What Is a Proforma Invoice? Pre-Sale Documentation Guide
A proforma invoice is a preliminary document issued before a sale, showing estimated prices, quantities, delivery terms, and payment conditions. It serves as a formal quotation and is used for L/C applications, import permits, and customs pre-assessment.
What Is a Proforma Invoice?
A proforma invoice is a preliminary document issued before a sale is finalized, showing estimated prices, quantities, delivery terms (Incoterms), and payment conditions. It is a formal quotation, not a payment demand. Unlike a commercial invoice, a proforma is not legally binding and does not create a payment obligation.
Proforma vs Commercial Invoice
| Criteria | Proforma Invoice | Commercial Invoice |
|---|---|---|
| Timing | Before sale | After sale/before shipment |
| Legal status | Quotation (non-binding) | Legally binding payment document |
| Accounting | No accounting entry | Formal accounting record |
| Customs use | Pre-assessment, permits | Duty calculation, declaration |
| L/C | Opening application | Payment presentation |
Proforma Invoice Uses
- L/C opening: Banks require proforma to establish letter of credit
- Import permits: Some countries require pre-approval before import
- Customs pre-assessment: Estimate duties before committing
- Currency transfer: Some countries require proforma for forex approval
- Formal quotation: Structured price and terms offer
Proforma Contents
- "Proforma Invoice" heading
- Number and date
- Seller and buyer details
- Product description, quantity, unit price
- Total amount and currency
- Incoterms delivery term
- Payment conditions
- Validity period (typically 30-90 days)
- Estimated delivery time
Frequently Asked Questions
Can customs clearance be done with a proforma?
No. Customs declarations require the commercial invoice. Proforma is for pre-assessment and permit applications only.
Can proforma and commercial invoice prices differ?
Yes, since proforma is non-binding. However, for L/C transactions, amounts should be consistent.
How long is a proforma valid?
Validity is set by the seller, typically 30, 60, or 90 days. After expiry, prices may change.
Is a proforma the same as a quote?
A proforma is a structured, formal quote in invoice format. A regular quote may be less formal. Both serve as price offers.
References
- ICC Trade Documentation
- UCP 600 L/C Rules
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