Overview

When products stored in Amazon's fulfillment centers become damaged, defective, or otherwise unsuitable for sale, they are classified as unfulfillable inventory. Amazon uses a structured disposition system to determine responsibility, track the reason each unit was removed from sellable stock, and decide whether sellers receive reimbursement. Understanding how this system works is essential for protecting your margins and managing your FBA inventory effectively.

Key Points / What Sellers Need to Know

• Unfulfillable inventory has specific causes — Units can become unsellable due to damage at the fulfillment center, carrier mishandling, customer returns, defects, or arriving from the seller in poor condition. Each scenario is tracked with a unique disposition code.
• Amazon takes responsibility for damage under its control — If a unit is damaged by a partnered carrier, inside the fulfillment center, or during delivery to a customer, Amazon will reimburse you according to its FBA reimbursement policy.
• Seller-caused or defective items are your responsibility — If inventory arrives damaged from the seller or is found to be defective, Amazon sets the unit aside as unsellable. You can request a removal order to have it returned or disposed of.
• Disposition codes appear on your inventory reports — Each unfulfillable unit is assigned a reason code that explains why it was pulled from sellable stock. These codes are visible in your Inventory Adjustments report in Seller Central.
• Reimbursements for Amazon-caused damage are typically processed within 10 days — When Amazon accepts responsibility, the damaged unit is automatically removed from your inventory and compensation is issued based on the FBA reimbursement policy.

How Inventory Disposition Works

Amazon's disposition system kicks in whenever a unit is flagged as unfulfillable. The process begins with Amazon determining the source of the damage or defect. If the issue occurred while the product was under Amazon's control — for example, damaged by a fulfillment center associate or by a partnered carrier during transit — Amazon assumes ownership of the damaged unit and compensates the seller. This reimbursement is calculated according to the FBA lost and damaged inventory reimbursement policy. In cases where the damage happened outside Amazon's control, such as a defective product or one that arrived from the seller already damaged, the unit is set aside as unsellable and the seller must decide whether to create a removal order to have it shipped back or disposed of at the fulfillment center.