The Proforma Invoice Introduction A proforma invoice (sometimes written as pro forma invoice) is little more than a 'preadvice'

or indication of what will stand in the commercial invoice, once negotiations have been completed. Indeed, the proforma invoice and the commercial invoice often look exactly the same, except that it should state clearly "proforma invoice" on this document, whereas the commercial invoice will state "invoice" or "commercial invoice". The proforma invoice serves as a negotiating instrument. The initial proforma invoice often sets the stage for the first round of negotiations if the exporter and importer have not yet had any real discussions. What is the difference between a proforma invoice and a quotation? In reality, there is very little difference in function between the two and the proforma invoice is really a quotation in invoice form; in other words, the difference really comes about in terms of the structure and layout of the proforma invoice/quotation. A typical quotation appears more like a business letter describing a written offer, while a proforma invoice appears exactly the same as a invoice (except with the words "proforma invoice" written on the document). The proforma invoice essentially serves as a 'quotation' that sets the road to further negotiations. Some exporters choose to prepare an 'official' quotation, while others prefer to use the proforma invoice as their quotation. In fact, the quotation can contain the same information as a proforma invoice. Sometimes a firm may send out a written quotation and the importer may ask for a proforma invoice. It is important to note that there is no standard format for the proforma invoice and one proforma invoice may differ redically in layout from the next (although there is common agreement on the information that should be included in the coument). It is a document prepared by the exporter and so will take the format/layout decided on by the exporter. You need to do a lot of homework before preparing your pro-forma invoice You need to ensure that the information that you include in your proforma invoice is sufficiently accurate and realistic, as well as being comprehensive enough to cover all the issues of importance to the importer. This will enable him or her to make an informed decision to buy from you. Remember, the proforma invoice is your offer to sell - it reflects on you. Based on this one single document, the importer will need to come to a decision to buy from you or not. If you do not provide sufficient information, or any crucial information is lacking, the importer (if you are lucky) may have to revert back to you and ask you to provide this information - this will delay the purchase decision and may result in you incurring additional costs (for example, you may have stock sitting around longer than it needs to because of the delay). Worse still, the importer may ignore or reject your offer and buy from someone else. In fact, it is quite a common problem in exporting that proforma invoices often lack the crucial detail that the importer needs in order to make a decision, thereby resulting in delayed purchase decisions or rejection of the offer altogether. To this end you should use a costing worksheet to calculate your export costs and to determine an acceptable price. The proforma invoice sets the stage for the negotiation process Assuming that an importer e-mails you - an exporter - asking you to submit a proforma invoice (or a quotation) for the supply of 100 pumps according to a set standard. You would then prepare and submit a proforma invoice to the potential importer outlining a description of the product, what the price is, what the delivery terms will be, what the payment terms will be, as well as any other information that may be pertinent to the sale. Before this, of course, you will have done the costing exercise mentioned above. The importer will most likely reply to your proforma invoice requesting/negotiating different requirements such as a lower price, longer terms of payment,

different methods of payment, a different delivery schedule and may even request changes to the product specifications. You may be required to revisit the design and manufacture of your product, the costing exercise mentioned earlier, as well as you pricing strategies. You may even have to find alternative ways of getting your product to the customer and you may need to carefully rethink issues such as packaging, labeling, insurance, commissions, etc. Several versions of a proforma invoice may be involved Based on these requests from the importer, you may choose to comply or to refer back to the importer (probably via telephone, fax or e-mail) to discuss or negotiate compromises to these requirements. When you and the importer finally come to an agreement, a second (sometimes even third or fourth) proforma invoice will be exchanged between the two parties. This final proforma invoice - accepted by the importer - sets the stage for the further processing of the order. You should be aware that the importer may use the proforma invoice to request foreign exchange within his/her country if his/her currency is not freely convertible. The proforma invoice can also help the importer apply for a letter of credit at his/her bank. The proforma invoice must be comprehensive, accurate, clear and concise In other instances where the exporter and importer have met before and have already discussed and thrashed out an agreement perhaps in a face-to-face meeting, only one final proforma invoice is necessary to confirm that the two parties are indeed in agreement. If the importer is satisfied with this final proforma invoice, he/she will request their bank to issue an L/C on the strength of information stipulated in the proforma invoice. For this reason, it is essential that the proforma invoice be comprehensive, accurate, clear and concise. Any errors or misunderstandings will be transferred to the L/C and will cause problems, frustrations and delays down the line. What is more, the proforma invoice is also important to the importer for the purpose of obtaining an import permit and foreign exchange allocation within his country. At the same time, the exporter may use the proforma invoice and acceptance of the order from the importer to obtain funding to pay for the manufacturer of the goods concerned. Why use a proforma invoice? In summary, the proforma invoice is a popular document in exporting because: It is a widely accepted form of sales offer in the global export community. It clearly outlines all of the relevant information required to enable an export purchase decision to be made by the importer It is a legal document, which if accepted by the importer is considered the basis of a binding agreement Banks and other financial institutions will commonly accept proforma invoices in order to establish a Letter of Credit on behalf of the importer The commercial invoice is almost identical to the proforma invoice (except for the title) and is thus easy to prepare, thus minimising the possibility of errors. Details pertinent to the proforma invoice The following details are pertinent to the setting up of the proforma invoice and need careful attention: The document title should clearly state "Proforma Invoice" The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In the case of transshipment, there may be an intermediate

consignee and their contact details and address should then also be included on the invoice.) If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the goods are being sent, then you should include both their contact details and addresses in the proforma invoice The name of the person and company to notify once shipment has taken place and their contact details and physical address (here the contact details such as telephone, fax and cell number and e-mail address are more important than the physical address) A proforma invoice reference number An order number or similar reference to correspondence between the supplier and importer The date of issue of the proforma invoice (the 'quotation date') - quite important A complete, detailed and clear description of the goods in question, incorporating the appropriate HS codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may not be the same in the importing country and may thus incur additional or higher duties to the importer's detriment because of their inadvertent misuse) The quantity of goods in question, including the number of units/items The packing details, including their external dimensions, cubic capacity, weight, numbers and contents of each package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.) The grand total price of the goods for the whole consignment Where applicable, the unit prices should be indicated - the unit price multipled by the number of units/items should be reflected in the line total. The various line totals (in the case where different items are included in the same commercial invoice, or where additional services are itemised in the invoice), should add up to the total price for the whole consignment (also referred to as the 'Grand Total') The currency in which the goods will be sold (e.g. US dollars or rands) The type and amount of any discount given, where applicable The likely delivery schedule and delivery terms The payment methods (for example cash in advance, documentary collection, L/C, etc.) The payment terms (for example 30 days on sight) The Incoterm to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.) Who is responsible for the banking fees and other related costs (insurance and freight costs are covered by the incoterm in question) What the freight and insurance charges are The exporter's banking details A declaration of the country of origin of the goods The expected country of final destination Any freight details such as the port of loading and discharge Any additional exporter-provided services that should be added to the invoice to come to the grand total Any transhipment requirements The validity of the proforma invoice - that is, when does the offer expire (leaving it openended could be very risky) Any other information relevant to the order Make sure the proforma invoice is signed, together with the signature's name written underneath, with initials, title and position The commercial invoice

Introduction After the pro-forma invoice is accepted by the importer, the exporter must prepare a commercial invoice. The commercial invoice is required by both the exporter (to obtain the necessary export documents to enable the consignment to be exported, to prove ownership and to enable payment) and importer (who requires the commercial invoice to facilitate the import of the goods into the country in question). In exporting, the commercial invoice is considered a very important document as it serves as the starting or initiating document that underpins the rest of the export transaction. The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the buyer (the importer) describing the parties to the agreement, the goods to be sold, and the terms involved, as agreed between the exporter and importer. As such, the commercial invoice is the final bill exchanged between the seller and the buyer. The commercial invoice will normally be presented on the exporter's letterhead and will be addressed to the importer. It should contain full details of the consignment, including price and other related costs, in order to facilitate customs clearance. It must also be signed and dated. Freight and insurance, when included in the selling price, should be itemised separately as these charges are not subject to duty in certain countries. It is important that the commercial invoice clearly differentiates between the dutiable component of the order (the market value of the order), any other typically non-dutiable charges such as freight and insurance, and the total invoice value of the order. You should be aware that the commercial invoice is used by Customs authorities throughout the world for assessing Customs duties, inspection purposes, and for the keeping of statistics. If there is specific information required to appear on the commercial invoice by the Customs' authorities in the importing country, the importer should advise you of this. It does no harm, however, just to ask him/her if they don't mention it on their own. If it later transpires that certain additional information was required, you can at least say that you did ask! Customs' and consular invoices Some countries, however, may require the commercial invoice to be completed on their own specified forms - such commercial invoices are known as "Customs' invoices" and may be provided in lieu of or in addition to the standard commercial invoices referred to above. In addition, a "consular invoice" is required by certain countries. The consular invoice must be prepared in the language of the destination country and can be obtained from the country's consulate, and often must be "consularised" (i.e. stamped by an authorised Consul official in the exporting country). Tip The importer needs the commercial invoice since it is often used by Customs authorities to assess duties. For this reason, it is common practice to prepare a commercial invoice in English and in the language of the destination country. The freight forwarder can advise you when a translated copy is necessary. From the proforma to the commercial invoice There is usually very little, if any, difference between the final proforma invoice accepted by the importer and the commercial invoice, except that the one is titled "Proforma Invoice", while the other is titled "Commercial Invoice". Although the proforma invoice comes before the commercial invoice, the proforma invoice really only serves as a means of negotiating the actual contract. We said previously that the proforma invoice is the 'offer' put to the importer by the exporter. The importer may accept the terms specified in the proforma invoice, but a more likely scenario is that the importer will negotiate some of these terms with the exporter. There may be some backward and forward communication between the exporter and importer before the importer finally agrees to the transaction. Once the importer indicates that (s)he is happy with the terms of the contract as outlined in the (final) proforma invoice, the exporter will then be requested to provide the importer

with a commercial invoice. The commercial invoice should reflect the final (agreed-upon) profroma invoice exactly - any deviances will result in problems executing the transaction and/or receiving payment (unless such changes have been requested by the importer and are agreed to by the exporter). Based on the terms specified in this commercial invoice, the importer will instruct his/her bank (referred to as the issuing bank) to issue a letter of credit (L/C). This L/C (or the documentation associated with any other form of payment) will also need to reflect the terms specified in the commercial invoice exactly, while all subsequent documentation must reflect the terms of the L/C; there can be no exceptions. From this explanation, it is clear that the commercial invoice plays a central role in an export transaction. What should appear in the commercial invoice The following details should appear in the commercial invoice: The document title should clearly state "Commercial Invoice" The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In the case of transshipment, there may be an intermediate consignee and their contact details and address should then also be included on the invoice.) If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the goods are being sent, then you should include both their contact details and addresses in the commercial invoice The name of the person and company to notify once shipment has taken place and their contact details and physical address (here the contact details such as telephone, fax and cell number and e-mail address are more important than the physical address) A commercial invoice reference number A purchase order number or similar reference to correspondence between the supplier and importer The date of issue of the commercial invoice A complete, detailed and clear description of the goods in question, incorporating the appropriate HS codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may not be the same in the importing country and may thus incur additional or higher duties to the importer's detriment because of their inadvertent misuse) The quantity of goods in question, including the number of units/items The packing details unless provided in a separate packing list, including their external dimensions, cubic capacity, weight, numbers and contents of each package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.) - if a separate packing list is used, reference should be made in the commercial invoice to the packing list The grand total price of the goods for the whole consignment Where applicable, the unit prices should be indicated - the unit price multipled by the number of units/items should be reflected in the line total. The various line totals (in the case where different items are included in the same commercial invoice, or where additional services are itemised in the invoice), should add up to the total price for the whole consignment (also referred to as the 'Grand Total') The currency in which the goods will be sold (e.g. US dollars or rands) The type and amount of any discount given, where applicable The likely delivery schedule and delivery terms The payment methods (for example cash in advance, documentary collection, L/C, etc.)

The payment terms (for example 30 days on sight) The Incoterm to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.) Who is responsible for the banking fees and other related costs (insurance and freight costs are covered by the incoterm in question) What the freight and insurance charges are The exporter's banking details A declaration of the country of origin of the goods The expected country of final destination Any freight details such as the port of loading and discharge Any additional exporter-provided services that should be added to the invoice to come to the grand total Any transhipment requirements The validity of the commercial invoice - that is, when does the offer expire (leaving it openended could be very risky) Any other information relevant to the order Make sure the commercial invoice is signed, together with the signature's name written underneath, with initials, title and position Commercial invoices are the basis for assessing duties and statistics Commercial invoices are often used by governments to determine the true value of goods when assessing customs duties and recording trade statistics. Governments that use the commercial invoice to control imports, will often specify its form, content, number of copies, language to be used, and other characteristics. Examples of commercial invoice Unzco commercial invoice with instructions for completing the invoice Commercial invoice: Checklist This invoice is regarded as the commercial document which contains and confirms the details of the transaction taking place between the buyer and seller. It is issued once the contract between the two parties has been finalised. Information appearing on the invoice normally includes the name and address of the buyer and seller, date of invoice, description of goods, unit prices and final price, terms of settlement, shipping marks and numbers, etc.This site, provided by FNB, provides a chcklist of items that need to be checked on the commercial invoice.

Packing List
When you prepare your goods for shipment, you may be required to prepare a detailed export packing list. This is a formal document that itemises quite a number of details about the cargo such as:

The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address The gross (i.e. the weight of the product and packaging - that is, the total weight), tare (i.e. the weight of the packaging without any contents) and net (i.e. the weight of the product only) weights of the cargo The nature, quality and specifications of the product being shipped The type of package (such as pallet, box, crate, drum, carton, etc.) The measurements/dimensions of each package The number of pallets/boxes/crates/drums, etc. The contents of each pallet or box (or other container) The package markings, if any, as well as shipper's and buyer's reference numbers Reference to the associated commercial invoice such as the invoice number and date A purchase order number or similar reference to correspondence between the supplier and importer An indication of who the carrier is (airline, shipping line or road hauler) Reference to the Bill of Lading or Air Waybill number

It is also important that the details on the packing list (such as shipper's/importer's details, number of items involved, etc.), match exactly what is stipulated on the commercial invoice and bill of lading/airway bill. You can imagine that if there is a mismatch between the packing list and the other transport/export documents that this may lead to closer scrutiny of the cargo and may ultimately result in delays in the cargo arriving at its destination! Note that pricing information is not required on the packing list.

The purpose of the packing list

The packing list should be attached to the outside of a package in a waterproof envelope or plastic sheath marked "Packing list enclosed". The list is used by the shipper or forwarding agent to determine (1) the total shipment weight and volume and (2) whether the correct cargo is being shipped. In addition, customs officials (both local and foreign) may use the list to check the cargo. Packing lists come in fairly standard forms and can be obtained from your freight forwarder.

Combining packing lists and commercial invoices

It is also not uncommon to find combined commercial invoices/packing lists. In such instances, the commercial invoice simply contains more packing information than it might normally have on it. This makes sense, as the commercial invoice already contains most of the packing and packaging information on the invoice; just a little more detail and it becomes a full-blown packing list. The title might also state; "Commercial Invoice?Packing List"

Don't make mistakes with the packing list

It is essential that the packing list agrees exactly with all the terms and conditions of the export sale. It is important for you to realise that any mistake on the packing list may cause a delay in clearance at the port of destination. Customs Authorities in the target country have the right to delay the clearance of the shipment until the importer provides a packing list reflecting the real contents of the container (should your packing list be incomplete or incorrect). If all the information required for the packing list is already stated in the commercial invoice, then the packing list may be unnecessary. Our recommendation is to provide it anyway - you don't want the consigment delayed simply becuase a customs official demands to see a packing list (you can never provide too much information).