Why Use a Pro Forma Invoice?

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In the world of trade, businesses have to complete more steps and use more documentation to seal an international sale than they do to make a domestic sale. Sellers use pro forma invoices to issue quotations to foreign buyers. And buyers rely on them to obtain needed financing and government approval to import. Pro forma invoices also help customs officials recognize shipments of merchandise not intended for resale. To be effective, they must provide details about cost, payment terms and shipping.

Buyer's Tool

Pro forma invoices are the preferred method of quoting prices in international trade, according to Export.gov. They provide transaction details such as shipping specifications, payment terms, applicable dates and exporter information a buyer needs to obtain financing in U.S. dollars and to secure government clearance to import merchandise from another country. Excluding vital information from a pro forma invoice can jeopardize the sale or delay documentation the buyer needs, such as an import license, letter of credit or foreign exchange allocation.

Customs Documentation

When a shipment is not intended for sale, customs officials can base their inspection of the merchandise on a pro forma invoice and authorize its entry into the country. The pro forma invoice also allows them to determine any applicable duties. For example, a pro forma invoice can provide merchandise descriptions, weight and dimensions and other key details for shipments of trade show exhibit materials, merchandise samples and items destined for replacement or repair that will not be resold. According to U.S. Customs and Border Protection, the importer is responsible for presenting the pro forma invoice when the shipment arrives at the port of entry.

Information Standards

Although no standard format exists for pro forma invoices, precision counts when creating them. Some charges that must be included -- such as freight, insurance and inland transportation information -- can be provided by a freight forwarding company. For exporters who don't use a forwarding agent, the Southern United States Trade Association recommends asking about a country's import restrictions using the U.S. Department of State's list of foreign consular offices and embassy diplomatic officers in the U.S.

Export.gov's Basic Guide to Exporting recommends typing "Pro Forma Invoice" at the top of the page and adding two statements somewhere on the document: one about the merchandise's country of origin, another attesting to the truth and accuracy of the information contained. It also lists 15 specific topics all pro forma invoices should cover:

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    Particulars of seller and buyer: name, address, phone, email
  • ·  
    Buyer’s reference number and the date the quote was requested
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    List and a brief description of products
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    Price (or value) of each item, preferably in U.S. dollars to skirt exchange rate fluctuations
  • ·  
    Shipment dimensions and total cubic volume
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    Gross and net shipping weight
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    Any trade discount
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    Delivery point
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    Terms of sale
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    Terms of payment
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    Transportation and insurance 
    charges
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    Time period that the quotation is valid
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    Total charges buyer will pay
  • ·  
    U.S. port of departure and estimated shipping date
  • ·  
    Currency of sale

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