Best Practices for Amazon Chargeback Management

In the last several years, Amazon has become a giant problem for its suppliers because of accounts receivable deduction chargebacks. If you are an Amazon supplier, chances are you are leaking more and more profits from increasing charges from Amazon…charges for non-compliance with their rules for order, shipping, delivery, and fulfillment.

Navigating the Complex Supply Network
Amazon has over 110 “Fulfillment Centers” with hundreds of millions of square feet of warehousing. With that kind of supply chain, it’s easy to comprehend why they need to insist on consist supplier processes, products, inventory and logistics.

If you hope to be successful with your Amazon business, you need to understand why and how these deductions and chargebacks occur. Then you can make sure you have the staff, systems, and optimal process in place to:

1. Comply with the rules, to begin with.
2. Quickly react to and correct your errors so they do not become systemic.
3. Dispute Amazon chargeback errors before the short time-bar to get your money back.

Maintaining Supplier Performance Ratings

Like most large retailers, Amazon rates your fulfillment performance over time and adjusts its chargeback amounts accordingly. This can stack against you very quickly if you perform poorly.

While Amazon has complex rules and chargeback procedures, they also provide helpful online tools, including:

• Vendor Central is the portal for “1st Party” suppliers selling directly to Amazon. These are usually identified on the site as “sold and shipped by Amazon.”
• Seller Central is the portal for “3rd Party” sellers selling through an Amazon listing and delivering directly to Amazon customers
• Carrier Central is the portal used for delivery appointments for Fulfillment Centers.

Our comments below refer to Vendor Central suppliers. We also provide a list of Best Practices for Managing Amazon Chargebacks at the end of the article.

Managing Amazon chargebacks through the Vendor Central portal

You need to become an expert at using the Vendor Central portal. You also need to stay on top of Purchase Order status, compliance issues, and chargebacks. Amazon may also send chargeback notices by email, with details about the category, date, and chargeback.

The Vendor Central portal will also have the details and tools for you to dispute the chargeback, and to research if you believe Amazon is wrong. The portal also shows the status of your disputes, so clicking on the Chargeback or Dispute to start your research.

Sometimes you can complete your research right in the portal. For example, if you have an Advance System Notification (ASN) violation chargeback, a review of the shipments and their ASNs might give you the information you need. If you provide ASNs by EDI, you can use a snapshot of the actual EFI file provided by your EDFI.

For many types of chargebacks like labels and dunnage, the proof you need will be a photograph of the open and closed shipping cartons. This should be built right into your warehousing and shipping process.

You should check the Vendor Central portal frequently to monitor the status of your disputes and check for new problems. You have only thirty days to dispute a chargeback though there may be some variation based on the supplier type.

If you are disputing a chargeback, give as complete a story as possible, as Amazon will not revisit the incident more than two times.

If your dispute is accepted as a result of the proof you provided, Amazon will credit you back for that amount. If denied, it’s your loss.

Amazon chargeback categories

Amazon chargebacks fall into the following general categories, and they will assign you a performance rating for each violation category. Ratings go from Good down to Very Poor. Report these ratings throughout your organization to get all departments to focus on improvement.

Purchase Order (PO) Chargebacks

PO-related chargebacks add up to “real money” very fast, so this is an area that demands close attention and prompt action. Make sure to handle PO confirmations within the time frames allowed.

Advance Shipment Notification (ASN) Chargebacks

Depending on your history of compliance, the chargeback can vary from 1% of the value of the product to as high as 6%. If you violate the product expiration rules, you can be charged 100% of the product cost, plus a handling charge.

Typical ASN Chargeback Situations

1. After the trucker picks up the shipment, the vendors must submit the ASN, so the receiver has advance knowledge of the incoming shipment.
2. To plan and process products through their warehouses, Amazon must know what is being received and when. ASNs advise them of the shipment contents, as well as establish carrier tracking. They will check the ASNs for errors and alert you via Vendor Central and email.
3. If the ASN is not received before the shipment arrives, is incomplete, or is incorrect, you can be charged up to 6% of the product cost and even 100% plus handling if your product expirations (if applicable) are within 90 days.

How to Dispute ASN Chargebacks

You can determine if ASNs have been received and posted by going to Vendor Central. Submit a screenshot from Vendor Central showing the proper submission or, if transmitted by EDI, a screenshot of the text copy of the transmission to prove it was submitted properly.

Receive Process Chargebacks

Amazon Fulfillment Centers check all incoming shipments for strict compliance with their policies for packaging, barcode, labeling, etc.

This type of chargeback also covers a wide range of issues that are encountered in receiving departments and include missing or unscannable barcodes, missing carton labels or information, no barcode on the products inside the carton, wrong item shipped, and product expiration dates, etc.

Preparation Related Chargebacks

Amazon requires that packaging and product preparation be in compliance with their regulations. If they aren’t, they can charge compliance penalties from 70 cents to $2.00 per unit. This includes bubble wrapping,  taping, boxing, bagging and suffocation warnings.

To dispute preparation-related charges, be sure your processes include photographs of open as well as sealed cartons so that the product is clearly visible. If needed, include measurements from your product specs. We also recommend completing a root cause analysis to identify the critical items that drive the largest dollar and volume of chargebacks.

Transportation Chargebacks

Amazon’s delivery rules are strict, as non-compliance slows down the high-volume fulfillment center receivings. Vendors make frequent transportation-related mistakes, resulting in chargebacks for appointment mistakes, paperwork, or carrier selection. You need to be careful that you and your carrier are aligned with respect to delivery requirements and that it is correctly reflected in Carrier Central. Watch out for duplicate entries, which are also subject to chargebacks.

You can dispute these charges if you provide proof of delivery showing delivery of product or documents on time, as well as the inbound shipment appointment (ISA) number.

Types of Transportation-Related Chargebacks

1. If you are not ready to load when the Amazon carrier shows up or if you miss the scheduled pickup date, they will penalize you for $200 for LTL and $500 for TL shipments.
2. If instead, you ship prepaid with your own choice of carrier (vs. Amazon’s), and they do not deliver on schedule, it will cost you from $90 for LTL to $250 for TL.
3. Import Vendor. For On-Time Window violations or Late Booking, it could cost you 3% of the cost of the product. For late delivery of Import Documents, $150 for the first three days, then an additional $50 per day afterward.
4. Non-Delivery Cancellation: If the order is not delivered within the delivery window and the order was not back ordered earlier, Amazon will automatically cancel the order and charge back the supplier for delivery compliance.
5. No Routing Request: For “collect” shipments where Amazon pays the freight, shippers are supposed to create advance routing requests. If they fail to do so, or if the date is outside the shipping window, it will lead to a chargeback.
6. Orders not delivered within the window will be canceled by Amazon, resulting in another sizable chargeback for non-compliance.

Best practices to reduce chargeback profit leakage

Make sure you understand what specific guidelines are applicable to your type of product and market as rules may vary. However, the best practices remain the same.

• Appoint an Amazon specialist to be the focal point for compliance, order, and shipping regulations.
• Ask for a specialist expert from Amazon as part of their new vendor support program.  Use this expert to drive periodic reviews.
• Create an internal Amazon “book,” which includes the references and basic instructions, and distribute it to all stakeholders.
• Monitor Amazon’s guidelines for changes.
• Become an expert in using Vendor Central. Vendor Central has training resources within your account, so be sure to use them.
• Employ an outside service to manage EDI transmissions.
• Understand what the rules are.
• Dispute chargebacks via Vendor Central within 30 days with a complete narrative and documentation the first time since they will only review a chargeback twice. Follow Up in 15 days. Contact the buyer directly if you need to.
• Have an automated process in the warehouse to photograph the boxes, including the inside, before sealing them with tape.
• Provide proof of invalidity – photographs, screenshots, etc., when disputing a chargeback.
• For ASN violations, take screenshots or text files and submit them from Vendor Central.

Carixa automation manages chargebacks

Lastly, employ Carixa deduction management software to automate and streamline chargeback management and, using robotic process automation and AI, instantly gather and reconcile chargebacks with accounts receivable, and improve the successful disputing of chargebacks, thus minimizing the risk of claim denial.  These automation routines can do follow-ups, gather documentation from internal and external portals and also upload to Vendor Central at the designated trigger or time windows.

Good luck in this journey to better profits, and if you need guidance please contact our experts at Carixa.