Tips for foreign trade newcomers: How does the pro forma invoice (PI) affect the transaction process?

What is PI in foreign trade?

Definition and Function of PI

PI, the full name of Proforma Invoice, is a Tips for foreign business document widely used in foreign trade transactions. Its main function is to serve as a preliminary quotation or transaction confirmation document to clarify the transaction details between the buyer and the seller. Unlike the formal Commercial Invoice (CI), PI does not have legal effect and is more of a tool for buyer reference and transaction communication.

The emergence of pro forma invoices solves the problem of information asymmetry in foreign trade transactions. Through PI, the seller can show the buyer key information such as product price, specifications, payment terms, and transportation methods in advance, and the buyer can also further confirm the order details through this document to ensure the smooth progress of the transaction.

The difference between pro forma invoice and commercial invoice

Although pro forma invoices and commercia  Tips for foreignl invoices are similar in appearance and content, their functions and legal status are completely different:

1. 1. 1. Different uses
         • PI proforma invoice is mainly used for quotation, order confirmation or letter of credit application and is an informal document.
         • CI commercial invoice is the official document for customs clearance and payment and has legal effect.
      2. Different legal effect
         • PI is only a reference document and cannot be used for customs clearance or payment collection.
         • CI is an important certificate for the buyer to pay and the goods to clear customs.
      3. Different content range
         • The content of PI is more flexible and can be adjusted according to the needs of buyers and sellers.
         • The content of CI must be completely consistent with the actual shipment, otherwise it may affect customs clearance and payment.

Purpose and  scenarios Tips for foreign of PI proforma invoice

The role of PI in international trade

The main uses of PI proforma invoice include the following aspects:

1. 1. 1. Initial Quotation
         In the early stages of a transaction, the one of the marketers decided seller provides the buyer with an initial quotation through PI to help the buyer understand the product price and transaction terms. This approach can improve the professionalism and formality of the quotation.
      2. Order Confirmation
         Buyers and sellers confirm order details, including quantity, price, delivery time, etc. through PI, so as to avoid unnecessary disputes in subsequent transactions.
      3. Apply for Letter of Credit
         The buyer can apply to the bank to open a letter of credit (L/C) based on the PI to ensure the security of the transaction.
      4. Internal Process Reference
         PI is also commonly used for seller’s internal process management, such as confirming shipping information with the logistics department or checking order amounts with the finance department.

How to use pro forma Tips for foreign invoice for order confirmation and letter of credit application

1. 1. • Used for order confirmation
        In the foreign trade process, the buyer and seller confirm the transaction details through the PI proforma invoice, including price, payment terms, delivery date, etc. After the seller issues the PI, the buyer signs and confirms, and this process is regarded una noche de cine te permite transmitir un éxito as the formal confirmation step of the transaction.
      • For letter of credit application
        After receiving the PI, the buyer usually needs to submit it to the bank for review as the basic document for applying for a letter of credit (L/C). The clear transaction information in the PI can help the bank formulate the terms of the letter of credit and ensure that the letter of credit is consistent with the order requirements.

How to do PI?

The preparation of PI proforma invoice is a job that requires great attention to detail, because it is not only a tool for communication between buyers and sellers, but also an important part of the foreign trade process. When preparing PI, you should ensure that all information is accurate to avoid problems in subsequent transactions.

Steps to prepare a pro forma invoice

1. Determine basic transaction information

Before making PI, the seller needs to clarify the basic information of the transaction with the buyer, including product name, specifications, quantity, unit price, total amount, delivery time and transportation method, etc. This information will serve as important content of the invoice.

2. Use standard templates

Most companies use a standardized PI template to ensure that the document structure is clear and avoid missing key information. The template usually includes the following parts:

Seller information: company name, address, contact information, etc.

Buyer information: customer name, Tips for foreign address, contact information, etc.

Product information: detailed product description, including name, model, quantity and unit price, etc.

Transaction terms: Incoterms (such as FOB, CIF), delivery time and payment terms, etc.

3. Ensure the content is complete

In addition to basic information, PI should also include the following:

Invoice Number: for easy subsequent inquiry and management.

Date: Indicate the date the invoice was generated.

Total Amount: Indicate the currency type and total amount (e.g. USD $10,000).

Signature or company stamp: Adds formality to the invoice.

4. Check and send

Before sending PI to the buyer, make sure all the information is correct. It is recommended to send PI in PDF format for the buyer to review and archive.

Necessary elements of PI pro forma invoice

1. 1. Invoice header
      contains the seller and buyer’s  Tips for foreign details such as company name, address and contact details.
   2. Product Description:
      Provide a detailed description of the transaction product, including name,