Order Contracts & Proforma Invoices (PI) in China: Key Terms

Everything is going well on WeChat with the factory: price, quantity, and delivery all agreed — then a PI arrives for your confirmation. You glance, reply “OK,” and wire the money. A month later the goods haven’t arrived. You dig out the PI to argue your case — and find neither a delivery date nor any penalty for lateness. You’re holding a piece of paper that proves nothing.

We’ve seen this story too many times. When sourcing in China, the PI (proforma invoice) is your contract — most orders never get a formal English sales contract, so the confirmed PI is the entire legal basis of the deal. The clearer it is, the safer your order. Drawing on ten years in Guangzhou and thousands of PIs processed, this guide covers what a PI is, the 10 fields every PI must specify, the 5 traps that catch most buyers, when a formal contract is needed, and what a sourcing agent checks for you.

What is a proforma invoice versus a commercial invoice?

A PI is the quotation-confirmation document a supplier sends the buyer before the real transaction begins, putting the agreed product, quantity, price, payment terms, and delivery date in writing. Once both sides confirm it (signature, stamp, or written reply), it carries contractual force in Chinese foreign-trade practice.

Many buyers confuse it with the Commercial Invoice (CI):

Remember it this way: the PI is “agree first,” the CI is “settle later.” Before you pay, scrutinize the PI; at clearance, use the CI.

What fields must every proforma invoice specify?

We review PIs by counting fields first. Fewer than the list below? Have the supplier complete it before you pay:

1. Full buyer and seller details: company name, registered address, contact person, phone/email — enough to identify the legal entity, not just a name
2. Product description: name, model, specification, material, color, dimensions — the more specific, the harder for the factory to swap materials
3. Quantity and unit: quantity, unit of measure (pieces/sets/kg), and the allowed over/under-shipment tolerance (usually ±5%)
4. Unit price and currency: unit price, currency (USD/CNY), and whether the price is tax-inclusive or tax-exclusive
5. Total amount: in figures and words (USD 12,340.00 / Twelve Thousand Three Hundred Forty US Dollars Only) — amount errors are the #1 PI dispute cause
6. Payment terms: deposit %, balance %, and when the balance is due (against the copy of the Bill of Lading? after inspection passes?) — this line decides your money’s safety; see Trap 2
7. Lead time: production time + the starting point (deposit receipt? approved-sample confirmation?) + the expected shipping date
8. Incoterms: FOB/CIF/DDP, etc. — defines who is responsible up to which point and where risk transfers; see Trap 3
9. Packaging and shipping marks: inner packing, carton dimensions, units per carton, marking details (consignee/order number) — prevents mixed shipments and quantity disputes
10. Validity period: how long the quotation stands (usually 15–30 days) — stops the factory raising prices later on “material cost increases”

Bonus points: a warranty clause (e.g., 12 months), a breach clause (e.g., a daily penalty for late delivery), and a dispute-resolution clause (arbitration seat / governing law).

What contract traps catch most buyers?

Trap 1: Vague delivery dates — “ship in 15 days” from when?

“Ship within 15 days” on a PI is the same as writing nothing. What’s the starting point? Deposit receipt? Sample approval? The order date? We’ve seen “delivery in 30 days” become “we count from when raw materials arrive” 45 days after payment.

The right way: “Production completed and shipment arranged within 25 days of receiving the 30% deposit; for each day of delay, a penalty of 0.1% of the total contract value.” Starting point, days, and penalty — all three are essential.

Trap 2: Payment terms disconnected from inspection — you pay the balance, then find the defects

The classic trap: “30% deposit, 70% paid before shipment.” On paper it looks fine, but who decides “before shipment”? The factory declares the goods ready and asks for the balance; you pay; the goods arrive defective — with zero incentive for the factory to fix anything.

The right way: “30% deposit, 40% paid after inspection passes, 30% against the copy of the Bill of Lading” (or “full balance after inspection”). Tie your balance to the inspection result, and the factory will take quality seriously — the single most effective quality lever in China sourcing.

Trap 3: Wrong Incoterms — CIF to port ≠ delivered to your door

First-time importers most often misjudge CIF, assuming “cost, insurance, freight” means door-to-door — then port clearance, duties, and delivery are all extra. With FOB you take over everything after loading; with CIF the seller covers to the destination port (excluding clearance and delivery); DDP is delivered duty-paid to your door.

The cost of getting it wrong: on a $20,000 order, the hidden CIF vs DDP difference can reach $3,000–5,000 (freight, duties, clearance, delivery). No forwarder yet? DDP gives the most controllable total cost; with your own forwarder, FOB is the most transparent. The worst choice is CIF — the leg after port belongs to no one, so it’s the easiest to under-budget.

Trap 4: Unclear amounts — RMB or USD, tax-inclusive or not

“Unit price 50” — 50 of what? RMB or USD? 13% VAT included? Who absorbs rate movement? Without these, payment time is each side’s interpretation. Currency, tax treatment, and the exchange-rate reference date all have to be written down. We’ve seen RMB quotes settled at the day’s USD rate cost a buyer an extra 3–5%.

Trap 5: Specs that just say “per approved sample” — no number, no date

“Production to follow the approved sample” — which approved sample, and which version? Revised three times during development? This sentence means nothing. The right approach: put the approved-sample number and approval date on the PI and send the approved-sample photos to the factory. If mass production doesn’t match, it’s the only evidence you can argue with.

When do you need a formal contract?

For most routine orders, a well-written PI is enough. In four situations, though, we strongly recommend adding a formal sales contract:

The formal contract doesn’t need to be complicated — just expand the PI’s 10 fields plus warranty, breach liability, and dispute resolution into clauses.

What does a sourcing agent check in the contract stage?

Many buyers think a sourcing agent is only for finding products and inspecting goods. In fact, the contract stage is where an agent’s value is most overlooked — and most concrete:

• PI review: field-by-field checks — amount in words vs. figures, currency, delivery start point, Incoterms. The nitpicking you’d rather skip, the agent does for you
• Chinese-English alignment: when the factory’s Chinese contract and your English understanding disagree, the agent mediates so “I assumed” and “they assumed” never diverge
• Tying payment to inspection: writing the balance-inspection link into the terms, so the quality lever actually works
• Sample and evidence management: archiving approved-sample photos, PI versions, and chat records — a paper trail when disputes arise
• Local leverage: when a factory runs late or ships wrong goods, an agent on the ground negotiates — far more effectively than calls from abroad

FAQ

Q: Does a PI confirmed by both sides count as a contract? A: In Chinese foreign-trade practice, a PI confirmed by both sides (signature / stamp / written confirmation) is recognized as the contractual basis — but get an explicit confirmation act: a “confirmed” reply or stamped return copy, not a verbal OK, which is hard to prove.

Q: Can I just use a PI and skip the formal contract? A: For routine orders, yes. For large-value, custom, or split-shipment orders, add a formal contract (see above). The principle: the higher the risk, the thicker the paperwork.

Q: What’s a reasonable deposit percentage? A: Industry practice is 30% deposit and 70% balance; custom items or expensive-raw-material categories may see 40–50%. Beware both extremes: below 20% may mean a factory without confidence (or a scam fishing for small amounts); 100% upfront is almost certainly fraud.

Q: What if the factory tries to raise the price after the PI is issued? A: Check the PI’s validity period and price terms. With one, the factory can’t raise the price within it; without one, it’s negotiation. That’s why the PI must state “valid for 15–30 days” — contract discipline has to be written down in advance; you can’t argue it into existence afterwards.

Q: How do I handle order changes (quantity/delivery date)? A: Any change needs a newly confirmed PI or a signed amendment stating what changed and when it takes effect. Verbal agreements to shift dates or quantities are just material for later denial. File the amendment with the original PI.

Next Steps

A clearly written PI is the last line of defense before you pay: choose your sourcing city (Guangzhou or Yiwu) → factory audit → sampling → contract/PI → payment → inspection → shipping. Each step has its own guide in this series — see Guangzhou vs Yiwu, the factory audit guide, the sample process guide, how to pay Chinese suppliers safely, pre-shipment inspection, and shipping from China.

We’re based in Guangzhou; negotiating terms, reviewing PIs, and tying payment to inspection is our daily work. Need a second pair of eyes on contract terms, a PI reviewed before you pay, or the whole process handed to a local team? Contact us — we’ll reply within 48 hours with a written proposal.

Free tool: the RFQ template turns this into a one-page request you can send to 3-5 factories today.