International shipping has been done for a very long time, and with the increased global connectivity, it has become even more popular. This type of trade involves multiple documents, including an invoice that is used for commercial transactions. Each export has to be accompanied by an invoice as part of the formalities associated with shipping, such as clearance at customs, determining the import value, and the payable duties.
An invoice is a mandatory document for any shipment exported by land, air, or sea. With a commercial invoice, international transactions (import and export) can be conducted with efficiency and ease. This streamlined process is particularly beneficial in matters related to customs clearance. Other advantages include facilitating prompt delivery of shipments, enhancing customer satisfaction for e-commerce transactions, and portraying businesses as professional entities.
Commercial Invoice
An official export document called a commercial invoice is created by a shipper or exporter and includes specific information about a shipment, including the quantity of goods, price(s), value, description of the shipment, and terms and conditions of sale. It serves as proof of sale and a basis for determining if a shipment meets a country’s customs requirements.
However, unlike a Bill of Lading, it does not provide proof of ownership of goods. It is rather used for clearance and shipments using a Letter of Credit. In such a case, lenders will need it as proof of purchase and must present it to their bank before payments are released to the seller.
What is it used for?
Customs officials use the information contained in an invoice to determine the import value and the taxes and duties payable by the importer.
Commercial Invoice Free Templates
Importance of Commercial Invoice
A commercial invoice serves different purposes during shipping. Any exporter or importer would need to have this invoice because shipments with it are simpler to process. Customs officials can consult the document to obtain pertinent information about the shipment, such as the type of goods being exported and the shipment’s value. It ensures that goods do not face delays at customs, which could result in costly expenses for the release of the shipment.
By accurately and consistently including all required information in the invoice, as per customs and trade regulations, the risk of clearance issues and associated costs can be minimized.
In addition, this document indicates the contents of a shipment. This means customs security officers can quickly inspect the shipment without having to examine it in-depth. Without all relevant documentation, the shipment would have to be withheld until all inspections and examinations are conducted.
Lastly, a well-prepared invoice contains sufficient information that can be used to trace the origin of a shipment, such as the exporter’s details, the country of origin, and the type of goods. This expedites the clearance process since the customs agents can quickly and conveniently access the information they need to grant entry to the goods into the country.
Some Examples of Commercial Invoices
The following are examples of commercial invoices on which exporters and importers can conduct international transactions:
- Canadian Commercial Invoice: A type of invoice used for shipments entering Canada from other countries.
- FedEx Commercial Invoice: An invoice for the importer when an exporter wants to ship internationally via FedEx.
- DHL Commercial Invoice: An invoice used for international shipments by DHL.
- UPS Commercial Invoice: This invoice is presented to a UPS representative when sending a shipment internationally with UPS as a carrier.
- USPS Commercial Invoice: This invoice used by exporters to send goods via the United States Postal Service.
Basic Contents of Commercial Invoice
The basic components of a commercial invoice typically include:
Basic information
This includes the names and addresses of the buyer and seller, the date of shipment, and a unique invoice number.
Description of goods
This includes a detailed description of the goods being shipped, such as the product name, model number, quantity, weight, and any other relevant details that accurately identify the goods.
Unit price and total Value
This includes the unit price of each item, as well as the total value of the goods being shipped, which is calculated by multiplying the unit price by the quantity of goods.
Terms of sale
This includes the agreed-upon terms of the sale, such as the currency used for pricing, the agreed-upon Incoterm (International Commercial Terms) specifying the responsibilities and costs associated with shipping, insurance, and customs clearance, and any other relevant terms and conditions.
Payment terms
This includes the agreed-upon payment terms, such as the due date and method of payment, such as “Net 30” meaning payment is due within 30 days from the invoice date.
Shipping information
This includes the shipping method, destination port or airport, and any relevant shipping instructions, such as the mode of transportation, vessel or flight number, and estimated time of arrival.
Packaging information
This includes details about the packaging used for the goods, such as the type of packaging, the quantity of packages, and their dimensions and weight.
Exporter and importer information
This includes the contact information of the exporter and importer, including their names, addresses, and tax identification numbers.
Total Weight and Measurement
This includes the total weight and measurement of the shipment, which may be necessary for customs clearance and shipping purposes.
In a commercial invoice, there may be references to other shipping documents that are related to the shipment.
These documents may include:
Bill of lading (B/L)
This is a document issued by the carrier or its agent that serves as evidence of the contract of carriage, outlines the terms and conditions of transportation, and provides details about the shipment, such as the vessel or flight number, the port of loading and discharge, the consignor and consignee, and the description of the goods.
The bill of lading acts as a receipt of the goods by the carrier and may also serve as a document of title, allowing the goods to be transferred to the buyer upon endorsement.
Packing list
This is a document that provides details about the contents of each package in a shipment, including the quantity, weight, and dimensions of each package. The packing list is often used by customs officials and other parties involved in the shipment to verify the contents of the shipment and ensure that it matches the information provided in the commercial invoice.
Certificate of origin
This is a document that certifies the origin of the goods being shipped. It may be required by customs authorities in the importing country to determine the country of origin for customs duty purposes or to comply with preferential trade agreements or other international trade regulations. A certificate of origin may be issued by the manufacturer, exporter, or a designated authority and may need to be included or referenced in the commercial invoice.
Insurance certificate
This is a document that provides evidence of insurance coverage for the goods being shipped. It typically includes details such as the type of coverage, the insured value of the goods, and the risks covered. The insurance certificate may be required by the buyer or the seller to protect against loss or damage to the goods during transportation and may be referenced in the invoice.
Other documents
Depending on the nature of the shipment and the specific requirements of the countries involved, other documents may be referenced in the invoice or required for the shipment, such as import/export licenses, permits, inspection certificates, or special documentation for regulated goods, hazardous materials, or other specialized shipments.
It’s important to note that the specific shipping documents required may vary depending on the countries involved, the type of goods being shipped, and the terms of the sale. It’s crucial to carefully review and comply with the customs and trade regulations of the countries involved to ensure a smooth and compliant shipment of goods.
How to Prepare Commercial Invoice
Below is a guide on how to prepare a proper commercial invoice:
- Gather all relevant details that are needed for the invoice. Make sure the essential details are mentioned and gather any information needed to satisfy the requirements of the country of destination.
- Contact the customer (importer) and ask them to provide the details to be included in the document. Reiterate the terms of trade and note any information they request to be added to the invoice.
- Download a suitable commercial invoice template and add all the required information. Ensure the seller’s and buyer’s information is given, including shipping details, item details, and any other relevant details.
- Compare the invoice with other documents such as the BoL (Bill of Lading), letters of credit, and purchase orders to ensure all information is accurate.
- Edit where necessary. A copy of the invoice can be translated into the destination country’s language if possible or necessary.
- Print at least two (2) copies of the completed invoice. Sign the document as the exporter. Place one copy inside the shipment and another outside in a transparent, waterproof bag.
- Lastly, the exporter should keep a copy of the invoice.
Commercial Invoice Vs. Packing List
While both documents typically have similar information and are issued by the exporter, a commercial invoice is meant to serve as proof of the shipping transaction and taxes paid and is meant for customs clearance purposes. It also communicates information about the transaction, including payment details, instructions, and transaction terms.
A packing list is used to confirm that the importer sent the proper order. It focuses more on the physical description of the shipment. As a result, it is used for inventory and stock-keeping purposes. In the event of a dispute involving the carriers, customs, buyers, or sellers involved in the shipping process, it can also be used as evidence of the goods shipped by the seller.
In addition, an invoice is only sent to the person responsible for the payments, while a packing list can be sent to the receiver of the goods even if they are not responsible for making payments.
Frequently Asked Questions
Failure to present an accurate commercial invoice can lead to delays at customs clearance and legal penalties. Legal penalties can be issued upon the submission of an inaccurate invoice because it can result in the underpayment of taxes and duties, which is a financial crime.
Yes, many countries accept electronic or digital commercial invoices, provided they comply with the relevant regulations and requirements for electronic documentation. However, it is important to check the specific regulations of the exporting and importing countries to ensure compliance with their requirements for electronic or digital commercial invoices.
A: Yes, a commercial invoice can serve as a legally binding document in international trade. It forms part of the contract between the buyer and seller and outlines the terms and conditions of the sale. It can be used as evidence in case of disputes or legal actions related to the transaction.
Final Remarks
A commercial invoice is typically required by sellers who want to sell their goods to customers in other countries. It outlines details about the parties involved, the goods traded, and shipping information. Using a template for a commercial invoice can offer several benefits. They are typically designed to comply with relevant customs and trade regulations, ensuring that the invoice includes all required information and meets the specific requirements of the exporting and importing countries. This can help ensure compliance with applicable laws and regulations, minimizing the risk of penalties, fines, or delays in customs clearance.
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