UCP600 Article 18: Commercial Invoice
Clause a.i
Clause: “A commercial invoice must appear to have been issued by the beneficiary (except as provided in article 38).”
Explanation: This means the invoice should be issued by the seller or the exporter named in the letter of credit (LC). The beneficiary is typically the party that receives payment under the LC.
Example: If a company “ABC Exporters” is the beneficiary under the LC, the commercial invoice should clearly state that it is issued by “ABC Exporters”. This ensures that the document matches the details provided in the LC.
Clause a.ii
Clause: “A commercial invoice must be made out in the name of the applicant (except as provided in sub-article 38 (g)).”
Explanation: The invoice should be addressed to the buyer or the applicant named in the LC. This ensures that the goods are billed to the correct party.
Example: If “XYZ Importers” is the applicant under the LC, the commercial invoice should be addressed to “XYZ Importers”. This confirms that the goods are invoiced to the correct buyer.
Clause a.iii
Clause: “A commercial invoice must be made out in the same currency as the credit.”
Explanation: The currency used in the commercial invoice should match the currency specified in the LC. This avoids any confusion or discrepancies in the payment amount.
Example: If the LC specifies the payment in USD, the commercial invoice must also be issued in USD. This consistency ensures there are no issues with currency conversion.
Clause a.iv
Clause: “A commercial invoice need not be signed.”
Explanation: Unlike some other documents, a commercial invoice under UCP600 does not require a signature to be valid. This simplifies the document preparation process.
Example: An invoice issued by “ABC Exporters” to “XYZ Importers” does not need to have a signature at the bottom to be acceptable under the LC terms.
Clause b
Clause: “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 honoured or negotiated for an amount in excess of that permitted by the credit.”
Explanation: Banks involved in the LC process can accept a commercial invoice that shows an amount higher than the LC amount. However, they must ensure that the amount they honor or negotiate does not exceed the LC amount.
Example: If the LC amount is $50,000 and the commercial invoice shows $52,000, the bank can still process the invoice but will only honor or negotiate up to $50,000. The bank’s decision to accept the invoice is binding on all parties involved.
Clause c
Clause: “The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.”
Explanation: The goods, services, or performance described in the commercial invoice must not exactly match but it should correspond to what is specified in the LC. This ensures that there are no discrepancies between what was ordered and what is billed.
Example: If the LC describes the goods as “1000 units of Model X smartphones,” the commercial invoice states below are acceptable –
- 1000 units of Model X smartphones
- 1000 units of smartphones (model x)
- model x smartphones (1000 units)
this need not be mentioned in a single sentence. It can be mentioned in different places of invoice also like in goods description field it is mentioned as ” 1000 units of smart phone” and somewhere else in the invoice it is mentioned as “model x”. Then also it is acceptable. Invoice should cover all the words of goods description which is mentioned in the LC in any of the places. If invoice mentions “1000 units of smart phone” but it does not mention “model x” in anywhere then it will be Discrepant.