Most small e-commerce brands assume that hiring a third-party prep or fulfillment center automatically means that they take care of every legal detail. In reality, the legal responsibility still lands on you as the seller.
Fulfillment partners help you move products, but if they mishandle inventory, break a labeling requirement, ignore FDA packaging rules, mismanage hazmat storage, or fail to follow warehouse worker safety laws, the enforcement agencies and marketplaces often come to your door first, not theirs.
A third-party prep or fulfillment center is an extension of your business in the eyes of Amazon, Shopify, the FDA, OSHA, and state regulators. If they make a compliance mistake, your account, your inventory, and your brand reputation absorb the damage.
Legal Compliance Checklist
1. Business Registration, Licensing, and State Nexus Rules
Before you even send inventory to a warehouse, verify:
- Is the prep/fulfillment center properly registered as a business in its state?
Ask for a business license, warehouse address verification, and formation documents.
- Does the warehouse create nexus for your company
Sending inventory to a third-party warehouse in states like California, Texas, New York, or Florida typically creates sales tax nexus, meaning you may need to collect and remit tax.
| State | Warehouse Inventory Creates Nexus | Notes |
| Texas | Yes | Even temporary storage counts |
| California | Yes | Strict enforcement of the e-commerce sellers |
| Florida | Yes | Applies to prep centers and 3PLs |
| Delaware | No sales tax | Still requires business registration for some entities |
If your warehouse stores inventory in multiple states, you may obtain multi-state tax obligations without realizing it. Sellers often learn this only after a surprise notice arrives from a state revenue department.
2. Product Safety Compliance (FDA, CPSC, EPA, Hazmat)
Your fulfillment partner must know what regulations apply to your product category. If they handle your goods incorrectly, you can be flagged for unsafe distribution.
What To Verify:
- FDA-regulated goods (supplements, cosmetics, topicals, foods)
Check: lot tracking, expiration management, temperature storage, tamper-evident packaging.
- CPSC compliance (toys, electronics, baby products)
Check: tracking labels, age-graded packaging, small-parts warnings, battery handling.
- EPA compliance (pesticides, disinfectants, chemical cleaners)
Check: storage restrictions, pesticide labeling rules, and separate-hazard inventory.
- Hazmat certification
Ask for their hazmat ID, SDS library, and proof that the facility is allowed to store or prep lithium batteries, aerosols, flammables, or corrosives.
Small Example Table
| Product Type | Regulatory Body | Required Controls in Warehouse |
| Supplements | FDA | Lot tracking, expiration segregation |
| Toys | CPSC | Safety labels, batch IDs |
| Lithium Batteries | DOT / Hazmat | Fire containment, certified staff |
| Cleaning Sprays | EPA | Chemical separation, SDS sheets |
If a warehouse does not maintain these controls, Amazon may suppress your listings or request re-testing.
3. Labeling Standards and Barcode Accuracy (Amazon, GS1 Requirements)
Mislabeling is one of the top reasons Amazon suspends FBA ASINs or destroys inventory.
Verify your prep center follows:
- GS1-authenticated UPCs — not third-party duplicated barcode
- Amazon FNSKU labeling rule
- Suffocation warnings on the poly bag
- Country-of-origin markings (required by CBP)
- Proper expiration date placement and format
Format required by many warehouses: MM-DD-YYYY or YYYY-MM
A legally compliant partner must have internal SOPs and barcode scanners to ensure 100 percent accuracy. Even a 1 percent labeling error can trigger an Amazon “incorrect barcode” compliance strike.
4. Written SOPs for Receiving, Prep, Storage, and Forwarding
A legally responsible fulfillment operation cannot run on casual verbal agreements.
Ask for:
- A documented receiving checklist (weight checks, photo documentation, SKU verification)
• Prep SOPs (bagging, boxing, labeling, bundling, kitting)
• Storage SOPs (bin locations, temp control, hazmat segregation)
• Outbound SOPs (carrier selection, insurance options, proof-of-shipment tracking)
At this stage, many sellers compare providers, and it becomes clear why established services like Dollan Prep Center are often preferred: clear documentation, transparent processes, and predictable compliance practices reduce your exposure dramatically. The point is not marketing but risk management—your warehouse must operate with the same discipline that regulators expect from you as the seller.
5. OSHA Warehouse Safety Compliance
If a warehouse is not OSHA-compliant, the liability often extends to you because your inventory was processed in an unsafe environment.
You should verify:
- Forklift and pallet jack operator certifications
• Fire extinguishers and emergency exits
• Stacking limits and racking safety
• Worker injury reporting procedures
Why this matters to sellers:
If OSHA issues a notice or shuts the warehouse down, your inventory becomes inaccessible, uninsured, and potentially unusable.
6. Data Privacy and Customer Information Handling (GDPR, CCPA)
When a third-party prep or fulfillment center processes your orders, they also handle sensitive information such as full names, home addresses, phone numbers, email contacts, and delivery instructions. That instantly places them under the umbrella of major privacy laws like GDPR for EU customers and CCPA for California residents.
Even if your warehouse operates entirely within the United States, the moment they ship to Europe, they must treat all customer data as if GDPR applies. Because of that, you need to verify that the warehouse has proper data protection protocols in place.
That means the environment where customer data is stored must be secure, only trained and authorized staff should be able to access order information, and the company should maintain detailed logs of who enters the system and why. A professional 3PL will also define how long customer data is kept, when it is deleted, and how it is protected during that retention window.
These rules exist to protect consumers, but they also protect you as the seller. If the warehouse mishandles data, the fines and investigations often reach your business as well, not just theirs. You want a partner that treats customer confidentiality as a legal responsibility, not an optional extra.
7. Insurance Coverage: Liability, Cargo, and Errors & Omissions
Insurance is one of the most overlooked parts of selecting a prep or fulfillment partner, yet it is the one area where a single gap can wipe out months of revenue.
A properly insured warehouse should carry strong general liability coverage—usually between one and two million dollars—to protect against accidents on its property.
They also need warehouse legal liability insurance, which covers your inventory while it is stored in their facility. If a fire, theft, or equipment malfunction destroys your products, this is the coverage that determines whether you are compensated. In addition, the warehouse must maintain product liability protection in case handling practices cause damage that later affects customers.
Cargo insurance is equally important because your products are most vulnerable while they are in transit; without this protection, any loss between the loading dock and the carrier’s facility becomes your financial responsibility.
Finally, errors and omissions insurance is essential for situations where the warehouse incorrectly labels, preps, or bundles your items, leading to Amazon penalties, returns, or entire shipments being rejected.
Before you trust any warehouse with your inventory, you should request a certificate of insurance and verify that these policies exist and are active. A compliant 3PL will provide it without hesitation because they know it signals professionalism and protects both parties.
8. Amazon and Marketplace Compliance (FBA Programs, FBM Protocols, Seller Performance)
Your prep partner should maintain:
- Updated knowledge of Amazon packaging standards
- Understanding of meltable-product rules (May–October)
- Ability to prep for Small & Light, oversized items, hazmat programs
- Accurate box-level content for inbound FBA shipments
- Timely communication with Amazon support when issues arise
Many account suspensions come from warehouse mistakes, such as:
- incorrect item quantities
- improper packaging
- sending prohibited items into FBA
- violating “no commingling” rules
- incorrect carton dimensions or weights
These are not minor issues. Amazon considers every one a compliance violation.
9. Contract Terms: Who Owns Liability When Something Goes Wrong
Your service contract must clearly define:
- Liability for lost or damaged units
- Liability for misprep or mislabeling
- Inventory audit frequency
- Dispute resolution procedures
- Termination terms and notice periods
- Storage conditions and temperature assurances
If this is not spelled out in writing, you may have no legal recourse if thousands of dollars in inventory disappear.
10. Reporting Standards and Transparency
A compliant warehouse provides:
- Real-time inventory dashboards
• Daily or weekly audit reports
• Lot/expiration tracking
• Receiving logs with photos
• SKU discrepancy alerts
Lack of transparency is a major red flag. When regulators or marketplaces ask for documentation, you need the warehouse to deliver fast.
Red Flags That Signal Legal Risk
Here are practical warning signs that a prep center is not legally compliant:
| Red Flag | What It Means |
| No COI available | Insurance gaps you will pay for |
| No written SOPs | High risk of errors and violations |
| Warehouse mixing hazmat and non-hazmat inventory | EPA and DOT violations |
| No photos during receiving | No proof in disputes |
| Slow customer support | They cannot respond to Amazon compliance requests |
| No documentation of worker training | OSHA violations possible |
A good partner shows you compliance, not excuses.
Conclusion
Choosing a third-party prep or fulfillment service is not just about price or speed. It is a legal decision. The partner you select becomes part of your regulatory footprint, your brand reputation, and your marketplace standing.
The warehouses that survive long-term are the ones that operate with documented SOPs, proper licensing, safety standards, regulatory compliance, and transparent reporting.
If you follow this checklist before signing any contract, you dramatically reduce the risk of Amazon suspensions, FDA warnings, tax nexus penalties, OSHA shutdowns, and product liability claims. In e-commerce, compliance is not paperwork. It is protection for your entire business.
