Types Of Export Invoices And What To Include In Them
The export procedure involves invoices in a significant way. The invoice is the only export document that completely details the whole export transaction.
When correctly filled out, the invoice gives crucial details to the buyer, the freight forwarder, customs, the bank, and other parties involved in the overseas transaction. It can lead to problems, holdups, and disputes when done incorrectly.
Today, all export businesses, large and small, are well aware of the Goods and Services Tax (GST) and related laws that are required for intrastate and interstate bills. However, when the source of supplies is outside of India, issues frequently come up.
The customs authority can determine what is in a shipment and compute any taxes due with an export invoice. Most often, an exporter produces an export invoice.
What Is An Export Invoice?
An export invoice is a document that lists the items supplied by an exporter and the amount due from the importer. An export invoice follows a format that is somewhat akin to a standard tax invoice. An export invoice does, however, also contain some other information, such as the names of the exporter and the importer, the type of export, a shipping bill, etc.
Why Is An Export Invoice Important?
An export invoice is an important document in shipping for the following reasons.
- In the event of an insurance claim, the export invoice is a supporting document.
- It demonstrates that the particular sale and purchase between the buyer and seller actually took place.
- It makes up a large portion of shipping-related documents.
- The government authorities may refer to the export invoice to determine the true value of the goods and determine the proper taxes that should be levied against them.
- The importer may use the export invoice to assist in getting goods past customs to the final destination.
Type Of Export Invoices
There are mainly five types of export invoices. These are explained below.
A commercial invoice is alternatively known as “Documents of Contents” as it typically includes data needed to prepare all other documents. Commercial invoices do not have a set format; however, they generally include the following:
- Name and address of the seller and buyer
- Order number/ Performa number
- The description of the goods, along with their quantity and quality
- Terms of sales
- Point of shipping and its destination
- Value of goods
- Advance paid
- Shipping mark or shipping number
- Other certifications required under the credit
Before the shipment of the products overseas, a certification from the consulate or embassy of the country to which the items are being exported is required. This is called the consular invoice.
The primary function of the invoice is to provide an accurate record of the kind of goods transported, their amount, value, etc., to make it easier to set the importer’s country’s duties. As the country’s consulate has already reviewed it, it also expedites the inspection process in the importer’s country.
The Performa invoice is an exporter’s initial offer to a potential foreign customer. It includes information on the nature and quality of items, their cost, and other crucial details like weight and shipping costs.
The buyer acknowledges by mailing the purchase order after accepting the preliminary invoice and quotation.
It is usually demanded in nations like the USA, Canada, and others. It must be completed by a template provided by the council office of the importer’s nation. Knowing the customs import value at the destination port is the key goal.
In addition to the information provided in the commercial invoice, the seller must include data in the custom invoice, such as freight value, insurance value, charges for packing etc.
This invoice has been authorised (stamped and attested) by the importer’s country’s consul, located in the exporter’s country. The only difference between it and a consular invoice is that a legalised invoice does not follow a predetermined format. This type of invoice is typically demanded in Middle Eastern nations.
What Information Should Be Included In An Export Invoice?
The information that one must include in an export invoice may differ from one nation to another. However, the essential information group is listed below and must be included in the export invoice document.
Date and invoice number
The exporter should provide the invoice number for the convenience of reference.
Name and address of the buyer
The customs agency or officer would require basic information about the buyer of the goods.
Buyer’s Reference Number
It is necessary for simple access.
Mode of payment
The invoice details would inform the buyer when the payment is due.
International terms of sale
International sales terms (also known as “Incoterms”) refer to a set of regulations or a legal document that outlines who is responsible for the cargo and when that obligation passes from the buyer to the seller of the goods.
Product description, quantity, unit cost, and total shipping cost
It is crucial to include information about the product in the invoice, including the type of goods, its number code, price per product, and overall cost of the quantity to be shipped.
The classification number of the Harmonised Tariff Schedule
The abbreviation HTS stands for Schedule-initial B’s six-digit number. This classification number helps in easing the process of shipping.
The country of origin for the product
The customs duty will be applied based on the country of origin and the product’s destination.
Mode of transport
In this section, information is provided regarding the shipping of the goods.
Currency of the invoice
If the payment is for the United States, the invoice should indicate USD, and if it is for India, it should indicate Rupees. For the currency code, one needs to consult the ISO code.
Type of insurance protection
The type of insurance coverage should be added to the invoice as it enables the buyer to determine who is liable if the products are lost.
Summing It Up
An export invoice has a distinct function from an accounting invoice, which you should be aware of. You cannot substitute one form for another, as each contains data with a distinct function.
Wrong information may cause customs to hold up your products, and you may be subject to fines or penalties based on that incorrect information if you mistakenly believe an accounting invoice to be an export invoice.
Talking with the customer about the sales contracts, the kinds of documents that will be used, and the kinds of information that should be on the invoice to facilitate the items’ customs clearance is one of the best ways to avoid this from happening.
Another way of lessening this hassle is to engage the services of a 3PL partner like Shiprocket X that can help you export documentation to make accurate export documents. Click here to learn more about how Shiprocket X can help you export invoices and other documentation.