Commercial Invoice Explained: Uses & Importance in International Trade

A commercial invoice stands as a crucial document that bridges the gap between buyers and sellers across borders. It is essentially a detailed bill of sale provided by the exporter to the importer, outlining the specifics of the transaction and the goods being shipped. 

Understanding commercial invoices is imperative for smooth international transactions. They play a central role in customs clearance. This blog will discuss in detail about commercial invoices, its format, uses, sample, content, differences from tax invoice and proforma invoice. 

What is a Commercial Invoice?

A commercial invoice is a crucial document in international trade that serves as a seller’s bill provided by the exporter to the importer. It functions as a formal record of the transaction, detailing the sale of goods and facilitating customs clearance in the importing country.

This document includes essential information such as the names of both importer and exporter, origin and destination country, description of the goods, their value, and the terms of sale. It often features details like the invoice number, date, mode of shipment, and terms of payment.

Uses of Commercial Invoice

A Commercial Invoice plays a crucial role in international trade, serving multiple purposes that are essential for the smooth execution of business transactions across borders. Here’s a some of the uses:

Customs Clearance: Commercial invoice is used by customs authorities to determine the value of the goods being imported. The invoice includes details like the description of goods, quantity, price, and country of origin, which help customs officials assess the applicable tariffs.

• Proof of Sale and Ownership: It serves as a legal document that confirms the sale of goods from the seller (exporter) to the buyer (importer). It also outlines the terms of sale, including the agreed price, payment terms, and delivery conditions.
• Payment Processing: The commercial invoice is used by the buyer’s bank to process payments, especially in transactions involving letters of credit. It acts as a formal request for payment from the seller to the buyer.
• Compliance with International Trade Laws: The commercial invoice often needs to meet specific formatting and informational standards like Incoterms, accurate HS codes, and proper documentation set by international trade agreements and local regulations. It ensures that both parties are complying with international trade laws and agreements. 
• Facilitating Logistics and Shipping: The commercial invoice is used by freight forwarders, insurance companies and shipping companies to ensure that the correct goods are shipped and delivered to the right destination. 

Contents of a Commercial Invoice

The content of a commercial invoice mostly similar to a tax invoice. Here’s a breakdown of details needs to be included:

1. Basic Information

• Invoice Number: A unique number assigned to the invoice.
• Invoice Date: The date when the invoice was issued.
• Order Number: A reference number for the order.

2. Exporter (Seller) Information

• Company Name: The name of the exporting company.
• Address: Complete address of the exporter.
• Contact Details: Phone number, email address, etc.
• Tax Identification Number: Relevant tax ID such as VAT, EORI, etc.

3. Importer (Buyer) Information

• Company Name: The name of the importing company.
• Address: Complete address of the importer.
• Contact Details: Phone number, email address, etc.
• Tax Identification Number: Relevant tax ID such as TIN 

4. Shipment Details

• Type of Shipment: Details on whether it’s a sea freight, air freight, etc.
• Mode of Dispatch: The method used for shipping (e.g., air, sea, land).
• Name of Vessel and Voyage Number: For sea shipments.
• Date of Exportation: When the goods are shipped.
• Bill of Lading Number: For tracking and documentation.
• Forwarding Agent: Information of the shipping or forwarding agent.
• Marine Cover Policy: Insurance details if applicable.

5. Goods Description

• Description of Goods: Clear and detailed description of the items being shipped.
• Quantity: Amount of each item.
• HSN/HS Code: Harmonized System Code for classification of goods.
• Unit Type: Measurement units (e.g., pieces, kilograms).
• Unit Price: Price per unit of each item.
• Total Value: Total value of each item and the overall shipment.

6. Financial Details

• Currency: The currency in which the transaction is conducted.
• Total Sale Amount: The total amount due for the goods.
• Payment Terms: Conditions under which payment will be made (e.g., Letter of Credit, net 30 days).
• Terms of Trade: Incoterms (e.g., FOB, CIF) indicating the responsibilities of buyers and sellers.

7. Shipping Information

• Name of the Loading and Discharge Port: Ports where goods are loaded and unloaded.
• Destination of Goods: Destination address.
• Country of Origin: Where the goods were produced or manufactured.

8. Additional Details

• Signature: Signature of the authorized representative of the exporting company.
• Date of Signing: Date when the invoice was signed.
• Special Instructions or Terms: Any additional terms or conditions relevant to the shipment.

Commercial Invoice vs. Tax Invoice vs Proforma Invoice

Note: The “Commercial Invoice” and “Tax Invoice” could be used interchangeably due to the lack of any rule or law defining “Commercial Invoice” specifically. 

Commercial Invoice Sample