What is the role of formal invoices in international trade?

A formal invoice is an informal invoice that is a form of quotation from a seller to a potential buyer. Buyers often require formal invoices for import applications and approval of foreign exchange.”Proforma” is Latin, meaning “purely formal”, so literally speaking, Proforma Invoice refers to an invoice that is purely formal and has no actual meaning. This type of invoice was originally issued by the seller to estimate the import cost for the buyer when promoting goods, assuming that the transaction has already been established. In fact, the fact that the goods were not shipped is why this type of invoice is also known as a “trial invoice” in Japan.international tradeThe difference between formal invoices and commercial invoices is that they have the word “formal” on them. This type of invoice can be used to invite buyers to place a confirmed order. The invoice generally indicates the price and sales conditions, so once the buyer accepts this condition, they can sign a confirmed contract according to the content of the formal invoice.Due to the detailed description of the import price and related fees on the formal invoice, some countries stipulate that an import license can be applied for with the formal invoice, or it can be used to declare the price of the goods to the customs.In practice, if a proforma invoice contains the content of a quotation and constitutes a legal offer, it can be used as a substitute for the quotation or even as a sales confirmation.Formal invoices can also be used for other occasions that require settlement. (1) Used for prepayment, which requires cash payment before loading. (2) In consignment sales, the exported goods do not have a definite sales contract, but are placed in the hands of the agent. For the agent, a formal invoice can serve as a guide for quoting to potential buyers. (3) If it is a bidding process, a formal invoice can enable the buyer to sign a sales contract at a reasonable price and sales terms among many competing suppliers.

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