In this article, you will learn:
- What is a Commercial Invoice?
- What Should Be There In A Commercial Invoice?
- Commercial Invoice Format
- Documenting Commercial Invoice
- Uses of Commercial Invoice
- Difference Between Commercial Invoice and Normal Invoice
- Difference Between Commercial Invoice And Proforma Invoice
- Commercial Invoice Vs Tax Invoice
- Commercial Invoice Template
- How To Create A Commercial Invoice Template?
- How to Fill a Commercial Invoice?
- Commercial Invoice in Export
A commercial invoice vs invoice is one of the most important documents whenever you ship goods internationally. Whenever it comes to selling goods outside the country, there is a certain set of documents that are needed to undertake such international shipment.
Commercial Invoice is one such document that is important for customs clearance wherein it is used to determine the duties and taxes payable. Thus, if you want uninterrupted customs handling of the goods being shipped, it is important that you fill out the commercial invoice completely and correctly.
In this article, we will talk about what is a commercial invoice vs invoice, commercial invoice format, what should be there in a commercial invoice, how to create a commercial invoice, and types of commercial invoices.
Also Read: Try QuickBooks Online Accounting Software for Global
What is a Commercial Invoice?
A commercial invoice vs invoice is a customs document that is used for shipping goods internationally. The commercial invoice is important for the customs clearance as it helps the customs officials to assess the duties and the taxes payable.
It is a legal agreement between the exporter and the importer that specifies in detail the goods sold and the requisite amount that the customer is required to pay.
Given by the seller to the buyer, a commercial invoice is one of the primary documents that is used for determining the duty payable, the value of goods being sold, and controlling imports.
Governments use these documents to assess the true value of goods while determining the customs duties and for importation control. Thus, a commercial invoice acts as proof of the sale of goods from the seller to the buyer and the terms and conditions on the basis of which such a sale takes place.
What Should Be There In A Commercial Invoice?
There is no standard format for a commercial invoice. However, a commercial invoice vs invoice must include specific information such as the parties involved in the transaction, the goods being transported, the country of manufacture, Harmonized System Codes for the goods involved, etc. The following items need to be included in the commercial invoice:
Complete Name and Address Details of Both the Shipper and Consignee
This section of the Commercial Invoice includes full details of the shipper (seller) and the consignee (buyer). It includes the contact name, address with postal code and country, and the tax ID of the shipper as well as the consignee.
Contact Number of Both Shipper and Consignee
Much like the details mentioned above, you need to specify the contact number of both the shipper as well as the consignee on the commercial invoice.
Terms of Sale (Incoterms)
Terms of Sale, also known as Incoterms, are the billing terms specified on the commercial invoice. These terms specify which party (seller or buyer) is responsible for paying various costs such as shipping, insurance, import tax, and duty charges.
Incoterms are the widely used terms of sale and are a collection of eleven individual rules that are recognized internationally.
These rules specify the responsibilities of both the buyers and sellers with regards to insurance, shipment, customs clearance, documentation, and other logistical activities.
Reason For Export
In this section, the shipper (exporter) specifies the reason or why he is undertaking such an export. For instance, he would specify if the shipment is a gift, a sale, item for repair, etc.
A Complete Description of The Items
In this section, the shipper needs to provide a complete description of the items that form part of the shipping transaction. For example, the details with regards to the shipping items could include:
- What item is it?
- What material is the item made of?
- What is the item used for?
- Item’s Serial or Part Number if applicable
These details provided by the shipper are used by the importing country’s brokerage department to determine the import duty and the taxes on the goods that form part of the shipping transaction.
Harmonized Tariff Codes (If Known)
Harmonized Tariff Codes are the codes that are used to classify and define internationally traded goods. The shipper needs to provide this information to help the customs department in the clearance of the goods.
This is a system that is used by the customs authorities across the globe to identify the product so as to determine the duties and taxes. Therefore, providing these details helps to avoid any delays and additional charges.
Country or Territory of Origin of the Commodity
Country of Origin is the country where the items in question are manufactured, produced, or grown.
Thus, it is the country of manufacture of imported goods and not the country from where the items are shipped.
For example, goods manufactured in France are shipped from Germany. Thus, in this case, the country of origin is France and not Germany.
Furthermore, if any work has been carried out on the items in a transaction in another country before the import of such goods, such work must change the items significantly for that country to be called the country of origin.
Number of Units, Unit Value, and Total Value of Each Item
The unit of the item deals with the item quantity, that is, the number of individual items that are being shipped. The number of units of an item could be specified in various units of measurement depending upon the nature of the item to be shipped. For instance kilogram (Kg).
Unit Value, on the other hand, is the cost or the purchase price of per unit item. For example, 20 notebooks at $5 each.
Likewise, the Total Unit Value is the combined value of all the items included in the shipping transaction. For example, 20 notebooks at US$5 each have a Total Unit Value of US$100.
Number of Packages and Total Weight
As the name suggests, the Total Number of Packages is the number of packages that form part of the shipping transaction.
Likewise, the total weight in kg (kilograms) or lbs (pounds) is nothing but the shipping weight including packaging.
Shipper’s Signature and Date
This section includes the signature of the shipper, certifying that the information so provided in the commercial invoice is correct. In addition to this, the shipper needs to specify the date on which the sale took place as per the records maintained by the shipper.
Remember, providing the correct date of sale or transaction becomes all the more important when goods are bought under a Letter of Credit.
Commercial Invoice Format
When it comes to Commercial Invoice, you need to mention specific details. As mentioned above, there is no standard Commercial Invoice Format.
However, it must include certain details, a statement certifying that the information provided in the invoice document is accurate, and the signature of the shipper.
The following are the items that define the commercial invoice format.
- Details of the shipper or the exporter such as the name, address, tax ID, and contact number
- Details of the consignee or the buyer such as name, address, and contact number
- Details of the buyer, that is, the third party if not the consignee
- Mode of dispatches such as the sea, air, rail, or road
- Type of shipment, that is, FCL (Full Container/Car Load), LCL (Less Than Container Load), Breakbulk, etc.
- Vessel Name and Voyage Number
- Port of Loading
- Port of Discharge
- Final Destination
- Invoice Date and Invoice Number
- Details of goods to be shipped such as:
- Description of goods
- Country of origin
- Harmonized code
- Unit weight
- Unit value
- Total Net Weight
- Total Gross Weight
- Total Shipment Pieces
- Currency Code
- Total Declared Value
- Freight and insurance charges
- Other charges
- Total invoice amount
- Reason for export
- Type of export
- Terms of trade – Incoterms
- Bill of Lading Number, Marine Cover Policy Number, Letter of Credit Number (Optional Fields)
- Name, the title of the shipper, company stamp, and signature of the shipper
Documenting Commercial Invoice
If you ship goods internationally on a regular basis, creating a commercial invoice template would make things easy.
It would not only help you to save time for core business activities but also allow you to make necessary changes in the commercial invoice template easily each time you ship goods internationally.
One way to create a commercial invoice is to search for free commercial invoice templates online at reputable websites like the nodal international trade agency in your country.
Just to give you an example, the Canada Border Services Agency is a nodal agency for border control, immigration, and customs services in Canada. Here is the link to Canada’s Customs Invoice which is available on their website for shippers to download.
You can also download the Commercial Invoice Template provided by recognized multinational delivery services companies such as FedEx.
In addition to this, shippers typically use Microsoft Word or Excel tools to create a commercial invoice template.
But a word of caution here is that these templates may overlook some important specifications. This can turn out to be costly for it may result in delays in customs clearance in the importing country.
Also, it can result in a misunderstanding on the part of both buyers and freight forwarding agents which will result in a delay in customs clearance. Such a delay would mean a penalty charged to the entity responsible for the delay.
Alternatively, to make your invoicing process effortless, you can use QuickBooks Online to create a customized commercial invoice.
With QuickBooks, you can easily create and send commercial invoices to your customers electronically. Once you generate a commercial invoice online, you can send its printed and physically signed copies along with your shipment.
Furthermore, QuickBooks Online allows you to automate your invoicing process. On creating your commercial invoices on QuickBooks Online, your accounting data gets updated automatically.
In addition to this, you can also set reminders and get to know when your customers have made their payments. Thus, with custom commercial invoice templates and an automated invoicing process, you can get paid faster.
Uses of Commercial Invoice
As stated above, a commercial invoice is an important document when you are shipping goods internationally. There are a number of circumstances where a commercial invoice is used during the international shipping of goods.
- Both the shipper as well as the consignee use commercial invoice to describe in detail the items that are bought and sold.
- A commercial invoice is used by the buyer to make payment to the seller via bank.
- A commercial invoice proves to be an important document for it acts as proof of the sale of goods in case the goods in the shipping transaction are insured and the buyer makes a claim against such goods.
- The Customs Authority of the importing country or the country of purchase requires a commercial invoice to assess the duties and the taxes payable before such goods are cleared through the customs.
- Governments also require commercial invoices to determine the true value of goods for customs and duties.
Difference Between Commercial Invoice and Normal Invoice
A normal invoice is a document issued by a seller to the buyer acting as proof of the sale of goods and services. This is the most common form of an invoice created by the business entities.
The format of a normal invoice or a standard invoice is flexible for it can be adjusted as per the various billing cycles as well as the industry types. Typically, a normal invoice format includes:
- Business name and contact information of the seller
- Business name and contact information of the buyer
- Invoice Number
- Invoice Date
- Details of goods and services such as product or service description, per unit price, quantity, total amount payable, etc.
On the other hand, a commercial invoice vs invoice is a document used when the goods are shipped internationally. It includes detailed information with regards to the items being sold by the seller (exporter) to the buyer (importer or consignee).
Such a document is referred to as the Customs Document for it is needed for customs clearance. Thus, a commercial invoice is used by the customs authority of the importing country to assess duties and taxes.
So, a commercial invoice format includes the following components:
- Details of the shipper such as name, address, and contact information
- Details of the buyer (consignee) such as name, address, and contact information
- Reason for export
- Invoice date and invoice number
- Details of the items to be shipped such as per-unit price, quantity, harmonized code, etc.
- Country of Origin
- Incoterms, that is, terms of trade
Difference Between Commercial Invoice And Proforma Invoice
A Proforma Invoice is one of the various types of a commercial invoice that is a preliminary invoice document sent by the seller to the buyer before the shipment of goods.
Unlike the normal invoice that acts as proof of sale and is a request for payment, a Proforma invoice is simply a quote sent prior to shipment by the seller to the buyer.
Thus, a Proforma Invoice is a document sent to the buyer to help him understand what to expect as far as the shipping transaction is concerned in terms of price, quantity, quality, payment, and delivery terms, etc.
So a Proforma Invoice is a document that does not confirm a sale and is not a demand for payment but the one that gives a general idea to the buyer with regards to the amount that he would be required to pay, items that he will receive, the payment terms on which such items would be sold, etc.
Hence, the seller issues a Proforma Invoice before the buyer issues a Letter of Credit to the seller. Once the buyer receives the Proforma Invoice, he issues the Purchase Order to the seller who then sends goods to the buyer along with the commercial invoice.
Thus, the details in a proforma invoice are almost the same as that of the commercial invoice. However, the final amount payable as specified in the commercial invoice could vary since a Proforma Invoice is issued before the actual sale and is just an estimate of what to expect in the transaction.
Whereas, a commercial invoice is a document that is required during the post-shipment. It is a customs document that is needed by the customs officials of the importing country to identify the goods in the shipping transaction and assess the duties and taxes payable.
Thus, a commercial invoice includes the actual amount payable by the buyer, buyer, and seller information, country of origin, Incoterms, etc.
Commercial Invoice Vs Tax Invoice
A tax invoice is a document issued by a registered dealer to the buyer of goods or services showcasing the amount charged as well as the goods and services on which tax is payable by the buyer.
Thus, whenever a vendor sells goods or services that are taxable, he needs to issue a tax invoice specifying not only the details of the goods or services sold but also the total amount on which various taxes are charged to the buyer.
Furthermore, a tax invoice also serves as an important document to claim the input tax credit. Accordingly, a tax invoice issued by one registered dealer to another includes:
- The heading ‘Tax Invoice’
- Name, address, and contact details of the seller
- Name, address, and contact details of the buyer
- Invoice Number
- Date of issue of invoice
- Tax Identification Number
- Details of goods or services like per-unit price, quantity, description, etc
- Tax charged on each item
- Total amount payable including taxes
- Payment terms
On the other hand, a commercial invoice is used by the shipper when goods are sold internationally. It is a legal document issued by the shipper to the buyer describing in detail the items that form part of the shipping transaction.
A commercial invoice is a customs document used by the Customs Authority of the importing country to identify the merchandise and calculate the duties and taxes payable.
Commercial Invoice Template
Since a Commercial Invoice is a primary document in the international shipment of goods, it must include all the essential details to avoid any unnecessary delays in customs clearance.
Since the shipper prepares a commercial invoice, he must ensure that correct information goes into creating such a document.
Following is a downloadable commercial invoice template that can be used to generate a customized commercial invoice for international shipment of goods.
How To Create A Commercial Invoice Template?
You need to follow the steps below to create a commercial invoice for the international shipment of goods.
Downloading a Commercial Invoice Template
As mentioned earlier, there is no standard format for a commercial invoice. However, creating a commercial invoice becomes easy if you already have a commercial invoice template that includes all the specific details and simply needs to be modified as per need.
You can either use Microsoft word or excel invoice templates or download free commercial invoice templates from reputed sites like the government authority responsible for international trade or international delivery services companies like FedEx and UPS.
Update Seller Details
Once you have the pre-made commercial invoice template, fill in the seller information like his name, address, tax ID, and contact number.
Update Consignee and Buyer Information (If Not Consignee)
Now, fill in the necessary buyer details like the buyer name, address, and contact information.
Update Shipping Details
Once you update the buyer and seller information, the next step is to fill in important shipping and logistics information.
This information is helpful to the consignee, the logistics company as well as the customs brokers to enable them to make correct transportation arrangements, customs clearance, and final delivery of items.
Shipping details to be specified include:
- Country of Origin
- Country of Final Destination
- Method of Dispatches like road, rail, air, or sea freight
- Type of shipment
- Port of Loading (POL)
- Port of Discharge (POD)
- Vessel or Aircraft Name
- Voyage Number
- Marine Cover Policy Number
- Letter of Credit Number – in case goods are sold under Letter of Credit
Specify Item Details
As mentioned earlier, you now need to fill in complete details of the items sold to the buyer. This include:
- A detailed description of items
- HS code
- Item code
- Unit quantity
- Per-Unit price
- Unit type
- Additional fees or charges such as transportation cost, set-up cost, etc.
- Currency of transaction
Invoice Numbers and Other Information
This part of the commercial invoice includes invoice numbers and other information.
- Shippers invoice number
- Date of issue of invoice
- Bill of Lading number
- Buyer reference number which is typically the buyer’s purchase order number
- Any additional reference if required
- Payment terms and method of payment
- Additional information such as packaging and delivery notes
This section of the commercial invoice includes detailed information with regard to the banking details of the seller. These include:
- Beneficiary business name
- SWIFT/BIC Code of the bank
- Bank location – Country
- Bank location – City
- Bank name
- Intermediary bank details in case the shipper uses intermediary bank for acceptance of payments
- International Bank Account Number – IBAN
Updating the Authorized Signatures
To complete the commercial invoice, the seller needs to put signatory details:
- Digital signature
- Digital company stamp
- Place of issue
- Date of issue
- Signatory company
How to Fill a Commercial Invoice?
Correctly filling out your commercial invoice is very important as incorrect information can lead to delays with regards to customs clearance.
Although, there is no specific commercial invoice format, there are specific details that you should mention correctly. Typically, a commercial invoice is printed on a paper with the company letterhead.
While filling in the commercial invoice, make sure you include:
- Seller details like name address, tax ID, and contact details
- Buyer details such as name, address, and contact information
- Reason for export, that is, is good being sent as a gift or for trade
- Shipping date and number, that is, specifying the carrier number which at times is also known as airway bill number
- Description of goods in detail
- Quantity of goods, HS code, declared or the true value of the shipment
- Freight and insurance cost
- Country of origin, that is, the country where goods are originally manufactured
- Gross and Net weight
How To Add Commercial Invoice To Your Shipment?
Commercial Invoice For Export
When you are shipping goods internationally, you need a commercial invoice for the export of such goods. A commercial invoice for export is one of the various types of commercial invoices that acts as a primary export document and is an agreement between the exporter (seller) and the importer (the buyer of goods).
It comprises complete details with regards to the goods in the shipping transaction, amount, etc confirming the same between the buyer and seller.
A commercial invoice for export also provides information with regards to the country of origin, product description, type of products that are being shipped, and the value of goods.
It is required to avoid any challenge while your goods are in transit and authenticating that you pay the right taxes and duties.
For instance, an invalid consignee name or address would result in a failed shipment. Likewise, if you failed to provide a detailed description of goods and their purpose, you are bound to face delays from the customs.
Commercial Invoice Glossary
The following are the terms you would come across during the process of international shipping, customs clearance, and other regulations. The definitions of some of the important terms are given below.
Actual Gross Weight
This is the complete weight of a shipment including goods as well as packaging.
Airway Bill (AWB)
It refers to an agreement between the shipper and the air carrier and lays down the terms on which the air carrier agrees to transport the goods. It also includes limitations of liability.
Airway Bill Number
This is the number given to a shipment by a multinational delivery services company used to track the package.
Assessment of Duties and Taxes
This is nothing but ascertaining the amount of taxes and duties that are payable.
Bill of Lading
Bill of Lading is an agreement between the carrier and the owner of the goods. A Straight Bill of Lading is non-negotiable. However, a negotiable or shipper’s Order Bill of Lading can be bought, sold, or traded while the goods are still in transit.
Certificate of Origin
It is a document that verifies or confirms the country of origin, that is, the country where the items were manufactured.
A commercial invoice is a customs document used when the goods are shipped internationally. It is a legal document between the exporter and the importer specifying the goods sold and the amount payable by the buyer. A commercial invoice is important for customs clearance for it helps the customs authorities to determine the duties and taxes payable on goods and services.
A consignee is an individual or a business entity as mentioned in the Bill of Lading to whom the items are shipped.
Country or Territory of Origin of Goods
This refers to the country or the territory in which the goods are manufactured or produced.
Duty is the tax levied by the customs authorities on the importation.
An export license is a government document that allows a shipper to participate in the export of appointed goods to certain destinations.
Harmonized System Code (HSN)
This is a globally accepted system for classifying trade goods used to classify goods and their related tariffs.
Some of the national governments across the globe issue and need this document to allow imports into their country.
A proforma invoice is an invoice generated and given by the exporter to the buyer before the shipment of goods takes place. This invoice simply gives an idea to the buyer as to what to expect in terms of the goods to be shipped, the amount, and other specific details.
Create Commercial Invoices On QB
QuickBooks Online has its own standard invoice template. In order to create a commercial invoice in QuickBooks, you can simply import your own customized commercial invoice template or add this template as a new style.
This can be done by undertaking the following steps:
- Log in to your QuickBooks Online account using your username and password credentials.
- In the gear icon, simply choose ‘Custom Form Styles’.
- Now, in the upper right corner, click the ‘New Style’ dropdown arrow and select ‘Invoice’.
- Once you select ‘Invoice’, you can now change the design, its content, email, and payments.
- On changing the new style, simply click ‘Done’.
How To Fill a Commercial Invoice?
There is no specific commercial invoice format but there are specific details that you need to mention correctly. These are seller-buyer details, the reason for export, Incoterms, shipping details, description of goods, country of origin, etc.
What is a Consignee On a Commercial Invoice?
A Consignee is an individual or the company as mentioned in the Bill of Lading to whom the items are shipped.
What is a Commercial Invoice for Shipping?
A Commercial Invoice for Shipping is one of the various types of commercial invoice that is nothing but a customs document needed when you ship goods internationally. It is an agreement of sale of goods between the buyer and the seller and is used by the customs authority of the importing country to identify the goods, determine duties, and taxes payable.
Where Do I Put The Commercial Invoice?
Fill your commercial invoice manually and attach it with your package together with the shipping label.
Where I Can Use Commercial Invoice?
A Commercial Invoice is used by buyers and sellers for describing the items bought and sold. Further, it is used by the importer to release funds to the seller via bank. In case goods are insured and there is an insurance claim made on such shipment, this invoice acts as an important supporting document. Also, customs authorities use commercial invoices for assessing custom duties and inspection purposes.
How to Create a Commercial Invoice for International Shipping?
For creating a commercial invoice, download the commercial invoice template and then fill in the requisite details such as the buyer-seller information, product details, invoice number, payment terms, bank details, and digital signatures of the authorized signatory.
How to Prepare a Commercial Invoice for Export?
A Commercial Invoice for Export is one of the different types of commercial invoices that acts as a primary export document and is needed when shipping goods internationally. This invoice can be generated by downloading a commercial invoice for an export template online and updating it with important information such as buyer-seller details, country of origin, product description, etc.
Risks of Not Filling Out a Commercial Invoice Accurately?
Incorrect information in a commercial invoice could mean delays thereby leading to the shipping delay costs. Furthermore, the commercial invoice is also used for customs clearance. Thus, any incorrect information could result in incorrect payment of duties and taxes that may have further legal implications.
What is a Commercial Invoice in Import?
A Commercial Invoice is one of the primary documents in the international shipment of goods. The customs authority of the importing country typically asks for the commercial invoice to review it and allow the goods to be imported into the country. A Commercial Invoice in import is a customs document used to classify goods, determine the valuation as well as duties and taxes payable on such goods.
What Should Be On a Commercial Invoice?
Although there is no specific format for the commercial invoice, there are certain important details that should be included on a commercial invoice. These include the complete name and address of both shipper and consignee, incoterms, the reason for export, complete description of items, Harmonized Tariff Codes, Country of Origin, Shipper’s Signature, etc.