What Is a Commercial Invoice and What Is It Used for?
In international commerce, a commercial invoice is a special export document requesting payment for goods or services. It is intended to keep shipments moving through customs quickly and efficiently by identifying what taxes and import duties customs officials need to calculate and apply to a package.
A commercial invoice is issued by a seller or exporter and received by a buyer or importer. It functions as both a binding contract and a bill of sale. Required details may differ depending on location, industries, or the goods being shipped, but a commercial invoice usually includes all terms agreed upon between the buyer and seller, as well as the quantity, price, and value of the items being shipped. It may also be a required document to instruct a bank to release funds to a seller.
What is the difference between a commercial invoice and a sales invoice?
It can be easy to confuse a commercial invoice with other varieties of invoices. The most important difference is that a sales invoice can be any document that includes the details of a transaction and requests payment after a product or service has been delivered. A commercial invoice, on the other hand, is used exclusively for international deliveries. It may include details, such as country of origin and regulatory compliance information, that are not included in a standard sales invoice.
What is the difference between a commercial invoice and a CN22 or CN23 form?
CN22 and CN23 forms are another common point of confusion for international shipments, because their function initially appears very similar to that of a commercial invoice. Both documents are required by customs officials to track what goods are being shipped. Unlike a commercial invoice, which must be included with all international shipments, a CN22 or CN23 form applies only to shipments from a European Union country to a recipient outside of the EU. They are usually used with deliveries made via a postal company rather than a private company such as DHL or UPS. The same shipment may require both a commercial invoice and a CN22 or CN23.
What Does a Commercial Invoice Include?
The specific information required in a commercial invoice depends on the industry, the specific goods being shipped, what countries are being shipped to and from, and a number of other unpredictable factors. Even without a standard format, however, there are some key pieces of information that need to be included in order to make a commercial invoice legally binding.
1. Contact information in the header
The header of your invoice needs to include accurate contact information for both the buyer and the seller. In both cases, that entails:
- Business name
- Street address
- Phone number
- Postal code
Tax identification number (This is generally a value-added tax (VAT) number in the EU, or an employee identification number (EIN) or federal tax identification number (FTIN) in the US.)
2. Invoice Number
A unique invoice ID number is essential for organization and tracking purposes, and helps to prevent duplicate payments and other costly errors.
3. Invoice Date
The payment due date for your invoice is either decided by your business’s standard operating procedure or agreed upon beforehand between the shipper and receiver.
4. Itemized Product Details
Every commercial invoice needs to include a detailed accounting of whatever is being shipped. These details should include everything in the package, such as:
- SKU number or code for the product
- Name of the product
- Brief description of the product
- Net and gross weights of the items being shipped
- Unit price or value
- Total price of all items in the shipment
- Subtotal for the entire invoice
5. Harmonized System Code
A Harmonized System (HS) code is required by the World Customs Organization (WCO). The code helps sort the shipment into categories determined by its type and purpose. This information is used by customs authorities to determine which taxes, tariffs, and duties apply to the shipment.
6. Country of Origin
Customs officials require a commercial invoice to identify the country that produced all goods included in the shipment. Depending on the country, this may
7. Terms of Sale
Payment terms for a commercial invoice are spelled out by the International Chamber of Commerce (ICC) and are also known as Incoterms. They establish who is responsible for shipping, insurance, and customs costs, who is liable for the shipment at each stage of its journey, and who is responsible for transporting the shipment where.
Commercial Statement Example
To illustrate the essential elements of a commercial invoice, we’ve put together a basic example template. Note that this example is considerably simplified and that the contents of an actual commercial invoice will vary according to an organization’s specific data.
Why Is a Commercial Invoice Important?
To quote the International Trade Administration, “A commercial invoice is a required document for the export and import clearance process. It is sometimes used for foreign exchange purposes. In the buyer’s country, it is the document that is used by their customs officials to assess import duties and taxes.” In other words, a commercial invoice helps to ensure the accuracy, timeliness, and completeness of shipments while also making sure that appropriate levels of taxes and duties are collected.
For example, if a machinery manufacturer in Romania is shipping a product to the United States, providing detailed information about the type of machinery and its materials, dimensions, weight, and value is crucial for customs officials to provide a quick and accurate assessment of import duties and taxes. That helps to ensure both that the U.S. buyer receives the shipment on time and as-described, and that the Romanian manufacturer receives a speedy and full payment for its products.
What Are the Risks of an Incorrect or Missing Commercial Invoice?
Providing accurate commercial invoices is a legal requirement for international shipping. Failure to comply with that requirement can result in fines and legal penalties, including having shipments held by customs. In an industry that depends on reliable shipping schedules, any shipping delays can quickly become costly.
Additionally, an inaccurate commercial invoice can lead to incorrect assessments of customs taxes and duties. The resulting underpayments and overpayments can then lead to further legal issues, delays, and strained client relations.
Create Commercial Invoices with
Document Automation Software
MHC document automation solutions were designed specifically to meet the needs of high-volume enterprise organizations. Our goal is to empower teams with a document creation and distribution system that can be used even by less tech-savvy employees. At the same time, we offer a solution powerful and flexible enough to handle the demands of businesses that generate large volumes of complex documents.
That extends to creating commercial invoices for high-volume organizations. MHC document automation includes user-friendly template management and data integration to ensure that your invoices are complete and on-brand. Streamlined document workflow management, configurability for business users, and batch or on-demand document generation speed up the process of creating and distributing commercial invoices. Interactive forms and smart documents allow users to build more versatile and accurate invoices to ensure customer satisfaction.
The Benefits of Using Document Automation for Commercial Invoices
Creating and distributing commercial invoices needs to be a fast, accurate, and consistent process. That makes it an ideal area for implementing automation. Integrating a document automation solution into your existing software system can speed up and simplify your commercial invoicing process in a number of ways, including:
- Batch and on-demand capabilities – Some clients require commercial invoices to be produced in large volume, while others need special handling to meet their specific needs. MHC EngageCX makes it easy to maneuver smoothly between high-volume batch orders and on-demand invoicing that requires more specialized data or formatting. That enables your business to serve a wider range of customers of different sizes and needs.
- Improved regulatory compliance – Producing commercial invoices without the assistance of an automated system makes the risk of incomplete, incorrect, or fraudulent data considerably higher. Automating invoice creation helps to ensure that every document is consistent and correct. That reliability is key when a compliance error can lead to customs delays, fines, and late shipments that can damage partner relationships.
- Integration with complex workflows – For an organization with a variety of enterprise systems, incorporating new software that works everywhere it’s needed can be a challenge. EngageCX’s open API framework and user-friendly controls are designed to integrate easily with nearly any business system and infrastructure. That makes it easy to integrate data from a wide range of workflows and internal systems, eliminating the need to assemble that data manually.
- Improved customer experience – When it comes to commercial shipments, speed and accuracy are of the essence. An automated document creation solution that can easily scale to match the needs of individual customers makes it easier to provide a consistent customer experience. EngageCX offers a deep library of reusable content fragments that make it simple for even non tech-savvy employees to build scalable documents, make changes, and create invoices that meet their customers’ needs.
- Smart documents – EngageCX allows users to build interactive documents that help them stand out from the competition while providing more functionality and accuracy than traditional invoices. Embed video or audio files, add interactive buttons and hyperlinks, and include product photos that make your commercial invoices more dynamic and useful.
- More brand awareness – Automating your commercial invoice creation provides more opportunity to incorporate logos and branding into your documents. Omnichannel distribution also makes it simple to distribute invoices via multiple channels, making it no problem to deliver documents via email, SMS messaging, online forms, or whatever platform your customer prefers.
What is the Difference Between Commercial Invoices and Similar Documents?
What is the difference between a commercial invoice and a pro forma invoice?
A commercial invoice includes the actual price and payment for the goods or service, while a pro forma invoice provides a bid, estimate, or other projected price. A pro forma invoice is not a legally binding document.
What is the difference between a commercial invoice and a bill of lading?
A commercial invoice is a contract issued by a seller to a buyer that serves as evidence of an international sale. A bill of lading is a contract between a seller and a shipping company that may be domestic or international.
What is the difference between a commercial invoice and a customs invoice?
While both commercial invoices and customs invoices are required documents for international trade and customs, the primary purpose of a commercial invoice is to serve as proof of the terms and value of a transaction. A customs invoice is specifically focused on providing details necessary for customs clearance.
What is the difference between a commercial invoice and a packing list?
A packing list is a document of the number of items included in a shipment, the weight and dimensions of those items, and the number of containers being shipped. Some of that information will also be included in a commercial invoice, but that document’s primary focus is confirming the value of a shipment.
What is the difference between a commercial invoice and a VAT invoice?
While a commercial invoice is general proof of the value of a shipment or transaction, a Value-Added Tax (VAT) invoice is a specific tax invoice that is required only for businesses that qualify for the European Union’s VAT consumption tax.
What is the difference between a commercial invoice and a tax invoice?
A commercial invoice is issued by a seller to specify the goods or services, terms of sale, and value of a shipment. A tax invoice is issued by a supplier and specifically focuses on the amount of taxes payable on the goods or services being shipped.
What is the difference between a commercial invoice and a purchase order?
A purchase order is a document sent by a buyer to a vendor or supplier that includes tracking and order details vital to tracking the purchasing process. A commercial invoice is sent by a seller to a buyer in an international transaction and establishes the value of a shipment.
What is the difference between a commercial invoice and a waybill?
A commercial invoice is focused on establishing the value of a shipment sent internationally. A waybill is not concerned with value and instead provides instructions about the shipment of goods or services.
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