Chargebacks in Amazon Vendor: how to avoid wasting time and money with these types of penalties

If you are a seller with an account Amazon Vendor, surely you will be suffering from chargebacks. These are an important part of Amazon’s business, and understanding how they work can have a big impact on the performance of your Vendor account.

what is a chargeback

A chargeback is a charge due to a breach of the SLA’s defined by Amazon in a Vendor account.

Some examples are late delivery, confirmed quantity reduction, non-delivery, lack of correct labels, product size, etc. It is about some Economic sanctions sometimes, They can drop profitability with Amazon so much that they make it unfeasible to continue with sales. Therefore, it is important to know how to prevent, manage and claim them. Here are some things you should know about them.

What are the types of chargebacks, and what penalty does each one entail?

These are the most common chargebacks that can affect sellers with a Vendor account on Amazon:

PO (Purchase Order) Related Chargebacks

Late delivery. These are shipments that are delivered outside of Amazon’s deadline. A PO has a start date and an end date. Once that end date has been reached, a 3% of the cost of the product will usually be applied for each confirmed unit delivered outside the shipping or delivery period. Not Delivered/Cancelled. Shipments that Amazon automatically cancels since once the PO end date has arrived, no units have been delivered. A penalty is applied, which can reach up to 9%, on the cost of each product confirmed and not delivered. Confirmed quantity reduction. From the first day of delivery, you have 5 days to definitively confirm the number of units of a PO. Within that period, Amazon will usually not penalize you. After this period, if there is a reconfirmation of units down, a penalty of up to 3% of the product cost per unit will be applied.

ASN management chargebacks

The ASN is the unique identification of a shipment, that is, an ASN defines all the products that are included and the format of the shipment to be made (boxes or pallets and their number). The ASN must be sent digitally, and included in the physical shipment.

Chargebacks in connection with ASN (Advanced Shipping Notice) management can occur for several reasons:

ASN Time Compliance: Amazon either did not receive the ASN notification or received merchandise prior to the ASN notification. The penalty is made on each of the included products. ASN Unit Count: The quantity in the ASN does not match the quantity of units on the PO or PO. The penalty is applied to the products involved. Error in the identification or notification of the BOL. The delivery appointment, or BOL number, does not match the BOL of the ASN. The penalty will be applied for each product. No indication of expiration date. Products that require an expiration date must include it in the digital notification of the ASN. Invalid expiration date. The product expiration date reported in the ASN is in the wrong format, or is later than 10 years from the date of receipt at the fulfillment center. Products with an expiration date below Amazon’s limits. All products shipped must comply with the minimum expiration dates indicated by Amazon. If the expiration date of the product is too close in time, Amazon will not receive the product and will apply a penalty. Box content accuracy.

Expected Excess Products: When a product is received that has not been included in the ASN notification (does not appear in the ASN). One unit penalty will be applied.
Expected excess quantity: It occurs when more units of the products that have been reported in the ASN are received.

Packing and picking chargebacks

Depending on the type of product that you are going to send to its warehouses, Amazon will require specific preparation. It may be that the package requires packaging, bubble wrap, bagging or sealing. Failure to comply with each of these requirements can generate a different chargeback.

Some examples of packaging chargebacks that Amazon Vendor vendors may face include:

The ASN does not contain the information of the shipping box or that some boxes do not have the proper labeling. When labeling the packages, the SSCC package label has not been attached correctly or the labels have arrived in poor condition. The penalty will be made for each unit that does not include the labels or whose labels are not readable by a code reader. Bagged, sealed, additional packaging and bubble wrap. Following Amazon guidelines, the merchandise is not properly packaged. Ships In Own Container (SIOC). It refers to products that do not have the easy-open package certification when Amazon requires it and also exceed the dimensions (45.5 x 34 x 26.5 cm.) or 12.30 kg in weight. Excess measures and weight per package Overweight: When the package weighs more than 23 kg. Oversize (Excess dimensions): When the package exceeds 63.5 cm on any of its sides.

Shipping Chargebacks

Refused delivery. Amazon requires that products be delivered in accordance with standard operating procedures and security requirements included in the vendor’s manual. This requirement establishes that you can only use pallets in acceptable condition, use vehicles that are unloaded with all security measures, and deliver the number of pallets indicated on the carrier’s delivery appointment form. In this case, a charge for breach of each PO (purchase order) of 290 euros is applied. Carrier was unable to attend the appointment. It occurs when the carrier does not show up on the agreed date and time, and the provider does not previously cancel the already confirmed appointment. The amount of the charge will also be 290 euros for each PO affected.

How to dispute a chargeback on Amazon

If a seller receives a chargeback, they must take immediate action to dispute it. To do so, the seller must follow the following steps:

Review chargeback notification: The seller must review the chargeback notification to understand the reason for the refund and the corresponding amount.
Collect documentation: The seller must collect all documentation related to the transaction in question, such as invoices, shipping reports and proofs of delivery (PoD’s).
file a dispute: The seller must file a dispute. Firstly, it is submitted from the chargebacks window, and if it is rejected without objective reasons, secondly to Amazon’s chargebacks department through a case in Vendor Central. In either case, the seller must provide all necessary documentation and explain why he believes the chargeback is incorrect.
Wait for Amazon’s response: Once the dispute is submitted, Amazon will review the information provided and make a decision. If the dispute is accepted, the refund will be canceled and the seller will not have to bear the chargeback cost. If the dispute is rejected, the seller can file an appeal.

It is important to note that the dispute process can take time, and the seller must be patient during the process. Additionally, it is crucial to submit all relevant documentation and ensure that it is complete and accurate. The key idea here is to be proactive and spend time reviewing these charges on the accounts. After all, it’s not in Amazon’s interest to contact sellers directly to resolve these issues. This is a tedious process, which may require the help of professionals, in order to focus on the core of the business.

Impact of chargebacks on vendor accounts

Properly managing chargebacks can have a significant impact on Amazon Vendor account performance. If a seller receives too many chargebacks, their account may be suspended or even terminated. Therefore, it is critical that sellers take preventative measures to avoid chargebacks whenever possible, such as making sure products are undamaged before shipping and adhering to Amazon’s return policies.

Be careful how we record these chargebacks in our accounting, I encourage you to talk to accountants to see how to do this. There is a widespread thought that Amazon will issue us the corresponding invoices, but this is not the case nor is it expected to be the case in the future, leading to possible incidents in the declaration to the Tax Agency.

As with Shortage Claims, Chargebacks can be a major concern for Amazon sellers with Vendor accounts. However, by taking the proper steps to dispute them and implementing sound business practices to prevent them, sellers can minimize the negative impact on the profitability of doing business with Amazon. Accurate and complete documentation is essential throughout the dispute process, and sellers must be patient while they wait for a response from Amazon. I recommend enlisting the support of experts who have the right tools and equipment to tackle this tedious task.

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