Compliance Methodology
Seven mandatory verification steps before any supplier is listed on the Merco marketplace.
Overview
Merco operates as a compliance-first LATAM→EU/US fashion sourcing platform. All suppliers listed on the Merco marketplace must complete seven sequential verification checks before their products become visible to buyers. These checks are non-negotiable and applied uniformly regardless of order volume.
This document describes each check, the regulatory basis, the evidence required, and how Merco verifies compliance. It is intended for use by legal, compliance, and procurement teams at EU/US brands conducting supplier due diligence.
The Seven Checks
KYB — Know Your Business
AML/CFT · CSDDD Art. 8
All suppliers undergo company registration verification, beneficial ownership mapping, and FATF AML/CFT screening before activation. We verify: legal entity name matches chamber of commerce records, no OFAC/EU/UN sanctions matches, and UBO chain is disclosed to at least 25% ownership threshold.
EUDR Traceability — Farm Polygon Verification
EU 2023/1115 (EUDR)
For EUDR-regulated materials (leather, wood-derived fibres, rubber), suppliers must upload farm boundary GeoJSON polygons in WGS84/EPSG:4326 coordinates. Merco runs satellite imagery analysis (Sentinel-2, Planet Labs) against Hansen Global Forest Change data to confirm no deforestation post-31 Dec 2020 on any polygon. Polygons failing the check block product listing.
Due Diligence Statement (DDS)
EU 2023/1115 Art. 4–9
After polygon verification, Merco generates a EUDR Due Diligence Statement referencing the verified polygon IDs, product HS codes, and supplier EORI number. The DDS is locked with a SHA-256 hash and stored immutably. It accompanies every commercial shipment as required by EU Regulation 2023/1115.
UFLPA Screening
US UFLPA (2021) · CBP WRO
For US-bound shipments, all suppliers are screened against the UFLPA Entity List, CBP Withhold Release Orders (WROs), and the Uyghur Human Rights Project database. Suppliers with any cotton, polyester, or textile input from Xinjiang Province require additional documentation (Section 307 rebuttable evidence package). MID codes are validated against CBP construction rules.
Labour & Social Audit
CSDDD Art. 7–8 · SA8000
Suppliers must hold a current SMETA 4-Pillar, BSCI, or SA8000 audit (≤24 months old) or complete Merco's remote social compliance questionnaire. Key indicators reviewed: working hours (ILO ≤60h/week), freedom of association, child labour screening (minimum age verification), and living wage benchmarking against national data.
Material Certification
EU Textile Regulation · GOTS · GRS · OCS
Products with sustainability claims require supporting certificates: GOTS for organic cotton (≥70% organic fibre), GRS for recycled content (≥20% recycled), OCS for organic blends. Certificates are validated against the issuer's public database (Textile Exchange, Control Union, Bureau Veritas). Expired certificates trigger an automatic alert and block listing renewal.
FTA / Rules of Origin
EU–Mercosur FTA · EU–Colombia FTA · USMCA
Merco calculates preferential tariff eligibility under applicable FTAs using the product's HS code, material composition, and country of manufacture. For EU-bound shipments from Mercosur (Brazil, Argentina, Uruguay, Paraguay) or Colombia, the two-stage transformation rule (tariff shift) is assessed. EUR.1 movement certificates or origin declarations (≤€6,000) are prepared and attached to shipment dossiers.
Scope and Limitations
Merco is not a customs broker and does not submit customs declarations on behalf of buyers or suppliers. Merco prepares compliance documentation (DDS, EUR.1, origin declarations) but the EU operator of record for EUDR purposes is the importing buyer.
Cotton and synthetic textiles are currently exempt from EUDR scope (EU Regulation 2023/1115, Annex I). EUDR checks apply to leather, natural rubber, wood-derived fibres (viscose, modal, lyocell from non-certified sources), soy, palm, cocoa, coffee, and cattle products.
Merco does not guarantee EUDR compliance — Merco provides the workflow, document management, and satellite analysis tools to support compliance. Legal responsibility for due diligence rests with the buyer (EU operator) per Art. 4 of EU 2023/1115.
Regulatory requirements referenced in this document are current as of April 2026. Merco monitors EU legislative updates (CSDDD implementation, EUDR scope expansion) and updates supplier requirements accordingly.