time by the High Court of South Africa), and further as may have been contractually undertaken by him;

4.2.3 To allow his principal to inspect his books and relevant vouchers, subject to such limitations relating to trade secrets, confidential information and customer information as may be reasonably required and necessary to protect the interests of the member in the conduct of his business

4.3 The member should at all times deal with the proceeds received from the disposal of his principal's produce in accordance with an appreciation that these monies are not his own, but are held by him on behalf of his principal. In pursuance thereto (and subject to such written agreement to the contrary which may be reduced to writing and signed by principal and agent), the member:

4.3.1 Shall ensure that he keeps proper books and records relating to the receipt and disbursal of such monies;

4.3.2 Shall not, without the prior written consent of the principal, use such monies for his own purposes, or loan the same from his principal, for any purposes whatsoever.

4.3.3 Shall not, without the prior written consent of the principal, use such monies in any pooling of proceeds of different principals in such a manner that the proceeds received from the sale of the produce of one principal are disbursed to or for the benefit of another principal.

4.4 The member may be guilty of improper or dishonourable conduct if he:

4.4.1 Fails and/or refuses, after having been called upon in writing to do so, to furnish his principal with a copy of any written contract concluded between the agent and his principal;

4.4.2 Fails and/or refuses to render an account to his principal within a reasonable time of having been called upon to do so in writing;

4.4.3 Consistently fails and/or refuses to answer correspondence received from his principal or from the Forum within a reasonable time;

4.4.4 Without good cause, withholds monies due to his principal;

4.4.5 Commits conduct, generally in regard to his principal, which amounts to the offences of fraud and/or theft;

(b) Exporters who do not act as agents

1. The Forum furthermore expects those members who do not act as an agent on behalf of others, but who purchase fruit from suppliers in terms of agreements of purchase and sale, to abide by the following general rules of conduct:

5.1 To record in writing (either by way of contract, letter or facsimile) the following best practices (see Addendum C – Checklist for the Purchase of Fruit):

5.1.1 A description of the product to be purchased (e.g. cultivar, class and size);

5.1.2 Place of delivery (or point of intake e.g. in port in South Africa after passing inspection by PPECB or after passing inspection in the E.U.);

5.1.3 Purchase price and when payment is to be made.

5.2 The member may be guilty of improper or dishonourable conduct if he:

5.2.1 Fails and/or refuses, after having been called upon in writing to do so, to furnish the supplier with a copy of any written contract concluded between himself and the supplier;

5.2.2 Consistently fails and/or refuses to answer correspondence received from the supplier or the Forum within a reasonable time;

5.2.3 Without good cause, withholds monies due to the supplier;

5.2.4 Commits, generally in regard to the supplier's conduct, offences amounting to fraud and/or theft;

5.2.5 Purchases produce from suppliers, for the purpose of export, without the member having any means, or reasonable expectation, that he will be able to pay the supplier thereof the purchase price that he has undertaken to pay.

It is incumbent on the FPEF to recommend to its members that reasonable and responsible steps be taken to avoid bringing the export fraternity into disrepute, particularly over agency business.

The APAC Act, established for local produce trading, does not practically afford the export industry the protection it seeks in agency business. It is also considered that the implementation of the APAC Act would hinder rather than streamline the export of fresh fruits. So the industry's best option is to self-govern rather than be regulated by a restrictive APAC Act.

For this reason, the FPEF took the initiative to advise its members – through section 4.1.2 of this Code of Conduct - to set up a separate, non-statutory, banking account using the wording "producer trust account" after their company's name. Furthermore, exporters have been advised to channel all monies related to agency business through this account, on which the exporters' auditors must verify that a clear audit trail exists. This audit trail would then enable the exporter (or liquidator) to accurately account for monies clearly belonging to particular producers.

On top of this, legal opinion has strongly suggested that the exporters make mention of this producer trust account in their written marketing agreement with their producers. Any reference or arrangement regarding agency monies transacted with the exporter is then confirmed in this agreement. (Annexure B to the Code of Conduct provides best-practice guidelines for agreements concerning agency business)

The FPEF requires the use of the producer trust account and the associated written marketing agreement as laid out in this addendum. Circumstances may prevail that both producer and exporter choose to operate agency monies in a different manner (to that recommended here) in their written marketing agreement. The legal tender that will stand in court in this regard is that which is reduced to writing between an exporter and his producer. The FPEF is neither willing nor entitled to interfere with the manner in which an exporter member and his producer decide to conduct their agency business - as long as the matter is comprehensively covered in their written marketing agreement. Where the producer and his exporter exclude the producer trust account in their business arrangement, this must be specifically stated in writing.

In the event of a dispute arising over 'alleged misappropriation of agency monies' between an FPEF member and his producer, the FPEF Board will determine the degree to which the exporter member adopted the recommendations laid out in this and other addenda. Neglect on behalf of the exporter member in taking proper care of this aspect of the business with his producer may lead to an exporter's membership to the FPEF being suspended or terminated.

Check with whom you are doing business - is the exporter/grower a Pty (Ltd), close corporation or sole proprietor? Is the exporter/grower a member of a recognized industry association? As may be required of you, do not hesitate to ask the industry association questions about the members' financial position and trade references.

Confirm in writing that the exporter is to act as agent to the grower (the principal) on a commission/fee basis.

Estimate/determine the amount of fruit (cultivar, size, class) to be delivered by week. Define standards and quality of the fruit, and address time and temperature protocols.

Define the point of intake and disbursements.

Where is the point of intake? (e.g. Is it at the farm gate, pack house, after PPECB inspection, or on the ship at the Port of exit?)

Exporter will only pay for disbursements from point of intake but producer must reimburse these (exporter permitted to deduct from income).

Concerning packaging material, if there is an expense before the point of intake, who is to pay? Clarify.

What brand is to be used?

Is there a minimum guaranteed price ("MGP")?

How much?

On what particular fruit?

When is it payable? (e.g. 50% on passing PPECB inspection and balance after passing inspection at Port of entry)

The deal should always be dependant on the grower supplying the estimated amount of fruit and agreed quality.

Is an advance on the selling price going to be paid?

If so, when? (e.g. 60% of estimated selling price)

This advance is always refundable if not part of an MGP. If the fruit sells for less than the expenses incurred, the exporter can deduct from other fruit income from the same producer. If there are insufficient funds, the producer must reimburse the exporter.

An advance is not refundable by the grower if it is part of an MGP.

Define a process to deal with quality problems with the fruit abroad. Very important is to include how and when the producer will be told about the problem. Both parties must decide on a mechanism for inspection by the producer, and how the fruit will be dealt with.

Is there going to be any "pooling"? Confirm that there is often "pooling" by market by week, subject to the fruit being the same type and quality. Debate why this is just and equitable.

Determine risk and who, if anyone will obtain insurance.

Agree on the commission/fee to be paid to the exporter (e.g. 10% of selling price or Rx per kg).

With regard to the accounting aspect of the transaction, deal with how things will be managed, and a procedure in case things don't go as planned. Determine how this will be done, and at whose cost?

Deal with your securities for disbursements. For example, the exporter may have a lien over the fruit in respect of all disbursements it has incurred. Provide that either party must notify the other in the event that an application to liquidate or sequestrate has been brought on either party.

Rebates, if they arise either directly or indirectly due to the contribution of the producer's fruit, are to be declared. Determine whether these are to be paid across to the producer, kept by the exporter or shared between the producer and exporter (if so in what proportion).

Record which law is applicable to the contract being signed between the grower and exporter (e.g. South African law or British law?)