Commercial Invoice Explained: What It is and How to Make One
March 31, 2023
A commercial invoice is one of the most important documents for every business that sells services and goods internationally. After all, a single mistake in your commercial invoice could end up in penalties or paying fines, and that’s the last thing you want your business to focus on.
If you want to learn all about commercial invoices, how to make one easily, and how to avoid any problems with customs authorities, you’ve come to the right place!
This article will break down all the important details regarding commercial invoices and show you how to make one with a generator so you can meet customs authority standards and regulations!
- A commercial invoice is used by businesses and sellers to request payments for internationally sold or shipped goods.
- It contains general information about the seller and buyer, payment terms, HS code, shipping and product details, invoice date and number, etc.
- Print three copies of the commercial invoice: one for the country where the product is exported, one for the country where the product will be shipped, and one for the buyer.
- The easiest and most efficient way to make a commercial invoice is to use an online invoice generator.
What is a Commercial Invoice?
A commercial invoice is a key export document businesses issue to solicit payment for internationally sold goods or services.
Customs authoritiesare responsible for regulating imports.They warrant commercial invoices to evaluate which taxes and tariffs are applicable to the goods you are exporting.
Commercial invoices often follow a pro forma invoice. A pro forma invoice is first sent to the buyer to give them an idea of the cost that will be reflected in the final invoice.
When is a Commercial Invoice Required?
You must present a commercial invoice when shipping goods across international borders. For example, if you’re a business based in the US that exports products to sell to a buyer who lives in Asia, you’re required to issue a commercial invoice.
However, if the shipment occurs within the same country, then a commercial invoice is unnecessary. This is also true in interstate shipping arrangements, such as when goods are sent from one US state to another.
What Does a Commercial Invoice Include?
The following are the essential details to include in a commercial invoice for international shipping:
#1. General Information
General information pertains to the buyer's and seller’s information. This includes their full name, street address, contact details, logo, postal code, city, and country. If the buyer is a business entity, then include their tax ID number in the invoice.
#2. Invoice Date and Number
The invoice date is the date the invoice is issued.
Invoice numbers, on the other hand, must be unique and sequentially arranged to keep your orders and inventory organized and help track which orders have been processed or need follow-up.
The chronological invoice numbering system is one of the go-to formats used by most businesses. It includes the date and the sequential number for the invoice, which should appear like this: “2023-01-01—0005”.
Another format you can use is customer invoice numbering, which entails assigning a number combination to each of your customers, followed by the issue date and the sequence number. Say you assigned the number ‘44’ to Customer A. The invoice number should look like this: “44-2023-03-28—0007”
#3. Shipping and Product Details
The shipping and product details include anitemized list of goods or products to be shipped. The customs department uses the list to check the contents, items, and prices of the package.
It must contain the following details:
- Item code (Stock Keeping Unit/SKU Number). Retailers assign an alphanumeric combination to each product for inventory and supply management.
- Product name. The name of the product and a brief description.
- Quantity. The number of items or products in the package.
- Net weight. The weight of the product that discounts the added weight of its packaging.
- Gross weight. The combined weight of both the item and the packaging.
- Unit price. The individual value of the item per unit of weight or volume.
- Total price. The total amount of the products in the package per product line.
- Subtotal. The combined total price for each item.
#4. Harmonized System (HS) Code
The HS code is used to classify goods based on the type, purpose, and nature of the product. It enables customs tax authorities to assess the correct amount of taxes and tariffs to impose on the product and determine any additional actions that must be implemented when handling and shipping the product.
The Harmonized System Code is updated every five years by the World Customs Organization. If you are unsure about the correct codes to use for your items, contact your local tax agency or the manufacturer of the goods you are selling.
#5. Country of Origin
The country of origin refers to the country exporting the goods. If you are shipping to Haiti, Namibia, Bolivia, Pakistan, or Cambodia, you are required to provide a Certificate of Origin (CO).
The CO provides a substantial reference for assessing your eligibility as a seller to export goods to a specific country.
#6. Payment Terms
The payment terms detail the concise time frame the buyer must follow to complete the payment for the goods. It informs the buyer of the exact amount to pay for the item and the payment methods they can use.
Payment terms also highlight internationally recognized terms of sale overseeing the export and import of goods by clarifying who is responsible for the following:
- Shouldering shipping costs, product insurance, and added charges made by the customs department
- Transporting the products from one point to another
- Handling and overseeing the goods at each stage of delivering the product
#7. Additional Notes
Additional notes contain any extra information that must be passed on to the buyer or customer. It can either be added payment instructions, warranty details, or even a simple ‘thank you’ note.
Commercial Invoice Glossary
Here are some of the most common terms you can find on a commercial invoice:
Actual Gross Weight
The total weight of the product.
Country of Origin
The country where the shipped goods originated or are produced.
The buyer (could be an individual or a business) to whom the products are being sent or shipped.
CO (Certificate of Origin)
A document that helps verify the country where the product is manufactured or produced.
The currency in which the values of the items are listed in.
A document that is required for specific merchandise that entails a license exception.
The transport costs for the item or package.
HS (Harmonized System) Code
It classifies goods based on product type, nature, and purpose for tax purposes.
Incoterm / Terms of Sale
The billing and payment terms agreed upon by the buyer and seller.
Invoice Line Total
The total price of all items plus the packaging weight in the shipment.
The total weight of the goods to be shipped, minus the packaging’s added weight.
The payment method and the number of days that the buyer must follow to fulfill the payment for the goods ordered.
It contains an appraisal cost that will be reflected in the final invoice.
Reason for Export
It specifies the objective for exporting the goods, such as making a sale or supplying items for a business operation.
Quantity of Units
The number of items per unit contained within the package.
A type of tax levied on imported products.
The corresponding value per unit of the item.
Tax Identification Number
A tracking number issued by the SSA or IRS to monitor taxes. It is also used to identify businesses acting as buyers in transactions.
It is similar to the Tax Identification Number, albeit used in European businesses or companies.
Employee Identification Number (EIN)
This is the US counterpart of a VAT ID.
How to Create a Professional Commercial Invoice Effortlessly
Our invoice generator comes with free templates and a built-in calculator that lets you produce error-free and professional-looking commercial invoices. It’s super easy to use, and all you have to do is:
- Open the invoice generator.
- Fill in all the blank fields with the correct information.
- Preview the document and download it.
You’ll receive your commercial invoice in an instant and you’ll be able to forward it effortlessly via mail or email in digital format.
What to Do After Making a Commercial Invoice?
Once your commercial invoice is finalized, print three separate copies of the document. You must provide a copy for:
- The buyer
- The country exporting the goods
- The destination country to which the product or goods will be shipped
Make sure that all three copies of your commercial invoice are stored safely to keep them from being tampered with or lost. Secure the first two copies in a packing list envelope and place the copy that is meant for the buyer inside the package.
Commercial Invoice FAQ
#1. What should a commercial invoice include?
A commercial invoice includes the seller and buyer’s names and contact information, the invoice number and date, shipping and product details, the HS code, the country of origin, and payment terms.
#2. Can I make my own commercial invoice?
Yes, you can make your own commercial invoice. The best way to do this is to use a free online generator.
#3. What is the difference between a commercial invoice and invoice?
A commercial invoice is used in the international sale and shipment of goods. A standard invoice is used by sellers in locally based transactions to request payments for their services and goods.
#4. What is the main purpose of a commercial invoice?
A commercial invoice is used mainly to request payment for internationally sold services and goods. It ensures that sellers abide by the globally recognized trade and sale regulations.
A commercial invoice is a must if you want to sell your products and services globally. It provides all the key information about your product that the customs authorities in your target destination must know for them to impose the correct taxes, tariffs, and duties on the shipment.
Preparing commercial invoices takes on a higher standard when it comes to consistency and precision. Understandably, you might eventually find yourself pressed for time to generate perfect invoices from scratch for all your international clients.