You may have seen these terms mentioned in some of our blog posts and wanted more details, so we’ve put together this blog on two important export documents. Below we explain what these documents are, what they’re used for and why they are so important in international trade deals.
The scene: You have haggled your way to a deal with a new customer/distributor or agent and now you need to secure the sale, get paid and/or obtain their purchase order. This is what a proforma invoice is for.
In trade transactions, a proforma invoice is a document that identifies to your buyer what you have agreed to. It’s like your commitment to the deal; A formal quotation of sorts reconfirming all the important things you have discussed in your emails. It plays a very important role in ensuring the terms of the sale (i.e how they will pay you, in what currency and when) is understood by both parties. It also clearly describes the products, pricing, your incoterms and to where and who the goods are being sold.
A proforma invoice will outline the following information:
- Details who is the seller and who is the buyer
- Where the goods are going
- When and by what mode of transport
- Key dates and any lead-times that might be relevant
- Importantly it will clarify the Inco Terms (FOB, CIF, DAP etc)
- The goods description, its packaging and also the products tariff code (HS classification)
- The country of origin of the goods – where they are made
- The agreed price, any shipping charges and the payment terms
- A list of certifications or additional documentation you will provide – not a requirement but it is very good practice
The proforma invoice collates all your negotiations into the one place and ensures everyone is clear on the terms of the sale. A great tool that, when used correctly, will overcome most commercial misunderstandings.
Once accepted (depending on your negotiations) your customers can make payment to you, raise a formal purchase order, and/or plan the logistics.
So now you have a handle on a Proforma invoice, what’s a commercial invoice?
A commercial Invoice contains much of the same details as the proforma invoice except that this document evidences the completed transaction rather than a proposed (or proforma) sale.
Commercial invoices are issued after the goods have been paid for (if you are following our mantra of “nothing goes until it has been paid”) and usually not until the goods are loaded on the agreed mode of transport.
The commercial invoice is an important customs document as it’s a declaration by you as to the goods, their value, their origin and their tariff code. It will be presented to customs officials at the time of import and serve as an important document in the buyer’s importation process.
Export Documentation & Risk
You will hear us harp on this over and over again, but a good set of export documents and procedures will ensure your export growth is made with confidence and with the risks clearly understood.
There is a lot of room for misunderstandings in international trade and that’s why export documents are standardised and play a key role to ensure all parties are aware of the terms of the agreement.
If you could benefit from some export document support our team can help you make sure you have everything you need (and show you some of the tricks along the way).
*CVEN uses and is a big supporter of Intertrade Docs (IT Docs). IT Docs is an export documentation program that makes the generation of internationally compliant and uniformed documents a breeze.