July 27th, 2021This blog is going to focus on the commercial invoice and for good reason. Having a full and complete understanding of the commercial invoice does one thing – speeds up the customs process. You get your products and into the hands of your customers much more quickly. You turn your profits faster. How is this accomplished?
What is a commercial invoice?
The commercial invoice is a legally binding document between the exporter, in this case, Sourcing Nova, and you, the buyer of the Chinese products. The invoice will clearly state the products sold and amount due. It is, for all intents and purposes, a bill for your products.
The commercial invoice is necessary for the customs department of your specific country to determine tariffs, duties and taxes on products.
Additionally, the invoice helps with importation control. The invoice will also have required information such as form, content, number of copies, target language and other necessary characteristics.
Purpose of Commercial invoice
The commercial invoice is your bill for your Chinese products. Customs, as well as other people and parts of the sourcing chain, will use your invoice to determine taxes and duties. Here are the advantages you will earn with a correctly filled commercial invoice.
Delays
Delays are the bane of anyone ordering products from China. Whether it is your first order or your 100th order, a delay can ruin a business. This blog is going to give you the tips you need for customs clearance and a quick decision your products.
Identifies contents
Your products arrive from China but lack the international shipping documents, including the commercial invoice. Customs will hold the products for a much more thorough and full search of your products. This may not be the only time either. Your next order could be delayed even if you have the correct commercial invoice form on hand.
History of the products
The more information available for customs the better. A tracking history will demonstrate to the customs department the origin of your products, if the products crossed multiple borders and if any of the products are banned on entry.
Insurance
The commercial invoice sets the coverage amount on your products.
Chamber of Commerce
The chamber will only need the commercial invoice if there is a Certificate of Origin or Movement Certificate. The chamber will check to be sure the products on the application are the same as the products exported.
You as customer or buyer
You need to be sure you are getting what you have paid for in addition to anyone else who may have an interest in your products – banks or a finance company.
Logistics, freight forwarder or other brokers
Each, if a part of the chain, will use the commercial invoice for Incoterms and any international shipping requirements.
So far, you should have a full understanding of the why you need a commercial invoice. However, chances are you have already gotten a pro-forma invoice. Why do you need a commercial one as well?
Pro-forma vs. commercial invoice
These two invoices are almost the same but will differ in one way – the quantity may differ from the pro-forma to the commercial invoice. This is common within the international trade markets.
So, why are both necessary?
The pre-shipment – The pro-forma invoice
The pro-forma is part of the start of your Chinese product chain. It will give you the details on what to expect for your products except for the final cost. It does not have the final cost because there could be issues along the way with the manufacturer – problems obtaining sufficient raw materials, mistakes in the order or even problems at the shipper with loading the products.
The post-production – The commercial invoice
Your products are done, and you receive the commercial invoice. It will lay out all of the final costs, fees and information of your products as part of the final delivery to you.
Notice it does not say post-shipment. Post-shipment would mean the products are loaded and en-route to you. This is not correct.
Are there any other differences?
There are.
The biggest difference is the commercial invoice will be the final cost plus any export/import fees. It represents the costs for you after all negotiations, inspections and other steps, except shipping, are included.
Lastly, you may need permits for your products, and the commercial invoice can help you with that. If you need a letter of credit or similar, the commercial invoice will aid you.
A commercial invoice and a purchase order – any differences here?
Indeed. Again, it is the difference between pre and post. Here is a better breakdown by steps in the sourcing process.
Order confirmation
The purchase order is a confirmation to buy from the manufacturer.
The commercial invoice is confirmation of a sale from the manufacturer.
When created
The purchase order is made when you place an order.
The commercial invoice is made when your order is complete.
Who initiates
The purchase order comes from you, the buyer.
The commercial invoice comes from Sourcing Nova or the manufacturer.
What each defines
The purchase order defines the terms of the purchase of products.
The commercial invoice defines the confirmation of the sale of products.
What information is included?
The purchase order will have all of the following: purchase date, company name making purchase, description of products, price, payment, billing address, purchase order #, shipping address and delivery date.
The commercial inventory will have all of the same information but will also include: the invoice #, manufacturer information, credits or discounts from previous payments, payment schedule and total due.
Inventory control
The purchase order keeps inventory at a manageable level.
The commercial invoice prevents overpayment or duplicated payment.
Accounting purposes
The purchase order makes it easier to track products.
The commercial invoice makes it easier to calculate receiving and payable accounts.
Is there anything that is the same about purchase orders and invoices?
It would appear they are the same, and it is common to confuse the two as a consequence. The differences are lain out for you. Here are the handful of similarities:
Contracts
Both are legally binding for you and for the manufacturer.
Shipping documents
Both are considered international shipping documents.
Details
Both have all of the important details for payment, shipping, tracking and contact information for you and manufacturer.
Unique number
Both will have a unique number. This is common practice for tracking, inventory and accounting.
Commercial invoice template
There are plenty of sites online as well as most office software suites that will have blank invoice template samples. Most are also free. You can use the blank template or create your own, provided you have the correct information included.
Remember: If you miss any of the required information on your commercial invoice, your products will be held up at customs. This will not sit well for you or your customers. Get all of the information correct on your blank invoice template at the outset. All will go well if you do.
Make certain your commercial invoice and invoice template has a section for transportation charges and services you are paying. The U.S. does not charge duties on transportation costs. Clearly noting the differences in these costs will protect you from unnecessary duties, tariffs and fees.
The blank invoice template
Your blank invoice template needs to have the following information. This information will be on a separate line for each item.
Exporter information
The blank invoice needs a section for the exporter – Name, address, contact information and the like
Importer information
The blank invoice needs a section for you – Name, address, contact information and the like.
Where to ship
If the products are not coming to you directly, the person and location should be listed clearly on the invoice sample.
Invoice number
The specific number of the invoice coming from the exporter.
Terms of sale
This refers to the specific Incoterms of the products.
Terms of payment
The payment terms as laid out by the pro-forma invoice, purchase order and letter of credit if included.
Currency of payment
The currency agreed on between you and Sourcing Nova.
Method of transport
There are two primary: air and sea. Products going to Europe can go via rail.
Product breakdown
This will be the quantity – total units; description – the items, container, gross container weight and unit of measure (net and gross in kg) of the products. Each will be on a single description line.
Unit price
The price of each individual unit for sale.
Extended price
The total value of the products is listed.
Commercial price
The price you will sell for each product.
Package marks
The number of packages and each individual package. For example, 1 of 7; 3 of 7 and so on. The shipping company name, country of origin (Made in China), port of entry, weight in kgs., package size (length x width x height), Bill of Lading # and shipper control number (not required.)
Miscellaneous charges
These may include packing, insurance, in-country shipping and the like.
Certifications
Any required of the shipper is recorded clearly on the commercial invoice.
After filling in the information
Again, double check the information. Be 100 percent certain you have everything you need on the commercial invoice blank before you download and/or print.
Make three copies
You need three copies – one for China, one for your home country and one for you.
At the bottom
On each copy, you will need the following:
- Declaration and signature to validate the information on the invoice
- Stamp, date and signature of the customs agency that the products cleared
Final thoughts
The commercial invoice is something that cannot be rushed or overlooked for your products sourced from China.
Are you done with your product research and ready to order? Leave us a comment below on what products you want to source. Sourcing Nova will help you every step of the way.
