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What is a Pro Forma Invoice?

A pro forma invoice (or Pre-invoice) is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods.
Dec 15
It is not a true invoice but serves as a commitment to sell goods or services at a specified price. Pro forma invoices are commonly used in international trade, especially when the final commercial invoice has not yet been issued. They provide detailed information about the transaction and can be considered as a preliminary step to the creation of the final invoice.

Key characteristics of a pro forma invoice include:

1. Description of Goods or Services: A pro forma invoice provides a detailed description of the goods or services to be provided, including quantities, specifications, and any other relevant details necessary for the buyer's understanding.

2.Prices and Terms: It outlines the prices of the goods or services, along with any applicable taxes, duties, or discounts. Additionally, it may specify the terms of sale, such as the agreed-upon payment method, delivery terms, and any special conditions related to the transaction.

3. Pre-shipment Agreement: It serves as a confirmation of the buyer's intent to purchase and the seller's commitment to deliver the goods or services as described in the document. While not a legally binding document, it reflects the terms and conditions that are expected to be included in the final commercial invoice.

4. Customs Information: In international trade, pro forma invoices often include information required by customs authorities for import/export purposes, such as the country of origin, the harmonized system (HS) code, and other relevant shipping details.

5. Trade Facilitation: Pro forma invoices facilitate the smooth flow of goods across borders by providing buyers with the necessary information to arrange for payment and customs clearance procedures. They are crucial for both the buyer and the seller to ensure that the transaction progresses smoothly and that all parties are aware of the terms and conditions of the sale.

While a pro forma invoice is not a demand for payment, it serves as an important document for both parties, enabling the buyer to prepare for the forthcoming transaction and the seller to provide comprehensive details about the goods or services being offered. It helps to avoid misunderstandings and discrepancies in the final commercial invoice, contributing to a more efficient and transparent trade process.