INTRODUCTION

Correct invoicing is a matter of great importance in

the export trade. The smooth performance of the contract of
sale will often depend on it. The seller may sometimes regard
the buyer’s instruction on this point as too exacting, but it
should be borne in mind that the buyer may require certain
details in order to comply with regulations in force in his own
country with respect to such matters as import licences,
Custom duties and exchange restrictions.

In certain circumstances the buyer may request a pro

forma invoice in advance, or for the invoice to be dated a
month, or some other fixed time, later than the date of the last
invoice.
The Invoice must be True and Correct
The exporter should make it a firm principle of
business policy in international sales & other
international supply contracts only to issue invoices
which are correct in all respects.

The exporter sometimes requested by the buyer

abroad to insert inaccurate particulars into the invoice.
The buyer may ask that the price for the goods be
understated in the invoice because he wants to reduce
or evade taxes or import duties in his country, Or
alternatively, he may ask that the invoice price be
inflated & the excess be transferred to an account
outside his country because he wishes to evade local
exchange control on the transfer of funds abroad.

False invoicing almost invariably has an

improper motive. A contract in which the parties agree
that a false invoice be issued is often unenforceable in
law.
What is Invoice
International trade is an economical activity
between countries/companies. As you know, every
country has own business culture, currency and
economical system. This system requires some
documents. These documents may change based on
the country, regulations and means of transportation.

Trade agreements between importer and

supplier or between countries require documents to
protect both sides’ rights during trade. These
documents fall under 5 groups to apply these different
regulations systematically. These are commercial
documents, official documents, transport documents,
insurance documents and financial documents.
Meaning and types of Invoice
A nonnegotiable commercial instrument issued
by a seller to a buyer. It identifies both the trading
parties and lists, describes, and quantifies the items
sold, shows the date of shipment and mode of
transport, prices and discounts (if any), and delivery
and payment terms.

In certain cases (especially when it is signed by

the seller or seller's agent), an invoice serves as a
demand for payment and becomes a document of title
when paid in full.

The Pro Forma Invoice - First Step

The pro forma invoice is usually the first export
document prepared. It is generated by the exporter in
response to an opportunity for export business; often
from a trade lead, whether from an unsolicited direct
inquiry or as follow-up from a trade event.
 Virtually nothing is accomplished in an export
transaction without the issuance and acceptance of a
pro forma invoice. Pro forma invoices can be either
formal or informal documents depending on the
requirements of the destination country.

The Commercial Invoice

The commercial invoice is considered to be the

most important international trade document and
should be prepared as accurately as possible. It is the
main document used by customs to accept or reject the
customs entry prepared by the customs broker. Even
with a sample shipment, a commercial invoice is
required, and needs to state the fact that the goods are
not for resale - are samples only - and have little
commercial value.
 Although there is no standard form for a
commercial invoice, the following information should be
included:

Seller’s name and address

Buyer’s name and address
Exact description of goods (kind, grade, quality,
weight)
Agreed-upon price in U.S. dollars (in order to
reduce foreign exchange risk)
Description of packages (number, kind,
markings, dimensions)
Type of container
Delivery point
Terms of payment
Date and place of shipment
Method of shipment
Signature of shipper/seller
The Packing List
The packing list is used by customs to apply
certain types of duties, and is a required document for
customs clearance. Most duties are applied on a basis
of value, known as “Ad Valorem” duties, and the
commercial invoice is key for those. There are also two
other types of duties applied to imports; specific and
compound.

Specific duties require the packing list as they

are applied on the physical nature of the goods, such as
their pieces, weight or measure and this information
comes from the packing list. Compound duties are
applied as both Ad Valorem and Specific tariffs together
and thus both the commercial invoice and packing list
would be required for customs clearance.

It is also used by shipping companies to identify

the weight and dimensions of your product, and should
be completed in metric form.
 Product liability is a liability of the producer of a
product which, owing to a defect, causes injury, damage
or loss to the ultimate user. The defect may consist in
the quality or rather lack of it – of the product itself, but
may also be due to insufficiency in the instructions for
use or in the failure to give adequate warning of a
dangerous propensity of the product.

Clearly the issue of product liability is of great

concern to the manufacturer who sells part of his
produce abroad. It may also concern other suppliers. Of
importance too is the question of whether they can
cover the risk of claims in respect of defective products
by insurance and, if so, on what terms.

A claim for damages caused by a defective

product may be based on contract, tort, a statutory
right, or a combination of these.
The Basis of Product Liability
Liability for defective products is based on one
of the following:
a) Strict Liability
b) Qualified Liability
c) Fault Liability

In all three types of product liability, the claimant

has to prove that the product was defective & that he
has suffered damage. If a legal system adopts the
principle of strict liability, all the claimant has to prove –
in addition to the facts mentioned above – is causation
i.e. that the damage was caused by the defect of the
product. If he succeeds in discharging that burden of
proof, the producer has no defence and, in principle, is
liable.
 If the principle of qualified liability is applied, the
claimant has similarly to prove causation, but the
producer has the defence available that in view of the
state of scientific or technical knowledge existing at the
time the product was put into circulation, he could not
have been expected to have discovered the defect. This
doctrine is known as the development risk, or state of
the art defence.

If a claim is founded on fault liability, the

claimant, in addition to causation, has to prove that the
producer was at fault, for instance that he was negligent
in the manufacture of his product.

In English law all these principle are applied.

Liability arising from the Contract of Sale
In English law, liability for defective goods of
the seller arises under the Sale of Goods Act, 1979 & in
the transfer of property in the goods under the Supply
of Goods & Services Act 1982, both as amended by the
Sale of Goods (Amendment) Act, 1994. Liability under
these two Acts is not limited to the producer of the
goods, nor is it relevant that the supplier is a
manufacturer selling his own goods or a merchant
selling goods produced by other.

These Acts provide for an implied condition as

to satisfactory quality if the seller sells, or the
transferor supplies, goods in the course of a business.
The goods sold or supplied are of satisfactory quality if
a reasonable person would regard them as satisfactory,
taking all relevant circumstances into account.
 If the tare defective & the defect amounts to a
lack of satisfactory quality, the buyer or transferee, if a
consumer, is entitled to reject them and claim damages
for breach of an implied condition of the contract, but a
non consumer may not reject them if the breach is so
slight that rejection would be unreasonable.

The Consumer Protection Act, 1987

Liability for defective Product
The Act gives a statutory right of action to a
user who suffer damage caused wholly or partly by a
defect in a product. Product is defined in the Act thus:
“Product” means any goods or electricity &
(subject to subsection (3) ) includes a product which is
comprised in another product, whether by virtue of
being a component part or raw material or otherwise.

Damage means “death or personal injury or any

loss of or damage to a property. Any claim must be for
more than £ 275 excluding interest but there is no
maximum limit in case of death or personal injury in the
Act.
Who are all Liable
The following are liable
1. The producer of the product,
2. The person who, by putting his brand name
on the product, has held himself out to be
the producer,
3. The Importer into a Member State of the E.C ;
or
4. A supplier, who when asked by the claimant
within a reasonable period to identify any of
those in 1 – 3 above, fails to give this
information within reasonable time.

Defences
The defences to the statutory action for
damages for a defective product, apart from those
denying the pre – condition of the action, are listed in
Section 4(1) of the 1987 Act.
Damages
Where the action can be founded on breach of
contract, damages for physical loss, i.e. for death,
personal injury or damage to property, as well as for
economic loss, i.e. loss of profit or other financial loss,
can be recovered to the extent the loss is not too
remote.

Where the action is founded on the Consumer

Protection Act, 1987, physical damage is recoverable
but pure economic loss is not provided for.
If the action for damages for a defective product
is founded on the torts of negligence, it has been clear
since Donoghue v. Stevenson that damages for
physical loss, both with respect to the person & to the
property, are recoverable.

Product Liability Insurance