Licensure of Third Party Logistics Providers

What is a 3PL?

A Third Party Logistics Provider, or 3PL, is an entity that provides or coordinates warehousing, or other logistics services of a product in interstate commerce on behalf of a manufacturer, wholesale distributor, or dispenser of a product, but does not take ownership of the product, nor have responsibility to direct the sale or disposition of the product.

Industry Specific Knowledge:

Many different licensing regimes apply to 3PLs depending upon the nature of the goods moved. Regulatory bodies have a vested interest in ensuring product safety and enforce these regulations through licensure requirements to protect the safe handling of certain kinds of goods. Licensure in this industry exists at all levels of government. For example, under the federal Hazardous Materials Safety Registration Program, you must register if you transport shipments containing any of the qualifying types of hazardous materials. Freight forwarders that move cargo via air and sea also have federal registration requirements (Ocean Transportation Intermediary License; Indirect Air Carrier License). 3PLs that also serve as customs brokers must be licensed at the federal level. State licensure varies by product as well. For example, many state departments of agriculture or departments of health require a food storage or food warehouse license in order to warehouse food for human consumption. This license requirement may also be triggered at the county or local level. Overall, the licensing schemes for 3PLs differ from state to state and product to product. LicenseLogix tracks license requirements for 3PLs in all 50 states on behalf of our clients.

What is the Drug Supply Chain Security Act?

The Drug Supply Chain Security Act (DSCSA), which was signed into law on November 27, 2013, outlines new requirements to develop and enhance drug supply chain security over the next 10 years. This includes requirements for prescription drug wholesale distributors and third-party logistics providers involved in the drug distribution chain. In addition to establishing standards for licensure, the DSCSA requires wholesale distributors and third-party logistics providers to report licensure and other information to the Food & Drug Administration (FDA) annually. Based on FDA guidance, under DSCSA, the FDA was required to, no later than 11/27/15, develop new federal standards for licensing of 3PLs and a federal system for 3PL licensing for use when a state system does not meet federal standards. The licensing regulations would then go into effect 1 year after regulations are finalized. At that time, 3PLs would then be required to obtain a state or federal license. To date, these regulations have not been finalized or promulgated by the FDA. Many states are currently working on promulgating rules to comply with the federal requirements and are awaiting additional federal guidance.

To fulfill the intent of DSCSA, there are a number of product tracing requirements to ensure product integrity throughout all facets of the supply chain. Section 584 requires the FDA to establish regulations requiring 3PLs to “provide the applicable licensing authority, upon a request by such authority, a list of all product manufacturers, wholesale distributors, and dispensers for whom the third-party logistics provider provides services at such facility.”

The FDA requires 3PLs to “confirm authorized trading partners (including manufacturers, repackagers, wholesale distributors, dispensers, and third-party logistics providers).”  FDA guidance indicates that this should be done by:

  • Checking with your trading partner directly to confirm they are authorized; or
  • For manufacturers and repackagers, checking the FDA’s drug establishment registration database for registration; or
  • For wholesale distributors, third-party logistic providers and dispensers, by checking with your respective state authority to confirm licensure.

Penalties for Licensure Non-Compliance:

Common penalties for licensure noncompliance include large fines, ranging from a couple hundred to a couple hundred thousand dollars. A state may also suspend or revoke a license, resulting in loss of revenue and damaged client relationships. DSCSA places additional importance on license compliance as it requires 3PLs to verify that their trading partners are “authorized” to engage in their activities. Unauthorized trading partners must be excluded from the drug distribution system. Compliance is critical in this dynamic industry for long-term financial success.

Our Services

Trading Partner/Vendor Verification:

At LicenseLogix, we recognize that our clients often must confirm that the vendors and third parties with whom they have relationships are complying with their licensing requirements. We serve as many 3PL companies’ compliance and research departments. We verify your vendors' and third parties' licenses, providing you and your customers an added level of assurance and compliance with regulatory requirements such as those imposed by DSCSA. As part of our Vendor Verification Plus program, LicenseLogix will:

  • Accept incoming data from you on all vendors and licenses to be verified;
  • Confirm the vendors' licensing requirements in the locations indicated;
  • Identify agency that issues the license or registration;
  • Contact issuing agency;
  • Collect status of license and related information including license holder name, license number or identifier, license expiration date, and frequency of renewal; and
  • Transmit results of verification to your system and/or provide you with a detailed verification report on all vendors and their licenses.

Customized Research:

Not every licensing scenario is black and white.  LicenseLogix has tools to offer our 3PL clients, and customized research, to solve any complex licensing matter that may come up as new clients are brought on or new market places are entered. For example, in response to DSCSA, not all states have set-up licensing requirements for 3PLs engaged in drug distribution. Many states currently license 3PLs as Wholesale Drug Distributors. Other states, such as California, have created separate licenses for 3PLs servicing prescription drugs and many other states are following behind. In August 2016, Alabama joined the ranks of states licensing 3PLs engaged in drug distribution, now requiring 3PLs to register and obtain licensure from the Board of Pharmacy. Florida’s Department of Business & Professional Regulation also has a stand-alone 3PL license.

State licensing in this industry is changing rapidly. LicenseLogix is monitoring all 50 states to identify new license requirements for our clients. LicenseLogix has worked with a diverse range of clients within the industry to help them address unique research questions to achieve maximum compliance.

Client License Information Center (CLiC):

Our 3PL clients save hundreds of hours and thousands of dollars each year using the Client License Information Center (CLiC) as their secure, web-based tool to outsource their renewal filings and manage their license portfolio. CLiC removes the need to manage all licenses and crucial compliance dates in a spreadsheet, prevents missed filing deadlines, and protects corporate data.

Examples of Our Client-Centered Work in the Industry

Our clients span from small-scale local logistics providers to nationwide 3PL companies doing business in all states. LicenseLogix manages the complex and dynamic license portfolios for several nationwide 3PL companies. As part of our client service, we have created customized license compliance programs on behalf of these clients that include:

  • Management of all aspects of the licensing phase: initial filings, renewals, license closures, license updates, submission of annual reports;
  • Customization of CLiC Accounts housing thousands of industry licenses for multiple operational entities. Creation of the CLiC interface allows our national clients access to a user-friendly portal to keep track of all of their federal, state and local licenses while automating renewals and streamlining the client’s new license applications.  Real time licensing Information is available to our clients on items such as critical deadlines, renewal fees, and filing statuses, while relevant corporate documents are easily accessible and downloadable to our clients.
  • Ongoing industry research services as new products or regions enter into our clients’ distribution streams.

3PL Industry Trends

In response to the legislation at the federal level, an increasing number of states are creating separate license categories and applications for 3PLs as an alternative to requiring licensure via a Wholesale Drug Distributor license application.

Some states, such as Arizona, California, Florida, Kentucky, South Carolina and Tennessee, have had a separate 3PL license application and category for a while. Other states such as Alabama and Indiana developed a separate and distinct licensure process for 3PLs just this year.

And other states, such as Alaska, are in the process of responding to legislative changes that created a separate license requirement for 3PLs. Alaska’s 3PL legislation will become effective in 2019.

LicenseLogix is experienced and prepared to handle all of your Third-Party Logistics Provider licensing, from filing to renewals. Ask a LicenseLogix licensing expert how LLX can help optimize your 3PL!