In shipping, a chargeback is a financial penalty assessed by a retailer or customer against a vendor for failing to meet specific shipping, labeling, or routing compliance requirements. Large retailers (Walmart, Target, Amazon, Home Depot) enforce strict vendor compliance programs — and when a vendor ships incorrectly, ships late, or uses unauthorized carriers or label formats, the retailer deducts a chargeback from the vendor’s invoice, often 1–5% of the order value.
Common Shipping Chargebacks
- Late delivery: Shipment arrives after the purchase order delivery window.
- Wrong carrier: Using a carrier not authorized by the retailer’s routing guide.
- Incorrect labeling: Missing or non-compliant GS1-128 (formerly UCC-128) pallet or carton labels.
- ASN violations: Failing to send the EDI 856 Advance Ship Notice on time or with incorrect data.
- Overship/undership: Delivering quantities that don’t match the PO.
Chargeback Prevention
Preventing chargebacks requires strict routing guide compliance: using retailer-approved carriers, meeting delivery windows, generating correct EDI documents on schedule, and using certified label formats. Establishing a routing guide compliance review as part of outbound shipping operations — with systems checks before freight is tendered — is more cost-effective than disputing chargebacks after the fact.