Article-18-UCP-600-Commercial Invoice

The word invoice comes from the 16th century French word "envoi" which means to "dispatch or send goods", similar to the word "envoy" meaning messenger. An invoice is an itemized list of products sold or services provided, along with the amount of money owed for each line item, and the total amount of money owed. An invoice is sent from the biller to the client, in hopes of being paid within a certain amount of time.

There are different types of invoices, we will cover here commercial invoice which is issued by the beneficiary in case of normal letter of credit, wherein transfer is not being effected, it must be issued in the favour of applicant and in same currency of the credit. If the beneficiary has changed its name and the letter of credit mentions the former name of the beneficiary, an invoice may be issued in the name of the new entity provided that it indicates "formerly known as (name of the beneficiary)" or words of similar effect. 

Article 18 of UCP-600-Commercial Invoice

a. A commercial invoice: i. must appear to have been issued by the beneficiary (except as provided in article 38); ii. must be made out in the name of the applicant (except as provided in sub-article 38 (g)); iii. must be made out in the same currency as the credit; and iv. need not be signed.

Explanation: A commercial invoice must be issued by the beneficiary (exporter or seller) which may be any person or entity who sells goods or provide services; to the favor of applicant (importer or buyer) who buys the goods or utilize the services and need to be in the same currency of the credit to avoid foreign exchange risk for both applicant and beneficiary.

A commercial invoice is not required to be signed by the beneficiary until it is one of the requirement under credit.

Pictorial example-1 for commercial invoice with basic requirement as per sub article 18(a).

b. A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and its decision will be binding upon all parties, provided the bank in question has not honored or negotiated for an amount in excess of that permitted by the credit.

Unless specifically prohibited in credit, the nominated bank (if acting on its nomination), a confirming bank or the issuing bank can accept commercial invoices issued for amounts in excess of the amounts permitted by the LC. However, the claim amount from the beneficiary; must not be more than the credit amount, there is a possibility that part payment have already been paid to beneficiary in advance or settled outside the credit.

c. The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.

Description of the goods, services or performance shown on the invoice is to correspond with the credit. There is no need for a mirror image. Details of the goods may be stated in a number of areas within the invoice which, when read together, represent a description of the goods corresponding to that in the credit.

For an example if field 45a of the credit states, “150 pieces of Aluminum Bar Stool 500X100X100MM stainless steel unit price $77.50, HS code 3926.00.00 and 75 pieces of Aluminum bar table 100X600X400MM stainless steel unit price $110.40, HS code 3926.00.00”.

Invoice presented as below covering all the required details in different area of the invoice (circled) is acceptable.

Pictorial Example-2:

Points to notes for handling a commercial invoice under credit:

·          A credit calling for 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. Provided that content should fulfill the requirements,But invoices identified as “provisional”, “pro-forma” or the like are not acceptable under letters of credit rules and standard banking practices.

·          The invoice can also show a deduction covering advance payment, discount, etc., not stated in the credit. For example 25% advance payments outside letter of credit and 75% payable by letter of credit “at sight” is possible

Contents of the Commercial Invoice

There is no standard format explaining how to prepare a commercial invoice however, a commercial invoice going to be used for trade transaction or under letter of credit should include following:

·          Name, address and contact details of beneficiary/seller as “Consignor”.

·          Name, address and contact details of the applicant/buyer as “Consignee”.

·          Must be in the same currency of the credit.

·          Should include the commercial invoice number.

·          Description of the goods stated in credit.

·          Delivery term (incoterm) if given in field 45a of credit.

·          May or may not be signed and dated if no specific requirement under credit.