What is a proforma invoice?
A proforma invoice is a document in the nature of an offer that the seller gives the buyer before the sale is final, showing the description of the goods, the quantity, the unit price and the terms of delivery and payment. Because it is not based on a firm sale, it does not replace the commercial invoice attached to the customs declaration; its function is to serve as the basis for the order, for opening a letter of credit and for permit applications.
What is the difference between a proforma invoice and a commercial invoice?
The difference is the stage at which the document is issued and what it creates. A proforma is given before the sale and expresses an offer; a commercial invoice is issued after the sale has taken place and is the basis of the obligation to pay. Article 115 of the Customs Regulation defines the invoice as a document "issued on the spot by the seller in firm sales and by the consignor in other cases". A proforma does not carry the firmness in this definition. The content of the two overlaps; setting up the proforma correctly from the start prevents the invoice issued later from conflicting with the declaration.
What should a proforma invoice contain?
A proforma should include from the start the fields that the commercial invoice issued later will have to carry. Article 115 of the Customs Regulation lists the information an invoice must contain; preparing the proforma on the same list removes the need for corrections at the declaration stage. The tariff position, the delivery term and the packaging details are the items most often left out of a proforma. The last item in the list, the validity period and the estimated ready date, is not in the regulation's list; it is a practical addition that follows from the offer nature of the proforma.
- Place, date and number of issue
- Name and address of the seller (in cases other than a firm sale, the consignor) and of the buyer
- Payment terms (such as in advance or on credit)
- Sale price and delivery term — the Incoterms rule, together with the named place and the version year
- The customs tariff statistical position of the goods (HS code) and the quantity in the unit of sale
- Unit price of the goods
- Type and kind, mark and number, and count of the packages containing the goods
- Place of delivery of the goods and of payment of their price, and the manner of dispatch
- Specific to the proforma: validity period and estimated ready date
Is a proforma invoice accepted at customs?
The basis of a declaration for release for free circulation is the invoice, not the proforma. Article 114 of the Customs Regulation makes it compulsory, except in cases to be determined, to attach the invoice to the customs declaration; under the second paragraph of the same article, where it is documented that the price will be formed later, the customs administration defers the obligation to present the invoice. The legislation, on the other hand, asks for the proforma directly in some permit applications: for the temporary import regime, the original of the proforma invoice and two copies of its translation are among the documents that can be requested from the permit holder; in outward processing, too, the proforma invoice is among the documents showing that the processed products will be made from the temporarily exported goods. So the proforma is not without function at customs, but it does not take the place of the commercial invoice. For the wider process see customs clearance.
What is the role of the proforma in letters of credit and payment processes?
The proforma is the basis of the instruction the buyer gives its bank to open a letter of credit. The amount, goods description, quantity, delivery term and shipment conditions in the credit are mostly transferred directly from the proforma; an error in the proforma therefore carries over into the credit and can afterwards be corrected only by an amendment. The document presented to the bank at the payment stage is not the proforma but the commercial invoice issued after shipment. In advance-payment deals the flow is the same: the buyer makes the transfer on the basis of the proforma, and the seller issues the commercial invoice after shipment.
Is a proforma invoice binding?
A proforma is not a sales contract on its own; the parties become bound by a declaration of acceptance. In practice, the buyer signing and returning the proforma, or making the payment, is read as acceptance of the offer, and the document begins to work in effect as a contract. For this reason the proforma should state its validity period and the conditions under which the price may change. Writing the delivery term only as a rule code is also not enough; if the named place and the version year are not given, where cost and risk pass is open to dispute.
Proforma invoice and commercial invoice compared
| Criterion |
Proforma invoice |
Commercial invoice |
| When it is issued |
Before the sale is final, at the offer stage |
After the sale has taken place, usually with the shipment |
| Nature |
Offer and preliminary information document |
Document of the firm sale |
| Does it create a payment obligation |
Not by itself |
It is the basis of the obligation to pay |
| Attached to the declaration |
Does not replace the commercial invoice |
A document that must be attached to the declaration |
| Typical use |
Opening a letter of credit, permit applications, order confirmation |
Customs declaration, determination of value, presentation to the bank |
Frequently asked questions
Can goods be imported with a proforma invoice?
As a rule an invoice is attached to the declaration for release for free circulation, and a proforma does not take its place. Where it is documented that the price will be formed later, however, the customs administration defers the obligation to present the invoice. In some permit applications, such as temporary import, the original proforma invoice and two copies of its translation are among the documents that can be requested directly.
Can the amount on the proforma differ from the amount on the commercial invoice?
It can; a proforma is an offer, and when the quantity, the packaging or the freight item changes, the amount changes too. The problem arises in deals with a letter of credit: because the credit is opened on the basis of the proforma, a difference that appears later is grounds for a discrepancy. If a difference is foreseen, having a tolerance written into the credit is more practical than amending it afterwards.
Is it compulsory to write the HS code on a proforma invoice?
The legislation has no compulsory content list for the proforma itself, but writing the tariff position from the start is a strong habit. The code determines which duties arise in the country of arrival and which documents will be needed; if it is not known at the offer stage, the cost calculation is built incomplete. In addition, this information is in any case required on the commercial invoice to be issued later, under the Customs Regulation.
Is a proforma invoice the same as a quotation letter?
Their functions are close, but a proforma is more structured: in the layout of an invoice it shows the items, quantity, unit price and the terms of delivery and payment. This structure makes the document usable in bank and customs processes. A free-text quotation letter is mostly not enough.