Plain English
What is a commercial invoice?
Imagine a UK manufacturer selling 100 machine parts to a buyer in the US. The buyer needs a breakdown of the bill. Customs needs information about the goods entering the country.
A commercial invoice is the seller's itemised bill for an international shipment of goods. It also provides information used for customs clearance and the assessment of import duties and taxes. [1]
In our example, the parts cost £10 each, so the goods total £1,000. The invoice identifies the transaction and records the goods and charges. The buyer uses it to understand the bill; customs uses its information as part of checking the shipment.
How is it different from a pro-forma invoice?
Earlier, the manufacturer may have sent a pro-forma invoice: an offer set out in invoice form, often used before supplying the goods or to request advance payment. It can look very similar to a commercial invoice. [2]
For this sale, the pro-forma sets out the proposed order. The commercial invoice records the goods and charges for the shipment. Their appearance alone does not tell you which document you are holding or what it can be used for.
Simple way to remember it
The commercial invoice connects the goods being shipped with the details of the sale.
In practice
What if the documents show different quantities?
Suppose the original pro-forma lists 100 parts, but the commercial invoice lists 80. Before dispatch, the buyer reduced the order and the manufacturer agreed. At £10 each, the goods total is now £800.
That difference has an explanation. The order change and shipment records should support it.
If the commercial invoice still lists 100 parts while the packing list shows 80, check what happened. Was the order reduced, is the delivery being split, or is a document wrong? Establish the facts before correcting the paperwork.
Professional view
What information is needed?
Requirements depend on the destination and the goods. For US imports, invoice requirements include details of the parties, a sufficiently detailed goods description, quantities, prices and currency, country of origin, and relevant charges. This is a summary, not the complete US checklist. [3]
A commercial invoice may also include a Harmonized System (HS) code, which identifies a goods classification used in customs tariffs. Check the destination's requirements rather than assuming the same invoice template works everywhere. [1]
Can a pro-forma be used for tax or customs?
The purpose and jurisdiction matter. For UK VAT, HMRC says a pro-forma invoice cannot be used as evidence to reclaim input VAT. [2]
US customs rules also provide for a pro-forma invoice as a substitute document in specified circumstances. This does not mean that any sales quotation is acceptable for customs clearance. [4]
Is the invoice total the customs value?
Not necessarily. Customs value is the value established under the applicable customs valuation rules.
For US imports, where the transaction-value method applies, the starting point is the price actually paid or payable for the goods sold for export to the US, with required adjustments. Certain costs or contributions may need to be added if they are not already included. [5]
For example, if our US buyer supplied a production mould free of charge to the UK manufacturer, an appropriate share of its value may need to be included. The invoice total alone would not resolve that question. [5]
What about delivery and payment terms?
Read the invoice alongside the agreed sales terms. Incoterms allocate delivery responsibilities, costs and the risk of loss or damage between buyer and seller. They do not set the contract price, payment deadline or payment method; those need separate agreement. [6]
Professional judgement
What should you check before relying on the invoice?
Compare the commercial invoice with the order or sales contract, the packing list and any relevant pro-forma. Check the parties, goods, quantities, currency, prices and agreed changes.
Resolve unexplained differences. Do not change figures simply to make the documents match. The records should accurately explain the transaction and the shipment.
Key takeaways
- A commercial invoice records the goods and charges for an international shipment and supports customs clearance.
- A pro-forma has a different purpose; its tax and customs uses depend on the applicable rules.
- Required invoice information varies by destination and goods.
- The invoice total is not automatically the customs value.
- Incoterms address delivery responsibilities, costs and risk. Price and payment terms require separate agreement.