Key Amazon Reimbursement Policy Details, Changes, and Updates

[Originally Published: March 26, 2024 | Last Updated: January 21, 2025] This article has been updated to reflect the latest Amazon Reimbursement policy changes.

Amazon is fundamentally changing how sellers get reimbursed for lost or damaged inventory. Here's a timeline of the critical changes:

Staying informed about these policy updates is crucial for protecting your bottom line. This comprehensive guide will help you navigate the changes and ensure you don't leave money on the table.

Amazon Reimbursement Policy Overview

Here's a breakdown of the current scenarios under which sellers can file claims.

• Lost or damaged Inventory: Ensures sellers can recover funds for inventory that is lost or damaged while under the retailer's responsibility. This is especially critical for FBA sellers who may experience discrepancies in inventory handling, making it essential to understand and leverage these reimbursement options.
• Shipment to Amazon Claims or Missing Inbounds: When inventory shipped to an Amazon fulfillment center is partially or completely missing and not accounted for upon arrival.
• Canceled Shipments: Reimbursement claims related to FBA shipments that were canceled but still resulted in charges or lost inventory.
• Lost in Transit: Items lost during shipping either from sellers to Amazon fulfillment centers or from fulfillment centers to customers.
• FBA Customer Return Claims: Reimbursements related to returned items, such as when the returned product is not restocked properly, goes missing, or is incorrectly classified as unsellable.
• Removal Claims: Claims for inventory lost or damaged during the removal process when items are returned to sellers or disposed of by Amazon.‍
• Reversals: When Amazon initially reimburses a seller but later reverses the decision, potentially leading to disputes and follow-up claims for proper resolution.

Amazon Shifts to Manufacturing Cost-Based Reimbursements

On December 10, 2024, Amazon announced a significant change to its FBA inventory reimbursement policy, effective March 10, 2025. Amazon is moving towards reimbursing based on the manufacturing cost of lost or damaged inventory rather than the previous reimbursement model, which was based on the item's selling price.

What This Means for Sellers

Under the updated Amazon reimbursement policy, sellers will be reimbursed for products lost or damaged for a customer order using one of two methods:

• Amazon's Estimated Manufacturing Cost: Amazon will calculate an estimate based on similar products sold on its platform, including comparable items from other sellers and wholesale channels.
• Sellers' Own Cost Information: Sellers can opt to provide their manufacturing cost data. If they don't, Amazon will use its estimate.

This update aims to create greater transparency and predictability with an additional tool to help sellers manage costs: the Inventory Defect and Reimbursement portal, where manufacturers' cost data can be submitted starting in late January 2025.

However, this new approach has raised concerns among sellers who point out that the manufacturing cost doesn't include key expenses such as shipping, labeling, packaging, or other operational costs involved in getting the product to Amazon's fulfillment centers. Some sellers argue that the new reimbursement model only covers a small fraction of the actual cost of goods sold and ignores many associated business expenses.

Seller Reactions and Concerns

As you can imagine, the reactions have been mixed, with many expressing frustration. Sellers have pointed out that:

• Wholesale and Additional Costs: If products are sourced wholesale, Amazon's manufacturing cost estimate may not align with the actual cost paid, leaving out critical expenses like shipping and labeling, which can add up quickly.
• Potential Loss of Profits: Some sellers feel that Amazon's focus on "manufacturing cost" unfairly ignores other crucial aspects like branding, intellectual property, and labor costs. As one seller pointed out: "This new policy doesn't consider the time lost in reshipping products, the inventory fees I incur when Amazon loses stock, or the lost sales from being out of stock."
• Incentive to Improve Fulfillment: Many sellers are questioning whether this policy change will incentivize Amazon to better track and handle inventory. With no consequences for losing inventory, it may lead to more cases of lost or damaged stock, further hurting small businesses.
• Confidential Business Data: There's also concern about Amazon gaining access to sensitive pricing information. For businesses with proprietary products, sharing manufacturing costs could feel like revealing key competitive advantages. One seller shared: "I don't want Amazon knowing my cost breakdown. Why should I risk them using this data to create competing products at a lower price?"

While Amazon's goal with this policy is to standardize reimbursements and streamline the process, the new rules will likely lead to more disputes and dissatisfaction among sellers who feel they're being shortchanged.

As a result, Amazon may see a shift in seller loyalty and even a potential increase in external fulfillment solutions. Sellers will need to weigh the cost of compliance with the new Amazon reimbursement policy against the benefits of using the platform.

How to Lessen its Impact

1. Review Manufacturing Cost Estimates: Log in to the Inventory Defect and Reimbursement portal and check the manufacturing cost estimate Amazon is using for your products. If you feel the estimate is inaccurate, provide your own data as soon as possible to avoid getting reimbursed for less than what you spent.
2. Stay Transparent with Your Costs: If you're uncomfortable with sharing your manufacturing costs, keep a record of your cost data in case Amazon requests it. Be prepared to challenge their estimates if necessary.
3. Use Third-Party Services: Partner with experts like Seller Investigators to help you file accurate claims, keep a proactive eye on reimbursements, and ensure that you're receiving fair compensation.
4. Diversify Your Fulfillment Channels: Given the uncertainty around Amazon's fulfillment services, it may be wise to explore other platforms like Walmart or even brick-and-mortar retail options. Reducing your reliance on Amazon FBA could shield you from some of these new risks.
5. Document Everything: Make sure to maintain a detailed inventory log, including your manufacturing, shipping, and labeling costs. This will help you build a stronger case if you need to dispute Amazon's reimbursement calculations.

Amazon Reimbursement Automation & Claim Eligibility Windows

Amazon has rolled out several updates to its reimbursement process, impacting both US and UK sellers. These changes aim to streamline reimbursements, automate processes, and enforce stricter timelines for claims.

Automated Lost Inventory Reimbursement

Starting November 1, 2024, Amazon began automatically reimbursing US sellers for lost inventory reported in fulfillment centers. This change reduced the manual workload for sellers and promised quicker resolutions. You can track auto reimbursements in the Amazon Reimbursements Report on Seller Central.

Benefits

• Efficiency: Reimbursements are issued automatically without requiring manual claims.
• Transparency: Sellers can track reimbursements in real-time in Seller Central.

Limitations

• ‍Manual Claims Still Needed: Not all lost or damaged inventory is covered under the automatic process. This means you must still file manual claims for removal losses and unreported discrepancies.

Claims: Automatic vs. Manual

Here's how claims are managed—some are processed automatically, while others require manual handling:

To maximize your chances of recovering unclaimed funds, combine Amazon’s automated efforts with a trusted Amazon reimbursement tool like Seller Investigators. They regularly perform reimbursement audits to identify eligible claims and help recover funds Amazon misses or doesn’t file automatically.

New Claim Eligibility Windows

Amazon is tightening the timeframes for filing manual claims. Here's a comprehensive breakdown of the new deadlines by marketplace:

US Eligibility Windows (Effective October 23, 2024)

• Fulfillment Center Operations Claims (e.g., warehouse-damaged, lost in transit, etc.): Submit within 60 days (previously 18 months). What once took nearly 550 days to process can now be done in just 60. To claim every eligible reimbursement, it's crucial to grasp the details of the Amazon reimbursement policy, understand how to interpret the reports, know the filing process, and, above all, act quickly.
• FBA Customer Return Claims: File between 60-120 days
• Removal Claims:
  • For items lost in transit: 15-75 days
  • Other removal claims: 60 days after delivery

UK Eligibility Windows (Effective January 9, 2025)

As mentioned, the new reimbursement eligibility window for UK sellers goes into effect on January 9, 2025. Be prepared to adjust your processes to meet these shorter filing deadlines.

• Warehouse Lost/Damaged Claims: Must be filed within 60 days
• FBA Customer Return Claims: Submit between 45-105 days
• Removal Claims: File within 15-75 days for lost-in-transit cases; other claims within 60 days

Starting January 15, Amazon will automatically reimburse cases of lost or damaged FBA inventory.

Overall, these changes mean you must act immediately to avoid losing opportunities to file manual claims. Industry experts indicate that the new program could leave up to 40% of potential reimbursements unclaimed, with some sellers forfeiting as much as 60%.

The solution? An advanced Amazon reimbursement tool that handles this complex process for you. Amazon reimbursement services efficiently recover funds to maximize your profits and reclaim what's rightfully yours.

Multi-Channel Fulfillment (MCF) Reimbursement Caps

Effective August 23, 2024, Amazon introduced reimbursement caps for MCF orders. These caps represent the maximum compensation Amazon will provide for inventory lost or damaged during fulfillment:

Impact on Sellers

• Standardized caps provide predictability but may not fully cover high-value inventory losses
• Sellers are encouraged to explore third-party insurance for items exceeding the reimbursement caps
• Need for careful inventory valuation and risk assessment

How to Prepare for These Amazon Reimbursement Policy Changes

Adjust Your Processes: Ensure you meet the updated claim deadlines in both the US and UK.

Automate Tracking: Use Amazon reimbursement tools to monitor inventory discrepancies and reimbursements proactively.

Get Insurance: Consider additional insurance for high-value items that may exceed Amazon's reimbursement caps.

Stay Updated: Subscribe to Amazon seller newsletters and resources that highlight Amazon Reimbursement policy changes.

Factor in the new Returnless Resolutions feature into your reimbursement approach: FBA Returnless is a policy that allows Amazon to issue a refund to customers for certain low-cost, non-returnable items without requiring the return of the product. However, this option can significantly impact Amazon reimbursements in the following ways:

1. Reduced Reimbursement for Returned Inventory: Items processed under Returnless Resolutions aren't reclaimed, so sellers aren't reimbursed if the item is refunded without return.
2. Impact on Seller Profits: Sellers lose both the product and revenue, especially for low-cost items, as Amazon refunds customers without expecting the product back.
3. Potential for Increased Return-Related Claims: Sellers can still file claims for customer- or warehouse-damaged items under standard reimbursement policies but must track and claim them carefully.
4. Amazon Damaged Goods Policy: This policy may apply if returnless items are damaged or lost in Amazon's fulfillment centers.‍
5. Increased Operational Complexity: Sellers may need to adjust their processes and focus more on claims for lost or damaged inventory, adding complexity to their reimbursement strategy. Luckily, leveraging Amazon's reimbursement automation tools and third-party Amazon reimbursement services can help mitigate some of the negative impacts of the Amazon reimbursement policy.