Amazon chargebacks, also known as “charge disputes,” are the silent killers of many businesses on the platform. Instead of focusing their energy on increasing their revenue, Vendors end up with dollars leaking out the side because of errors and issues that could have easily been avoided.
Read on to learn more about Amazon chargebacks, and what strategies you can undertake, as a Vendor, to avoid or handle them smoothly.
Why Do Chargebacks Occur?
Although Amazon chargebacks can be filed for a variety of reasons – including unauthorized use of credit cards – shipping and packaging happen to be the most popular ones.
It is important to keep in mind that Amazon is not the one performing the chargebacks, but the card issuers (any financial institution that issues credit cards).
Therefore, compliance and operations checks can go a long way to prevent these chargebacks and stop your revenue leak.
As outlined in the Amazon Services Business Solutions Agreement:
- You are responsible for chargebacks filed against your account for service-related reasons, such as non-receipt of the product.
- Amazon is responsible for any payment-related fraud chargebacks, such as stolen credit cards or other payment fraud attempts.
Frustration-Free Packing Program (FFP)
As we all know, the plastic footprint is unbearable.
Both Amazon sellers and vendors alike should strive to abide by Amazon’s efforts to reduce waste; otherwise, the could be subject to chargebacks as well.
Amazon is working on its packaging guidelines to create awareness on the issue and to encourage manufacturers worldwide to create sustainable packaging.
The Amazon Frustration-Free Packaging Program aims – among other things – to eliminate waste and regulate packaging to ensure products arrive undamaged.
On September 3rd, 2019, Amazon made it clear that any incoming inventory, arriving at fulfillment centers, had to go through a Packaging Performance Test. This inventory (large products) had to be certified on SIOC (Ships in Own Container, or minimum Tier 2); otherwise, the Vendor will be charged USD$1.99/unit.
These guidelines applied to packaged products that have not been certified as Tier 1 or Tier 2.
Ideoclick.com outlines a list of products that will not be affected by this new policy:
- ASINs with Hazmat classifications
- ASINs in Prime Pantry Amazon Fresh, or media
- ASINs with its longest side less than 9”, its shortest side less than 0.375”, or its median side less than 6”
- ASINs that are at least 8 months old from the date the ASIN was set up
- ASINs that are packaged for shipment to Amazon in an orientation that nests or interlocks the individual selling
Amazon will also expand the Frustration-Free Packaging Program to include certification eligibility for smaller items.
2020 FFP Update
According to orcapac.com, Amazon issued a communiqué, stating the following:
“We are making a reduction in the qualifying package dimensions for a product to require certification as Tier 1 – Frustration-Free Packaging (FFP) or Tier 2 – Ships in Own Container (SIOC).
Effective February 1, 2020, with a grace period until August 1, 2020, 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”). Any non-sort packaged item that is fulfilled through Amazon’s fulfillment network with any one or more of its dimensions less than 6 inches on it longest side, or less than 4 inches on its median side, or less than 0.375 inches on its shortest side is excluded from the SIOC chargeback.”
“If you ship your products in a small and thin package (longest side <6”, shortest side <0.375” or median side <4”), you don’t need to do anything at this time. However, 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 FFP (Tier 1) or SIOC (Tier 2), which was introduced in September 3, 2019.”
Certify Your Product In 3 Steps
According to the desired Tier, your primary ASINs must be tested with a third-party ISTA Certified Lab or APASS Lab.
- Once you get the results, you must submit the report and the certification through Vendor Central.
(The test methods and report templates you use will depend on the dimensions of the package of your product.)
- Upon testing completion, enroll and certify your products. (Each ASIN enrolled needs its own template.
- If your products were not eligible to obtain the ISTA-6 Certification, try redesigning your packaging.
Types of Amazon Chargebacks
You may be seeing deductions in your Remittance advice from Amazon and wonder why they are chipping away at your payments.
Simply put, Amazon has a lot of rules, and when you don’t comply with them, you get penalized to make up for their losses.
Amazon chargebacks fall into the main categories of shipping and packaging and include anything from technical errors to missing barcodes to improper packing materials.
Understand the types of Amazon chargebacks below to take the first step to get back on track:
The most common form of Amazon chargeback is errors related to purchasing orders (POs). As little as failing to confirm a PO in a timely manner, shipping extra units or violating ship window policies can result in a chargeback.
How to avoid these chargebacks?
· Vendors must confirm POs within 12 hours after releasing the order, and can only change the confirmation within 48 hours after this initial confirmation.
· They also have to Accept or Back order within 24 hours via Vendor central or EDI. Back orders must have a ship window.
Any failure in the above equates to an Amazon chargeback that can be quite large depending on the size of the order.
Amazon also files chargebacks when vendors fail to set up routing requests when they transport packages, or do not follow the correct policies for shipping and delivery fees. Vendors are required to create routing in advance of collect orders where Amazon pays the shipping charges. If the collection date past the shipping window, a chargeback will follow.
All shipments that arrive at Amazon Fulfillment Centers are checked for compliance.
Any violations in the policies for shipments can mean another Amazon chargeback.
These failures include:
- labels on the boxes that do not have complete information
- barcodes that cannot be scanned or are missing altogether from the items and the carton labels
Failure to meet shipping deadlines is also a chargeable offense:
- If the date of fulfillment is outside the shipping window, a large chargeback can be expected.
- Orders that are not delivered within the specified period will be canceled by Amazon, resulting in another sizeable chargeback for non-compliance.
Amazon has very strict policies for the type of packaging that vendors must use when shipping products to them.
Failing to polybag items or not bagging and taping items and cartons correctly are violations, for example:
- incorrect boxing
- stuffing and bubble wrapping
Amazon will not hesitate to charge vendors for these mistakes:
- Failing to put the proper barcode or PO label on boxes – with the PO number
- Product that is close to expiry
Advanced Ship Notice
Amazon requires the Advanced Ship Notice (ASN) to be sent from Vendor Central or the EDI trading partner:
- Vendors must create the ASN in Vendor Central or through EDI before the shipments reach Amazon’s Fulfillment Center.
- If the ASN is not sent by the vendor within two weeks of Receipt of the Shipment, fees will result.
- If the ASN is not sent correctly, resulting in an error in transmitting the EDI, vendors will pay the price.
Avoid Amazon Chargebacks
Going through the rigorous process of becoming an Amazon Vendor can be exhausting. Now, imagine how frustrating can be for them to face chargebacks after all the price reductions they have already suffered during negotiations.
Vendors do get volume business from Amazon, but making mistakes is very costly.
Even the smallest mistake, on the part of a Vendor, can result in thousands of dollars’ worth of chargebacks. The good news is that you can avoid being slapped with Amazon chargebacks for service-related reasons.
You can regain and improve your profitability by streamlining operations to meet the following compliance requirements:
- Process orders, acknowledge POs, etc. within the prescribed timeframe
- Send ASNs before PO’s shipment is scanned in Amazon FC via manual entry in Vendor Central on the ship date or instruct EDI provider to check Amazon’s 856 mapping
- Create routing requests for ships collect orders before sending PO shipments to Amazon
- Consider an EDI system to automate order processing, including acknowledgment, ASNs, and instruct EDI provider to check 855 PO Acknowledgment mapping
- Enter correct shipping dates for different units within 12 hours, including on weekends
- Develop a system for checking and tracking product expiry
- Label your packages correctly with correctly printed labels, clear barcodes
- Follow packing guidelines for bagging, bubble wrapping, taping, etc.
- Check packing issues at the Distribution Center level
- Check ASIN information on labels printed from Vendor Central
- Advise EDI provider to check GS1 Label mapping for Amazon
- Review Amazon Packaging Certifications Guidelines in the Vendor Central Resource Center to comply operationally
- Don’t change the shipping address that has been provided by Amazon
- Choose a shipping method that provides tracking and delivery confirmation for high-value merchandise
- Do not ship either before or after the shipping window
- Keep clear shipping records with shipping dates, method, tracking, receipt, and photo evidence of labels and other requirements for 6 months after the order date
- If units are unavailable by ship cancel date, cancel units from PO and ship what is available
- Consider requesting Amazon buyer to give wider PO ship windows or send POs on Monday mornings only
Find a Chargeback on Vendor Central
If you are facing a chargeback, you can review the details in the Payments tab of your Vendor Central account in one of two ways:
- Navigate to Remittance and check the itemized deductions listed under the Description for the check that includes the Amazon chargeback.
- Navigate to Vendor Operational Performance to see all charge types and totals for your account in the past year, particularly operational errors. Select an Amazon Chargeback Type from the list to learn about the details.
Knowing what the chargeback is for will help you identify what to avoid in the future. The details on amount, status and type will also help you manage the chargeback or a dispute if you feel that the charges are erroneous.
Dealing with Chargebacks
The process of Amazon chargebacks begins when a buyer requests a chargeback from their credit card company. Then:
- The credit card company contacts Amazon to obtain the details of the transaction in question.
- Amazon Payments sends the vendor an email notification to request this information. (If you have received a notification, you may issue a refund or dispute the chargeback with the credit card company through Amazon.)
Whichever way you decide to go, you have to respond to the notification within 7 days, including weekends, or the chargeback will be automatically approved.
Make sure that you also respond promptly to any other requests relating to the chargeback.
Filing a Dispute
If you decide to dispute an Amazon chargeback, you must familiarize yourself with the details of the chargeback:
- Prepare any records related to the chargeback in support of your claim.
- You will have to present these and craft a clear and concise explanation of why you are disputing the chargeback to have any chance of getting it cleared.
- You will typically have to provide information such as the shipped date, shipping method, tracking, and item information.
Make sure that you are also following all the terms of your Vendor Agreement.
4. If you are facing several disputes, create separate documentation and explanations for each of them to increase your chances of approval.
5. When you are ready to file, navigate to the Represent your case link on the Performance page under Chargeback Claims.
Once you have filed your dispute, keep checking for updates so that you can respond in a timely manner.
- You can see whether the dispute is under review, needs more information, approved, paid, or denied.
- Pay close attention to information needed so that you can prepare and provide supporting documents quickly.
- You have only 30 days total to process your dispute.
- If your dispute is denied, read the reasons carefully. You are allowed only one more chance to dispute and provide more evidence.
- In most cases where clear evidence is provided, Amazon will approve your dispute and you will find the deducted amount credited back to your account within 90 days.
Check your Vendor Operational Performance page frequently to avoid missing the deadline on any new chargebacks, and contact AMZ Advisers if you need help with any information related to Amazon Chargebacks.