These days, it's pretty standard for companies to ship products internationally. If you want to do this, too, you'll need to familiarize yourself with the proper use of commercial invoices.
What is a commercial invoice? These essential documents are used to fulfil the requirements associated with international shipping. Today, we'll take a closer look at commercial invoices, so you can learn how to create an invoice of your own.
What is the difference between a commercial invoice and a standard invoice?
Every invoice you send serves the same purpose: to request payment from the recipient. An invoice functions as a bill, though an invoice will contain additional information such as the contact info for the business, a description of the products or services rendered, and payment terms.
The main difference between a standard invoice and a commercial invoice is found in the purpose of each document.
What is a commercial invoice used for? Commercial invoices are documents that are designed for international trade. Therefore, a commercial invoice differs from a standard invoice since it contains details that help your packages get through Customs.
Do I need a commercial invoice?
In most cases, a commercial invoice is a legal requirement for businesses engaged in overseas shipping. Commercial invoices are among the most important documents your business will create if you do any business overseas.
A commercial invoice ensures that your shipments reach their destinations on time while fulfilling all of the requirements associated with international shipping. First, a commercial invoice will help Customs officials to determine what taxes and import duties apply to your package. Secondly, a commercial invoice will ensure that you've provided enough information for your package to enter the destination country.
Failing to provide a commercial invoice (or omitting critical information from the document) can prevent your shipment from arriving on time. It can also lead to underpayment for import duties and taxes. The latter can have legal ramifications for you and your business, which is why you must complete your commercial invoices in full.
What must commercial invoices include?
Your commercial invoice must contain a fair amount of detail to clear Customs. A packing list alone will not be sufficient, as a packing list does not contain the relevant information that Customs authorities require. This information will often include:
- Your contact information
- The shipping method
- A reason for export
- Total value of the shipment
- Contact info for the buyer
- Invoice number
- Invoice date
- Description and quantity of goods (including weight)
- Payment details
- Harmonized System (HS) code
- Insurance costs
You might already know the invoicing process used with standard business invoices for domestic shipments. But some of these terms might be new or unfamiliar. Don't worry; we'll walk you through a step-by-step process so that you can quickly and easily create your own commercial invoice.
How to create a commercial invoice
It may surprise you, but there's no real standard format for a commercial invoice. But that doesn't mean that your company can't create its own commercial invoice template to assist with international shipments.
You can use the following steps to generate a commercial invoice, ensuring that you comply with all legal requirements.
How to create a commercial invoice?
- Insert your company logo
As with any invoice, you can customize your document by including your corporate logo. Even if you don't have a logo, make sure to put your company name in bold, easily-recognized letters at the very top of your commercial invoice. Doing this can help you stand out and increase brand awareness with your international clients.
- Label your invoice
Don't count on your recipients to identify your document at a glance. Labeling your commercial invoice helps all parties involved understand the document's importance. When the recipient sees it, they should know they're being asked to render payment for the shipment they have received.
- Add your company contact information
Next, you'll insert your company name and contact information. You can include any information you prefer, though it's customary to have details such as:
- Business name
- Physical address
- Phone number
- Email address
It may also be helpful to designate a point of contact at your company who will be responsible for sending the invoice and receiving payment. If you designate an employee, you might also list their name ("ATTN: John Doe") under your business name. You can then list their contact details, such as their extension or email address.
- Specify the country of origin
This step may seem a bit redundant, especially if your country is included under your contact info above. But it's plausible that a company could operate in one nation but manufacture goods in another and even have an overseas warehouse for shipping and receiving.
Including the country of origin prominently on your commercial invoice will make it easier for Customs authorities to process your shipment, which can make the entire shipping process smoother.
- Include the shipping method
In addition to the origin and destination of the shipment, a seller should also include the method of transport on a commercial invoice. This means you'll specify the exact method of transportation and as many details about the shipping route as possible.
You may hear this data referred to as "incoterms," which is short for "International Commercial terms." It's customary to provide detailed information about the methods and people responsible for each step in the shipping process.
Including these details will provide additional context for Customs workers to understand how these goods are being brought into the country. In turn, this can expedite the Customs process and get your packages to the buyer on time.
- List the contact information for the buyer
Just as you recorded your company's contact information, you'll also record the contact info for your buyer. This includes the same basic details as above, including:
- Name of the buyer or business
- Physical address
- Email address
- Phone number
As before, if the buyer provides you a point of contact, it's perfectly appropriate to include this individual information, so long as the other information accurately reflects their business details and the destination of your packages.
- Record the invoi
Next, you'll record the invoice number and the invoice date. What is a commercial invoice number? This number is primarily used for internal accounting purposes and is used by both buyers and sellers. it can be matched to a corresponding purchase order number. Together, these numbers can be used to track outstanding invoices and your cash flow.
Your customer may also be expecting to match invoice numbers with a purchase order number for their own accounting needs. These numbers don't really impact the Customs process, but they can be important for monitoring your shipments and payments.
The invoice date should reflect when the invoice was sent — not necessarily when the shipment was received. This will become important in establishing a deadline for outstanding invoices and receiving prompt payment from your clients.
- Include a description of the goods being sold
The next section will likely be the longest, depending on the variety of goods you're shipping. Here, you'll include the quantity and description of every item within the shipment.
Be specific. Part numbers may be helpful for your inventory purposes, but Customs authorities will expect to see detail about the type of goods you're shipping and even the material they're made from. For example, if you're sending t-shirts, you'll want to specify "Men's shirts, 50% cotton, 50% polyester."
Make sure to include the correct amount and price of each item to comply with duty requirements and other fees. You'll also include the gross weight and the net weight of your shipment. Your net weight reflects the quantity of goods being shipped, while the gross weight will also include the weight of any packaging or shipping materials.
- Record the HS code
What is an HS code? Sometimes referred to as the "export code" or "commodity code," the Harmonized System Classification is a standardized way of sorting products involved in international trade. Typically, the HS code is 10 digits long. Customs agents will use it to assign duties and taxes to the items you're shipping.
It's also customary to include a brief summary of your shipping contents below this code. That way, there will be no confusion about the nature of your products. This is essential for the Customs process. Underpayment of your duties and taxes can have legal consequences for you and your business.
- Record the order total
The next section is standard for any invoice. Here, you'll record the subtotal of all items that the buyer will receive, as well as the grand total once you factor in additional fees or any applicable buyer discounts.
Customs agents may pay particular attention to this section to verify that the transaction is legitimate. Make sure that you include the correct price of each item. You may also be expected to provide proof of the transaction to satisfy the Customs agents.
Remember, as the seller, you're responsible for paying all duties and taxes associated with international trade. Therefore, your commercial invoice should not include these fees unless you've made prior arrangements with the customer as part of a contractual agreement.
- Communicate your payment process
As with any invoice, you'll need to include information about your preferred payment method(s) as well as the terms of the sale. In other words, communicate clearly whether you take credit cards, check, or other payment methods.
You can also communicate any penalties or fees for unpaid or overdue invoices. Encourage your clients to pay promptly by assessing a small (10% to 15%) charge on any invoices that are not paid by the deadline.
You can choose any deadline you wish, but it's common for the seller to specify that money must be received within 30 days of the invoice being sent.
Conversely, you can also offer a small discount as a thank you to customers for paying within a week of receiving their invoice. This ensures a faster transaction and builds goodwill with your customers.
- Record your insurance information
Finally, you'll want to provide proof of any insurance on the freight you're sending. It's also important to include the details about the person maintaining the insurance policy, the cost of the policy, and some basic information about the terms.
Change the way you invoice
Whether you're involved in international or domestic commerce, invoices are among the most important documents your company will use. Why not make the invoicing process as simple as possible?
Frequently asked questions
Some countries have specific requirements about the ways you transport freight in and out of their borders. But here are some common questions regarding shipping costs and other issues associated with an international sale.
Import duty varies widely. It is determined by individual governments. To calculate the price of your import duty (and how it will affect your shipping costs), you can use this tool from the International Trade Administration, which includes data from 170 countries.
What should you do about currency? As the seller, the currency you accept is up to you, though even U.S.-based invoicing software (such as the kind offered by Invoice2go, a Bill.com company) offers features to help you process foreign currency. This can potentially broaden your options when it comes to international commerce, helping you to diversify your client portfolio.
An EORI number (short for "Economic Operators Registration and Identification Number") is a number used by Customs agents throughout the European Union. Unless your business is operating in one of these EU countries, you won't have to have your own EORI number.