GLOBAL SELLING BLOG

What is a commercial invoice? Know its importance in exports

A commercial invoice is a legal document used in international trade to process agreements. Here’s a guide to understanding its uses and how to obtain it.

From facilitating customs clearance to establishing terms between buyers and sellers, accurate paperwork can significantly impact the success of an export transaction. One such key document is the commercial invoice, which serves as a detailed record of the goods sold. In this blog post, we will discuss what a commercial invoice is, as well as its contents, uses, and importance in exports.

What is a commercial invoice?

A commercial invoice is a legal document used in international trade that confirms the sale of goods and authorizes payment from the importer to the exporter. It is one of the main documents used for the determination of customs duties.¹

Why is a commercial invoice important?

A commercial invoice facilitates seamless shipment movement, provides legal protection and fosters positive relations with customs authorities. The following are some reasons why a commercial invoice is necessary in exports:

1. Helps in customs clearance

Commercial invoices facilitate customs clearance by providing necessary information about a shipment which helps determine duties, taxes, and compliance with customs regulations.

2. Acts as a transaction receipt

A commercial invoice functions like a receipt that validates the agreement between both parties and the associated payment terms.

3. Maintains transaction record

A commercial invoice provides a comprehensive transaction record for accounting and tax purposes, minimizing the risk of audits and ensuring transparency in international sales revenue.2

What are the uses of a commercial invoice?

Some of the key uses of a commercial invoice in export are:

1. Evidence for claiming payment:

A commercial invoice also acts as proof of sale and evidence to claim payment, preventing an importer from rejecting a transaction.

2. Assurance of payment:

Although a commercial invoice is not a payment receipt, it plays a key function in payment assurance since it is a legal document that verifies that a transaction has occurred.

3. Check for accuracy:

One of the most important advantages of a commercial invoice is that it gives the importer sufficient information to confirm the accuracy of orders and receipts. ³

Contents of a commercial invoice

Businesses may need to adjust their commercial invoice format based on different countries' customs regulations. However, every commercial invoice should include certain fundamental categories of information. These are as follows:

1. Information about the exporter and importer

A commercial invoice must clearly outline details of both the exporter and the importer involved in the transaction.

2. Business logo

If applicable, the logo or name of the issuer should be included in the header of the commercial invoice.

3. Contact information

The names, addresses, email IDs, and phone numbers of both the exporter and the importer should be provided.

4. Tax IDs

The tax identification numbers or their equivalents specific to each country for both the seller/exporter and the buyer/importer should be included.

5. Information of the notified party

Details of who gets notified upon the goods' arrival at the destination – typically the forwarding or shipping agent – should be mentioned.

6. Transaction details

The invoice should provide detailed purchase information to ensure a smooth customs process and allow officials to accurately assess taxes and duties.

7. Invoice number

Invoice number should be included.

8. Date of issuance

The date on which the invoice was issued should be mentioned.

9. Order number

An order number should be added for ease of identification.

10. Total sale amount

The overall value of the shipped goods should be stated.

11. Payment terms

Payment terms, including payment methods, currency, and due date should be mentioned.

12. Shipment information

The invoice must include detailed information about the shipment, including bill of lading number, HS code, details of the goods being transported, shipping date, country of origin, etc. ⁴

Difference between commercial invoice and packing list

While packing list and commercial invoice may seem similar, they serve distinct purposes. Some key differences between these two documents are as follows:

Aspect

Commercial Invoice

Packing List

Purpose

Provides financial details and serves as proof of sale.Provides financial details and serves as proof of sale.

Lists the contents of the shipment for logistical purposes.Lists the contents of the shipment for logistical purposes.

Information Included

Focuses on the transaction details, including prices and terms of sale.

Focuses on the physical contents and packaging of the goods.

Focus

Includes buyer/seller details, invoice number, description, quantity, price, terms of payment, and total value of goods.

Includes detailed description of goods, packaging, weight, and dimensions of each package.

Used By

Primarily used by customs authorities and for payment processing.

Used by logistics teams, customs officials, and the buyer for verifying shipment contents.

Document Type

Financial document.

Logistical document.⁵

A commercial invoice is more than just a billing document; it is a key component in ensuring smooth international trade transactions. By providing essential details for customs clearance and payment, it helps both traditional and e-commerce exporters meet legal and financial obligations. For more assistance with export documentation, Indian exporters can leverage the tools and services offered by e-commerce export programs like Amazon Global Selling.

Amazon Global Selling: Easy e-commerce exports and hassle-free shipping

If you are a business owner and you want to sell your products across the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18+ Amazon global marketplaces. As an e-commerce exports program, Amazon Global Selling provides support and guidance at every step of your exports journey – documents and licenses, logistics, payments, advertising, and more.

Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfilment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping, helping businesses navigate customs and reach a vast audience.

Frequently Asked Questions

What are the uses of a commercial invoice other than export?

Apart from exports, a commercial invoice is used for other purposes like:

• Maintaining records
• Evidence of sale
• Assurance of payment
• Accuracy check⁶

How is a bill of bading different from a commercial invoice?

A commercial invoice is a legal document supplied by the exporter to the importer in an overseas selling transaction, while a bill of lading (BoL) is an official contract between the exporter and the shipping company, containing information on products sold, payment details, and address of the receiver.7

What is the time limit for raising a commercial invoice under Indian law?

Under Indian law, a commercial invoice must be issued during the shipment or delivery of goods or services, but no strict time limit is specified. However, prompt issuance is crucial to prevent delays or payment issues. ⁸

When is a commercial invoice issued?

Once the deal is finalised and the goods are prepared for shipping, the exporter sends the importer a commercial invoice.⁹

To understand export regulations and documents for your business, click here

Who issues a commercial invoice?

The exporter issues a commercial invoice to the importer. ¹⁰

Published on June 20, 2022.

Sources:

1. https://www.trade.gov/common-export-documents
2. https://happay.com/blog/commercial-invoice/#
3. https://fincent.com/glossary/commercial-invoice
4. https://statrys.com/blog/commercial-invoice#when-is-a-commercial-invoice-issued
5. https://www.trade.gov/common-export-documents
6. https://nimbuspost.com/blog/what-does-commercial-invoice-mean/#
7. https://cleartax.in/s/commercial-invoice-vs-bill-of-lading
8. https://happay.com/blog/commercial-invoice/
9. https://happay.com/blog/commercial-invoice/#
10. https://happay.com/blog/commercial-invoice/#

What is international trade: All you need to know about its importance and advantages

What is an export invoice under GST?