Frequently Asked Questions about the AWD Agreement

Here are some of our most frequently asked questions:

1) Section 4. Initial Term and Written Renewal

Q. Why do I have to renew the Agreement every year? Why not automatically renew until we decide to end our relationship?

A. Certain reconciliation issues such as assignment of bad debt, returns and adjustments to the original invoice are best resolved at the end of the agreement. Dealing with these issues while a contract is in force conflicts with laws regarding "conditional sale". At the end of the agreement, there is freedom to reconcile almost any issue. Therefore, we make annual renewal our standard policy.

2) Section 5.2: "Invoices are due and payable within one-hundred and eighty (180) days from the date on which the Products arrive at Distributor's warehouse."

Q. You said that you would reconcile our accounts monthly or bi-monthly. Why then does the agreement say that you will pay me in 180 days for the goods I sell to you?

A. It is illegal to establish a term of sale whereby alcoholic beverages are paid for as they are sold. However, nothing excludes a party from paying parts of the total invoice on a more frequent basis. If a supplier wants to establish a shorter term of payment, then AWD requires that all Product we purchase from a supplier is sold and paid for within the shorter term. AWD selected 180 day terms as they are among the longest of generally accepted trading terms and provide the most flexibility. Furthermore, if an AWD supplier is unable to sell and collect payments for products within the terms of sale to AWD, it is grounds for non-renewal of the agreement. These terms makes it easier for all parties to be in compliance.

3) Section 5.2: "No late charge…shall be charged...on amounts past due."

Q. Why shouldn’t you pay a late charge or penalties on amounts past due?

A. Since AWD clients control product marketing, sales movement and effectively, the project cash flow, it is inappropriate to penalize AWD for slow performance and its effect on past due amounts.

Q. What keeps AWD from taking the money and leaving the country?

A. AWD is able to provide significantly more security than usually available in almost any other importer or distributor transaction. Our clients have the option of establishing a separate DBA (Doing Business As - fictitious name) with AWD, the BATF, the State of California and City of San Francisco. This allows us to set up a separate bank account requiring both AWD and the client to sign for money being released from the account. All outgoing invoices and incoming checks are made payable to the registered DBA. AWD charges a $5,000 set-up fee to register this arrangement with the BATF, City of San Francisco, Secretary of State and the bank. AWD will also provide our clients with a Surety Bond at additional expense and assist with the filing of UCC1 forms that provide Suppliers with effective control of goods in our possession. ( see paragraph 5 )

4) Section 6.1: "All orders...will be subject to acceptance by Distributor."

Q. Why does AWD have the final right to accept or refuse an order? If I'm doing the selling, shouldn't that be my responsibility?

A. By law, the Distributor must exercise "control" over the transaction. AWD is legally liable and therefore must be certain that all federal, state and local requirements for the sale are met before processing orders. In practice, AWD will only exercise this right when a legal problem exists.

5) Section 10.2: "In the event Distributor files bankruptcy...Distributor hereby conveys all inventory...back to Supplier..."

Q. If AWD goes bankrupt, what's to stop their creditors from seizing my products in settlement of other debts?

A. The AWD agreement protects your rights in bankruptcy. However, government agencies do have the authority to seize inventories in certain situations. Suppliers improve their protection by filing a California UCC1 form for each and every shipment received by AWD. This gives the supplier first lien on the reported merchandise. It also provides the Supplier with effective control of the products while they are in our possession and is the best protection in a bankruptcy situation should it occur. AWD charges $200 per filing.

6) Q. How does AWD work with my country’s export credit insurance?

A. Export credit insurance companies treat AWD as a logistics service provider to the producer. You can report AWD transactions to your export credit insurance agency in ONE of the following ways:

a. You can insure AWD’s sales to your accounts.

b. You can insure your sales to AWD.

Nearly all AWD clients using export credit agencies chose to insure the sales made by AWD to accounts. AWD invoices were designed by the export credit agencies themselves and are accepted as documentation when you report your sales.

If the account does not pay, AWD assigns the receivable to the credit agency and they can begin collection proceedings.

Please contact us if you have any further comments or questions.