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what is the best way to make a quotation? How much information is necessary to avoid confusion at later stages of the deal, and are there parts of a quotation that may be considered to be legally binding?

When importers request quotations, experienced exporters always provide them with a proforma-invoice.

A pro forma invoice is similar to a quotation, but is more formal and if done right provides solid information to help the importer make decision. A Proforma invoice is an invoice provided by a supplier in advance of providing the goods or service. Proforma-invoice however, resembles commercial invoice and provides information to the importer the product to be shipped including itemized list of charges, pricing terms, quantity, value, weight, size and other important specifications of the transaction. Proforma-Invoice is one of the most important and common document the importer receives prior to shipment.

Many legal experts suggest that proforma-invoice is considered as a legally binding document, even though price might change prior to the final sale of the goods. When an exporter provides a proforma-invoice to the importer the importer can use the proforma-invoice to request foreign currency if his currency is not freely convertible. Proforma-invoice can also help the importer apply for a letter of credit at his bank.

Here are some reasons why pro forma invoices are widely used in international transactions:

1. Considered a binding agreement.
2. May be required by some countries as part of their import licensing procedures.
3. Bankers and financial institutions use pro forma invoices to open letters of credit for importers.
4. Easily recognized due to their similarity to commercial invoices.
5. Their invoice format encourages exporters to include all the information that will appear in the commercial invoice.

Keep the following points in mind when your company is asked to produce a pro forma invoice:
1. The title of the document should clearly say “Pro Forma Invoice”.
2. Exporter’s name, address, telephone number and e-mail address.
3. Sold to name, address, telephone number and e-mail address.
4. Pro forma invoice reference number.
5. Date issued. The date of the pro forma invoice is the date of the quotation.
6. Customer purchase order number, if available.
7. Terms of payment (letter of credit, documentary collection, pre-payment, T/T, open account etc.)
8. Estimated date of shipment.
9. If more than one product, number each product beginning with number 1.
10. Quantity shipped.
11. Full product description, include the Harmonized Schedule (HS) code when available
12. Indicate clearly currency used (USD, euro, yen etc.)
13. Unit pricing should be included. Unit pricing should be extended by the quantities quoted to form the line item total.
14. Any additional seller-provided services should be itemized and should be added to reach a grand total.
15. Terms of sale using INCOTERMS 2000 (FOB, CIF, CFR, DDU etc.)
16. Identify the number of unit measure, weight, case, pallets, box, etc.
17. The country of origin of the product.
18. Validity period, never make open-ended commitments remember that the validity date can be changed.
19. Must be signed and title be included.

Remember that pro forma invoices are formal offers to sell. When the buyers agree with all the terms and conditions of the pro forma invoice the result is a purchase order sent by the buyer, which finally leads to a sales contract that is, if the buyer and the exporter agree to have a formal sales contract. The pro forma and purchase order must be compared before goods are shipped to check for discrepancies. Should there be a discrepancy, the buyer should be promptly notified to correct any errors.

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