We’ve discussed reimbursements on Amazon Seller Central before, but what if you’re a brand selling to Amazon on Vendor Central? Please don’t fret, we’ve got you. You may have noticed Amazon’s announcement that they will lean into the SIOC (Ships in Their Own Container)/SIPP (Ships in Product Packaging) Program. As with all things Amazon, they are trying to modify vendor behavior via fee structure changes, but besides SIOC, what other kinds of Chargebacks are there? Let’s dive into what a Vendor Central Chargeback is, what types there are, and how to resolve and prevent them.
What is a Chargeback?
Vendors are responsible for ensuring that they comply with Amazon’s supply chain processes and policies, including requirements for fulfilling, preparing, and transporting shipments to Amazon’s fulfillment network. Vendors who fail to comply with Amazon’s supply chain processes and policies may incur a Chargeback. Essentially, it’s a financial penalty for not doing what Amazon wants its Vendors to do. And just like disputing a charge with your bank or credit card company, Amazon will allow you to dispute any infractions where you believe you were incorrectly charged.
What Kind of Chargebacks Are There?
Chargebacks are grouped into seven core categories, with multiple subcategories under each. The seven different categories are:
- Problems with Purchase Orders (PO’s)
- Problems with Advanced Shipment Notifications (ASN)
- Problems with Preparation
- Problems with Packaging
- Problems with the Transportation Process
- Problems with the Receive Process
- Problems with Direct Fulfillment
Some of the Chargeback categories above are extremely difficult to dispute as they are often associated with electronic date/time-stamped occurrences that cannot be disproven (i.e. Problems with PO’s, ASNs, or Transportation Processes). Categories that involve Preparation and Packaging, among others, can be disputed with images and other supporting documentation. All Chargebacks can be disputed, with the most successful ones being properly researched and providing all possible evidence needed to prove your case upfront.
Problems with Purchase Orders
First, let’s cover the problems with purchase orders (PO’s). In short, these are problems associated with the purchase order process. These include but are not limited to, unconfirmed PO units, overages, PO on-time Accuracy, and rejected PO Rates. Unconfirmed PO units mean that you shipped units that were not confirmed on the Purchase Order level. The Rejected PO Rate, formerly known as the Purchase Order Confirmation Rate only applies to specific Amazon categories like Baby, Beauty, Grocery, Health and personal care, and Luxury Beauty. If you accept a purchase order for products in these categories but reject more than 20% of the quantity, Amazon will reduce the purchase price offer on your products by 3% of COGS.
Amazon has stringent rules about when units on a Purchase Order must be confirmed (i.e. within 24 hours) and when the FRD (Freight Ready Date) must be set. If you’re late confirming, you will get charged for unconfirmed PO units, and if you are late entering the FRD, you will be charged for PO On-time accuracy. It’s essential to ensure your team is updated on Purchase Order timelines. The amount for this Chargeback is 10% of the cost of the product for unconfirmed PO units. For PO On-time accuracy, the Chargeback can be waived if your previous four-week average on-time rate was greater than 90%. However, if it was not, you will be subject to three different sub-type charges.
- 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 you’re unsure about all the moving parts around Purchase Orders, it’s okay, Hinge can help.
Problems with the Advanced Shipment Notification (ASN)
What is the Advanced Shipment Notification? The ASN is an electronic communication sent to the Fulfillment Centers AFTER your freight is picked up. You should submit the ASN within 30 minutes of the carrier’s departure from your premises or at least six hours before the carrier appointment at the Fulfillment Center. If the Fulfillment Center is near your warehouse location, send the Advance Shipment Notification before the carrier departs with your shipment.
The most common ASN Chargeback we see is On Time Non-Compliance; as you probably guessed, this happens when the ASN is submitted too late. The charge amounts for these can get out of control quickly! 2% of the cost of the product for an Advance Shipment Notification accuracy compliance rate above 95%, 4% of the cost of the product for an Advance Shipment Notification accuracy compliance rate between 70% – 95%, and 6% of the cost of the product for an Advance Shipment Notification accuracy compliance rate below 70%. If your Purchase Order was $50,000 and you’re at 70%-95%, you’re subject to a $2,000 Chargeback. Ouch!
Other than timeliness, the other ASN-related Chargebacks are: Invalid or missing ARN for TL or LTL (collect shipments only), Unit count mismatch, PRO or BOL mismatch for TL or LTL (prepaid shipments only), Missing expiration date, and Invalid expiration date.
- ARN (Amazon Reference Number) inaccuracies or a missing ARN for LTL (Less Than Truckload) or FTL (Full Truck Load) .
- PRO or BOL mismatch for TL or LTL (prepaid shipments only), essentially, the PRO or BOL doesn’t match what was entered on your ARN.
- Unit count mismatch, if the physical case pack quantities, GTIN or UPC or item type quantity don’t match what was submitted on your ARN.
For ARN, BOL, and Unit Count Mismatch, the charge is 1% of the cost of the product for an advance shipment notification accuracy compliance rate above 95%, 3% of the cost of the product for an advance shipment notification accuracy compliance rate between 70% – 95%, and 5% of the cost of the product for an advance shipment notification accuracy compliance rate below 70%.
Missing expiration date: This is when an expiration date is missing in the advance shipment notification for an item that expires. The charge tier system is based on if the product is consumable or not.
Non-consumables:
- 1% of the cost of the product for an advance shipment notification accuracy compliance rate above 95%
- 3% of the cost of the product for an advance shipment notification accuracy compliance rate between 70% – 95%
- 5% of the cost of the product for an advance shipment notification accuracy compliance rate below 70%
Consumables:
- 2% of the cost of the product for an advance shipment notification accuracy compliance rate above 95%
- 4% of the cost of the product for an advance shipment notification accuracy compliance rate between 70% – 95%
- 6% of the cost of the product for an advance shipment notification accuracy compliance rate below 70%
Invalid expiration date: When the expiration date in the advance shipment notification at the time of receipt is either:
- In the past or less than 30 days from the receive date – The charge will be 100% of the cost of the product + $2/unit
- More than 30 days but less than 90 days from the receive date – the charge will be 2%, 4%, or 6% of the cost of the product (based on trailing 4 weeks rate)
- Equal or more than three years (1,095 days) from the receive date – the charge will be 2%, 4%, or 6% of the cost of the product (based on trailing 4 weeks rate) for products in the categories: Grocery, Pantry, Drugstore, Sports, SDP Miscellaneous, Office Products, Lawn and Garden, and Outdoors (excludes Amazon Fresh, Prime Now, and Go).
Alternatively, when the expiration date in the advance shipment notification at the time of receipt is either:
- In the past or less than 30 days from the receive date – the charge will be 100% of the cost of the product + $2/unit
- More than 30 days but less than 90 days from the receive date – the charge will be 2%, 4%, or 6% of the cost of the product (based on trailing 4 weeks rate)
- Equal to or more than five years (1,825 days) from the receive date – the charge will be 2%, 4%, or 6% of the cost of the product (based on trailing 4 weeks rate) for products in the categories: Baby, BISS, Kitchen, Health and Personal Care, Personal Care Appliances, Pet Supplies, Tools & Building Supplies, Home, Home Improvement, Beauty, and Luxury Beauty (excludes Amazon Fresh, Prime Now, and Go)
Problems with Preparation
If you’re familiar with shipping to Amazon FBA via Seller Central, you’ll be happy to know the prep compliance is the same on the vendor side! The following are the most common prep-related Chargebacks we see:
- Bagging
- Bubble Wrap
- Set Creation
- Cap Seal
These may sound self-explanatory, and for the most part, they are. But what if you know your products are being prepped correctly, and you’re still getting these Chargebacks? Fear not! You can take images of the product in your warehouse as it is shipped to Amazon and create a dispute on each Chargeback. Does your product not need prep according to Amazon’s prep guidelines? Take images of the product in your warehouse as it ships to Amazon and create a case with Vendor Support to dispute the prep requirements. Once your case is resolved, and if it is resolved in your favor, you can take that Case ID and include it with your images in the Chargeback Dispute.
Problems with Packaging
These Chargebacks are rooted in the SIOC (Ships in Their Own Container)/SIPP (Ships in Product Packaging). Essentially, this is Amazon saying that based on your product dimensions, your product is eligible to be shipped to the consumer with no outer packaging. Lots of things can indeed be SIOC, but sometimes, despite the size and weight qualifying the product, there are features about your product that qualify as an exception. If so, you can create a dispute with product images to challenge this type of Chargeback.
Items that are packed in flexible packaging have additional exclusions:
- Granular or loose-filled products with a diameter < 1” (25.4mm) (e.g., play sand, kitty litter, soil, dog food)
- Liquid items (e.g., hand soap, cleaning products, machine lubricants)
- Cylindrical or spherical items and packaging (e.g., items likely to roll on conveyance systems). Items that are packaged in a rigid, non-cylindrical inner pack before bagging are eligible
- Foods intended for human consumption
- Sharp (e.g., knives, box cutters, axes/hatchets, razor blades, food choppers/scrapers) or pointed items (exp., needles, fine point tweezers, scissors, forceps, and scalpels, screwdrivers, screws/nails, metal or plastic stakes, pins)
- Magnetic items
Problems with the Transportation Process
Amazon uses input from your routing request to select the optimal carrier, allocate transportation capacity, and reserve Fulfillment Center (FC) labor and dock. Any failure to honor your self-declared FRD makes Vendor Lead Time (VLT) volatile, disrupts carrier planning, increases transportation costs, and causes capacity issues. A Pickup Accuracy defect is triggered when the vendor reschedules a Collect Truckload (TL) or Less-Than-Truckload shipment after 5:00 p.m. PST the day before the scheduled pickup date or the carrier arrives at the vendor’s location (backed by GPS arrival data) and is unable to be loaded due to a vendor-caused issue resulting in a missed pickup.
Problems with the Receiving Process
Issues with the receiving process are very closely tied to Problems with Preparation. Chargebacks include but are not limited to, non-compliance with dunnage requirements, no PO labels on cartons, expired items, overweight cartons, and oversized cartons.
Amazon requires you to put PO labels on your cartons. Be mindful not to place the label on the seam of a box or on the edges where the Fulfillment Centers might encounter issues with scanning your box. Overweight and oversized carton issues are identical to those of Seller Central. For cartons over 50 pounds, there should only be one sellable unit within each carton with proper warning labels affixed in a highly visible location. An Oversized Carton Chargeback occurs when you send a carton to an Amazon Fulfillment Center that measures over 25 inches on any side (length, width, or height) unless the sellable unit(s) are larger than 25 inches. For cartons that exceed 25 inches on any side, there should only be one sellable unit within each carton with proper warning labels affixed in a highly visible location.
Problems with Direct Fulfillment
A Cancellation Rate Chargeback occurs when you cancel an order, either because you denied an order that Amazon submitted (formerly known as fill failure) or because you began to fulfill an order Amazon submitted but could not complete (formerly known as floor denial).
These Chargebacks occur when you don’t have any inventory when Amazon placed the order or when you don’t have enough to complete the order. The amount for this Chargeback is $10 per issue.
A Ship Method Mismatch Chargeback occurs when you ship a direct fulfillment order using a different shipping method from the one Amazon specified in the order. The amount for this Chargeback is $10 per issue.
That’s a lot, but all Chargebacks can be disputed if you believe you were compliant. Remember to keep organized and thorough records of your purchase orders and shipments, so you have evidence close to hand if you need to raise a dispute. On average, Chargeback Disputes can take up to 3 weeks to resolve. If you get denied on your first go around, you can reopen the dispute, but be mindful that you can only reopen that dispute once. Now that we better understand Chargebacks and the penalties they can impose upon your Vendor Central account, we can move on to Vendor Central Invoices so you can ensure your purchase orders are paid accurately.
Understanding Your Vendor Central Invoices
Your Vendor Central invoices detail the products shipped to Amazon Fulfillment Centers, including their costs and quantities. It is crucial to review each invoice meticulously against your shipment records to ensure everything aligns.
Reconciling Your Invoices: A Step-by-Step Guide
- Download the Invoice: Head to the “Payments” section in Vendor Central and select “Invoices.” Here, you can view recent invoices from a specific time frame at a high level.
- Match Invoice Details with Your Records: Carefully compare the following on your invoice to your corresponding shipment information:
- Product Details: Verify that ASINs, product descriptions, and quantities precisely match your shipment records.
- Costs: Ensure the per-unit cost listed on the invoice reflects the agreed-upon price with Amazon.
Common Invoice Variances and How to Address Them
- Cost Variances:
These discrepancies occur when your cost for an ASIN differs from what Amazon paid on your invoice.
How to Handle Cost Variances:
- Double-check the cost of your goods within the Amazon Catalog
- Check any agreements you may have in place
- Gather your proof, such as agreements, invoices previously paid with the correct cost, and any emails you may have with your Vendor Manager if one has been assigned to your account.
Raise A Dispute
On the right side of the invoices page, you will see “Raise a dispute” or “Create Credit note.” After clicking the link, you will be given the option to select the line item on your invoice you wish to dispute. Ensure you attach proof that Amazon did not pay the agreed-upon cost for each ASIN.
- Shortages:
Shortages occur when Amazon orders a specific quantity of a product and you ship the exact amount, yet you receive an invoice for less than the total order quantity per ASIN. Similar to reconciling FBA shipments, these discrepancies require investigation.
How to Handle Shortages:
- Keep your signed BOLs (Bill of Lading) or a screenshot of the proof of delivery from Small Parcel Carriers (such as UPS, FedEx)
- Keep any internal pick tickets you may have when your warehouse is picking and packing your Purchase Orders
- Keep organized records of any communication between yourself and Vendor Support
Raise A Dispute
Use the documentation above to prove that confirmed PO quantities were shipped and that Amazon owes you additional payment for these shortages. This dispute process is the same as above, in which you select “raise a dispute” on the right side of the invoices page within Vendor Central to begin the process.
In conclusion, navigating the intricacies of Chargebacks and Invoices when selling on Amazon Vendor Central can be a challenging but essential aspect of managing your account effectively to ensure profitability. By understanding the types of Chargebacks, reconciling your invoices diligently, and taking proactive steps to address discrepancies, you can optimize your operational performance and ensure a profitable Amazon business. Reach out if you have any further questions or require assistance handling Vendor Central Chargebacks or Invoices. Your attention to detail and proactive approach will help ensure smooth operations and financial accuracy within your Vendor Central account.
