Amazon’s Provisional Co-Op Rates and Deductions

2023-11-30
8 min read

Provisional Co-Op Rates

The Amazon provisional Co-Op policy provides seamless cover for Contra-Cogs activities.

Amazon continually invests in the success of vendors'/suppliers' businesses by improving customer experience, increasing discoverability of their products, and growing sales. Amazon drives impressions and sales to their product through activities such as automated marketing emails, site personalization widgets, traffic drivers related to search engine optimization and improving browse capabilities, paid external marketing directly for their products, catalog improvements, and vendor self-service tools to manage and promote their products.

In order to fairly compensate Amazon for the cost of these activities benefiting vendors' products, Amazon may charge vendors/suppliers Co-Ops based on the percentage of the costs of the goods Amazon purchases from them. Amazon also may charge Co-Op to cover inbound freight costs of shipping vendors'/suppliers' products to Amazon warehouses and costs of damaged/defective returns of their products.

What Are Provisional Co-Op Rates?

To offer vendors'/suppliers' products to customers without interruption, Amazon may apply provisional Co-Op rates to cover marketing development funds (MDF), damage allowance, and freight allowance costs for any of their items received into Amazon fulfillment centers.

Provisional rates may be applied until a negotiated Co-Op agreement is reached between vendors/suppliers and Amazon. Once negotiated Co-Op agreements are signed, Amazon will retroactively apply these negotiated rates during the time that the provisional Co-Op rates were charged and credit or debit the difference as applicable.

What Costs Do Provisional Co-Op Rates Cover?

Provisional rates cover MDF, damage allowance, and freight allowance costs on vendors'/suppliers' items:

  • MDF covers Amazon's costs on capabilities to effectively market vendors'/suppliers' products to customers and overcome purchase barriers that affect product sales.

  • Damage allowance covers the costs for damaged/defective returns of products.

  • Freight allowance covers the inbound freight costs of shipping vendors'/suppliers' products to Amazon warehouses.

When Do Provisional Co-Op Rates Apply?

Provisional rates only apply to items received into Amazon fulfillment centers that are not covered by negotiated MDF, damage allowance, or freight allowance Co-Op agreements. Provisional rates allow Amazon to offer vendors'/suppliers' products to customers without interruption.

Provisional rates also help to reduce the number of Co-Op corrections billed during audits for inventory sold in the year before or earlier. If purchasing terms waive a vendor/supplier from providing freight or damage allowance, then provisional rates for freight or damage will not be applicable.

Do Provisional Co-Op Rates Replace the Co-Op Rates Already Negotiated with Amazon?

No.

Provisional rates will only apply to items received into Amazon fulfillment centers that are not covered by negotiated MDF, damage allowance, or freight allowance Co-Op agreements. Once Co-Op agreements are signed, Amazon will retroactively apply the negotiated rates and credit or debit the difference as applicable.

If My Co-Op Agreements Are Set Up, Why Do I Still See Provisional Co-Op Rates on Amazon Vendor Central?

If all items received into Amazon fulfillment centers are already covered by negotiated MDF, damage allowance, or freight allowance Co-Op agreements, then provisional Co-Op rates will not be billed. Amazon will only apply provisional rates to items that are not covered by negotiated MDF, damage allowance, or freight allowance Co-Op agreements.

Example 1: Your Co-Op agreement has expired and you haven't yet negotiated and signed a new Co-Op agreement. In this case, Amazon will temporarily apply provisional Co-Op rates to your items until a negotiated Co-Op agreement is reached between you and Amazon. Once the negotiated Co-Op agreement is signed, Amazon will retroactively apply your negotiated rates during the time that the provisional Co-Op rates were charged and credit or debit you the difference as applicable.

Example 2: Your Co-Op agreement does not cover all of your vendor codes and product groups. In this case, Amazon will temporarily apply provisional Co-Op rates to your items until a negotiated Co-Op agreement is reached between you and Amazon for the missing vendor codes or product groups. Once a negotiated Co-Op agreement is signed, Amazon will retroactively apply your negotiated rates during the time that the provisional Co-Op rates were charged and credit or debit you the difference as applicable.

How Is Provisional Co-Op Calculated, and Where Can I Find the Provisional Co-Op Rates?

Provisional Co-Op is accrued and billed against receipts into Amazon fulfillment centers on a monthly basis. Provisional Co-Op rates may differ based on the period, country, product group, and agreement type.

Provisional rates and billing details are published via Payments > Co-Op > Provisional Co-Op Rates.

How Do Vendors Avoid Being Charged Provisional Co-Op Rate?

To avoid being charged provisional Co-Op rates, vendors/suppliers need to set up their MDF, damage allowance, and/or freight allowance Co-Op agreements before shipping items to Amazon.

To create new Co-Op agreements, connect with your Vendor/Account Manager. Once a negotiated Co-Op agreement is reached between you and Amazon, Amazon will stop charging you any provisional Co-Op rates and retroactively apply your negotiated rates during the time that the provisional Co-Op rates were charged.

Can Provisional Co-Op Rates be Corrected if Charged Incorrectly?

If charged a provisional Co-Op rate, vendors need to contact their Vendor/Account Manager to set up a Co-Op agreement as soon as possible.

Once the Co-Op agreements are set up, Amazon will automatically adjust the provisional payments with the final amounts per the Co-Op agreements. If vendors believe that they were incorrectly billed for Co-Op, go to dispute a Co-Op agreement invoice or Help > Dispute Management > Dispute a Co-Op Agreement Invoice.

Debit Balances

When Incoming revenue from received inventory and outgoing payments for submitted invoices vary drastically, vendors may sometimes have a debit balance to settle with Amazon.

A debit balance occurs when a vendor's/supplier's payable balance exceeds their current receivable balance. When Amazon determines that future payments to a vendor/supplier will exceed future receivables, they identify the vendor's/supplier's account as having a debit balance.

The debit balance can be caused by a number of deductions that Amazon may initiate, including Co-Op, Returns, and non-compliances (chargebacks). Amazon then holds back an amount from current payables to avoid or minimize the debit balance. Amazon may place a hold on an account at any time to cover anticipated amounts owed to them that have the potential to create a debit balance.

Provisions for Receivables

Provisions for receivables are temporary credit memos that Amazon can place on vendors' accounts when the forecasted costs associated with returns, marketing, and rebates that are due to Amazon exceed the forecasted payments owed to the vendors.

The purpose of these provisions is to prevent returns, marketing, and rebates, creating a debit balance on the supplier's account. Provisions are deducted from payments due to suppliers, and are subject to a subsequent adjustment based on the actual costs of returns, marketing, and rebates and the actual payments due to suppliers.

When a provision is placed on a supplier's account, it will give the date it was placed and display as YYMMDD _ PROVISION _ FOR _ RECEIVABLES. For example, a date of 161017 on a supplier's remittance means that the provision was placed on October 17, 2016.

The temporary provision for receivables will reverse when invoices for returns, marketing, and rebates are settled or a decision is made not to return the inventory. When a provision is reversed, it will show as YYMMDD _ PROVISION _ FOR _ RECEIVABLESR.

Provisions are recalculated, adopted, or reversed on a daily basis. As they are not "real" deductions, there are no invoice copies, and they cannot be disputed.

About Rebates, Incentives, and Co-Op Agreements

Vendors/suppliers can use the Rebates, Incentives, and Co-Op Agreements feature to reconcile their calculated amounts for agreements with Amazon billing estimates.

Based on the specifics of some agreements, Amazon requires vendors/suppliers to provide the actual amount they expect to be billed (their 'Actuals') before Amazon invoices them.

To provide Amazon with your actual billable amounts go to Merchandising > Rebates, Incentives and Co-Op Agreements and locate the required agreement.

On this page suppliers can:

  • Enter the actual amounts, upload files, and add comments

  • View the amounts they have already submitted

  • Check the status of their submissions

  • Review their supporting documentation

  • View Amazon's responses to their submissions

Note: a supplier's 'Actual' may be rejected if an incorrect amount was entered or the supplier did not provide sufficient documentation for Amazon to reconcile the calculations with their own.

Further Reading about Amazon at SupplierWiki

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Written by Shawn Oleson

About Shawn Oleson

Shawn is the Retail Insights Manager for Amazon at SupplyPike. His experience supporting 1P brands at Amazon helps our teams build a quality product for our customers.

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Shawn Oleson

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