By: Shalish Kumar
Often when potential importers are duly satisfied with the product, quality, sample sent for approval or lab analysis, packing, delivery schedule and prices acceptable. They request for a firm offer from the exporters.
What do most exporters provide their prospective buyers? Offer quotation indicating price, quantity and cost of transportation? Other terms like, Mode of payment, product availability, shipping instructions and service charges? Terms of sale, description and delivery time?
Yes, but this is not enough information for importers to make a buying decision. To make life easier for buyers, exporters should always quote using a carefully prepared Performa invoice.
It is a common for most exporters to provide their buyers with limited information when asked for a quotation. This lack of details and accurate information by exporters is probably a major factor why products with good quality and competitive prices do not get sold.
Whether you are the exporter or the importer, it is quite critical that you understand how successful exporters quote buyers using pro forma invoice. You should be able to clearly distinguish the differences between quotation, Performa invoice and commercial invoice. The following brief descriptions are intended to help you understand their differences and to provide you with all the items that you should include in a Performa invoice plus the areas that you have to consider when completing a commercial invoice.
A worksheet for calculating export costs to sell goods or services at a stated price and under specific conditions, the quotation is generally presented to the buyer in a formal way using a Performa invoice. A quotation may include all the contents that appear in a typical pro forma invoice except:
(1)Country of origin of product and
(2) the title Performa invoice.
A price quotation prepared in the form of an invoice, a Performa invoice, is different from commercial invoices. It is used to create a sale and is sent in advance of the commercial invoice. The content of a Performa invoice is almost identical to a commercial invoice and is usually considered a binding agreement although the price might change in advance of the final sale.
For establishment of LC or for advance payment by the importer through his bank, usually banks prefer Performa invoice to a quotation.
In some countries, the US for example, Customs may accept a Performa invoice (generated by the US importer and not the exporter) if the required commercial invoice is not available at the time when filing entry documents (entry - the process of filing documents with US Customs at the port of entry to get goods released from Customs). U.S. Customs may use a pro forma invoice to assess duty and examine goods. The importer on record however, is required to post a bond and produce a commercial invoice within 120 days from the date of entry. If the required commercial invoice is needed for statistical purposes the importer has to produce the commercial invoice within 50 days from the date Customs releases the goods to the importer.
Here are some reasons why pro forma invoices are widely used in international transactions: