Merchantable (merch) grade is a quality where appearance is not its major attribute, because it is used more for multi purpose applications such as shelving's, interior linings and CAA treated for outdoor use.
Grading - Is based on the best face.

Knots - Tight Encased - Maximum 75 mm or 1/3 width whichever is the less. 4 per board maximum. 20 mm or smaller knots, any number.

Intergrown - 100 mm (maximum) singly but not to exceed half the board width.

Partially intergrown - 75 mm singly but not to exceed half the board width.

Spike Knots - 50 mm wide but not to exceed 2/3 of the board width.

Cone Holes - Largest hole up to 20 mm - no more than four per board.

Wane - Face: nil Back: 20 mm Edge: 10 mm

Pith - Face: 12 mm Back: unrestricted