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 a commercial invoice as part of the formalities associated with shipping, such as clearance at customs, determining the import value, and duty payable.
The commercial invoice is mandatory for any shipment exported by land, air, or sea. With a commercial invoice in place, international purchase and selling (import and export) can be done smoothly. This ease is attained especially in matters related to customs. Other benefits of it are; it facilitates timely delivery of shipment, plays a crucial role in customer satisfaction for e-commerce, and makes businesses seem professional.
Commercial invoice is a formal export document prepared by a shipper/exporter detailing significant information about a shipment, such as the number of goods, price (s), value, a description of the shipment, and terms and conditions of sale. It acts as proof of sale and a basis for assessing if the 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 for calculation of the shipment’s associated taxes and duties at customs.
A commercial invoice is also required when importers pay for shipment using a Letter of Credit. In such a case, lenders will require the commercial invoice 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 a commercial invoice to determine the import value and determine taxes and duties payable by the importer.
Importance of Commercial Invoice
A commercial invoice serves different purposes during shipping. It is more detailed than a standard invoice to facilitate smooth shipping processes.Any exporter or importer should consider using this invoice because shipments accompanied by it are easier to process as customs officials can consult the document to get relevant information about the shipment, such as the type of goods being exported and the value of the shipment. This prevents goods from being held up at customs as a result of which it could cost a lot of money for the release of the shipment. A commercial invoice template is a necessary requirement, and if fulfilled appropriately, the shipment can be processed quickly.
In addition, this document indicates the contents of a shipment. This means custom’s security officers can quickly inspect the shipment without having to examine the shipment in-depth. Without all relevant documentation, the shipment would have to be withheld until all inspections and examinations are conducted.
Lastly, a well-prepared commercial invoice shows sufficient information which can be used to trace the origin of a shipment such as the exporter’s details, Country of origin, and the type of good. This speeds up the clearance process since the customs agents can quickly and conveniently get the information; they need to grant entry of goods on the commercial invoice.
Some Examples of Commercial Invoices
The following are examples of commercial invoices through which exporters and importers can conduct international shipment transactions.
- Canadian Commercial Invoice: A type of invoice used for shipments entering Canada from other Countries.
- FedEx Commercial Invoice: A FedEx invoice is presented to the importer when an exporter wants to ship internationally via FedEx
- DHL Commercial Invoice: A commercial invoice used for DHL international shipments.
- UPS Commercial Invoice: A UPS commercial invoice is presented to a UPS representative when sending a shipment internationally with UPS as a carrier.
- USPS Commercial Invoice: A commercial invoice used by exporters to send goods via the United States Postal Service.
Basic Contents of a Commercial Invoice Template
A commercial invoice has to be detailed. Remember, the shipment will possibly pass through the hands of many people and authorities in transit. Therefore, it is imperative to ensure that it contains all the relevant sections. In addition, regardless of the template being used, the following information should be included.
Section 1: Transaction information
The first section of the commercial invoice should address details about the transaction.Each transaction has its unique details.
This information includes the following:
Invoice number: Each invoice has a unique invoice number assigned to it that is meant for reference and record keeping. This number should be provided such that in case there’s an issue with the shipment, carriers or customs can direct the shipper on the exact shipment with an issue.
Invoice date: Invoices have to be dated. The invoice date is important for distinguishing one invoice from another and referencing.
Order number: Each shipment is meant for a specific purchase order. The order number must then be given to indicate the exact order it is meant for. The recipient can compare the order number to the purchase order number once they receive the shipment to check if the correct order was shipped.
Sale total: It should have a section to indicate the total value of the shipment. This figure is vital for customs to determine tax and duty payable by the buyer for the shipment.
Currency: A section to input the monetary unit (currency) the shipment has been valued for. This information is necessary for conversion purposes of shipment valuations since the shipment has to go to another Country, often using a different currency.
Instructions of payment: The terms and conditions of payment should also appear in the commercial invoice. These terms and conditions will vary from one transaction to another and include the payment method required to be used and payment due date.
Section 2: Exporter and importer information
The second part of the commercial invoice template should be completed with details about the involved parties (importer and exporter). In addition, the following information needs to be provided under this section.
The information include:
Exporter/seller’s name address, phone number: The exporter’s details that should appear in the document are; their full name, physical address, and a valid phone number. This information is utilized for identification purposes and to communicate with the exporter.
Exporter/seller’s tax ID number (VAT, EORI): For any individual to ship goods internationally, they ought to have a tax ID number typically assigned by their Country’s taxation department or bureau like the IRS in the US. This number should be provided in a commercial invoice.
Importer/buyer’s name, address, phone number: The invoice should have a section where the importer’s full name, billing address, and valid phone number can be input.
Importer/buyer’s tax ID number (VAT, EORI): Since one of the reasons customs needs a commercial invoice is for the importer’s tax deduction purposes, the importer must give their tax ID number in the document. This information is necessary for identification purposes when customs have to communicate to the Country’s taxation department on how much duty and tax the importer is liable for shipping the goods.
Notify party’s information: The invoice should indicate the appointed person to be contacted once the shipment arrives in the destination Country. Their full names should be mentioned along with their contact details. This can be the importer, shipping agent, or another entity.
Section 3: Shipping information
The next section should outline all the relevant shipping information. Shipping entails all activities from when the exporter releases the goods from the possession until they reach the importer.
This information includes:
Bill of Lading number: Each shipment will have a Bill of Lading number accompanying it. Each BOL number has a distinguishable figure assigned to it. This number should be provided in the invoice to assist customs officials in identifying and examining the shipment.
Forwarding agent: A forwarding agent is the party appointed to receive the shipment and relevant documentation on behalf of the importer. Their name and forwarding address should be indicated in the invoice.
Harmonized System (HS) code: The harmonized system code is used for classifying trade goods and assigning them to their related tariffs. This number should be accurately captured in the invoice such that customs can use it to identify the trade goods being shipped.
Description of shipment/goods (number of packages, units, weight): Descriptive information of the shipment needs to be given in a commercial invoice. Therefore, it must have a section to input this information including the type of goods, net weight (without packaging), gross weight (with packaging), and quantity of goods.
Incoterms: Incoterms (terms of sale) are globally recognized acronyms used to describe the exact nature of the relationship between a buyer/importer and seller/exporter involved in a commercial transaction of the international nature. These acronyms stipulate the responsibilities of each party when it comes to transportation/shipping of goods, for example, the party responsible for ensuring the goods, shipping, and customs costs are paid etc. The nature of the relationship should then be declared using the appropriate acronym.
Origin of goods: A commercial invoice must also state the shipment’s origin. With the legalities involved in international trade, customs will want to know where the shipment originates from. Therefore, the name of the origin country must be indicated. A certificate of origin should be added to this effect.
Insurance: If the shipment is insured, the invoice should state the party that insured the goods and the insurance costs. This will be dependent on the incoterms.
Exportation date, final destination, and mode of transport: Other relevant shipping information should be given, such as shipping date, mode of transport, and the shipment’s final destination. Shipment can be imported through land, rail, air, and sea.
Shipper’s signature: Lastly, a commercial invoice has to be signed by the exporter. Therefore, it must have a section that prompts the seller to provide their signature.
Essential Steps for Making Commercial Invoice
There is no one-size-fits-all commercial invoice template. Therefore, regardless of the type of transaction, two exporters can use the same template. Even though the design may be similar, its contents will depend on the type of transaction and how much information is needed by the country where the shipment is being sent.
Below is a guide on how to prepare a proper commercial invoice:
- Gather all relevant details that are needed on the invoice. Ensure the basic details of it are available and collect any information that meets the destination country’s requirements.
- Contact the customer/importer and ask them to provide details included in the document. Reiterate the terms of trade and note down any information they request to be added to the invoice.
- Download a befitting commercial invoice template and input all the required information. Ensure the seller and buyer’s information is given, shipping details, item details, and any other relevant details.
- Compare the invoice with other documents such as BOL (Bill of Lading), letters of credit, and purchase order to ensure all information has been accurately captured.
- Edit where necessary. A copy of the commercial invoice can be translated to the destination country’s language if possible or necessary.
- Print at least two (2) copies of the completed invoice. Sign the document as the shipper. 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, taxes paid and is meant for customs clearance purposes. It also communicates the following information about the transaction; payment details, instructions, and transaction terms.
While 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. It can also be utilized as proof of goods shipped by the seller in the event of disputes among the parties involved during shipping – carriers, customs, buyer, and 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.
The use of commercial invoice templates is time-saving and helps users create professional invoices. Therefore, we have made such downloadable templates available for the readers. They are readily customizable and contain all the necessary sections of an adequate commercial invoice.
What happens if a commercial invoice isn’t filled accurately?
Failure to present an accurate commercial invoice can lead to hold-ups at customs, delay costs, and legal penalties. In addition, legal penalties can be issued upon submission of an inaccurate commercial invoice because inaccurate information can result in underpayment of taxes and duties, which is financial illegality.
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, goods traded, and shipping information. Using a template speeds up the customs clearance process and thus helps the exporter and importer evade any associated shipping delays. The use of templates is recommended for creating professional commercial invoices as they are pre-designed to outline all the information that should appear in the document.