Proforma Invoice

Definition

A proforma invoice is a document that looks like an invoice but works as a price quote. A seller sends it before a sale is final or the goods ship, and it lists the goods, prices, and terms the seller expects to use. Customs usually relies on the final commercial invoice to set the value of the goods, so a proforma invoice is treated as a preliminary or stand-in document.

What it contains

A proforma invoice is a seller’s quote written in invoice format, so most of what it holds is the same information a commercial invoice carries. A quotation proforma usually has six kinds of detail.

1. Seller and buyer: The seller and buyer details give the names and addresses of both parties.

2. Goods description: The goods description says what is being sold, in enough detail to support the HS code.

3. Quantity, price, and currency: These lines give the quantity, the price per unit, the total, and the currency the prices are in.

4. Incoterm: The Incoterm is a short code, such as FOB, that says who pays for shipping and where the risk passes to the buyer.

5. Terms and dates: Payment terms, an estimated ship date, and a validity date, which is the day the quote expires, round out the quote.

6. HS code and country of origin: The HS code is a number that classifies the goods for duty. Neither field is required on a quote, but brokers want both because they carry straight onto the customs entry.

The US customs version is stricter. Under 19 CFR 141.85, the importer signs it, says how each price was worked out, lists which charges are included, and promises to hand over any other invoice that turns up.

What a proforma invoice looks like

Where it’s used

A buyer often needs a proforma invoice before the goods move. The buyer may show it to a government office to get an import licence, to a bank to open a letter of credit (the bank’s promise to pay the seller once the right papers are shown), or to a finance team to approve an advance payment.

Later, it can turn up at the border. The people who handle it fall into four groups.

1. Exporters and sellers: The seller or exporter writes the quote and sends it to the buyer.

2. Importers: The importer uses it for licences, bank steps, and payment approvals. When the commercial invoice is missing in the US, the importer signs the customs version of it.

3. Customs brokers and trade compliance specialists: Brokers and compliance specialists meet it when the commercial invoice has not arrived with the shipment, or when the goods are not being sold at all, such as samples or a part returning from repair. Freight forwarders and express carriers see it on the same shipments.

4. Banks: Bank document checkers read the papers against a letter of credit. They do not accept a pro forma in place of an invoice unless the credit allows it.

How it’s used

1. Price request

The process starts when a buyer asks for a price. The seller answers with a proforma invoice showing the goods, prices, Incoterm, and payment terms.

2. Pre-shipment use

Before anything ships, the buyer takes the proforma invoice to a licensing office, a bank, or a finance approver.

3. Broker check

A broker or compliance specialist can review it early. Good practice is to confirm the description supports the HS code, look for permits the goods need, and spot costs that duty must include but the price leaves out.

4. Commercial invoice

Once the goods ship, the seller issues the commercial invoice. This is the document the broker files the customs entry on.

5. Late invoice

When the commercial invoice is late, customs rules offer a way through. In the US, CBP can accept the entry with a 141.85 pro forma when the missing invoice is not the importer’s fault. The importer must post a bond worth 1.5 times the invoice value and produce the real invoice within 120 days (19 CFR 141.91).

The EU allows a simplified declaration that is completed later, and in India an officer can assess duty provisionally (Customs Act, Section 18).

6. Reconciliation

The last step is a side-by-side check. The broker compares the commercial invoice with the proforma and the filed entry, looking at quantity, price, currency, Incoterm, origin, and HS code, and corrects the entry if anything differs.

Example

A US importer’s 500 chairs arrive before the seller’s invoice. The broker files the entry with a 19 CFR 141.85 pro forma showing the order price of USD 200 a chair, and the importer posts a USD 150,000 bond, which is 1.5 times the USD 100,000 invoice value (illustrative numbers). In week three the commercial invoice shows USD 208 a chair. The broker corrects the entry and files the invoice well inside the 120 days.

Types

Sources define two kinds of proforma invoice. They look alike, so the real difference is who writes them and why.

Quotation proforma invoice

A quotation proforma invoice is the seller’s price quote written in invoice format. A seller sends it when a buyer asks for a price, and the buyer uses it to get an import licence, apply for a letter of credit, or get a payment approved. Sales teams write it, and importers, banks, and brokers read it. A machine maker might send one so the buyer’s bank can open a letter of credit.

Customs pro forma invoice

A customs pro forma invoice is a form the importer signs when bringing goods into the US without the seller’s invoice. It follows the set format in 19 CFR 141.85. Importers use it when no commercial invoice is required, such as for goods not meant for sale, or when a required invoice is missing and CBP accepts the entry under a bond. The customs broker usually helps prepare it.

Variations

Proforma vs. commercial invoice

A proforma invoice is a quote, while a commercial invoice records a finished sale. The commercial invoice is the main proof of value customs checks, and the US, the EU, and India all expect one at entry. For example, a broker who files on a proforma price may find the final price is higher, which changes the duty.

Proforma for samples and no-charge goods

The proforma format is also used when goods are not sold, but “no commercial value” does not mean “no value.” US rules still ask for a value for each item and enough detail to work out duty, so a blank or zero value invites a hold. Some carriers ask for a commercial invoice for samples, so check their rules too.

Proforma vs. provisional invoice

Banks treat both as unacceptable under a letter of credit unless the credit says otherwise (ISBP 821). A provisional invoice comes after a real sale and may be adjusted later, while a proforma comes before the sale and is only a quote. A bank can refuse a document titled “Pro-forma Invoice” presented for payment.

FAQs