What is the Commercial Invoice?
A commercial invoice is a legal document that records the transaction between two parties. It is issued by the seller, who is also termed the exporter, to the buyer, i.e. the importer. Apart from its use as evidence of sale, its primary objective is customs clearance and tax determination.
Significance of Commercial Invoice in an E-commerce Shipping and Delivery
Commercial invoice plays a vital role in inspection and taxation while also serving as a guarantee of payment.
- Verification and clearance: The shipping lifecycle is divided into several parts, where the shipments are received in multiple warehouses. A commercial invoice lists information such as product description, destination, etc. While changing hands, it is used to inspect the contents of a shipment. Furthermore, it is also used in customs to determine the duties per the listed products.
- Guaranteed payments: A buyer must pay the agreed price as the commercial invoice is legal proof of transaction. In case of a missed payment date, a merchant can also use it as a notice.
Prerequisites of Commercial Invoice and How It Works
A commercial invoice is issued when there is a transition between two parties. Therefore, a translation and a promise to fulfil are the two main requirements of a commercial invoice.
Once the seller issues a commercial invoice, it is used in the following ways.
- Changing hands: An intermediate contractor inspects the shipments before taking responsibility.
- Customs clearance: The invoice is referred by the customs office for documentation. Customs taxes are based on the products listed in the said invoice.
Use Case with Commercial Invoice
A buyer from Bangkok bought five pairs of jeans and requested their delivery to Manila city. The merchant issued a commercial invoice listing the products’ details, after which they were shipped. Upon entering the Filipino border, the customs duty was levied based on the commercial invoice before the final delivery. The buyer pays for the jeans and the shipping and customs duty to the last-mile courier.