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 this page, you can find most common discrepancy examples related to the commercial invoice.
Invoice is a commercial document. A commercial invoice is a required document for the export and import clearance process. It is sometimes used for foreign exchange purposes.
A commercial invoice should be issued by the beneficiary of the letter of credit, according to the letter of credit rules and standard banking practices.
UCP 600 Article 18 explains specific requirements for commercial invoices.
Commercial invoice is one of the main documents in letters of credit transactions, for that reason almost all letters of credit request presentation of a commercial invoice.
Important Definitions Regarding the Commercial Invoice Under Latest Letter of Credit Rules:
According to UCP 600, latest letter of credit rules, a commercial invoice need not to be signed, but almost all custom authorities require manually signed commercial invoice. As a result, make sure that commercial invoice is signed and stamped properly.
When a credit demands presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.) except invoices titled with “provisional”, “pro‐forma” or the like.
An invoice should be issued by the beneficiary. In a transferable letter of credit, the second beneficiary could issue the commercial invoice.
The invoice should show exact description of the goods, services or performance shown in the letter of credit. The description of goods, services or performance on an invoice is to reflect what has actually been shipped, delivered or provided.
A commercial invoice should indicate the value of the goods shipped or delivered and the unit prices, when stated in the credit.
Invoice should be issued in the same currency as that shown in the letter of credit.
Partial shipment can be defined as shipping the goods not whole at once, but in smaller consignment(s).
Partial Shipment Examples: Let us assume that letter of credit requires shipment of 10 buses.
If the shipper dispatches;
8 buses under 1 shipment, makes a partial shipment
4 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment
5 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment.
Letter of credit rules allow partial shipments and partial drawings, which means that an exporter could make partial shipments under a letter of credit as long as the credit terms do not dictate the contrary.
In order to understand, whether or not partial shipments are allowed under a documentary credit, you need to look at “Field 43P: Partial Shipments” within the swift message body.
Field 43P: Partial Shipments: “Allowed” means that partial shipments are permitted
Field 43P: Partial Shipments: “Not Allowed” means that partial shipments are not permitted.
If a letter of credit prohibits partial shipments, the beneficiary must ship the goods in full quantity under a single shipment. (Please be noted that there are some tolerances exist in the letter of credit rules. Refer UCP 600 Article 30-c).
Contrary acts will be punished by banks either with partial shipments effected or short shipment effected discrepancies.
Discrepancy Example: Short Shipment Discrepancy Under a Letter of Credit:
A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:
Letter of Credit Conditions
Field 50: Applicant : Auto Paint Importer Co. Ltd. 1800 Arnold Industrial Place 94520 CA USA
Field 43P: Partial Shipments: Not Allowed
Field 43T: Transhipment: Allowed
Field 45A: Description of Goods and or Services: Supply of 100% Acrylic Premium Quality Latex (Water Based) paints packed in 55 Gallon Drums. Price : 300 USD / drums Quantity: 80 Drums. As per Proforma Invoice No 100 dated 10.02.2014. Delivery Terms: CIF Long Beach Seaport California Incoterms 2010.
Field 46A: Documents Required: 3 original signed commercial invoices and 3 copies.
The beneficiary presented a commercial invoice as shown on the below picture.
Commercial Invoice
Discrepancy: Short shipment effected. Letter of credit prohibits partial shipments. As a result, the beneficiary should have shipped 80 drums of paints in 24.000,00 USD full amount, but instead the beneficiary shipped 70 drums of paints corresponding to 21.000,00 USD, which is a partial letter of credit amount.
Reason for Discrepancy: Letter of credit prohibits partial shipments. Beneficiary should have shipped the goods in full quantity as called for in the credit under a single shipment.
A commercial invoice should be issued by the beneficiary of the letter of credit, according to the letter of credit rules and standard banking practices.
A commercial invoice must appear to have been issued by the beneficiary or, in the case of a transferred credit, the second beneficiary.
A commercial invoice must appear to have been made out in the name of the applicant.
If the beneficiary of a letter of credit presents a commercial invoice, which has been issued by an entity other than the beneficiary, the issuing bank raises a discrepancy, which is known as invoice not issued by the beneficiary.
Discrepancy Example: Commercial Invoice Not Issued by the Beneficiary
A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:
Letter of Credit Conditions
Field 59: Beneficiary – Name & Address: Himmel Konig Sondermaschinen GmbH Auguste-Kessler-Str. 10 72100 Aalen Germany
Field 45A: Description of Goods and or Services: Supply of 1 pcs erosion and tool grinding machine as per Proforma Invoice No 120 dated 12.03.2014. Delivery Terms: CFR Apapa Seaport Lagos Incoterms 2010.
Field 46A: Documents Required: 2 original signed commercial invoices and 3 copies.
Field 47A: Additional Conditions: Third party documents are acceptable which means that all documents, excluding drafts and invoices, may be issued by a party other than the beneficiary.
The beneficiary presented a commercial invoice as shown on the below picture.
Commercial Invoice
Discrepancy: Invoice should have issued by “Himmel Konig Sondermaschinen GmbH”, but it is actually issued by “Maschinen Handels GmbH” .
The additional condition, which is included in field 47-A, would have no effect on determination of the discrepancy, because the draft and the commercial invoice have been excluded from the scope of this clause.
Reason for Discrepancy: Commercial invoice not issued by the beneficiary. A commercial invoice must appear to have been issued by the beneficiary or, in the case of a transferred credit, the second beneficiary.
A commercial invoice should not indicate goods, services or performance not called for in the credit.
As per letter of credit rules and international standard banking practices, an invoice is not to indicate goods, services or performance not called for in the credit.
This letter of credit rule applies, even when the invoice shows additional quantities of goods as required by the credit or samples are declared to be shipped free of charge.
If the beneficiary of a letter of credit presents a commercial invoice, which contains goods not indicated in the letter of credit, the issuing bank raises a discrepancy, which is known as commercial invoice shows merchandise not called for in the letter of credit.
Discrepancy Example: Commercial Invoice Shows Merchandise Not Called For
A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:
Letter of Credit Conditions
Field 45A: Description of Goods and or Services: Shirts – long sleeve – 980 pieces, shirts – short sleeve – 1510 pieces, long pants – 980 pieces, shorts – 250 pieces. As stated on order sheet 4750 revised – dated 10th January 2014. Delivery Terms: CPT Barcelona Spain Incoterms 2010.
Field 46A: Documents Required: Signed commercial invoices in two originals showing letter of credit number and certifying that the merchandise is as per purchase order.
The beneficiary presented a commercial invoice as shown on the below picture.
Commercial Invoice
Discrepancy: Commercial invoice shows merchandise not called for in the letter of credit. If you look at the last column of the description of goods part, you will see that “10 Pcs of Shirts – long sleeve (Free of Charge)” is not called for in the letter of credit.
Even if they have been shipped “Free of Charge“, it is against letter of credit terms.
Reason for Discrepancy: An invoice is not to indicate goods, services or performance not called for in the credit.
This applies even when the invoice includes additional quantities of goods, services or performance as required by the credit or samples and advertising material and are stated to be free of charge.
The letter of credit rules and international standard banking practices do not allow presentation of a “provisional”, “proforma”, “performa” invoice instead of a commercial invoice.
If the beneficiary presents a proforma invoice instead of a commercial invoice, the issuing bank raise a discrepancy, which is known as “Proforma Invoice Presented Instead of a Commercial Invoice”.
Discrepancy Example: Proforma Invoice Presented Instead of a Commercial Invoice
A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:
Letter of Credit Conditions
Field 45A: Description of Goods and or Services: Electrical Equipment as per proforma invoice no 40000 of 2014/04/10 mention to be indicated on the definitive invoice.
Field 46A: Documents Required: Signed commercial invoice in six copies issued by beneficiary, original of which must be certified by the chamber of commerce and legalized by the consulate of Jordan, if available at beneficiary’s location, if not, legalization should be effected by any other Arab Consulate.
The beneficiary presented a proforma invoice as shown on the below picture.
Commercial Invoice
Discrepancy: Proforma invoice has been presented instead of a commercial invoice.
Reason for Discrepancy: Letter of credit rules prohibit presentation of a proforma invoice instead of a commercial invoice.
When a letter of credit requires presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.). However, an invoice is not to be identified as “provisional”, “proforma” or the like.
According to the letter of credit rules and international standard banking practices, the description of the goods, services or performance shown on the commercial invoice is to correspond with the description stated in the letter of credit.
Commercial invoice, which is the only document as defined in the UCP 600, that must show the full description of goods as quoted in field 45-A Description of Goods and or Services.
On other documents, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit.
If the commercial invoice states a description of goods and services not indicated in the letter of credit, banks raise a discrepancy which is known as description of goods on the commercial invoice is not as per L/C terms.
Discrepancy Example: Description of Goods on the Commercial Invoice is not as per L/C
A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:
Letter of Credit Conditions
Field 45A: Description of Goods and or Services: Evening dress as per proforma invoice dtd 19.05.2014 for goods delivered CIF Stockholm Port, Sweden Incoterms 2010.
Field 46A: Documents Required: Signed commercial invoices in one original and three copies, certified by the chamber of commerce in the exporting country and bearing this clause: ”We certify that invoices are in all respects correct and true both with regard to the price and description of goods referred to therein and as per Proforma Invoice no.010 dated 09/05/2014 indicated in this credit and that the country of origin or manufacturer of the goods is Spain” and must be made out in the name of l/c applicant indicated in field 50.
The beneficiary presented a commercial invoice, which is indicated an inconsistent description of goods with the letter of credit.
Commercial Invoice
Discrepancy: Description of goods not per L/C terms on the commercial invoice. As per letter of credit terms, the commercial invoice should have shown “Evening dress” as a description of goods.
But the invoice shows “Used Evening Dress (30% Defected)” under Description of Goods column.
Reason for Discrepancy: The description of the goods, services or performance shown on the invoice is to correspond with the description shown in the letter of credit.
On the rear side of the legalized invoice, you can see a chain of signatures and stamps belonging to different parties.
