On this page, I would like to share a legalized commercial invoice example.
The invoice was prepared in 2012 by one of Turkish manufacturer and exporter in accordance with the letter of credit, which was issued by a Yemen bank.
What does a legalized commercial invoice mean in international trade?
Legalization of a commercial document means the authentication of the signatures as seen on the document.
Once the signatures are authenticated, the document becomes legalized and could be used as a valid document in legal procedures.
You can see the commercial details of the transaction on the front page of the legalized invoice.
In addition to commercial details, you can see seller company’s signature and stamp at the bottom of the page.
Just above the seller’s signature, you can see chamber of commerce’s signature and stamp certifying that the goods are of Turkish origin.
Additionally, chamber of commerce approves that the seller’s signature on the commercial invoice is authentic and genuine.
Back Side of the Legalized Invoice
On the rear side of the legalized invoice, you can see a chain of signatures and stamps belonging to different parties.
The first signature and stamp belongs to a Turkish governmental body which is located in the same province as the local chamber of commerce. This signature approves that the local chamber of commerce’s signature is authenticated.
The second signature and stamp belongs to Embassies and Consulate Generals of Ministry of Foreign Affairs of the Republic of Turkey. This signature proves that the previous signature is authentic.
Finally, you can see Yemen Embassy’s signature and stamp, which is legalizing the commercial invoice.
A certified commercial invoice is a commercial document, which is issued by the beneficiary of the letter of credit and certified by the chamber of commerce.
Legalized invoice, also known as consular invoice, in addition to chamber of commerce certification, contains a signature and stamp of an embassy or consulate of the relevant country.
The consular invoice is made out on a special form available at the embassy or consulate of the relevant country, or issued as a copy of the commercial invoice, depending on the requirements of the country in question. (1)
Which Countries Require Certified Commercial Invoice or Legalized Commercial Invoice?
Generally Arab States located in the Middle East, such as Jordan, Yemen, Saudi Arabia, Egypt etc., demand certified and/or legalized invoices during the import customs clearance operations.
Normally, certification or legalization procedures should be done by the exporters.
What is the Function of a Certified Invoice or Legalized Invoice?
Certified and legalized invoices inherited from the 1970s and 1980s, where most underdeveloped countries had been implementing high custom duties on imported goods in order to protect their domestic manufacturers.
Later on, almost all of these countries, which had been employing import substitution strategy, shifted their directions towards open economic policies with significantly reduced custom tariffs.
As a result the need for the certified or legalized invoices have been reduced considerably.
Nevertheless these kind of documents generate revenue for the embassies and chambers of commerce.
For this reason, even today some countries are still demanding certified invoices or legalized invoices despite their limited operational value.
Explanation of Legalized Invoice Function with a Sample
An importer has to pay 135% import tariff duty when importing a standard family car to Egypt. (Please see picture on the left for details) In order to pay less custom duties, importer companies who located in with high custom duties countries, demand commercial invoice which shows only a portion of the actual sales amount. In order to prevent such actions that cause custom tax losses, governments demand certified or legalized invoices from the importers.
What sort of information a certified invoice or legalized invoice should contain?
A certified or legalized invoice should contain all details that a standard commercial invoice normally indicates, but in addition to this information a certified invoice should also contain the signature and stamp from the respected chamber of commerce.
If you get the certified invoice signed and stamped by a respected embassy, then you will be having a legalized invoice.
Standard Commercial Invoice
Name and address of consignor ( seller, supplier company, exporter company)
Name and address of the consignee ( buyer, importer company)
Description of goods, quantity , net weights, gross weights,
Shipping marks and numbers,
Origin of goods
Trade terms ( FOB Hamburg Port, Germany Incoterms 2010, CIF Los Angeles Port, USA Incoterms 2010 etc.)
Unit price, total amount, discounts or rebates,
Freight cost and insurance cost if available (in case of CFR, CPT, CIF or CIP shipments)
Name of the vessel, voyage number and date of shipment.
If shipment is insured by the buyer shipper must note this fact on the invoice.
The invoice should also contain a statement that the products being shipped are of ( xyz country ) origin and that they are manufactured in the ( xyz country ).
If the products contain any foreign components then- besides the full name and address of domestic manufacturer the full names and addresses or all the manufactures involved must be given.
Certified Commercial Invoice
Certified commercial invoice usually bears the signature and stamp of the local chamber of commerce.
In some cases, letter of credit may indicate that the certificate of origin must be certified by a special chamber of commerce such as one of the Arab Chambers of Commerce resident in the exporting country.
Legalized Commercial Invoice
Generally three copies of the standard commercial invoice will be required during the import clearance of the goods. In most cases, one original copy of the commercial invoice needs to be legalized according to letter of credit conditions.
Exporters have to make sure that the content of the standard invoice is correct and complete as indicated above. ( Please keep in mind that invoice content for legalization may change from one country to another. Double check the invoice content with the respected embassy before submission)
A responsible member of the exporting company should sign a statement that the invoice is true and correct and contains the correct origin of the goods. (if required)
The invoice must be legalized with a signature and stamp by the Consular Section at the Embassy.
Commercial invoice is a document which is used mostly in international trade transactions.
It is a commercial document required by customs to determine true value of the imported goods, for assessment of duties and taxes.
The commercial invoice is necessary for both the seller and the buyer.
With the commercial invoice, the seller confirms that goods have been delivered as contracted and therefore has the right to claim payment, provided that all information, payment terms, and commodity descriptions correspond exactly with the letter of credit instructions.
On the other hand, the importer needs the commercial invoice for customs clearance since customs authorities often use it to assess duties. (1)
Contents of the Commercial Invoice
There is no internationally accepted standard format in use that explains how to prepare a commercial invoice.
But a commercial invoice, which is going to be used in an international trade transaction, should cover following points.
Name of the Exporter, address, and contact details: “consignor”
Name of the Importer, address, and contact details: “consignee”
Title of the document, commercial invoice number, commercial invoice date:
Definition of goods: “Crushing and Screening Machine” etc…
Delivery term: “FAS ANTWERP PORT, Incoterms 2010”, “FOB PORT OF SINGAPORE, Incoterms 2000” etc…
Quantity, Unit Price, Currency Code, Total Price: “10 Mtons of “Titanium Dioxide Rutile” from 3.000 USD per Mton, Total Amount is 30.000,00 USD CIF HAMBURG PORT, Incoterms 2010.”
Payment Terms: “Irrevocable Letter of Credit payable at 30 Days from Bill of Lading Date”, “Cash Against Documents at Sight” etc…
Bank account details of the exporter and all other additional conditions regarding the sales.
Insurance coverage and cost (if applicable)
Shipping charges (if applicable)
Signature and stamp (not required under letter of credit rules but it is asked by most of the custom authorities and government institutions.)
How to Use Commercial Invoice in Letters of Credit Transactions:
A letter of credit requiring an “invoice” without further definition will be satisfied by any type of invoice presented such as commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc. But invoices identified as “provisional”, “pro-forma” or the like are not acceptable under letters of credit rules and standard banking practices.
When a credit requires presentation of a commercial invoice, a document titled “invoice” will be acceptable.
The description of the goods, services or performance in the invoice must correspond with the description in the letter of credit text.
The description of goods, services or performance in an invoice must reflect what has actually been shipped or provided.
An invoice must evidence the value of the goods shipped or services or performance provided.
Unit price(s), if any, and currency shown in the invoice must agree with that shown in the credit.
The invoice must show any discounts or deductions required in the credit.
The invoice may also show a deduction covering advance payment, discount, etc., not stated in the credit. (with this article letters of credit rules allow mixed payments under letter of credit payments. For example %25 advance payments outside letter of credit and %75 payable by at sight letter of credit is possible)
If a trade term is part of the goods description in the credit, or stated in connection with the amount, the invoice must state the trade term specified, and if the description provides the source of the trade term, the same source must be identified (e.g., a credit term “CIF Hamburg Port Incoterms 2000” would not be satisfied by “CIF CIF Hamburg Port Incoterms”). Charges and costs must be included within the value shown against the stated trade term in the credit and invoice. Any charges and costs shown beyond this value are not allowed.
The quantity of merchandise, weights and measurements shown on the invoice must not conflict with the same quantities appearing on other documents.
Special Hints Regarding the Commercial Invoice From ISBP (International Standard Banking Practice):
Although it is not required by letter of credit rules, please do not forget to sign and stamp the commercial invoice that you need to present under the letter of credit. Signature and stamp on the commercial invoices are asked by most of the custom authorities and government institutions.
Please make sure that your company name indicated in the letter of credit is correct. If your company name is not correct, get in touch with your customer and have the letter of credit amended.
Please make sure that the description on the commercial invoice is matching with the description stated in the letter of credit.
Do not write additional product names to the invoice which are not mentioned in the letter of credit, even if you give them free of charge.
After reading this post, you should understand why documentation is very important under letters of credit.
Additionally, most frequently used document links have been supplied on later parts of this article.
There are many important points in a typical letter of credit transaction that need to be taken care of professionally.
However, documentation is much more important than any other aspects of the letters of credit transactions, because the documentation forms the backbone of the letters of credit structure.
In order to understand the importance of the documentation, please assume that you are an exporter, whom has just shipped an order.
How can you prove to the issuing bank that you have make the shipment according to the letter of credit terms?
Which means that;
you have shipped the goods on time, not late
you have shipped the right goods, not wrong ones
you have shipped the goods in good condition, no apparent defect on the packing
you have delivered the goods to the carrier for transportation from port of loading to the port of discharge indicated in the credit etc.
In order to prove above points to the issuing bank, you have to supply a relevant transport document.
Furthermore, let us also consider that the delivery term was CIF Incoterms 2010, which obligates the exporter, which is you, to arrange and pay the insurance for the shipment.
Once again, you have to supply an insurance policy to fulfill your insurance responsibility.
The examples can be extended, but perhaps the main idea is very clear. Letters of credit transactions are related to the documents only, not actions.
The importance of the documentation is stated in UCP 600 article 5 as follows:
Banks deal with documents and not with goods, services or performance to which the documents may relate.
In addition, every condition stated in the letter of credit must be connected to a document. This point is also clearly indicated in UCP 600 article 14 as below.
If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.
Documents Most Frequently Used Under Letters of Credit Transactions:
On the rear side of the legalized invoice, you can see a chain of signatures and stamps belonging to different parties.
