Proforma Invoice Meaning and How It Differs from a Commercial Invoice (Customs Rules)

Two invoices, two jobs

A proforma invoice is a draft invoice the seller sends before shipment. It sets out what will be shipped, at what price and on what terms, so the buyer can approve the deal, pay a deposit or the full price in advance, or apply for a letter of credit (L/C). It is an offer or price confirmation, not a bill for goods already supplied.

A commercial invoice is the final bill for the goods actually shipped. The buyer pays against it, banks examine it under an L/C, and customs in the importing country uses it to check the description, quantity and value of the goods and to assess duty and import taxes. US rules describe a pro forma invoice as the importer's own statement of value, used when the seller's invoice is missing (19 CFR 141.85).

• When: the proforma before the order is confirmed or before production; the commercial invoice at or after shipment, one for each shipment.
• Purpose: the proforma quotes, confirms price and terms and triggers payment or the L/C; the commercial invoice bills the buyer and supports the customs declaration.
• Quantities: the proforma shows what was ordered; the commercial invoice shows what was actually loaded.
• Customs: the commercial invoice is the standard document; a proforma is accepted only in limited cases, which vary by country.
• Letters of credit: the proforma is often named in the credit; only a commercial invoice is presented to get paid.
• Changes: a proforma can be revised before shipment; a commercial invoice already sent is corrected with a new document, such as a credit or debit note.

What the proforma invoice is used for

Exporters use the proforma at several points before anything is shipped. Because it becomes the reference for payment and for the credit, write the Incoterm with its named place, the payment term and the currency on it, and repeat them unchanged on the commercial invoice.

• Quotation or offer: the buyer sees exactly what it will get, for how much and on what terms, ideally with a validity date.
• Advance payment: a buyer paying a deposit or the full price by T/T usually pays against the proforma, so show the amount, the currency and your bank details.
• Letter of credit: the buyer gives the proforma to its bank to apply for the credit, and many credits describe the goods "as per proforma invoice No. ... dated ...". Check the credit against your proforma as soon as it arrives.
• Licences, permits and foreign currency: in some countries the buyer needs a proforma to apply for an import licence or permit, to register the import with its bank or to buy foreign currency to pay you. Rules differ by country, so ask the buyer which details its bank or authority needs, such as HS codes, country of origin or a validity date.
• Price confirmation: it fixes the agreed prices and terms in writing, so both sides can check the order before production starts.

The commercial invoice: final bill and customs document

Most countries value imports on the transaction value: the price actually paid or payable for the goods sold for export, with certain costs added. The commercial invoice is the main evidence of that price, so duty and import VAT depend on it. HMRC calls this Method 1 and notes it cannot normally be used for goods supplied free of charge, because nothing is paid.

Required contents vary. US rules (19 CFR 141.86) ask for the port of entry; the time, place and parties of the sale; a detailed description with grade or quality; quantities; the purchase price of each item in the currency of purchase; all charges itemized by name and amount, such as freight, insurance, commission and packing; rebates; the country of origin; and any goods or services supplied for production but not included in the price. The invoice must be in English or come with an English translation. Brazil (Customs Regulation, art. 557) also asks for package marks and numbers, gross and net weight, the countries of origin, acquisition and procurement, the payment terms and the Incoterm, with the goods described in Portuguese or an official language of the GATT (English, French or Spanish).

The packing list is the companion document. US rules require the invoice to state in adequate detail what each package contains (19 CFR 141.86(e)), and a packing list is the usual way to give package numbers and marks, contents, net and gross weights and dimensions. Make it from the same shipment data as the invoice so its totals agree with the invoice and the transport document.

When customs will not accept a proforma

In the United States a commercial invoice must be filed for each shipment unless an exemption applies (19 CFR 141.83). If it is not available in proper form, CBP accepts the entry only if it is satisfied that the cause is beyond the importer's control, and the importer files a written declaration, any seller's or shipper's invoices or else a pro forma invoice in the form set out in 19 CFR 141.85, and a bond of one and a half times the invoice value. The required invoice must then be produced within 120 days after the entry summary is filed or, if it is needed for statistics, within 50 days after the entry summary is due, unless CBP extends that time for good cause (19 CFR 141.91). CBP may instead waive the invoice, but the importer still files an executed pro forma invoice (19 CFR 141.92).

Elsewhere the rules differ. Brazil requires the import declaration to be supported by the original commercial invoice signed by the exporter; an invoice issued electronically that says so, and digital signatures that guarantee authenticity, are accepted. In the UK, HMRC's declaration guidance says that if the declared value is based on a proforma invoice and the final invoice value differs, the declarant must request a post-clearance adjustment. Ask the buyer or its broker before you ship on a proforma alone.

Goods sent free of charge still need a value. For goods not shipped under a purchase, US rules ask the invoice to show the value of each item or, failing that, the price the seller would have received in the ordinary course of trade in usual wholesale quantities (19 CFR 141.86(a)(6)). A US commercial invoice is not required for goods not intended for sale or any commercial use, but any available invoice, or else a pro forma, must still be filed (19 CFR 141.83(d)). UK export guidance says to use the market value if you are not selling the goods, and HMRC normally values free-of-charge imports by Methods 2 to 6, for example on the price the importer would have paid. Show a realistic value for each item and a statement such as "No charge. Value for customs purposes only." (see Triplicate's note on shipping samples).

Letters of credit: the invoice the bank pays against

Under UCP 600 Article 18, a commercial invoice must appear to have been issued by the beneficiary, must be made out in the name of the applicant and in the same currency as the credit, and need not be signed unless the credit asks for it; Article 38 gives exceptions for transferred credits. The description of the goods in the invoice must correspond with the description in the credit. A bank may accept an invoice for more than the credit allows, provided it has not paid or negotiated more than that amount.

A document titled "Proforma invoice" does not meet this. The ICC's International Standard Banking Practice (ISBP) says an invoice presented under a credit is not to be identified as "provisional", "pro-forma" or the like, so present a final commercial invoice even when the credit asks only for an "invoice". If the credit describes the goods "as per proforma invoice No. ...", repeat that reference on the commercial invoice. Triplicate's note on L/C discrepancies covers the other checks banks make.

What must match, what may change, and how to number them

The commercial invoice should tell the same story as the accepted proforma, the contract and any letter of credit. Differences are fine where the shipment itself differs, as long as they are explained and agreed with the buyer. Triplicate's free generator makes the proforma invoice, commercial invoice and packing list from the same data, so prices, terms and descriptions match across all three.

• Must match: seller and buyer, the goods description, unit prices, currency, the Incoterm with its named place, the payment term, and the proforma, order or L/C reference.
• May differ: the quantities and weights actually shipped, within any tolerance in the contract or credit; partial shipments, each with its own commercial invoice; the vessel or flight, dates and transport document number.
• Freight and insurance: freight is in your price on CFR, CIF, CPT and CIP, and insurance too on CIF and CIP; on FOB or FCA the buyer pays the main carriage. Where the invoice includes them, show them separately: US rules want all charges itemized and UK guidance asks for freight and insurance listed separately.
• Numbering: give the proforma its own number with a revision suffix (for example PI-0123 Rev. 2), date every version and mark old versions superseded. Give each commercial invoice a new number from your sales sequence and quote the proforma, order and L/C numbers on it.
• Corrections: never re-use a number or quietly edit a commercial invoice already sent. Issue a corrected invoice or a credit or debit note and tell the buyer, whose broker may need to amend the declaration.
• Records: keep every version. In the UK, HMRC requires records of traded goods declared to it to be kept for 4 years, and VAT records for at least 6 years.