Introduction:Commercial Invoice plays a primary role in air cargo
When it comes to air shipments, efficient documentation plays a crucial role in ensuring a smooth and hassle-free transit process. Among the essential documents required for international trade, the commercial invoice holds particular significance. In this article, we shall explore the key aspects of a commercial invoice for air freight, its purpose, and how to create a comprehensive invoice that meets all the necessary requirements.
Understanding the Commercial Invoice: What is a “Commercial Invoice”
A commercial invoice is a legally valid document issued by the seller (exporter) to the buyer (importer) . It provides an itemised list of goods sold and which are being transported, The document will also carry the corresponding values of the goods.
It is the primary document for clearing a shipment through customs, be it export or import. The customs authorities at the airport of departure want to know the following:
- WHAT is being exported out of the country
- WHERE is the product going
- HOW is the shipment being transported
- WHAT are the terms of sale
- WHAT is the total value of the goods and finally
- IS there any form of prohibition placed on the export of the goods and/or on the destination
The Purpose
The commercial invoice serves multiple purposes, including facilitating customs clearance, determining the value for taxation and duties, and aiding in the smooth flow of goods through the supply chain. It is the proof of sale, a document of contract between the buyer and seller.
The Components of a Commercial Invoice for Air Freight:
Header Information: Begin by including the word “COMMERCIAL INVOICE” prominently at the top of the document. Provide the seller’s and buyer’s contact details, including names, addresses, phone numbers, and email addresses. Also, mention the invoice number, date of issue, and any relevant reference numbers, such a PO numbers (Purchase Order).
Important: A commercial invoice and a Pro-Forma invoice are not the same. A pro-forma invoice is valid only in a very few cases
Shipment Details
Clearly state the shipping terms (Incoterms) agreed upon by the parties involved, such as EXW (Ex Works), FOB (Free On Board), or CIF (Cost, Insurance, and Freight). Include the airport of departure and the airport of destination, along with the scheduled departure and arrival dates.
ETD and ETA
ETD means Estimated Time of Departure and ETA is Estimated Time of Arrival. The date and time are always local.
Important: An INCOTERM consists of two parts viz. The term, named place: eg. CIF, Chicago airport, FOB, Shanghai Airport.
Description of Goods
Provide a comprehensive description of the goods being shipped, including the quantity (e.g. 2 cylinders of stainless steel, unit of measurement, product name, part number (if applicable), and any other specific details relevant to the items. It is essential to use accurate and detailed descriptions to avoid confusion during customs clearance.
Value of Goods
Specify the value of each item in the shipment, including the currency used. The total value should reflect the transaction price agreed upon between the seller and buyer. Additionally, indicate the payment terms and any applicable discounts or rebates.
Terms and Conditions
Include any terms and conditions that govern the transaction, such as warranties, return policies, or liability disclaimers. These terms provide legal protection and establish the rights and obligations of the parties involved.
Packaging and Shipping: The Packing List as Accompaniment to the Commercial Invoice
Describe the packaging materials used to secure the goods during transit. Mention the weight, outer dimensions, and the number of packages in the shipment. If there are any specific handling instructions or special requirements, clearly state them in this section. The packing list must contain the nett weight of goods falling under each HS Code.
Certification and Signatures:
Include a statement certifying that the information provided in the commercial invoice is true and accurate. Sign and date the invoice. Countries such as Brazil usually demand a commercial invoice signed in blue ink.
General System of Preferences
If the shipped products fall under the category of GSP (General System of Preference) (for EU please refer to this link.), the seller needs to provide a valid documentation. It can be EUR. 1 (e.g. Kenya), ATR (Turkey) or an official declaration of the country of origin on the commercial invoice citing a REX number.
REX: The Registered Exporter Number
A system prevalent in the European Union to replace the old form of documentation for the GSP mentioned above. The REX Number is explained here. This number is included in the official text of the declaration of the country of origin, and is placed, preferably on the top section of the commercial invoice.
The REX System as of 2019
The following countries have been added to the list of countries with the advantages of REX System
- Bangladesh
- Benin
- Burkina Faso
- Cape Verde
- Cambodia
- Haiti
- Indonesia
- Kyrgyz Republic
- Lesotho
- Madagascar
- Mauritania
- Mongolia
- Nigeria
- Philippines
- Senegal
- Tajikistan
- Uganda
- Uzbekistan
- Vanuatu
- Vietnam
Tips for Creating an Effective Commercial Invoice
Accuracy is key: Ensure that all information provided is accurate, consistent, and aligns with other relevant documents such as the purchase order and packing list.
Language and formatting: Create the commercial invoice in a language that is easily understood by all parties involved. Use a clear and professional format, with appropriate headings, font sizes, and colours for easy readability.
Include supporting documents: Attach any supporting documents that may be required, such as certificates of origin, export licenses, or other customs-related paperwork.
Digitisation and automation: Consider utilising digital tools and software to streamline the creation and management of commercial invoices. Automated systems can help reduce errors, improve efficiency, and enable easy retrieval of past records.
Embargoes, Prohibitions and Restrictions
The exported is expected to know, whether there are any embargoes against the country of import. He is also expected to know, whether he is permitted to export the goods and whether there are any restrictions, which require an export permit.
Please Remember
The country of import might have restrictions against the import of certain products. Consult the consignee and obtain information regarding such cases
Conclusion
A well-prepared commercial invoice for air freight is vital for facilitating the smooth movement of goods across international borders. By including all necessary details and adhering to relevant regulations and requirements, exporters and importers can ensure compliance and minimise delays or complications during customs clearance. Remember to maintain accurate records of commercial invoices, as they play a crucial role in documenting international trade transactions and may be required for auditing or legal purposes.