AMAZON SHUTS DOWN CHINA ORDERS, LEAVING VENDORS IN THE LURCH - BLOOMBERG

In a move seen as a response to U.S. trade policy, Amazon (NASDAQ: AMZN) has canceled orders originating from China and Southeast Asia, leaving several vendors with unsold inventory. The cancellation appears to be part of Amazon’s strategy to mitigate its exposure to U.S. tariffs on imported goods from China-based suppliers, who provide a significant portion of Amazon’s components and finished products.

A document reviewed by Bloomberg suggests that Amazon is attempting to limit the impact of tariffs on goods from China, a major supplier for the company. The e-commerce giant had previously warned in its 2023 annual report that "economic factors, geopolitical events, security issues, or other factors negatively impacting China-based sellers and suppliers could adversely affect our operating results."

Amazon’s vendors typically include manufacturers or distributors who sell goods wholesale to the company, which then resells them to Amazon shoppers. Third-party vendors, on the other hand, sell merchandise directly to customers on the Amazon Marketplace.

Currently, about 40% of the items sold on Amazon’s platform come from third-party vendors, while the remaining 60% are from independent merchants who rent digital shelf space from Amazon, paying fees for logistics, advertising, and commissions.

Now, these first-party vendors find themselves caught between the U.S. trade policy targeting foreign-made goods and efforts by U.S. corporations to minimize exposure. Bloomberg reports that a consultant to Amazon vendors claims the company has canceled several "direct import orders" of Chinese-made products without prior notice.

Since Amazon is the “importer of record” for these orders, it is responsible for paying the import tariffs when the goods arrive in the U.S. However, if the order is canceled after shipping has begun, the burden of the tariff falls on the vendor once the goods reach the U.S., potentially leaving them with significant financial liability and unsold inventory.