Purpose of note
Some of our clients have asked us to explain the difference between a Proforma and a Commercial Invoice. This note describes the differences, explains when each should be used and what information each should contain. Since most of our clients are overseas businesses that do business in the UK, I have written this note from their perspective.
Commercial Invoice versus Proforma Invoice
When goods enter the UK from abroad the goods need to be accompanied by a shipping document that enables the shipment to be correctly assessed by customs. The shipping document that is usually used is either a Proforma Invoice or a Commercial Invoice.
- Proforma Invoices are usually used for customs purposes only, often where unsold goods are being shipped.
- Commercial Invoices are usually used where sold goods are being shipped.
Therefore, a Commercial Invoice will often be used when the exporter has sold the goods to a third party and a Proforma Invoice will often be used when the exporter is shipping goods to itself, or when goods, such as samples that still belong to the exporter are shipped.
It should be noted that the term ‘Proforma Invoice’ can also be used to describe a preliminary or draft invoice. This note is just concerned with its meaning in the context of international trade.
Contents of a Commercial Invoice and a Proforma Invoice
The precise contents of both the Proforma Invoice and the Commercial invoice will depend on the nature of the transaction. For example, some transactions might need a licence. However, in broad terms, the invoicing requirements are as shown in the table below.
Table: Normal contents of a Proforma Invoice and the Commercial invoice
| Proforma Invoice | Commercial Invoice | |
| Invoice number | Needed | Needed |
| Invoice date | Needed | Needed |
| Exporter’s details Company nameAddressContact nameContact detailsReferenceCustoms identification number (EORI in Europe)VAT number (if in Europe) | All needed | All needed |
| Importer’s details Company nameAddressContact nameContact detailsReferenceCustoms identification number (EORI in Europe)VAT number (if in Europe) | All needed | Al needed |
| Consignee’s details (if different to the importer) Company nameAddressContact nameContact detailsReferenceCustoms identification number (EORI in Europe)VAT number (if in Europe) | All needed | All needed |
| Shipment details Method of despatchVessel / AircraftVoyage numberTerms / method of paymentCountry and port of loadingDate of departureCountry and port of dischargeReason for exportIncoterms including delivery and payment country of origin of the goodsmeans of transport and routeExport licence numberImport licence numberShipping costsInsurance | Terms of payment not needed (there is no sale)Inco terms will usually be DDPReason for export might be “Material on consignment” | All needed |
| For each item shipped Plain English descriptionHarmonised system tariff code Quantity WeightValue | All needed but The value will be for customs duty & VAT only (as they have not been sold) | All needed but The value will be the sales value |
| Other Bill of lading numberInsurance policy numberLetter of credit number | Needed if relevant | Needed if relevant |
Key terms used: import, export and consignee
In the table above I have used three key terms: importer, exporter and consignee. It’s useful to understand the precise definition of these terms.
Importer of record
The Importer of Record (abbreviated to importer or sometimes called the declarant) is the entity that is authorised by the customs authority in the destination country (HMRC in the UK) country that is officially responsible for making sure that a shipment of goods complies with all the rules and regulations of the destination country. The importer of record needs to make sure that:
- the goods are correctly valued;
- the relevant taxes and duties are paid; and
- all the correct export documents and permits have been filed
The importer does not necessarily have to be the actual buyer of the goods. However, in the UK it usually is, because only the owner of the goods that arrive in the UK can reclaim the import VAT.
Exporter of record
The Exporter of record (abbreviated to exporter) is the entity that is authorised by the customs authority in the departure country to send goods from one country to another. The exporter does not have to be the actual seller of the goods. The exporter can sometimes be an organisation acting on the seller’s behalf.
Consignee
The consignee is the entity that receives the shipment. Once the goods are cleared through customs, the consignee is the entity who takes ownership of them. The consignee can be a private individual consumer (ordering goods from an overseas business), or it can be another business.
Purpose of note Some of our clients have asked us to ex […]