What is a Customs Invoice?
A customs invoice or a pro forma invoice is a vital document used by the importers and exporters for declaring the value of goods for customs clearance. The mandatory information is essential for clearing customs in the receiving country. Then, the customs authorities peruse the customs invoice to assess duties and taxes, if any, on the incoming cross-border shipment.
Why is a Customs Invoice Important?
A customs invoice summarizes the contents of the freight shipment. The paperwork is referred by the customs authorities to determine if a shipment is allowed to enter the receiving country. It also helps assess duties and taxes if any that need to be levied on the specified goods. Effectively, the customs invoice is the most important document for availing customs clearance of any goods.
Customs invoices allow cross-border businesses to ship and receive goods even if there is no history of working together.
What is a Customs Invoice Used for?
A customs invoice helps in the smooth and hassle-free passage of goods through customs. A customs invoice that is accurately filled and complete in all respects can help the customs authorities determine which taxes and import duties apply to a particular package. This facilitates trade and prevents delays.
Also, through this document, the customs officials can decide whether the freight complies with all the mandatory rules and regulations associated with the import process. Moreover, the information can be used to determine the tax liability of the recipient to the country of destination.
What details are required on a Customs Invoice?
You must provide the customs authorities with the following information on the customs invoice for a quick clearance of your freight.
- The place and the time when the merchandise is sold.
- The name, address, contact information, and the tax identification number of the seller.
- The name, address, contact information, and the tax identification number of the buyer.
- The name, address, contact information, and the tax identification number of the ship-to party if different from the buyer’s.
Besides this, a detailed description of the merchandise that includes the Harmonized System (HS) number, the name by which each item in the shipment is known, the grade/quality of the items, the numbers/symbols associated with the items, country of origin, country of shipment, quantity, price per unit, the relevant trade terms and the location associated with the terms, details of the goods and services provided by the buyer to produce the merchandise should be mentioned. The customs invoice must also include a signature, the title of the signor, and the date of signing.
You must even give any additional information as provided in the terms and conditions, and the import license requirements, if available.
The customs authorities may also ask for additional certifications and statements required by the buyer’s country, the place where the title of the goods will transfer from the seller to the buyer, the mode of payment, and any other relevant terms/laws as applicable to specific merchandise.
How do I fill out a Customs Invoice?
The below process can be followed to fill out a customs invoice.
Step 1:
Provide the company name and full address of the shipping company at the top of the customs invoice. Then, provide a relevant contact name, contact information, and tax identification number. The same information must be listed for the recipient after the shipper’s data.
Step 2:
Add the buyer’s name, address, and contact information if it is different than the recipient’s. Don’t forget to include the buyer’s tax identification number if you have the details of the same.
Step 3:
Allocate a reference or invoice number to the shipment and also mention the same on the invoice. These numbers come in handy while tracking orders and payments.
Step 4:
Mention the date on which the order was placed along with the shipping date. In some cases, the order may have been placed in advance such as a month or even a year. In such cases, it is always better and safer to have both these dates mentioned to avoid any confusion.
Step 5:
Provide details of the contents of the shipment on the invoice. This includes the name of the product, its use, its value, as well as the details of the materials used so that its fragility, toxicity, size, and weight can be determined. Moreover, serial numbers, if any provided on the product or goods can be mentioned which can be used in case of theft.
Step 6:
Verify all the information and reconfirm its accuracy. If everything is good to go, sign the form before its presentation to the customs authorities.
Where is a Customs Invoice attached?
Customs invoice is an essential component in international trade. The sender has to print and affix the customs invoice and the shipping label on the package before it is handed to the shipping company or courier agency.
The best practice is to print three copies of the invoice as the customs authorities are likely to take away one copy during transit before the package is sent further. It is a good practice to slip in an extra copy inside the package in case the customs invoice comes off or tears while in transit.
The customs invoice must be fastened to the exterior of the parcel. This will allow the customs authorities to check the contents and determine the value of the goods to calculate the tax that has to be levied.
A documents-enclosed pouch is the best way of displaying the customs invoice on a package. Using a clear plastic wallet or an envelope is also a good idea. Just ensure that it is taped down securely so the documents don't move while in transit.
Standard envelopes taped down to the side of the package with ‘Customs’ written on the outside of the envelope are also an accepted and permitted practice. However, you must make sure the taped document is not obstructing any barcodes on the shipping label.
Customs Invoice Sample
Is Customs Invoice same as Commercial Invoice?
A customs invoice is a document that enables the import and export of goods. Likewise, a commercial invoice is necessary for clearing customs in cross-border shipments. Both commercial invoices and customs invoices serve basically the same purpose i.e. help cross-border shipments to clear customs.
The customs invoice may look exactly like a commercial invoice, the only difference being the label ‘Pro Forma’ or ‘Customs’ affixed on the package. Moreover, the difference between the two is over the type of businesses that use them and the purpose of using them.
Customs Invoice :
In most cases, a customs invoice is similar to a commercial invoice. However, in some countries like Canada, a customs invoice may serve as a supplemental document required for importing.
A customs invoice is an estimated bill of sale. They serve as a finalizing document for high-value transactions arriving from another country and may incur extra costs while in transit.
Although rarely, large importers and exporters can also use a commercial invoice instead of a customs invoice. This is because sometimes the goods shipped differ from what is mentioned on the invoice.
The customs invoice, just like the commercial invoice, contains all the necessary information to clear customs. The customs agents in the receiving country scan through the document to determine if duty and taxes are due. It also helps them understand if the shipment will be permitted in the country or would it face any restrictions.
Commercial Invoices:
Commercial invoices are used by smaller online merchants that sell to consumers because the customer has already paid for the goods in advance, unlike the case of large shipments where payments are done after the receipt of goods.
The commercial invoice is a part of the purchased goods and serves as the customs documentation. The customs authorities peruse this invoice to assess the duty and taxes owed for the specific shipment. A commercial invoice contains information such as the price of the item, its HS Code, its value, and the quantity sold.
Customs Invoices FAQ
Do I require a customs invoice for documents?
When you ship international documents in an envelope or any other packaging, you only need to complete the relevant shipping document. An invoice is generally not required.
Do I need a customs invoice for returns?
Yes, you must provide a customs invoice for returns as it will facilitate the return of your shipment successfully.
Do I need a customs invoice for personal items?
Yes, you need a custom invoice even for personal items. This is necessary to not only ascertain the insured value of the personal effects but also the contents of the personal package.
Also Read
- Landed Cost | Definition, Formula, and Calculation
- Customs Bond | What is it & Why do Importers need one
- What is an Importer of Record - Definition, Responsibilities & Compliance
- Shipper's Letter of Instruction | Meaning, Format & more
- What is a Bill of Lading & What are its Types
- Packing List & its format for Exports