So, your products are safely packed and new international customers are eagerly waiting for them to arrive. Now you just need to get your goods to them by air, land or sea, but to do that you’ll need to produce a commercial invoice.
What is a commercial invoice?
A commercial invoice is a document created for international shipments containing important information about the export. It includes extra details than regular sales invoices to calculate tariffs and confirm the shipment is legal. Commercial invoices are also used to create a customs declaration.
What are commercial invoices used for and why are they important?
Getting your commercial invoices right is essential for preventing hold-ups with your shipments and staying on good terms with customers and customs authorities. In the sections below, we’ll look at what you need to include on your commercial invoices to ensure the shipping process runs smoothly for you (the seller) and your overseas buyer.
What should a commercial invoice include?
- Although there isn’t a standardised format for a commercial invoice, there are several pieces of information it must include.
- The country of origin of the goods
- How it’s being transported and the route
- The total value of the goods
- The full contact details of the buyer, including their full name, address and telephone number
- An invoice number and date of issue for the commercial invoice
- The terms of sale such as the price paid by the buyer, as well as the payment method, currency and any applicable discounts or extra charges
- The quantity of goods, gross weight and net weight, and the number and weight of packages included
- The Harmonised System (HS) tariff code and a description in plain English of the goods
- Incoterms, including details on delivery and payment
- UK EORI number. This is your Economic Operator Registration and Identification number. If you don’t have one, you can register here.
Here’s more detail on a few of the key points above:
Country of origin
This means where the goods were manufactured, in whole or in part. For instance, if the product is manufactured entirely in the EU and exported to a country that gives preferential treatment to EU nations, it might be given lower or nil rates of duty when it reaches the destination country.
The HS tariff code
Goods shipped outside the EU must be labelled with a commodity code that categorises them and thereby determines the correct taxes and duties. The Harmonised System (HS) is the global naming scheme that specifies in 8 to 14 digits exactly what a product is and even what it’s made from. You can use the official Trade Tariff tool to lookup the correct codes for your commercial invoices.
Incoterms
International Commercial terms are predefined commercial terms used across the world to set out the fine points of how goods are shipped and who, between the sender and recipient, is responsible for each step. Incoterms on your commercial invoice should define in precise language where the goods will be delivered, who arranges transport, who is responsible for arranging and paying for insurance and who handles customs, including duties and taxes.
When is a commercial invoice required and for which countries?
Commercial invoices are required...
It used to be that only exports from the UK to countries outside the EU strictly required commercial invoices – goods sent within the EU were in ‘free circulation’ and could be moved without customs controls or charges. However, Brexit promises to shake up the rules – it’s just not clear yet what that will look like. To be safe, make sure you have an EORI number that starts with ‘GB’ for inclusion on your commercial invoices. It can take as little as five minutes to get one. Commercial invoices to all countries outside the EU require that number too, along with the other pieces of information listed earlier.
What’s the difference between a proforma invoice and a commercial invoice?
Both proforma and commercial invoices are used in the global trade process, and they often feature most, or even all, of the same information.
The main difference is that a proforma invoice is created before goods or services are produced or shipped. It confirms the buyer’s purchase request and the provisional quantities and prices of the goods. It gives the buyer a chance to check the arrangement before the purchase proceeds.
In contrast, the commercial invoice is issued when the goods are shipped and confirms the finalised details of the sale, which may differ slightly to the estimate that appeared on the proforma. For example, if you don’t have enough stock to meet the full order or the price has changed slightly since the proforma invoice was created, this will be reflected in the commercial invoice. The commercial invoice also details how the buyer should pay you and the chosen currency for the transaction.
Which currency should a commercial invoice be in?
Whether you’re producing a proforma or commercial invoice, if you invoice in a foreign currency, e.g. your client’s native currency, you expose yourself to the risk of currency inflation. If the pound falls in value, your goods could be worth less than when you shipped them. Choosing to invoice in pounds passes the risk to the buyer. However, being unwilling to invoice in the buyer’s currency could make you less competitive. If you decide to invoice in a foreign currency, you can lower the risk by setting the exchange rate on the day of payment, charging more to cover losses, hedging the currency at a fixed rate using a forward contract.
