Amazon will start penalizing sellers who ship unsafe packages to its warehouses, like leaky chemicals and unmarked aerosols

Key Points
  • In an email last week, Amazon told third-party sellers that it will soon start charging new penalty fees for packages that fail to comply with its safety requirements.
  • The move is expected to improve warehouse efficiency for Amazon, while reducing hazardous safety violations, which have increased in recent years according to the U.S. Office of Hazardous Materials Safety.
  • Details of the incident reports, obtained by CNBC through FOIA requests, include packages leaking substances like gasoline and lye, and a cellphone battery that started smoking.
An Amazon employee works in the picking station for merchandise at the Amazon fulfillment center in Robbinsville, New Jersey, November 26, 2018.
Shannon Stapleton | Reuters

Amazon is making third-party sellers more responsible about meeting package safety standards when they send inventory to be stored and shipped by Amazon. In an email obtained by CNBC, the company told third-party sellers last week that it will soon start charging new penalty fees for packages that fail to comply with its safety requirements.

For example, Amazon has certain rules around how aerosol products like hairspray or electronic devices with rechargeable batteries should be packaged before being shipped, as they have to comply with federal regulations.

For Amazon, these fees will reduce clutter in its warehouses, and potentially reduce the number of hazardous materials safety violations in its shipments. Amazon has seen a rise in violation reports since 2009, according to documents from the U.S. Office of Hazardous Materials Safety, although the reports cover a tiny proportion of the packages Amazon ships each year. According to these documents, some unmarked packages have leaked hazardous materials like gasoline and lye, and others have included flammable aerosols.

"This means new fees for Amazon sellers that are not very careful about following Amazon's guidelines," said Paul Dworianyn, founder of Awesome Dynamic Tech Solutions, which helps Amazon merchants. "Amazon is taking a more proactive and transparent approach to show sellers where they may be falling short."

Amazon declined to comment for this story.

Hazardous safety violations

Amazon will charge the fee under what it calls "unplanned services," which will make sure the packages meet safety standards in six areas: shipping box overweight, shipping box oversized, electrical products hazard, sharp products hazard, spilled products hazard and unacceptable pallet condition.

Amazon has been charging unplanned service fees from at least 2013 on other things like missing barcode labels or bubble wrap requirements. But this is the first time Amazon is charging for safety-related issues. Amazon said it would run a trial period starting Nov. 29 and that it would notify sellers at least one month before it starts charging the fees.

Amazon has reason to double down on ensuring safety compliance in the packages it ships out of its warehouse.

According to the Office of Hazardous Materials Safety, Amazon has seen a sharp increase in reports of shipments allegedly violating the U.S. Department of Transportation regulations. In 2009, Amazon only had two incident reports, but that number jumped to 32 in 2016 before reaching 42 this year.

Details of the reports, obtained by CNBC through FOIA requests, give some insight into the type of safety problems with some Amazon shipments.

In one case from April, a gas pressure washer was shipped with gasoline inside the machine. The report said the fuel eventually leaked, and the package was found to have none of the required hazardous markings visible.

"If materials are going to be shipped with fuels inside, they should have clear warning labels and hazardous warnings," the report said. "If possible, machinery should be shipped without fuel at all."

Another case from March caused some warehouse employees "hand, arm, and skin irritation," the report said. An investigation later discovered there was a hazardous spill from a package containing Red Crown High Test Lye, which could potentially cause severe burns.

Multiple reports involved "undeclared aerosols" that were flammable and had no hazardous markings on the packages. There were also a number of undeclared lithium-ion batteries. In October 2017, smoke came out of a package containing a cellphone battery.

On Wednesday, several workers in an Amazon warehouse in New Jersey were exposed to bear repellent after its container was punctured, according to local news reports. It was unclear if the bear repellent came from a third-party Amazon seller.

Fred Killingsworth, a former Amazon employee who now runs the marketplace consulting firm Hinge Global, said the hazardous issues arise mainly because third-party sellers are simply not aware of federal regulations when they ship their products to Amazon's warehouse. That makes it that much more difficult for Amazon to stay compliant.

"It's pretty challenging," Killingsworth said. "It's a range of things that can cause an item to be a hazardous material."

While some sellers have expressed concern around Amazon's lack of clarity around the fee structure and the company's propensity to mistakenly charge certain fees to sellers, most merchants and consultants welcomed the move as improving the overall Amazon marketplace experience, according to message boards and conversations with several sellers. The new fees, alongside the newly instituted policies around long-term storage, will help products move faster in Amazon's warehouse.

"It's always been about driving efficiency at Amazon," Killingsworth said.

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