When businesses import and export goods internationally, they face requirements and must provide important documents than they would when shipping goods domestically.
One of the most important documents for international shipping is the commercial invoice.
This article will go through everything there is to know about the commercial invoice, including what it is, why it is so important, any related documents, and how the details needed to fill out a commercial invoice that will meet the basic customs requirements.
This can be useful if you are looking at creating your own commercial invoice templates for your business.
What is a commercial invoice?
A commercial invoice is a document used in the international trade and shipping industry. It is crucial for the customs clearance process of goods. It is issued by the exporter or seller to a buyer or importer.
Just like other official invoices, a commercial invoice is used as a request for payment but in international transactions only. It helps the customs officials determine how much the customs duties will be.
When is a commercial invoice issued?
If you are shipping goods between states in the USA, you are not required to provide a commercial invoice due to free trade agreements or customs legislation that provides the free movement of goods.
If you want to ship goods between the USA and Hong Kong, or even Hong Kong and Singapore for example, you will always require a commercial invoice to be issued.
There is one exception to this rule, and that is shipments between European Union (EU) countries do not require a customs declaration or commercial invoice customs legislation to facilitate the free movement of goods.
What are some other documents that relate to a commercial invoice?
As the international shipping process is much more complicated, other documents are related to the commercial invoice and can be included as supporting documentation.
Another invoice that is commonly used in international transactions is the proforma invoice. Commonly, a proforma invoice is sent before a commercial invoice in international transactions.
A proforma invoice is a preliminary document of the negotiation stage between a buyer and a seller. It includes estimated costs of the goods and further non-finalized details that will also appear on a commercial invoice.
Proforma invoices do not hold the same legal validity as commercial invoices, nor can this document be used for accounting purposes or to request payment.
A copy of a pro forma invoice can be attached with a commercial invoice when the goods are being delivered. If you want to learn more about pro forma invoices, check out our article here.
A Bill of Lading
A bill of lading is another special export document for international trade that accompanies a commercial invoice through the customs process.
The relationship between the two is such as the bill of lading represents an example of a receipt of goods in international transactions, while the commercial invoice provides key financial details of the transaction while omitting a title to the goods, and ownership of the goods.
The bill of lading number will appear on the commercial invoice.
In terms of the customs process, a bill of lading acts as the official contract of carriage, between the exporter (seller) and the shipping company.
A Bill of Lading works like a boarding pass for international goods in international shipments.
However, on the other end of the transaction, for someone to claim ownership of the goods, they must be listed on the bill of lading. This is one key difference when compared to a commercial invoice.
Some people can confuse a packing list with a commercial invoice in the international movement of goods.
This is because both these documents have the same details included, yet one is used for financial purposes while the other is more for logistical purposes. You can probably guess which document serves each purpose.
Nonetheless, the packing list is a very important document that accompanies a commercial invoice in cross-border shipments.
Why are commercial invoices so important?
Commercial invoices are only important in the shipment of goods across international borders.
A commercial invoice is not required in other circumstances or industries, including the movement of goods domestically.
How do you fill in a commercial invoice?
There is no standard format for how a commercial invoice should look. However, you will find three types of required information to be filled in on a commercial invoice.
1. Details about the exporter and importer
The details of the exporter and importer are only used on a commercial invoice to identify basically who is involved in the transaction.
A commercial invoice should include:
- A business logo (if applicable)
- Both the exporter's/importers' names, addresses, emails, and phone numbers
- Both the exporter's/importers' tax IDs or country-specific equivalent
- The notify party information (who gets notified once goods arrive at the destination)
Usually, it's the forwarding or shipping agent.
The details in this section are usually located in the header section if using a standard invoice template as an example.
2. Details of the transaction
The following details should be included on a commercial invoice that relates to the international transaction taking place.
- Invoice number and date
- Order number
- Total sale amount
- Payment due date
- Payment currency
- Instructions for payment terms
These details must be accurate so that customs can easily work out the required import duties and taxes owed.
3. Details about the shipping of the commercial goods
The third type of important detail that must be included on a commercial invoice relates to the shipping process of the goods. On a commercial invoice, the following must be included.
- The Bill of Lading number
- Customs agent details
- Harmonized System (HS) code: A 6-digit HS code used to identify which commodity group the goods fall under and to streamline import duty tariff requirements
- Description of goods including the number of packages, quantities, net and gross weight, units, and the unit price
- Incoterm code: One of 11 international trade rules represented in a 3-digit code that identifies who (exporter or importer) is responsible for the costs of transport, risks associated with a shipment, and other terms with shipment
- Country of origin of the goods: a certificate proving the country of origin may be necessary)
- Any insurance attached to the shipment
- Date of exportation, the means of transport used, and destination details
- Exporters signature
Any best commercial invoice template?
You can find plenty of invoice templates and samples online. If you are not sure how a commercial invoice should look, you can check out our article on how to create an invoice to easily create and modify your own commercial invoice template to incorporate all the details listed above.
What happens if a commercial invoice is rejected?
It is a legal requirement that a commercial invoice is properly completed and filled out accurately. This means the customs duties and taxes are the correct amounts.
If a commercial invoice gets rejected, it is usually because the invoice itself is missing details, includes incorrect details such as the incoterm code or HS code, or misinformation relating to the financial details determined by customs authorities.
There may be legal ramifications from tax authorities and penalties applied to the exporter based on misinformation about customs costs and taxes on a commercial invoice.
When shipping goods across borders, you must be aware of the requirements imposed by customs authorities. Commercial invoices are an important part of this process and should be completed correctly in order to avoid delays and keep legal matters in order.
Now that you've reached the end of this article, you have all the knowledge you need to create a commercial invoice that will help you ship goods internationally.
It's quick and easy—and it's a great way to get started with your business invoicing.
What means commercial invoice?
Why do I need a commercial invoice?
Who provides the commercial invoice?
What information is required on commercial invoice?