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Proforma Invoice
A price quotation prepared in the form of an invoice, a pro forma invoice is different from commercial invoices in that it is used to create a sale and is sent in advance of the commercial invoice. The content of a pro forma invoice is almost identical to a commercial invoice and is usually considered a binding agreement although the price might change in advance of the final sale.

In some countries, the U.S. for example, Customs may accept a pro forma invoice (generated by the US importer and not the exporter) if the required commercial invoice is not available at the time when filing entry documents (entry - the process of filing documents with U.S. Customs at the port of entry to get goods released from Customs). U.S. Customs may use a pro forma invoice to assess duty and examine goods. The importer on record however, is required to post a bond and produce a commercial invoice within 120 days from the date of entry. If the required commercial invoice is needed for statistical purposes the importer has to produce the commercial invoice within 50 days from the date Customs releases the goods to the importer.

Here are some reasons why pro forma invoices are widely used in international transactions:

• Considered a binding agreement.
• May be required by some countries as part of their import licensing procedures.
• Bankers and financial institutions use pro forma invoices to open letters of credit for importers.
• Easily recognized due to their similarity to commercial invoices.
• Their invoice format encourages exporters to include all the information that will appear in the commercial invoice.

Keep the following points in mind when your company is asked to produce a pro forma invoice:

1. The title of the document should clearly say "Pro Forma Invoice"
2. Exporter's name, address, telephone number and e-mail address.
3. Sold to name, address, telephone number and e-mail address.
4. Pro forma invoice reference number.
5. Date issued. The date of the pro forma invoice is the date of the quotation.
6. Customer purchase order number, if available.
7. Terms of payment (letter of credit, documentary collection, pre-payment, T/T, open account etc.)
8. Estimated date of shipment.
9. If more than one product, number each product beginning with number 1.
10. Quantity shipped.
11. Full product description, include the Harmonized Schedule (HS) code when available
12. Indicate clearly currency used (USD, euro, yen etc.)
13. Unit pricing should be included.
14. Unit pricing should be extended by the quantities quoted to form the line item total.
15. Any additional seller-provided services should be itemized and should be added to reach a grand total.
16. Terms of sale using INCOTERMS 2000 (FOB, CIF, CFR, DDU etc.)
17. Identify the number of unit measure, weight, case, pallets, box, etc.
18. The country of origin of the product.
19. Validity period, never make open-ended commitments remember that the validity date can be changed.
20. Must be signed and title be included.

Remember that proforma invoices are formal offers to sell. When the buyers agree with all the terms and conditions of the pro forma invoice the result is a purchase order sent by the buyer, which finally leads to a sales contract that is, if the buyer and the exporter agree to have a formal sales contract. The proforma and purchase order must be compared before goods are shipped to check for discrepancies. Should there be a discrepancy, the buyer should be promptly notified to correct any errors.