What is a Customs Invoice? Definition, Importance, Example

Currently, international trade is at a record high, with global trade volumes hitting $28.5 trillion in 2021. 

One reason this has been possible is the efficient functioning of customs departments across the globe. Another reason is the timely and smooth movement of goods across international borders.

A critical factor in enabling both of these aspects of global trade is the use of custom invoices by exporters and importers. Custom invoices are essential for cross-border trade to take place legally in every country.

But before we can understand why businesses and countries need a shipping invoice for customs, let us understand what a customs invoice is and what it does.

What is a Customs Invoice?

A customs invoice is an important document needed by importers and exporters to ensure the smooth international movement of goods.

Custom invoices declare the value of goods entering a country and are essential for customs clearance. Customs clearance refers to the process of a country’s customs department allowing a shipment to enter.

A country’s Customs department is responsible for controlling the movement of goods across its border. They determine whether the entry of shipments can be allowed. They also decide if the importer owes any taxes or duties on the imported goods.

Also known as a Proforma invoice, a customs invoice contains all necessary information about the shipment to ensure it clears customs without hassle.

What is the Importance of Customs Invoice?

Source: USA Today

A customs invoice is vital for many reasons. Here are some of the most relevant ones:

• It summarizes what the freight shipment contains and other essential details about the goods in the shipment. Relevant parties can check the invoice and know at a glance about the content and value of the shipment.
• Getting permission from customs officials to import or export goods is critical. Without a customs clearance invoice, customs officials won’t allow a shipment to pass through. All international movement of goods hangs on an adequately filled customs invoice.
• Customs officials decide whether to allow a shipment to enter based on the customs invoice information. If unsatisfied with the information, they can refuse entry, levy fines, or even seize the goods.
• A customs invoice is a basis for determining what duties and taxes apply to the shipment. Based on the invoice, customs officials can calculate the payment and whether the appropriate amount has been paid, not paid, or partly paid.
• A properly filled customs invoice ensures that goods are allowed entry on time, so deliveries are not delayed. If goods get held up at customs, delivery deadlines can’t be met, which can cause losses for individuals or businesses.
• Custom invoices are applicable for all goods, including animals, personal items, medicines, or hazardous materials. Customs officials use a customs invoice to decide whether a shipment is legally allowed to enter the country.
• By making an invoice, businesses can exchange goods across international borders even if they don’t have a history of working together.

Customs Invoice Can be Used for Which Purpose?

A customs invoice ensures the smooth movement of goods across international borders. It benefits using online invoices for both businesses and customs departments. It saves time and contributes to the economy by supporting trade and revenue generation through taxes and duties.

Businesses use custom invoices to:

• Ensure that their shipment clears customs without hassle or delay
• Do business with new customers and vendors across different countries
• Calculate the final price of the imported goods, as the price includes applicable duties

Customs departments use custom invoices to:

• Assess if goods entering the country are legal and comply with applicable regulations
• Assess the tax liability of the party importing or exporting the shipment
• Assess the import duty payable by the party importing the shipment or the export duty owed by the party exporting the shipment

What Details Have to Be Added On a Customs Invoice?

The shipper must accurately provide certain details about the contents of the package on the shipping invoice for customs. These details are needed to ensure smooth clearance at customs. 

Some of these details apply to all goods, while others only apply to specific goods. Also, different countries have different formats for invoices, so one must be careful while filling out the invoice.

The details that generally have to be given on a customs invoice are:

• The place and time of selling the goods
• The buyer’s name, address, contact information, and tax identification number
• The seller’s name, address, contact information, and tax identification number
• The ship-to party’s name, address, contact information, and tax identification number (if the buyer and the ship-to party are different)
• The Harmonized System (HS) number, a standard code of 6 digits that most countries’ customs departments accept
• The name of every item included in the shipment
• The grade or quality of the items in the shipment
• The numbers or symbols associated with the items in the shipment
• The country of origin
• The country of shipment
• The price per unit of the goods in the shipment
• The trade terms relevant to the shipment
• The locations associated with the trade terms
• The goods and services tax information that the buyer provided to procure the item
• The signature of the exporter’s concerned authority, name of the signor, title of the signor, and the date of signing

Source: New18

The shipper must also provide additional information per the invoice payment terms and conditions and the import license requirements, if available.

Customs officials might also ask for any additional certificates and statements required by the laws and regulations of their country. They can also demand information about where the title of the goods will transfer from the seller to the buyer. They can further require the mode of payment or other relevant information applicable to the goods.

It is important to fill out the form for the customs clearance invoice in as much detail as possible. Preparing all possible additional requirements is also good to ensure customs do not hold up the shipment.

It is given in a later section to show you how to fill in these details.

What’s the Difference Between a Customs Invoice and a Commercial Invoice?

A customs invoice and a commercial invoice are very similar documents, but they are different as they differ in scope and origin. Therefore, it is crucial to understand the similarities and differences between customs invoices vs. commercial invoices.

The major similarity between the two documents is that they have the same purpose of helping goods clear international borders. They can also look very similar or even the same.

One of the biggest differences is that the customs invoice has the words “Pro Forma” or “Customs” written on the package. Even though the two invoices might look the same, mentioning these words can differentiate between a customs invoice and vs. commercial invoice. You can check out the customs invoice sample to see this.

There is also a difference in the type of business that uses customs and commercial invoices. Typically, large importers use custom invoices for large shipments. On the other hand, smaller online merchants use commercial invoices for goods sold to customers.

Further, custom invoices are used as an estimated bill of sale as the payment is made after the goods are received. Commercial invoices are for completed sales where customers have already paid for the goods.

In some countries, a customs invoice is a supplemental document. And in some exceptional cases, even large importers and exporters can use a commercial invoice as a customs invoice. However, such cases are rare.

Source: Incodocs

How to fill a Customs Invoice?

You have to follow 7 steps to fill out a customs invoice correctly. These are:

• Step 1: At the top of the customs invoice form, provide the shipper’s company name and complete address. Then you must provide other data about the shipper, like a relevant contact name, contact information, and the tax identification number of the shipper.
• Step 2: You have to provide the same details for the recipient: the recipient’s company name and full address, contact name and information, and the tax identification number.
• Step 3: You need to provide the same details for the buyer if the buyer is different from the recipient.
• Step 4: Mention the reference or invoice number for the shipment on the customs invoice form. This invoice number is on the invoice for the sale of the goods in the shipment. It should not be confused with the invoice number of the customs invoice.
• Step 5: Add the date of the order and the shipping date.
• Step 6: Provide details of the shipment’s contents like name, use, value, if it is fragile or not, materials used in making it, size, weight, serial numbers (if any), etc. For more information about the details, you need to fill out, check the previous section of this post.
• Step 7: Double-check all the information on the invoice to ensure they are complete and accurate. If the invoice has been correctly filled, sign the form.

This is a customs invoice example.

Source: Images.ctfassets

Where is a Customs Invoice attached?

A customs invoice is a vital document for customs clearance, so it must be attached to the package. 

You should attach the customs invoice on the outside of the package so that customs officials can quickly check the invoice and clear the shipment for entry. If they can’t access the customs invoice easily, you will face a delay in processing your shipment at customs.

To properly attach the shipping invoice for customs, you need to print out the form after filling it out and attach it to the package securely. A contractor invoice template is given in a separate section to show you what you need to attach to your package. 

You must also attach the shipping label and the customs invoice before handing the package to the shipping or courier company for transport.

You must ensure the documents are secure and don’t move or get lost during transit. So, a documents-enclosed pouch or clear plastic envelope is a good idea. The pouch makes it easy to see the customs invoice while protecting the documents from damage during transportation.

You can also use a regular envelope to attach the customs invoice outside the package. You should mark it “Customs” clearly. This envelope will be accepted if the tape does not obstruct any barcodes, labels, or other important information.

It is best practice to print and attach three copies of the customs clearance invoice to the package. This is because customs officials sometimes tear away one copy. So, if that happens, and one copy gets damaged or lost somehow, there is still one copy with the package.

How to Download Customs Invoice Form?

You can download a customs invoice form for your exports here.

The page mentions proforma invoices. This is the same as a customs invoice. The page also links to a commercial invoice form, a Canada Customs Invoice form, and a CARICOM (Caribbean Common Market) Customs Invoice Form.

Amaey Anand

Amaey Anand is a certified accountant with over 10 years of experience in the finance industry. He has worked with various organizations to streamline their petty cash management processes and reduce inefficiencies. He has also written several articles on financial management for leading publications such as Zensuggest and The Wall Street Journal.