What is a Commercial Invoice?
A commercial invoice or a CI, is a document required by the customs department in international trade transactions as proof of sale of the given products between the buyer and the seller. It is issued by the seller after loading or after delivery and contains the exact quantities of the goods being shipped.
International trade is a very labourous and tiresome process and the commercial invoice along with the proforma invoice are some of the most important documents to establish the authenticity of an export transaction.
It is a record that notifies the authorities that the invoice displayed is accurate and duly signed, offering parties with reliable terms. The buyer/importer can then use this invoice – and other shipping documents – to clear the shipment at customs in the country of export and import.
Why is a Commercial Invoice important?
A commercial invoice is prepared with information regarding the shipment to the buyer, freight forwarder, customs broker, C & F agent, and bank. It is mandatory for all sea freight, air freight and incoterms shipments. So, if an exporter ships airfreight via FedEx or DHL, they must provide a FedEx commercial invoice or a DHL commercial invoice.
When is a Commercial Invoice required?
A commercial invoice is required for any international shipment which carries a commercial value to fulfil all regulations under the export/import country’s customs regulation. The document is to be prepared when the exporter is ready to ship the goods. Since international commercial invoices do not show tax as international transactions, they may not be subjected to local taxes. Hence, the exporter must take care to provide all the information in the correct format so that the importer does not face any trouble at the customs.
Commercial Invoice Requirements
Any commercial invoice for shipping & export should contain following essential details:
- Exporter’s company name, address, and contact number
- Importer’s company name, address, and contact details
- Buyer’s details if they are not essentially a consignee
- Mode of dispatch (whether by road, rail, air, or sea)
- Type of shipment (FCL, LCL, breakbulk, etc)
- Types of Containers (Reefer Container, TEU, Insulated Containers, etc)
- Vessel name and voyage number
- Names of the loading port, discharge port, and destination
- Invoice number and date
- Reference number of the Shipping BL document, Marine cover policy number, The LC, Reference number of the Air way bill document [If applicable]
- Name of country of origin of the goods
- Destination of the goods
- Terms/method of payment (optional)
Also Read: Types of Letter of Credit
Apart from these components, the commercial invoice must also have the product details. This would include the description, quantity, the product classification code like the [HSN Code (Harmonized System of Nomenclature] or the [Schedule B codes (HS/HTS)], unit type, price, and currency. Do not overlook to mention the terms of trade or the agreement between the two trading parties. In the end, provide the name, date, and signature of the authorized company representative.
Also Read: Forex Hedge | Currency Hedging Strategy for Exporters
Documenting Commercial Invoice
Shippers generally prefer using a template in Microsoft Word or Excel to share invoice details. However, these templates tend to miss some important information, which could lead to expensive delays at the customs department of the importing country. It may also confuse buyers and freight forwarders, leading to fines and demurrage charges charges.
Exporters could consider using export documentation tools such as IncoDocs which allows one to create packing list and other important shipping documents. Most of these templates are aligned to the UN Layout Key recommendations for trade documentation. This, in turn, ensures trade compliance, doing away with any problems and delays in shipment.
The best way, however, is to rely on a pre-filled invoice online. One can find an aligned invoice by the UN’s Economic Commission for Europe (ECE). Or refer to sample invoices from international shipping companies such as FedEx and UPS.
Alternatively, download an invoice format from commercialinvoiceform.org. This allows you to enter the details online directly. It has a glossary of words attached, which outlines the terms on the form by clarifying each section.
Commercial Invoice - Sample Format
Example for a Letterhead Format
Template for an Export format
How to fill out a Commercial Invoice?
Remember, there is no specific format for creating an invoice. However, it must have all the basic (but important) details of the transaction.
Fill up your invoice carefully. While the taxation ID, address details, and recipient’s details are important, note that if the sender or the recipient were an individual (and not a company) their tax ID would ideally be their Social Security Number or equivalent government identification number.
Finally, ensure that you fill any columns that are not applicable for your shipment with ‘NA’. Do not leave them blank.
Commercial Invoice vs Proforma Invoice
The common question arising in businesses is what is the difference between Pro Forma Invoice & Commercial Invoice. A pro forma invoice is required in the pre-shipment process. It generally gives customers an idea of what to expect in terms of the details of the transaction, including the price, quality and quantity of the product, payment, delivery terms, etc. In other words, it documents the sale terms, but it doesn’t demand payment.
On the other hand, a commercial invoice is required in the post shipment process. It allows request payment for items that have actually been sold by showing the amount actually to be paid, it will provide information of the seller, buyer, destination, mode of dispatch, current account, freight forwarder, [HS code] of the product, price, payment terms, and currency of transaction, among other details.
Commercial invoice vs Tax Invoice
A seller requires a tax invoice to initiate his tax procedures. He can independently stipulate his amount for chargeable goods (Something like GST Invoice in India).
In contrast, a commercial invoice is required to specify invoice for quality, quantity, price & terms of sale.
Also Read: How to claim GST Refund on exports?
Commercial invoice vs Customs Invoice
A commercial invoice is used for all export-related activities, and a customs invoice is declared for the importing country's customs regulation. A customs invoice has an additional step involved, which is why it is called an extended version of a commercial invoice.
FAQs on Commercial Invoice
1. Can a commercial invoice have a no value/zero value?
The term zero value/no value is simply used to derive the purpose of a sample commodity. So if a product is shipped for a specimen reference, the trader has no amount to pay for the transit.
2. What is a Commercial invoice and Packing list?
A commercial invoice is a legal statement that acts as evidence of a trade transaction between the importer and the exporter. In comparison, a packing list is a detailed description of goods being shipped for proceedings.A packing list may serve as conforming document, but it can never be used as a substitute for a commercial invoice. Freight Forwarders and Commercial Stationers carry packing list form. Generally, freight forwarding industry provides a quicker and easier solution to the shipping process.
3. What is a Commercial Invoice and Certificate of Origin?
These documents are required for the processing of shipment. A Commercial invoice is used for helping authorities to understand the terms of the transaction, and a Certificate of Origin is used for appropriate testing and drafting of import duties for goods.
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