Originally published on June 27, 2015, updated January 17, 2020
As an FBA Seller on the Amazon platform, you are responsible for ensuring that all of the products you sell meet regulatory requirements as seller of record within the marketplace you’re selling. However, if you’re also importing the product, you may be subject to greater liability and regulatory enforcement.
Following are five factors to keep in mind as an FBA seller working to go global or increase selection in an existing marketplace. I’ve seen numerous FBA shipments stopped at the border for noncompliance, and have supported product investigations and Amazon-initiated removals of FBA inventory based on noncompliance over the 7+ years I worked at Amazon. While no compliance program is entirely foolproof, these considerations will help you avoid common pitfalls I’ve seen sellers encounter with regulators.
Are you an FBA seller acting as importer of record (IOR)? Are you ready to move into new selection or start importing your products for sale through FBA in another region with Amazon? If you are responsible for filing Customs paperwork into the destination country, then you are, in most cases, solely responsible for meeting regulatory requirements within that marketplace. In Mexico, there is joint liability with your customs broker. In the EU, even if you are not the importer of record, you may still be responsible for the compliance of the goods that are offered for sale if the agent you are working with does not meet the requirement of having an appropriate EU legal entity. In any case, you aren’t just responsible for meeting basic regulatory obligations; in some cases, if you are IOR, you can also be held responsible for maintaining customer safety complaint records or performing a recall if requested by the relevant regulatory agency. Finally, as noted, Amazon always requires FBA sellers to sign a contract stating that they will meet all local regulations pertaining to the goods they sell, meaning that if you break that contract even inadvertently, they may not return your inventory or charge back your account for their efforts.
Incoterms (photo reference):
Keep in mind, regulators are not trying to be operationally efficient. They are responding to political pressure, or responding to lobbying by NGOs to increase regulations while also being lobbied by business interests to decrease regulations. This can result in sometimes difficult-to-decipher requirements or exemptions. Regulations are also updated on a regular basis, and it’s best to stay on top of upcoming changes, or work with a trusted expert who can keep you up to date. In the US alone, there are over 40 independent regulatory agencies responsible for regulating consumer goods – and each country has its own regulatory regimes it enforces. For example, HTS codes (Harmonized Tariff Schedule) may not match to other regulatory agencies – while an HTS code may be for musical instruments, if the product is child-sized or labeled junior, in the US it is subject to the requirements of CPSIA (Consumer Product Safety Improvement Act) and must be tested and certified to the requirements of a children’s product. Lastly, you may be fully compliant with federal law, but fail to meet state or provincial law, and enforcement by these regulators can be significant (such as UK Flammability, CARB compliance, or CA Prop 65).
There are some requirements that are less enforced than others, or which can be reasonably verified through a declaration from a supplier rather than a test and certification. These obligations also vary depending on whether you’re buying white label, importing already branded product, or are the contracting manufacturer of the product. In some regions, you may be expected to test to voluntary safety standards, which by virtue of the enforcement model, are essentially mandatory. In other cases, laws have been on the books for many decades and were a response to issues of the time and are no longer quite relevant, but must still be observed. Customs is the usual location for enforcement action (see CPSC data here). An additional serious issue with enforcement after Customs entry is the need for recall or investigating a customer safety incident. If there is a non-safety incident or low enforcement likelihood, then you may not need to perform a public, and likely very costly, recall of the products. An experienced product compliance consultant can help you determine which requirements are a go/no-go for a shipment or inventory on hand.
Enforcement (US, Q1 2012):
There are many ways to verify and track compliance requirements. Product testing is the most common, as supply chain tracking is often either impossible for an FBA seller or too expensive. Some testing providers are more risk-based than others, and some are far more expensive than is strictly necessary. In multiple cases, I have seen testing labs issue quotations too high for the immediate need, such as a quotation for $3k or more. I would not recommend that a client pay more than $800. In some cases, it is required to work with certain providers because they are one of the only providers accredited to perform the certification work necessary for the region in which you’re importing. For the most part, there is competition and the possibility for achieving a more reasonable price working with potential providers.
One of the challenges of buying goods half a world away, and sending them directly to a fulfillment center a different half of the world away is that you, the FBA seller responsible for achieving a positive customer experience, have likely not seen any part of that shipment in person. The providers who perform product testing services also perform product inspection services, in which the product can be evaluated to your particular expectations (achieving a less than 1% expected defect rate, for example). Even aside from achieving your ODR goals, ensuring that the product description matches the end product can help ensure customers are getting what they expect, helping with the star rating and customer feedback.
Originally published on June 27, 2015, updated January 17, 2020
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.