When Is a Proforma Invoice Required in International Trade? A Complete Guide
In international trade, documentation plays a critical role.
One of the most commonly requested documents before shipping goods is a proforma invoice .
Exporters, importers, customs authorities, and banks often ask:
- When is a proforma invoice required?
- Why not use a regular invoice?
- Is a proforma invoice mandatory for exports?
In this guide, we’ll clearly explain when a proforma invoice is required in international trade, why it is used, and how businesses create it professionally using online tools.
What Is a Proforma Invoice in International Trade?
In global trade, a proforma invoice is a preliminary document sent by an exporter to an importer before shipment or payment.
It provides advance information about:
- Goods or services being sold
- Price and quantity
- Delivery and shipping terms
- Estimated taxes or duties
Unlike a commercial invoice, a proforma invoice does not request payment and is not used for accounting entries.
Because of this, it is widely accepted as a planning and approval document in cross-border transactions.
When Is a Proforma Invoice Required?
A proforma invoice is required or requested in several international trade situations.
1️⃣ Before Exporting Goods
Before goods are shipped internationally, buyers often ask for a proforma invoice to:
- Review pricing and quantities
- Confirm product specifications
- Approve the purchase internally
This helps avoid disputes after shipment.
2️⃣ For Import Customs & Compliance
In many countries, customs authorities may request a proforma invoice:
- To assess the value of goods
- To estimate duties and taxes
- When a commercial invoice is not yet available
The proforma invoice helps customs understand the nature of the shipment in advance.
3️⃣ For Letter of Credit (LC) Processing
Banks commonly require a proforma invoice before issuing a letter of credit.
The document helps banks verify:
- Transaction value
- Seller and buyer details
- Payment terms
Without a proforma invoice, LC approval is often delayed.
4️⃣ For Import Licenses or Permits
In some regions, importers must submit a proforma invoice to government authorities to:
- Apply for import licenses
- Request special permits
- Get foreign exchange approvals
The proforma invoice acts as a supporting document for these applications.
5️⃣ For Price Quotation & Negotiation
In international trade, prices often change due to:
- Shipping costs
- Exchange rates
- Customs duties
A proforma invoice allows both parties to:
- Negotiate terms
- Lock pricing temporarily
- Set expectations before final invoicing
Proforma Invoice vs Commercial Invoice in Trade
Understanding the difference is crucial.
| Feature | Proforma Invoice | Commercial Invoice |
|---|---|---|
| Issued | Before shipment | After shipment |
| Purpose | Estimate / confirmation | Legal billing |
| Payment required | No | Yes |
| Used for accounting | No | Yes |
| Customs use | Preliminary | Final clearance |
In short:
- Proforma invoice → planning stage
- Commercial invoice → final transaction stage
What Information Should a Trade Proforma Invoice Include?
A proforma invoice for international trade should clearly mention:
- Exporter and importer details
- Proforma invoice number and date
- Description of goods
- HS codes (if available)
- Quantity and unit price
- Total value
- Currency
- Delivery terms (Incoterms)
- Estimated shipping costs
- Payment terms (reference only)
- Validity period
Using a professional GoSetle® Proforma Invoice Generator ensures all required fields are included correctly.
How to Create a Proforma Invoice for International Trade
Most exporters now create proforma invoices online instead of manual documents.
Using the GoSetle® Proforma Invoice Online , businesses can:
- Enter exporter and importer details
- Add product or service descriptions
- Set quantities, prices, and currency
- Include delivery and payment terms
- Generate a professional PDF proforma invoice
This helps ensure accuracy and global compliance.
When Is a Proforma Invoice NOT Required?
A proforma invoice is usually not required when:
- Goods are already shipped
- Payment is immediately due
- A final commercial invoice is available
In these cases, a commercial invoice should be used instead.
Who Uses Proforma Invoices in International Trade?
Proforma invoices are commonly used by:
- Exporters and manufacturers
- Importers and distributors
- International wholesalers
- B2B service providers
- Trading companies
They help align expectations before goods or money move across borders.
Conclusion
A proforma invoice is required in international trade whenever pricing, shipment, or approval must be confirmed before the actual transaction takes place.
It plays a key role in:
- Export preparation
- Import approvals
- Banking and customs processes
To avoid delays and errors, businesses prefer generating proforma invoices using professional online tools like the GoSetle® Proforma Invoice Generator, ensuring accuracy and global acceptance.
Try : GoSetle® Invoice
Read : How to Create a Proforma Invoice Online with GoSetle® (Free, Easy & Professional)
