If you are either an importer or an exporter you have to distinguish clearly the difference between an offer, a proform invoice and a commercial invoice. The following definitions should help you to understand the difference between them and make your invoicing decisions easier.
An offer is a written calculation of exportation costs including the goods ´or services´ price and the conditions accompanying the transaction. An offer is generally presented to a client in a formal way as a proform invoice. The offer/proform invoice has to include all the elements included on a typical commercial invoice with 2 exceptions: 1. We do not have to specify the product/service origin country, 2. In the tile name there should be stated ´proform invoice´.
It is a price offer prepared in a form of an invoice. The main difference comparing with a commercial invoice is that it is used to iniciate the sales process and sent before the commercial invoice. A proform invoice should include almost the same elements as the commercial one and it is supposed to form a binding agreement, the price may changed before the final sale anyway. Proform invoices are widely used in international transactions as they are supposed to be binding agreements between the importer and exporter. In case of some countries they are also required as a part of import license obtaining process. The financial institutions use proform invoices to open letters of credit, advances, etc for importers. The proform invoice format encourage the exporter to include all the elements required in a case of a commercial invoice. When your company is asked to issue a profrorm invoice you should include the following elements:
- The document should be titled «PROFORM INVOICE»
- EXPORTERS DATA: name, address, phone number, e-mail address.
- IMPORTERS DATA: name, address, phone number, e-mail address.
- Invoice REFERENCE NUMBER and PO NUMBER if it exists.
- Offer´s DATE and approximated shipping DATE.
- PAYMENT CONDITIONS (credit letter documented founds, pre-payment, wire transfer, etc.).
- Exporter´s BANK ACCOUNT DETAILS including the IBAN code for a bank transfer.
- A complete description of the product including HS CODE.
- Invoice CURRENCY (EUR, USD etc.)
- MEASURE UNIT (weight, container, pallet, box, etc.)
- Product´s ORIGIN COUNTRY.
- INVOICE VALIDITY
- LOAD DATA: number of pieces, quantity shipped in a LOT, complete/partial LOT, etc.
- SHIPMENT and DELIVERY type: in case of a maritime transport indicating INCOTERMS (FOB, CIF, CFR, DAP, DDP, etc. destination port) and reload if applicable.
- A unit price (has to be multiplired per quantity offered to calculate the total price).
- A cost of any documentation, inspection, legalization, etc. to be paid be either the importer or the exporter has to by detailed and added to the total.
- A SIGNATURE of the exporter and free space for the importer´s signature.
When the buying party accepts all the conditions included in the proform invoice they send a sales order to the selling party and the contract sale contract is finally closed. The proform order and the commercial order have to be sent before the shipment starts to make sure that there are no discrepancy between them. In a case of a discrepancy the selling party has to be notified in order to correct any errors.
A commercial invoice is a final invoice that confirms the agreement between the exporter and the importer. It may include the same details as the proform invoice or different ones resulting from final negotiation. Commercial invoices are also used by government institutions to valuate the real market value of the load for the customs, to check the loads and for the statistic reasons. Authorities of many countries use commercial invoices to control the import process. It is crucial that the exporter consults the data required at the invoice to avoid any problems at the customs office. Hereunder there are some crucial guidelines to follow while issuing a commercial invoice:
- It has to be issued in a manner typical for commerce. Authorities in most countries require issuing a separate invoice for every shipment.
- It has to be an ORIGINAL, only a few countries accept a photocopy accompanied by a foreign provider, expediter or importer verifying that it is an original copy.
- When a commercial invoice is not available in some countries authorities may accept a proform invoice including required information to examine the load and collect statistic data.
COMMON ERRORS WHILE INVOICING AN EXPORT
Any of the following may cause a delay or seizure of the load by the customs officers:
- Low-invoicing which means that you declare a value lower than the real market value of the goods.
- Lacking or not enough detailed description.
- Various distinct pieces detailed as one.
- The selling party does not show the discount based on the net price.
- The lack of royalties, commision or packaging fees or any other subject additions which are involver in the market value, detailed on the invoice.
- The costs of transport and insurance not detailed separately (some countries do not evaluate the separateely).
- Lack of relevant information or blank lines.
- Lack of the country of origin.
- Lack of the selling party´s (or their agent´s) signature.
- Wrongly calculated values.