Commercial Invoice

The commercial invoice is the most important & valuable document that has to be presented strictly in accordance with the instructions of letter of credit. The following functions truly highlights the essence of commercial invoice as a core document for credit transaction.

Functions of the commercial invoice

1. The commercial invoice acts as a bill that is prepared and submitted by the seller to the buyer. It is a comprehensive and factual document which contains complete description of goods and its price, terms and currency of transaction, the name and addresses of seller and buyer, the buyer’s purchase order number or reference number of the transaction, tariff classification used by the buyer’s country etc.
2. The commercial invoice is the vital document used worldwide for customs identification, classification, duty/tax assessment, and final approval for entry of the goods to the importing country. Accurate & authentic descriptions of goods are necessary to help custom authority for accomplishment of custom duty assessment, valuation and follow the procedure of custom clearance.
3. The commercial invoice is the document that confirms the value of goods for insurance purposes. The commercial invoice value can never be stated as a lesser value than the insured amount.

The commercial invoice is the exclusive document through which seller confirms that goods have been delivered as contracted and therefore he is legitimately entitled to claim payment provided that all information, payment terms, and commodity descriptions correspond exactly with the letter of credit instructions. On the other hand, the importer needs the commercial invoice to satisfy the custom authority in all respect for obtaining custom clearance.

Commercial Invoice information
To fill-up commercial invoice accurately, a seller needs to have experience and professional knowledge. In this connection the seller needs to devote his attention on the following specific area / field at the time of preparing the commercial invoice in order to ensure flawless & smooth functioning of credit transaction.

1. A seller should carefully examine following areas at the time of preparing commercial invoice.  The commercial invoice should be prepared in a comprehensive manner so that it can meet the requirements of buyer in all respect. All information and terms used in the invoice, should be clearly defined to avoid any sort of misunderstanding. Adequate attention need to be given to set up terms of sale as it defines the responsibilities between the seller and the buyer for movement of goods from origin to the ultimate destination. Terms of sale is also very important to determine the risk and cost sharing of transportation of goods to be borne by the parties starting from loading point to ultimate discharging point through different modes of transport.
2. At the time of preparing commercial invoice, the seller should act consciously to include every small details of transaction so that no mistake or lack of information is detected by the issuing bank. Mistake or lack of information of any sort will lead to unnecessary extra costs and delays. For example, the delivery would be delayed if the delivery address is incomplete or not provided at all. Moreover if name of the carrier and the date of shipment are not stated, then unnecessary delays will occur to trace the consignment. The seller should also check with his buyer whether particular requirements are needed for tax payment on importation (e.g. a tax reference) or any other important disclosure on the invoice.
3. It is of utmost importance to ensure that the description of goods be clear and accurate. That means accurate & clear cut description of goods will help buyer to clearly identify and classify the products for entry of imports to their country. Normally customs broker or freight forwarder performs the custom clearing job on behalf of the importer. So appropriate product identification & description of goods in the invoice would facilitate the broker to discharge his responsibility.
4. To avoid delays in payment, the seller should quote the customer’s order number on the invoice properly. If no such number is available, then the name of person placing the order and the date of issue should be mentioned categorically to help the buyer trace out the transaction quickly.
5. If the name of currency is not mentioned in the invoice out of mistake, it will create confusion and will lead to additional cost for the seller to do amendments.
6. Different countries have different rules and procedure to calculate the import duties and taxes. To facilitate assessment of custom duties and taxes by the custom authority of importing country, the seller is to provide breakdown of all costs separately as per applicable terms of sale. FOB (free on board) value of the goods and other charges related to transportation of goods such as freight charges, insurance cost, loading/unloading charges, packing cost, inland charges, are needed to be shown in the invoice separately to help buyer for calculation of import duty & taxes. That means the base price of goods must be shown along with other additional costs involved in the transportation separately in the invoice as per applicable terms of sale, enable the buyer to calculate taxes & duties as per the rules of the country.
7. As per normal trade practice, an exporter/seller needs to prepare & submit minimum three signed and dated copies of commercial invoice – one for himself to process the shipment, one for the buyer to handle the import and one for the custom authorities of the importing country.
8. Some countries require specialized forms of invoices (known as consular invoice) for imports entering into their countries. This consular invoice is to be collected from the Consulate office of the importing country and need to be prepared in the language of that country. In many cases these invoices have to be certified by the consulate office and/or Chamber of Commerce of the country involved.