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Amazon Vendor Chargebacks - How to deal with them

Katy Luxem (Guest) from eCommerce Nurse
05 August 2020 12:00
This information is accurate at the time of publishing and Amazon may have since updated this. Please check Amazon Vendor Documentation for the most up-to-date version.  

For brands selling online, becoming an Amazon vendor is a privilege. It often involves jumping through many hoops, as Amazon vendors must meet a lot of requirements; first to become a vendor, and then to maintain a vendor relationship in good standing. Once they’re set up as a vendor, businesses may busily focus on building their brand and managing profit, sometimes on auto-pilot and without thinking about the possibility or impact of chargebacks. This mistake can cause a steady stream of expenses from errors and issues that could (likely) be quite easily avoided. Amazon will charge vendors for a long list of reasons and issues that, if not addressed, can cut into your margins significantly, especially over time.

This blog will address some of the most common issues and reasons why vendors experience chargebacks and what to do about them. If the problems are too confusing or you need additional help moving forward, eCommerce Nurse can assist. Our full-service agency can determine the root cause of your issues, and ensure your workflow and business are optimised for Amazon. With a little attention, you can be on your way to healthier profit margins and a less stressful operations environment.

What is a chargeback?

When it comes to Amazon, a chargeback is a fee or deduction from a remittance check. These may also be called “charge disputes,” and they can occur for a host of reasons that are mostly operational in nature. The fees also vary in amounts, depending on the specific compliance issue you’re facing. Even a charge of $1.99 or £1.50 per issue can add up quickly for vendors with large orders. 

Vendors can see their chargebacks in Vendor Central, under the Payments tab. Chargebacks will be listed under the Remittance area, where itemised deductions from invoices are kept. Another way to look at chargebacks is in your Vendor Operational Performance area under the Payments tab. By reviewing this area, vendors can see non-compliance performance data in the form of the chargeback fee and the category it falls under. Noting the category of the chargeback can be crucial to determine what underlying operational errors the business might need to remedy.

Types of chargebacks

Chargebacks happen for a variety of reasons, including unauthorised use of credit cards, but operational malfunctions (late arrivals, technical issues, etc.) and packaging non-compliance are some of the most commonly seen ones. There are detailed explanations of each chargeback, as well as the most up-to-date guidelines in Vendor Central. These can be found under the Support > Help > Vendor Operational Performance (Chargebacks) section. Chargeback types include:

Problems with Packaging

  • About the Frustration-Free Packaging/Ships In Own Container chargeback

As Amazon expanded its Frustration-Free Packaging program, they began requiring vendors to certify and comply with certain guidelines to reduce excessive packaging and overboxing that is contributing to environmental issues. As of 31 August, 2019, vendors may see a $1.99/ £1.50 per unit chargeback under the Vendor Performance Dashboard in Vendor Central for issues with items not complying with the Frustration Free Packaging rules. 

The minimum package dimensions that require certification of an ASIN as FFP or SIOC are 6″ x 4″ x 0.375″ (previously 9” x 6” x 0.375”), for the US. And 5.5 x 34 x 26.5 cm (any packaged item with its longest side more than 45.5 cm, or its shortest side more than 26.5 cm, or its median side more than 34 cm) for the UK. Any non-sort packaged item that is fulfilled through Amazon’s fulfillment network with any one or more of its dimensions less than these amounts are excluded from the SIOC chargeback. If your package exceeds any of these limits on any side and is fulfilled in Amazon’s non-sort network, you must certify it as Frustration-Free Packaging (FFP) Tier 1 or Ships in Own Container (SIOC) Tier 2, which was introduced September 2019.

Problems with PO

  • About Overage PO Units, PO On-Time Accuracy, and Paper Invoice chargebacks

This type of chargeback is very common, as vendors try to deal with carriers, appointment requests, and order information. Common issues often have to do with confirming POs on time, shipping within the ship window, and shipping extra or not enough units.

PO on-time accuracy is when you tell Amazon your goods will be received by a certain date, but for whatever reason, they do not arrive by the promised date. This is all handled via the Purchase Order Management section in Vendor Central, and it is very important to put the receive-by date with a few days allowance, or more. The Carrier Appointment Request Portal (CARP) will have the official booking information for when it's actually going to get to the warehouse. As a vendor, your PO on-time accuracy metric and any chargebacks associated with this are related to what you enter on the PO when you accept or reject the products.

At eCommerce Nurse, we recommend checking once per week on items that are supposed to land. You can actually edit this anytime, even when it's on the way there or after you think it's arrived. The best way to do this is to go to Orders, click into the PO and update the delivery date a week or two in the future to give yourself extra time. If things have not arrived or are not on schedule, simply push out the receive by date on the PO to avoid chargebacks related to PO on-time accuracy.

Any failure to confirm POs or accept a back order will result in an Amazon chargeback that can be sizable, depending on the size of the order.

Problems with the Receive Process

  • About the No PO Found on Carton and Carton Information Compliance chargebacks

 This chargeback also covers a range of issues that warehouse receivers may encounter and charge you for. These can include any issue Amazon has when they receive your shipment, such as no barcode or an unscannable barcode, no carton label or missing carton information, no barcode on the products inside the carton, wrong item shipped, etc.

 Problems with Preparation

  • About Bagging Non-Compliance, Bubble Wrap Non-Compliance, Barcode Labelling Non-Compliance, Boxing Non-Compliance, and Taping Non-Compliance chargebacks

Preparation chargebacks result from any error or noncompliance related to product prep that should have been completed by the vendor. This includes not taping the box closed or not polybagging items that require bagging, such as liquids or clothing. Other issues can include incorrect packaging or shipping an item that is close to expiration. A bagging issue may only be 50p per unit, but that adds up depending on how many units are affected. The chargeback can be sizable depending on the nature of the issue and size of the order.

Problems with ASN

  • About the ASN Accuracy chargeback

ASN (Advanced Ship Notice) chargebacks mean the item was not sent correctly from Vendor Central or the vendor’s EDI trading partner. For example, if Amazon did not expect the delivery or was not informed of the right delivery time.

Problems with Delivery

  • About No Show, Late Booking of Import Shipment, Rejected Delivery, Import PO Not On Time, and Late Delivery of Import Documents chargebacks

Amazon takes problems with delivery seriously, as they slow down a smooth-running fulfillment centre. Vendors can incur a number of transportation-related issue chargebacks. These are often related to appointment mistakes, paperwork, or carriers. Amazon charges $250/£425 per shipment for a no-show or rejected delivery.  This can happen if a carrier did not book a timeslot for delivery or set up a routing request.  Problems with delivery chargebacks cover anything from a rejected delivery to not having the correct delivery time or not having the correct paperwork and trade documents for Amazon to accept delivery, and more. You’ll want to be sure you align with your carrier when creating the appointment booking in CARP to avoid duplicate appointments being created. Duplicate appointments are also subject to chargebacks. 

Problems with Direct Fulfilment

  • About the Cancellation Rate chargeback

These chargebacks occur when a vendor doesn't have any inventory at the time Amazon places the order, or if there is not enough to complete the order. These were formerly known as fill failures, or floor denials, depending on the issue. This can be a costly chargeback, because it results in a negative customer experience, ie, if Amazon cannot fulfill an order a customer has placed. Also, a high cancellation rate can negatively impact your performance metrics and can lead to suspension.

How to avoid and deal with chargebacks

Because there are many different vendor situations, it’s important to pay attention to specific guidelines for your business. Vendors with large catalogues or certain types of products will have different needs than vendors who do large volumes of one product, for example. Complications can vary business to business, and product to product. Fortunately, Vendor Central has a lot of training and resources in your account if you know where to look. Navigate to Support and then the Training Hub or Resource Center. 

  • Use an EDI system, such as Khoo Commerce, to automate order processing and acknowledgement. Reducing inefficiencies and inaccuracies can streamline and integrate your systems with carriers and Amazon. Fewer errors in this department can drastically reduce chargebacks and costs over time.
  • Enter correct shipping information and track shipping dates within 12 hours, even if the date falls on a weekend.
  • Be sure to ship within the shipping window, and not before or after.
  • Keep a close eye on your PO arrival dates and timeframes. Be sure to change as necessary. Consider wider PO ship windows if you are worried about on-time accuracy, or always schedule these the same day of the week if it suits your business and makes it easier to check or keep track of (on a Monday, for example).
  • If units become unavailable, cancel those units from the PO and schedule and ship only what’s available, if this is possible.
  • If it’s relevant for your category and products, don’t be cavalier about expiry dates. Be cautious and develop a process for ensuring products do not arrive on Amazon’s side too close to expiry, or you will not only be charged a fee, but your product will be disposed of, costing you even more in lost revenue.
  • Package items correctly. Review Amazon Packaging Certification Guidelines in Vendor Central and ensure you are bagging, bubble-wrapping, taping, and boxing correctly. If your products qualify for Frustration-Free Packaging, be sure to comply with the latest requirements.
  • Watch for notices via Vendor Central to your email for any policy updates. Amazon usually gives a lead time and grace period of a month or more.
  • Check labels and ensure ASIN information, barcodes, labels, etc. that you print from Vendor Central are accurate and adhered to the product correctly.
  • Ensure you ship with a carrier that can deal with the specific demands of your products. High-value products should be shipped with tracking and delivery confirmation, for example.
  • Ideally, use an Amazon-approved carrier for minimising issues.

Lastly, we recommend keeping detailed records of your POs, shipping info and dates, tracking information, labels, receipts, and anything else. These may be needed if you want to file a dispute on a chargeback with Amazon. If you disagree with a charge you’ve incurred, vendors can file a dispute under Chargeback Claims in the Performance tab of Vendor Central within 30 days. Be prepared to provide your evidence, and file in a timely manner. When there is a clearly an error, vendors can expect the charged amount credited back to their account within 90 days. Sometimes your initial dispute can be rejected for simply not having enough or the right information. Records to support any claims are crucial.

Need more help minimising chargebacks?

As you can see, vendor chargebacks are a complex issue involving many systems and various logistical causes. It’s worth it to resolve and preemptively prevent these issues for healthier, long-term profit margins. At eCommerce Nurse, we can help vendors identify the root cause of any chargeback issues, and work together with you and your team to ensure your current operations are fully in line with Amazon's policies. Contact us for more information.

Chargeback Fees by Type

This information is accurate at the time of publishing and Amazon may have since updated this. Please check Amazon Vendor Documentation for the most up-to-date version.  

Chargeback Type

UK

USA

PO: Unconfirmed

None

10% of product cost

PO: Overage

50p per unit

 

Tier

Overage %

Chargeback
rate (COGS)

1

0-40%

10%

2

41-90%

50%

3

91% and above

80%

PO: Paper invoice

£4 per invoice

 

PO: On time accuracy

If the trailing four-week rate is below 90%, the subtype charges will be:

 

●      3% of the cost of the product for confirmed units that arrive outside of the ship/delivery window (Not on time).

●      3% of the cost of the product for the difference in confirmed units if that number is reduced after 5 days into the ship/delivery window. For example, if you confirmed 15 units but reduced that to 10 units after 5 days into the PO window, we deduct 3% from the unit cost of the missing 5 units (Down-confirmed).

●      10% of the cost of the product for confirmed shipments that are auto-canceled by our system due to not being delivered by the PO cancellation date (Not filled).

If the trailing four-week rate is below 90%, the subtype charges will be:

 

●      3% of the cost of the product for confirmed units that arrive outside of the ship/delivery window (Not on time).

●      3% of the cost of the product for the difference in confirmed units if that number is reduced after 5 days into the ship/delivery window. For example, if you confirmed 15 units but reduced that to 10 units after 5 days into the PO window, we deduct 3% from the unit cost of the missing 5 units (Down-confirmed).

●      10% of the cost of the product for confirmed shipments that are auto-canceled by our system due to not being delivered by the PO cancellation date (Not filled).

PO: Rejected

None

This chargeback only applies to items categorized by Amazon as Baby, Beauty, Grocery, Health and Personal Care, and Luxury Beauty.

 

If you accept an order for a product, but reject more than 20% of the quantity Amazon orders from you in a given PO, we will reduce the purchase price we offer on your product by 3% of the cost of goods sold (COGS) for all units over this 20% threshold. The reduction will be surfaced to you in the form of a chargeback.

 

This chargeback will not apply to an order of a product if the total product units we ordered from you in the 12 months preceding the PO submission date are less than the minimum unit threshold shown in the table below. The minimum unit threshold for a product is determined by product category. For example, for a baby product, if we have ordered less than 5,000 units over the 12 months’ prior to the PO submission date, the chargeback will not apply to the order of that product.

Delivery: No show

£425 per shipment

$250 for Truckload (TL) and $90 for Less Than Truckload (LTL).

Delivery: Rejected

£425 per shipment

None

ASN: Accuracy

25p per unit with invalid ASN content

Up to 6% of product cost

Import Shipment: Late booking

3% product cost

3% product cost

Import Shipment: PO not on time

3% product cost

3% product cost

Import Shipment: Late delivery of documents

€50 per document set per day late (starting after day 4) for Ocean freight, or €150 per document set per day late for Air freight.

$150 per document set if the documents are one to three days late. An additional $50 is charged per document set for each day thereafter.

Prep: Bagging

50p per unit

50c per unit

Prep: Suffocation Warning

None

24c per unit

Prep: Taping

30p per unit

66c per unit

Prep: Boxing

70p per unit

$1.49 per unit, except for books and music. For music products, the amount for this chargeback is $1.13 per unit. For books, the amount for this chargeback is $3.05 per unit.

Prep: Barcode labelling

30p per unit

 

Prep: Bubble Wrap

50p per unit

The amount for the internal bubble wrap chargeback is $0.75 per unit. The amount for the external bubble wrap chargeback is $1.32 per unit.

Prep: Bagging

50p per unit

 

Prep: Set Creation

None

$1.00 per unit

Prep: Opaque Covering

None

$1.20 per unit

Prep: Apparel - Remove Hanger

None

80c per unit

Receive: Carton Info Compliance

5p per unit

$5 per carton (package). Vendors who consistently maintain a compliance rate of 10% or less will be charged $15 per carton (package).

Receive: No PO on carton

£8 per carton (Package)

$10 per carton (package).

Receive: Dunnage Not Compliant

None

$25 per carton (package)

Receive: Non-Compliant Barcode

None

3% of the cost of the product

Receive: Expired Product

None

$2 per unit plus 100% of the cost of the product

Receive: Overweight cartons and Oversize

None

$25 per carton (package).

Receive: Carton Content Accuracy

None

$1.50 per defect.

Direct Fulfilment: Cancelation

A Cancellation Rate chargeback occurs when you cancel an order, either because you denied an order that we submitted (formerly known as fill failure), or because you began to fulfil an order we submitted but could not complete it (formerly known as floor denial).

 

These chargebacks occur when you don't have any inventory at the time we placed the order, or if you don't have enough to complete the order.

The amount for this chargeback is €10/£8 per issue.

 

$10 per issue.