A commercial invoice serves as proof of sale and facilitates customs clearance.
Commercial invoices should include specific information such as buyer and seller details, product description, quantity and price, and delivery and payment terms.
Incomplete or incorrect invoices can result in penalties and damaged cross-border relationships.
When businesses import and export goods internationally, they face requirements and must provide more 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 tell you everything you need to know about the commercial invoice, including what it is, why it is so important, any related documents required, and how the details should be filled out in a commercial invoice that will meet the basic customs requirements. At the end of this article, we will also share a way to generate an invoice for free within minutes.
💡 Tip: Before you dive into the commercial invoice, you might want to learn about the general invoices in our complete guide to invoices
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.
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
Are There Any Other Documents Relating 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.
Learn more about pro forma invoices and see how they can fit into your business.
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 that 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.
💡 Tip: A pro forma invoice estimates shipment costs before payment, while a commercial invoice specifies the actual cost of goods and is used for customs clearance.
Why Are Commercial Invoices So Important?
Commercial invoices are only important in the shipment of goods across international borders.
For example, a furniture company in the US is exporting its products to a customer in Germany. To avoid any shipment delays and financial losses, the commercial invoice (also known as an international shipment invoice) must contain all the necessary information about the furniture being shipped.
This includes details about the types of furniture, their materials, dimensions, weight, and value.
By providing this information, customs officials can accurately calculate the import duties and taxes that the German customer is required to pay. If the commercial invoice is incomplete or inaccurate, the shipment may be held up at customs, causing frustration and potential financial losses for both the buyer and seller.
So, whether you're a small business or a multinational corporation, it's crucial to ensure that your international shipment invoices are accurate and complete.
How to Create an Invoice?
There are plenty of invoice templates, samples, and invoicing software that you can find online. Depending on your purpose, you can adapt and make use of those resources.
We have created a free online invoice generator tool that can help you generate unique invoices for your business.
It's quick and easy—and it's a great way to get started with your business invoicing.
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. Remember that a commercial invoice containing crucial information, such as the types of goods being shipped, their value, dimensions, and weight, is essential for customs officials to determine the correct import duties and taxes.
Now that you've reached the end of this article, you have a comprehensive understanding of the importance of commercial invoices in international trade.
With these best practices, you can navigate the complexities of international shipping with confidence and avoid any potential shipment delays or financial losses.
What does commercial invoice mean?
Why do I need a commercial invoice?
Who provides the commercial invoice?
What information is required on a commercial invoice?