What Are Amazon’s Compliance Chargebacks?
There are a variety of forms of revenue loss for Amazon suppliers. Regular AP deductions, Co-Op deductions, and compliance chargebacks make up a considerable portion of the lost dollars.
Amazon suppliers can monitor their chargebacks and their compliance performance at Amazon by logging into Amazon Vendor Central. Compliance performance is visible in the Operational Performance button under Reports.
Amazon Vendor Central > Reports > Operational Performance
What is a Chargeback at Amazon?
At Amazon, the term chargeback is used to signify an AR deduction for a compliance defect.
Some retailers use the term chargeback as a way of describing AR deductions and differentiating them from AP deductions. Some people use chargeback and deduction as stand-ins for AR and AP deductions, respectively. At Amazon, this process is more-or-less the case, so that they can differentiate from the varieties of revenue loss that suppliers may face.
Seven Categories of Compliance Chargebacks at Amazon
It may be helpful to think of compliance chargebacks at Amazon as broken down into seven main problem categories. This is how Amazon breaks it down on their chargebacks support landing page in Vendor Central.
Vendor Central > Support > Help > Vendor Operational Performance (Chargebacks)
Purchase Order (PO) Problems
Complying with Amazon's POs is challenging for any supplier, so it stands to reason that POs would be one of the most common issues.
Amazon breaks this section down into a few different sub-categories:
Unconfirmed PO Units: supplier sent items that were never confirmed in the form of a PO.
Overage PO Units: Amazon received more units than were on the PO.
PO On-Time Accuracy: the ordered items were not received within the PO window.
Paper Invoices: a supplier submits invoices to Amazon using an unapproved method (not the official electronic invoicing method).
Rejected PO Rate: a chargeback based on the rate at which suppliers reject or backorder the units of a product that Amazon orders.
Advanced Shipment Notification (ASN) Problems
ASN problems are usually a matter of timing. See the ASN Accuracy section below for a deeper dive on ASN compliance at Amazon.
Preparation compliance, similar to packaging compliance, at Amazon means preparing materials for shipping/receiving.
Amazon breaks this down into a few sub-components/issue types:
Suffocation Warning Non-Compliance
Bubble Wrap Non-Compliance
ASIN Stickering Non-Compliance
Set Creation Non-Compliance
Opaque Covering Non-Compliance
Cap Seal Non-Compliance
Remove Hanger Non-Compliance (for Apparel Products)
Packaging compliance fines at Amazon are all connected to their Frustration-Free Packaging Program and certification process. The primary chargeback in this category is the Frustration-Free Packaging/Ships in Own Container chargeback.
Transportation Process Problems
This category breaks down issues with Collect shipping and Amazon as well as issues that come up with Import suppliers.
Amazon breaks this category down into these subcategories/issue types:
Import Shipment Late Booking
Import PO On-Time Non Compliance
Import Documents Late Deliver
Receive Process Problems
Receiving non-compliance relates to issues that would occur if Amazon cannot receive shipments efficiently in their automated process. Most of these issue types describe some kind of breakdown in the processing of shipments at the FC.
Amazon breaks this category down into these main issue types:
Dunnage Not Compliant
Non-Compliant Barcode (see more below)
No PO Label on Carton (see more below)
No Carton Content Label (see more below)
Carton Content Accuracy (see more below)
Direct Fulfillment Problems
Direct Fulfillment is when suppliers ship their products directly to consumers without going through an Amazon FC.
Amazon breaks this down into two main issue types:
Cancellation Rate Chargeback
Ship Method Mismatch Chargeback
Amazon defines fill failure as when a supplier cannot fill orders. Cancellation rates and fill failure are very similar conceptually. Obviously, Amazon tracks fill failure for all of the suppliers.
5 Examples of Common Amazon Compliance Chargebacks
In this article we'll be examining five common chargebacks by their issue types and their sub-types.
1. Po On Time Accuracy
PO On Time Accuracy measures the Amazon vendor's ability to ship/deliver products within the ship/deliver window indicated on the corresponding PO.
Amazon splits their definition for this chargeback by We-Pay/Collect and They-Pay/Prepaid, but the fundamental premise is the same in each. The PO will specify when the ship/delivery window. There is a fine if it is missed.
Sub-types for chargebacks can be found in the excel download file in the Operational Performance Dashboard. The sub-types for PO On Time Accuracy are:
NotOnTime: collect shippers request a freight ready date (FRD) after the PO ship window has ended, or Prepaid carriers request a first delivery date (CRDD) after the PO delivery window has ended. Not-yet-published and staged orders are also subject to early ship/deliver as well as late ship/delivery.
NotFilled: the supplier did not send all the units confirmed on the PO.
2. ASN Accuracy
ASN Accuracy measures the accuracy of the virtual shipment information sent in the ASN against what is actually received at the FC. In other words, the unavailability of accurate ASN data associated with a physical shipment that arrives at the FC will result in this particular kind of chargeback.
The sub-types for ASN Accuracy are:
On-Time Non-Compliance (ONTC): no ASN has been received related to the PO-ASIN received
Unit Count Mismatch: discrepancy between ASN units, received units, and PO units
Invalid/Missing ARN: We-Pay/Collect vendors (or merchants) missing out or using incorrect ARNs on the ASN
Missing Expiration Date: expiration dates missing on the ASN for products that need an expiration date (according to the Amazon catalog)
PRO/BOL Mismatch: They-Pay/Prepaid vendors (or merchants) missing out or using incorrect PRO/BOL compared to the carrier appointment data
3. Carton Content Accuracy
Carton Content Accuracy measures the virtual record of carton contents in the ASN against what was physically received in the carton at the FC. In other words, it is the products and product quantities themselves that are being measured, as opposed to the shipment as a whole (ASN Accuracy).
The sub-types for Carton Content Accuracy are:
Shortage: these occur when, based on the ASN, at least one unit of an expected item is not in the box; there are fewer units than expected.
Unexpected Item Overage (UIO): these occur when an item that, based on the ASN, is not expected is present in the container on arrival at the FC. Amazon's example: "if an ASN indicates that 10 units of an item should be in a box but the received box contains 10 expected units plus four units of a different item, the discrepancy is calculated as four. If only four unexpected units are received and none of the 10 expected units, the missing number (10) is added to the number of unexpected units (4), which means the defect count becomes 14."
Unexpected Quantity Overage (UQO): these occur when more units of a particular item are present in the box than was expected based on the ASN. Amazon's example: "if an ASN indicates that one unit of an item is expected in a box but the actual received box contains four units of the same item, the discrepancy is calculated as three unexpected units."
Case Pack Defect: these occur when the total number of units in a box with inner packs/master packs creates a mislabeling issue. Amazon's example: "if an ASN indicates that 10 units should be in a box but the received box contains only five case packs of two units each, the defect quantity is calculated as 10 missing units because each unit is treated as a defective unit. This will result in a chargeback fee of $26. The chargeback applies to all units in the box when an item-level barcode is visible on a case pack or master pack that is not the expected sellable unit."
4. No Carton Content Label (no CCL)
Amazon defines carton labels as "a unique identifier for that shipment element; a compact, readable record of relevant data about that shipment element; a physical link to a virtual record; the bedrock of automation for inventory transfer."
So, the No Carton Content Label (no CCL) chargeback is when the carton does not have an acceptable label and/or it was not scannable (print quality, on seam of the box, etc.) and/or the label information was not included in the ASN.
The sub-types of No Carton Content Label (no CCL) are:
No valid license plate (LP) label present on carton: these occur when a carton does not have the required carton content label or the labels can't be read by Amazon's receiving imaging system.
LP label not on advance shipment notification: this could mean any of the below.
The ASN did not include the LP information (for auto-receive)
For direct import vendors, if the Serialized Ship Container Code (SSCC) label information hasn't been uploaded in the Century Distribution Systems (CDS) ASN portal before the five-day service level agreement it could be triggered. Amazon provides a table for determining responsibility for submitting SSCC labels to the CDS Vendor Management System:
- GTIN-14 Gold List missing: these occur when, after Amazon receiving has already failed to read the LP label, it fails to read the GTIN-14 barcode because it is not registered on the Gold List. More information on Gold List registration can be found in the Vendor Manual and the GS-1 website.
5. Non Compliant Barcode
A Non Compliant Barcode chargeback is when the product shipped does not have an item barcode or the barcode could not be scanned.
Amazon products must include an identification number (UPC, ASIN, EAN, ISBN, etc.) that is barcoded and printed numerically on the exterior, so they can be easily identified, scanned, and processed.
This chargeback does not have sub-types.
Further Reading and SupplyPike
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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.Read More