Cross-border shipping is a complex part of running an ecommerce business. One key aspect of international shipping is deciding who will be the Merchant of Record (MoR). The Merchant of Record is the legal entity that is responsible for processing payments, handling taxes, managing refunds, addressing chargebacks, and ensuring compliance during transactions on behalf of a business shipping products to customers abroad.
The MoR can be an ecommerce brand or an outside provider. It is a critical component of your international shipping strategy as the MoR directly impacts your financial operations, legal compliance, and customer experience.
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What is the Merchant of Record Responsible for?
1. Compliance with Regulations
The MoR is responsible for ensuring compliance with local and international tax laws, such as VAT, GST, or sales tax, in the regions where the transactions occur.
For ecommerce brands selling internationally, understanding the role of an MoR helps them delegate or manage these compliance responsibilities effectively, avoiding fines or legal issues.
2. Handling Payment Processing
The MoR manages payment processing, including:
- Accepting payments
- Handling chargebacks
- Managing refunds
If an ecommerce brand opts to outsource to a third-party MoR, they avoid directly dealing with these complexities.
3. Liability Management
The MoR takes on the financial and legal risks associated with transactions, such as fraudulent activity or disputes. Knowing who is the MoR helps the brand allocate these responsibilities correctly.
4. Simplified International Expansion
If an ecommerce brand partners with an external MoR (like a Payment Service Provider or a marketplace), they can leverage the MoR’s existing infrastructure to sell in global markets without setting up a local entity in each country.
5. Customer Trust
The MoR’s name appears on the customer’s bank statements. If this isn’t aligned with the brand, it can confuse or alarm customers, impacting their trust and likelihood of repeat purchases. Brands need to ensure that the MoR aligns with their operational and branding needs.
6. Strategic Decision-Making
Ecommerce brands can choose between being their own MoR (taking on all responsibilities themselves) or partnering with a third-party MoR. Each approach has trade-offs. Self-managing the role of MoR you’ll retain more control but have to deal with higher complexity and liability. On the other hand, third-party MoR providers can help you simplify your operations, but you may have less control over the customer experience.
How to Choose the Right MoR—Pros and Cons
For an ecommerce brand, the Merchant of Record (MoR) can be either the brand itself or a third-party entity that manages financial transactions on its behalf. There are pros and cons to each approach.
The choice of MoR depends on the business size, operational capacity, geographic scope, and compliance requirements. Smaller brands often benefit from using third-party MoR services to simplify operations, while larger enterprises with significant resources may choose to be their own MoR for maximum control.
When an ecommerce brand is the MoR
The brand must directly handle all transactions.
- Responsibilities include managing payment processing, handling taxes (e.g., VAT, GST), addressing chargebacks and refunds, and ensuring compliance with financial regulations in all operating markets.
- Choose this option when: your business has the internal resources and expertise to manage complex financial operations, and you need full control over customer transactions and data.
When a payment service provider (PSP) is the MoR
Your ecommerce brand may choose to have a payment provider like Stripe, Adyen, or PayPal act as the Merchant of Record because all transactions are processed through their platform.
- Responsibilities include: payments processing, managing chargebacks and refunds, handling currency conversions and global tax compliance (varies by provider).
- Choose this option when: you need to offload part of the operational burden but still maintain substantial control.
When a third-party provider is the MoR
There are some companies that specialize in providing the services to be the Merchant of Record for businesses shipping abroad. Examples include Paddle, FastSpring, 2Checkout. These providers act as the MoR for your brand, handling the entire transactional and compliance process.
- Responsibilities include: payment processing, local tax calculations and remittance, compliance with regional financial laws, fraud prevention, reporting and auditing.
- Choose this option when: you need to delegate the full scope of MoR duties to a specialized expert.
When an online marketplace is the MoR
If you are selling on a marketplace like Amazon, eBay, or Etsy, that platform will often act as the Merchant of Record in cross-border purchases.
- Responsibilities include: payment processing for marketplace transactions, tax compliance and remittance, refunds and chargebacks.
- Choose this option when: your brand primarily sells through the marketplace platform rather than your own website.
It’s worth noting that there are other options that may help give you some MoR support. For example, some Enterprise Resource Planning (ERP) solutions (like Oracle NetSuite or SAP Commerce Cloud) offer an MoR-like functionality as part of their suite, to help streamline financial management.
Some ecommerce integrations and selling platforms like Shopify Plus and BigCommerce also offer to serve as MoR for specific transaction types. The responsibilities they will take on vary by provider.
Bottom Line
Choosing the wrong Merchant of Record (MoR) can lead to compliance failures, hefty tax penalties, and increased chargeback disputes. It may disrupt customer trust due to inconsistent billing, limit international growth with inadequate support, and cause operational inefficiencies, ultimately harming your ecommerce brand’s reputation, profitability, and scalability in global markets.
For these reasons, it’s critical to understand the role that an MoR plays in your international shipping strategy. Be sure to work with international shipping experts to help guide you when shipping internationally.
This post was written by Maureen Walsh, Marketing Manager at DCL Logistics. A writer and blogging specialist for over 15 years, she helps create quality resources for ecommerce brands looking to optimize their business.
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