What is a proforma invoice? How does it work?

Proforma invoice can be defined as a compact form of an international sales contract.

In other words, it is a lite version of the international sales contract.

Proforma invoice is expected to be issued by the seller, also known as exporter in international trade, at the beginning of the transactions.

Contents of the proforma invoice may change from industry to industry, customer to customer or country to country. There is no fix and single format available.

But in general terms, by preparing a proforma invoice; exporter mainly defines and conveys following information to the importer:

• the price of the goods
• description of goods
• quantity and quality of the goods 
• packaging
• delivery terms 
• delivery period 
• modes of transport   
• payment method

FOB or CIF: Which one is better for importers?

Incoterms 2010 defines 11 delivery terms, 4 of which designed to be used in only sea shipments, whereas 7 of which could be used with any mode of transport.

The most frequently used two Incoterms, FOB and CIF, are restricted to be used in sea shipment only. They are so popular that, their usage most probably surpass remaining 9 Incoterms' usage.

But, the main question remains: Which one is better when importing goods into one country? FOB or CIF.

On this article, I will try to explain whether FOB or CIF is a better option for importers.