Frequently Asked Questions about the AWD Agreement
The AWD Distribution and Administrative Services Agreement has been
approved by the Bureau of Alcohol, Tobacco and Firearms (BATF) and
is subject to little change. Most questions from potential clients
refer to sections that address BATF laws excluding "consignment"
and "conditional sale" agreements. This agreement and the
business structure offered by AWD have been carefully designed to
provide customers with the most efficient and flexible relationship
allowable by law.
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
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
4) Section 6.1: "All orders...will be subject to acceptance
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.
Direct to Consumer Shipping is rapidly growing. AWD now offers consumer fulfillment in 22 states. Ask us for more information.