Correct and complete documentation plays an essential role in international trade operations to maintain uninterrupted business transactions between buyers and sellers.
Proper documentation is necessary at practically every stage of international trade operations. One such important document needed is a Commercial Invoice. Correct commercial invoices play a vital role in ensuring both logistics and customer clearance operate efficiently.
In this blog, we will look closely into everything there is to know about commercial invoices, from their meaning and types to use and format. Without any further delays, let’s dive right into the world of commercial invoices.
What is a Commercial Invoice?
During international trade, the commercial invoice acts as a key document between exporters and importers to create a legal record of the sale. The document gives customs officials, banks and logistics service providers access to vital information regarding the exported merchandise together with its monetary worth and payment conditions.
The commercial invoice functions as a bill for the goods shipped, a customs declaration for duties and taxes and finally, it acts as proof of transaction value.
A detailed commercial invoice includes details such as;
- Seller & buyer information
- Description, quantity, and value of goods
- Payment terms
- Shipping details
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Types of Commercial Invoices
Each type serves a distinct purpose in international trade, from preliminary agreements to legal and customs compliance. Here are some of the most commonly used types of commercial invoices;
- Proforma Invoice – A Proforma Invoice serves as a preliminary bill which buyers receive before shipment for approval and is often used to secure payment or as a quotation. The document is not legally binding but benefits customs clearance and financing.
- Final Commercial Invoice – It serves as the official after-shipment invoice which presents all final transaction details including the goods list with their value and contractual conditions. It serves as proof of sale and enables the buyers to settle their bills for cash. It is also used for financial recordkeeping and customs clearance procedures among other uses.
- Consular Invoice – This is a specialised invoice that gets certified by the consulate of the importing nation aimed at verifying the shipment details. Some nations need consular invoices to manage their import operations and determine proper taxes.
- Customs Invoice – It functions specifically for customs clearance as it contains additional information needed by importing countries to follow their regulatory requirements. The customs invoice assists in identifying duties and taxes while ensuring compliance with trade laws.
- Credit Invoice – The seller uses a Credit Invoice for refunds or adjustments to the original billing amount. They also utilize this invoice to provide discounts to the buyer. It reduces the amount owed by the buyer and corrects billing errors.
Uses of Commerical Invoice
- Customs Clearance – A commercial invoice helps determine import duties as well as taxes and checks regulation compliance.
- Payment Processing – Enables buyers to process payments by acting as a billing statement.
- Legal Proof of Transaction – Validates the sale between buyer and seller. The legal proof can also be later used to settle disputes or carry out audits.
- Shipping & Logistics Requirement – Commercial invoice is a necessity for freight forwarders and carriers to handle shipments.
- Insurance Claims – The documentation proves the worth of goods in case an insurance claim arises due to item loss or destruction.
- Trade Statistics & Reporting – The government uses this system to collect details about international trade activities.
- Regulatory Compliance – Commercial invoices and details gathered from them are used to maintain regulatory compliance.
- Valuation & Taxation – The invoice allows tax authorities to determine appropriate VAT/GST or other taxes, if applicable.
What is a Customs Invoice?
A customs invoice is a tailor-made commercial document required specifically by the customs authorities to evaluate and clear the goods for international trade. The document provides comprehensive product details which contain item descriptions together with its quantity, monetary worth and origin information to meet import/export requirements.
The customs invoice adopts a format which is often different from the standard commercial invoices. Customs invoice follows a format as specified by the destination country and it typically includes information such as the exporter’s certification of accuracy or preferential trade agreement details, if any.
The document serves customs authorities to determine applicable duty fees and taxes while verifying the legality of the shipment.
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Difference Between Commercial and Customs Invoices
| Feature | Commercial Invoice | Customs Invoice |
| Purpose | Billing, Proof of Transaction, Shipping Requirement, etc. | Specifically designed for the customs duty assessment and legal compliance of trade. |
| Obligatory | Mandatorily required for all international shipments | Required only by certain countries. |
| Issued By | Seller/Exporter | Seller (as per the destination country’s specifications) |
| Details Contained | Goods description, quantity, value, payment terms, etc. | HS Code, origin, customs value, etc. |
Format of a Commercial Invoice
The exact format of a commercial invoice will vary depending on the exporter and the destination country. However, it largely contains the following information;
- Name, address, contact details and tax information of both, the buyer and the seller.
- Invoice Number
- Date of invoice
- Order Number
- Description of goods
- Value and quantity of goods
- Country of origin
- Shipping Details (Port of Loading/Destination)
- Payment Terms
- Signature & Stamp
- Additional information such as (Freight charges, export route, gross weight, etc)
(Include an image of the commercial invoice)
Format of A Customs Invoice
- Exporter & Importer Details
- Customs Declaration Statement
- HS Code & Product Origin
- Breakdown of Costs (Freight, Insurance, etc.)
- Certification (if required by the destination country)
(Include an image of the Customs invoice)
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Conclusion
International trade heavily includes commercial invoices and customs invoices mainly due to the unique functions they deliver. A commercial invoice functions as a professional payment request document that details the transactions between buyers and sellers.
The document contains necessary trade details that specify what items are being offered and how they will be priced, their quantity, specified payment conditions and so on. The specific purpose of a customs invoice revolves around satisfying customs requirements in the importing nation.
The customs authority depends on this documentation to make proper assessments of import duties and taxes and verify regulatory compliance.
Understanding the requirements and uses of each of these invoices is important for a hassle-free international trade.
Frequently Asked Questions
- Can a Proforma invoice be used to clear customs?
No, it is not possible to use any invoice other than the customs invoice to clear customs.
- Who issues commercial invoices?
The seller or the exporter issues the commercial invoice to the buyer or importer.
- Is commercial invoice attestation mandatory?
No, while it is not mandatory in every scenario, it is important to get the commercial invoice attested wherever it is explicitly required.
- Do all countries require a customs invoice?
No, not all countries need a customs invoice. Most of them accept a commercial invoice while some countries like the USA, require a customs-specific invoice.