How to Read a Factory Proforma Invoice: Payment Terms, Trade Terms, and 5 Costly Mistakes
Factory proforma invoice with payment terms, calculator, fabric swatches, and a pet bed sample
Sourcing Basics

A proforma invoice is a binding commitment — not a quote. Here is exactly what every clause means, where the money moves, and the five mistakes that cause the most disputes between buyers and suppliers.

The proforma invoice (PI) is the document that turns a product inquiry into a real transaction. It defines payment terms, trade terms, lead time, and cost responsibility. Most wholesale disputes — delayed shipments, unexpected fees, missed deadlines — trace back to a PI clause that was misread or ignored. This guide walks through every key section so you know exactly what you are agreeing to before you sign.

How Payment Works: From Deposit to Delivery

PetFangFang operates on a standard 30/70 payment structure. Here is the exact sequence of events — and what triggers each payment.

1

Customer pays 30% deposit

Production does not begin until the deposit clears. Lead time is calculated from the date the deposit is received in our account — not from the date the PI is signed or confirmed.

Payment trigger
2

Production, QC, packing, and loading

Goods are manufactured, inspected, packed to agreed spec, and loaded onto the vessel. We handle all domestic export clearance and inland trucking to the port of origin.

Factory
3

Freight forwarder issues Bill of Lading scan

Once the goods are on board, the freight forwarder issues the Bill of Lading. A scanned copy (B/L copy) is sent to the buyer as proof of shipment.

Shipment
4

Customer pays remaining 70% balance

The balance is due upon receipt of the B/L copy — before original documents are released. Payment at this stage is a condition of receiving the Bill of Lading, which is required to clear customs at the destination port.

Payment trigger
5

Original B/L or Telex Release sent

Once the balance is confirmed, we release the original Bill of Lading by courier or issue a Telex Release (electronic release instruction to the shipping line). The buyer uses this to collect the goods at the destination port.

Document release

Long-term buyer terms

Established buyers with a track record of on-time payment may negotiate adjusted payment schedules. The structure remains 30% deposit before production, with the 70% balance due before shipment — consistent with standard industry practice for trusted relationships.

FOB, CIF, and EXW: What Each Term Actually Means

Trade terms define exactly where the seller's responsibility ends and the buyer's begins. Getting this wrong is the single most common source of unexpected costs and post-shipment disputes. Here is what each term means in practice.

FOB

Free on Board — Ningbo Port

Seller arranges domestic export clearance and inland trucking to Ningbo port
Seller loads goods onto the vessel — seller's responsibility ends at the ship's rail
Buyer pays all ocean freight
Buyer pays marine insurance
Buyer pays all destination port costs (clearance, duties, terminal fees, delivery)
Most common term for Yiwu-sourced goods — 90% of shipments depart from Ningbo.
CIF

Cost, Insurance & Freight — Named Destination Port

Seller pays ocean freight to the named destination port
Seller pays marine insurance for the voyage
Buyer pays destination port clearance and customs duties
Buyer pays terminal handling charges at destination
Buyer arranges inland delivery from port
Risk transfers to buyer when goods are on board at origin — CIF does not mean door delivery.
EXW

Ex Works — Factory

Seller prepares goods at the factory and makes them available for pickup
Buyer arranges freight forwarder to collect from factory
Buyer handles all export clearance, trucking, ocean freight, insurance
Buyer responsible for all destination costs
Lowest quoted price — but buyer assumes all logistics responsibility from factory door onward.
Cost ItemFOB NingboCIF DestinationEXW Factory
Export customs clearanceSellerSellerBuyer
Inland trucking to portSellerSellerBuyer
Ocean freightBuyerSellerBuyer
Marine insuranceBuyerSellerBuyer
Destination port clearanceBuyerBuyerBuyer
Import duties & taxesBuyerBuyerBuyer
Inland delivery at destinationBuyerBuyerBuyer

Where Buyers Go Wrong — and How to Avoid It

These are the five PI-related disputes we see most frequently. Every one of them is preventable by reading the PI carefully before signing.

1
Misreading FOB as "delivery to my door"

The most frequent dispute. Buyers assume FOB means the seller delivers the goods to their warehouse or Amazon FBA center. FOB means the seller's responsibility ends the moment goods are loaded onto the vessel at Ningbo. Everything after that — ocean freight, insurance, destination port fees, customs clearance, and last-mile delivery — is entirely the buyer's cost.

✓ FOB = seller loads on ship. Buyer pays everything from that point forward.

2
Missing when the 70% balance is due

Some buyers assume the balance is paid when goods arrive at the destination port. This is incorrect. The 70% balance is due upon receipt of the B/L copy — which is issued when goods are loaded in China, typically 4–6 weeks before arrival. Delaying payment causes the shipping line to hold the Bill of Lading, which results in demurrage charges at the destination port that are the buyer's liability.

✓ Balance due on B/L copy — not on arrival. Delay = demurrage at your cost.

3
Ignoring the PI validity period

A PI is valid for 7 to 15 days from the issue date. If the deposit is not paid within this window, the PI expires and the quoted price is no longer valid. When raw material costs or freight rates change, the factory issues a new PI at the current price. Buyers who return after the validity window expecting to lock in the original price have no basis to do so — the offer has lapsed.

✓ Pay the deposit within the PI validity window or request a reissue before it expires.

4
Assuming the seller covers import duties and taxes

No matter which trade term applies — FOB, CIF, or EXW — import duties, VAT, consumption tax, and any other government levies at the destination are always the buyer's responsibility. These vary significantly by country and product category: US import duties on pet products, EU VAT rates by member state, and tariff classifications all differ. The seller has no way to estimate or guarantee these costs — and the PI will explicitly state that all import taxes are buyer's liability.

✓ Import duties are always buyer's cost. Check your country's tariff schedule before placing the order.

5
Calculating lead time from PI confirmation, not deposit receipt

Lead time on the PI is stated as a number of days from deposit receipt — not from the date you sign or confirm the PI. If a PI shows "20 working days" and you sign today but take 5 days to transfer the deposit, production begins when the funds clear, not when you signed. Buyers who book logistics or set customer expectations based on the PI date rather than the deposit date consistently encounter delays.

✓ Lead time starts when the deposit clears in our account — plan your logistics from that date.

PI Checklist: What to Verify Before Signing

PI ItemWhat to Check
Trade termFOB / CIF / EXW — know exactly where your cost responsibility begins
Port of loadingNingbo for Yiwu-sourced goods; confirm this matches your freight forwarder's routing
Payment terms30% deposit before production; 70% balance on B/L copy — not on arrival
Lead timeCounted from deposit receipt date — not PI confirmation date
PI validity7–15 days — deposit must be paid within this window or PI expires
Tax and duty clauseAll destination import duties and taxes are buyer's responsibility — always
Product specificationsVerify sizes, quantities, colors, and unit prices match your confirmed sample order
Bank detailsConfirm account details match your previous correspondence — wire fraud risk

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Browse our pet bed collection and request a proforma invoice — we will walk you through every line item.

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