Meaning of Proforma Invoice in International Trade | Top Tips

Proforma Invoice is an informal invoice that is a form of quotation from a seller to a potential buyer. It is often required by the buyer for import applications and foreign exchange approvals.

Meaning of Proforma Invoice

“Proforma” is a Latin word which means “purely formal”, so literally, It means purely formal, meaningless invoice. This invoice is originally an invoice issued by the seller when marketing the goods, in order for the buyer to estimate the cost of importation, assuming that the transaction has been established. In reality, no goods have been shipped, which is why it is also called a “trial invoice” in Japan.


Proforma Invoice


There is also a common type of commercial invoice

Commercial invoice is the exporting party to the importing party to list the shipment price list, is the basis for both buyers and sellers to keep accounts, but also import and export customs duty payment of the general description.

Commercial invoice is a comprehensive reflection of the business, including the name of the goods, specifications, prices, quantities, amounts, packaging, etc., but also importers for the import declaration of indispensable documents, so the commercial invoice is the core of the full set of export documents, in the production of documents, the rest of the documents are required to refer to the commercial invoice repair.

Commercial invoice related post:

What Is Commercial Invoice | Best Filled Out Template

Proforma Invoice and commercial invoice is different from the invoice on the “form” words. This invoice can be used as an invitation to the buyer to place a firm order. The invoice usually states the price and the conditions of sale, so that once the buyer accepts the conditions, he can sign a firm contract in accordance with the content of the Proforma Invoice.

Since the Proforma Invoice contains details of the import price and related charges, some countries provide for the possibility of applying for an import license on the basis of the Proforma Invoice or for declaring the price of the goods to customs.

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  • In practice, if the proforma invoice with the content of the quotation and constitute a legal offer (offer), can be used to replace the quotation, or even for sales confirmation (sales confirmation).
  • Proforma Invoice can also be used for other occasions that require settlement.
  • Used for prepayment, that is, in the shipment before the request for cash payment.
  • In consignment sales, the exported goods do not have a firm sales contract, but are placed in the hands of an agent, for whom the Proforma Invoice can be used as a guide for making offers to potential buyers.
  • In the case of a tender, Proforma Invoice enables the buyer to enter into a contract of sale among many competing suppliers at a reasonable price and on reasonable terms of sale.


Proforma Invoice


Differences between Proforma Invoice and Commercial Invoice

It is very similar to a Commercial Invoice, but there are significant differences between the two, including:

Differences in the time of creation

Proforma Invoice is usually issued by the seller when the buyer and seller ask for quotations, and the buyer can accept the price and terms of the transaction in the Proforma Invoice, or make a counter offer. the Proforma Invoice is not part of the final terms and conditions of the international trade between the two parties.

Commercial Invoice in the buyer and seller on the price of goods, trading conditions and so on to reach a consensus issued by the seller, as both sides to reach the final transaction of the legal basis, will be provided to the international trade in the relevant parties, including banks, logistics companies, customs and so on.

Different contents

Although both of them are highly similar in content, Commercial Invoice contains the final and jointly confirmed transaction conditions, while Proforma Invoice is only a quotation with deadline requirements issued by the seller based on the buyer’s inquiry.

Different Usage Scenarios

Proforma Invoice is used as a basis for buyer and seller to negotiate on price and transaction conditions, and can also be used as a basis for buyer to apply for import license and letter of credit.


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