Order Confirmation and PI (Performa Invoice)
A proforma invoice (PI) is the seller’s pre-shipment quotation that lists agreed unit price, total invoice value, the Incoterms 2020 delivery basis, payment terms (most often T/T, L/C at sight, D/A, or D/P), and a shipment window of typically 30 to 90 days from L/C opening, while an order confirmation is the buyer’s signed acceptance of that PI that converts the quotation into a binding sales contract under English common law and the United Nations Convention on Contracts for the International Sale of Goods (CISG, Article 18).
The two documents do the same paperwork from opposite ends of the trade. The PI obligates the seller but commits the buyer to nothing until signed, and the order confirmation locks in every commercial term (price, ±2 to ±5 percent quantity tolerance, latest shipment date, payment, inspection, and force majeure wording) so that the L/C opened on top of them is consistent and dispute-free.
What follows is the full anatomy of both documents as used in textile and apparel trade, the seven fields that trip up first-time exporters, and how each clause interacts with payment, shipping, and inspection obligations.
What Is a Proforma Invoice (PI)?
A proforma invoice is a seller-issued quotation formatted like a commercial invoice, sent before any goods are manufactured or shipped. It carries no signature requirement from the buyer and is not, by itself, a contract under the CISG, but it functions as an offer that the buyer can accept by issuing a purchase order or signing the PI back.
Under the International Chamber of Commerce’s Incoterms 2020 rules (the eleventh revision, in force since 1 January 2020), the PI is the natural place to fix the named delivery term (FOB, CFR, CIF, DAP, DDP, EXW, FCA, CPT, CIP) because switching Incoterms after the L/C has been advised is one of the leading causes of documentary credit discrepancies logged annually by trade-finance dispute records.
In textile trade specifically, the PI typically also carries the buyer’s style number, the seller-factory’s internal work order number, fabric composition (for example 100% cotton, 65/35 poly-cotton), yarn count (Ne 30/1), fabric weight in GSM, color fastness ratings (AATCC Test Method 8 for crocking, AATCC Test Method 16.3 for light), and the AQL sampling plan (commonly AQL 2.5 for general merchandise), so the PI doubles as the technical specification sheet.
What Is an Order Confirmation?
An order confirmation is the seller’s written acknowledgment that a buyer’s purchase order has been accepted and the deal is now binding. Most merchandising teams use “order acknowledgement” and “order acceptance” interchangeably, but in legal terms the document serves the same function: it is the moment the CISG treats an offer as accepted (CISG Art. 18(1)) and consideration is fixed.
The order confirmation mirrors every field on the PI (same unit price, same quantity tolerance, same Incoterms code, same port of loading, same port of discharge, same payment terms) but it adds the buyer’s PO number, the seller’s internal contract number, the agreed production start date, the latest shipment date, and the inspection agency. Three inspection agencies dominate Bangladesh knit and woven export orders, and each of them issues certificates that the negotiating bank accepts: SGS, Bureau Veritas, and Intertek.
Many exporters use a combined “proforma invoice + order confirmation” form where the PI sits on page 1 and a signature box for the buyer sits on page 2. From a legal standpoint this is acceptable as long as both pages are initialed and the signature is dated, and for L/C presentation the bank requires the buyer’s signed acknowledgment to release the pre-shipment finance.
PI vs Order Confirmation: Key Differences
| Field | Proforma Invoice (PI) | Order Confirmation (OC) |
|---|---|---|
| Issuer | Seller | Seller (acknowledging buyer’s PO) |
| Legal status | Pre-contractual offer | Contractual acceptance (CISG Art. 18) |
| Buyer signature | Not required | Usually required |
| Typical moment | Pre-production / sampling stage | After PO received, before L/C opening |
| Payment instrument | Used to open L/C | Cross-checks against L/C terms |
| Inspection clause | Often omitted | Always named third-party agency |
| Force majeure wording | Sometimes included | Always included |
The five-second merchandising test is simple: if a banker can get the L/C to match the document line-for-line by reading only the OC, the contract is clean. Anything that diverges (extra unit price, even one missing tolerance, an Incoterms code spelled differently) is a discrepancy risk that the negotiating bank will flag.
Essential Fields on a Proforma Invoice
- Seller name, address, tax ID / BIN (in Bangladesh, the Bangladesh Bank BIN for export-oriented units)
- Buyer name, address, buyer’s VAT or EIN equivalent
- PI number, date, and validity (most PIs state “valid for 30 days” or “until 31 March 2026”)
- Style number, buyer’s PO number, seller’s internal work order
- Detailed commodity description including fiber content, yarn count, GSM, and construction
- Unit price in agreed currency (USD is the textile default, EU buyers sometimes use EUR)
- Quantity with tolerance; the two most-used are ±2% and ±5%, both acceptable under the “more or less clause” in standard documentary credits
- Total invoice value
- Incoterms 2020 code such as FOB Chittagong or CIF Hamburg, plus named place
- Payment terms (T/T 30% deposit plus 70% against B/L copy, L/C at sight, L/C 30/60/90 days, D/A, or D/P)
- Shipment window (latest shipment date, allowed partial shipments, allowed transshipment)
- Port of loading and port of discharge
- Bank details for receiving payment
- Inspection or third-party agency clause
- Force majeure clause referencing named events such as war, pandemic, or port closure
- Authorized signatory and stamp
Essential Fields on an Order Confirmation
The OC repeats the PI’s commercial fields and adds the operational layer a merchandising team needs to schedule production and ship on time:
- Buyer’s PO number and PO date
- Confirmed delivery date range, for example “ship on or before 15 April 2026”
- Production start date and ex-factory date
- Pre-shipment inspection booking date, commonly 7 days before ETD
- Lab dip, fitting sample, and size set approval timeline, typically 4 to 6 weeks from order confirmation in woven and 6 to 8 weeks in knit garment order confirmation
- Shipping marks artwork and packing specification including ratio of solid, ratio, and assortments per carton
- Buyer’s bank and SWIFT code for L/C advising
- Seller’s bank and SWIFT code for payment receipt
- Late-delivery penalty clause, usually 1% per week capped at 10%, almost always triggered if the B/L date falls past the latest shipment date
- Cancellation clause after a defined standstill window, commonly 30 to 60 days of no response
- Reconciliation clause for exchange-rate risk on the seller’s currency, mainly relevant for Bangladesh-China yarn imports
Common Payment Terms in Textile Export
Four payment terms dominate Bangladesh textile export in 2026:
T/T (Telegraphic Transfer). The buyer wires 30% as deposit (typically within 3 working days of order confirmation) and the 70% balance on presentation of the shipped-on-board B/L copy. Used for low-value repeat orders and for buyers whose banks sit in jurisdictions with USD-clearing restrictions.
L/C at sight (Irrevocable Documentary Credit). The buyer’s bank guarantees payment to the seller against compliant shipping documents. Most Bangladesh knit exporters ship on L/C at sight when order value is USD 50,000 or more, because the LC disbursement passes through the buyer’s bank and the seller’s bank. Sellers’ banks commonly include HSBC, Standard Chartered, BRAC Bank, and Eastern Bank Limited for Bangladesh-side L/C negotiation.
L/C usance (deferred payment). Same as L/C at sight but the buyer gets 30, 60, 90, or even 120 days of credit from B/L date. The seller discounts the bill at the negotiating bank and bears the discount cost, commonly 2.5% to 6% per annum depending on prevailing benchmark rates and the buyer’s country risk grade.
D/P (Documents against Payment) and D/A (Documents against Acceptance). Used mainly for repeat buyers with established credit. The seller’s bank forwards shipping documents through the buyer’s bank, releasing them against actual payment (D/P) or against the buyer’s signed acceptance of a bill of exchange (D/A, typically 30/60/90 days). D/A volumes have fallen sharply since 2022 in several destination markets; the four largest garment destination markets of Bangladesh (the US, the EU, the UK, and Canada) still prefer L/C or T/T.
Quantity Tolerance: The ±2% vs ±5% Choice
Quantity tolerance is the single most negotiated field on a textile PI. The “more or less” clause permits the seller to ship up to the tolerance and receive payment pro-rata, which protects the seller from short-shipment claims when production loss trims yield by a percent or two.
±2% is the woven industry default and matches the most-used Incoterms 2020 expectations. ±5% is the knit industry default and matches the higher natural waste rate of cutting circular-knitted panels versus weaving. Buyers in Germany and the Netherlands historically push for ±3% as a compromise, and their banks typically accept ±3% in L/Cs because it sits within both norms.
Documentation Hierarchy in a Shipping Transaction
- Buyer issues Purchase Order (PO)
- Seller issues Proforma Invoice (PI)
- Buyer signs PI or issues Order Confirmation (OC)
- Buyer’s bank opens L/C (the L/C is dictated by PI + OC)
- Seller produces samples and gets buyer’s approval
- Seller produces bulk; pre-shipment inspection booked
- Inspection certificate issued by SGS, Bureau Veritas, or Intertek
- Goods shipped; B/L, invoice, packing list, COO, and GSP or other preferential certificate issued
- Seller presents shipping documents to negotiating bank within L/C validity, commonly 21 days from B/L date
- Bank checks documents, pays seller, forwards documents to buyer’s bank, and buyer custom-clears
Documentation Hygiene Under ISO 9001:2015
ISO 9001:2015, Clause 7.5, requires an organization to maintain controlled documentation that includes externally-originated documents like a buyer’s purchase order and a seller’s PI. In practice this means: a unique identifier on every PI (PI/2026/034), the date of issue, the version (Issue 1, Issue 2 with revision marks), and the retention period (commonly 7 years for export transactions under Bangladesh customs rules). Merchandising teams that run on ISO 9001 store the PI, OC, amended L/C, samples approvals, inspection report, and B/L copy in one job folder that auditors can pull within minutes.
Two ASTM standards typically appear in the spec block of a PI for woven or knit garment shipments. ASTM D3776 covers mass per unit area (fabric weight) and confirms the GSM on the PI when the buyer’s lab tests the commercial shipment. ASTM D3774 covers width, used for fabric lay planning on the cutting floor. The buyer’s lab dip approval also cites AATCC Test Method 8 (crocking) and AATCC Test Method 16.3 (light fastness), which means the PI’s claim of “Grade 4 minimum on AATCC 8, dry” is a contractual commitment backed by a method.
Frequently Asked Questions
Is a proforma invoice a real invoice?
No. A proforma invoice is a quotation that pre-dates the actual commercial invoice, and it cannot be used for customs clearance in the buyer’s country because it carries no customs HS code declaration. Only the final commercial invoice, issued after shipment and supported by the bill of lading, is a customs document. The PI’s role is purely commercial and technical.
Can a buyer refuse to pay after signing the order confirmation?
The buyer can refuse to pay only on contractual grounds: documented quality failure proven by the agreed inspection agency, gross lateness past the force majeure exclusion, or proven non-conformity with one of the seven technical specifications filed in the PI. Refusal without cause is a breach under CISG Article 49, and the seller can suspend further performance, recover the price, and claim damages in the seller’s jurisdiction or the agreed arbitration seat.
How long is a proforma invoice valid?
Most PIs state a 30-day, 60-day, or 90-day validity window from the date of issue, after which the price, payment terms, and shipment window must be renegotiated. In volatile fiber markets (cotton, polyester) the validity typically shrinks to 15 days because daily index moves on the Cotton Council International benchmark and the China polyester chain can exceed the seller’s tolerance.
What happens if the PI and the L/C disagree?
If the L/C terms disagree with the PI, the L/C is the binding instrument, so the bank pays on the L/C wording, not the PI. The seller’s safest move is to ask the buyer to amend the L/C before producing bulk so the PI, OC, and L/C match line-for-line. This is the single most repeated discrepancy category in trade-finance dispute records.
Do small orders need a full PI and OC?
Yes. Order size does not change the documentation rule: even a USD 2,000 sample shipment benefits from a two-page PI and a one-page order confirmation. The cost of preparing them is roughly two hours of a merchandiser’s time, versus the cost of a USD 50 wire fee plus lost time if payment is delayed over a missing or disputed reference number.
References
- International Organization for Standardization. ISO 9001:2015 — Quality Management Systems — Requirements. iso.org — Clause 7.5 documents the controlled-documentation rules that apply to PIs and order confirmations in ISO-certified factories.
- ASTM International. ASTM D3776 / D3776M-20 Standard Test Methods for Mass Per Unit Area (Weight) of Fabric. astm.org — the textile method used to verify fabric weight (GSM) claims filed in the PI.
- ASTM International. ASTM D3774 / D3774M-21 Standard Test Methods for Width of Textile Fabric. astm.org — sets the width-tolerance band typically cross-referenced on a woven fabric PI.
- AATCC. AATCC Test Method 8 — Colorfastness to Crocking: AATCC Crockmeter Method. aatcc.org — the color-rubbing grade most often cited in knit garment order confirmations.
- AATCC. AATCC Test Method 16.3 — Colorfastness to Light: Xenon-Arc. aatcc.org — the light-fastness method cited for shirting, outerwear, and home-textile PIs.
- Cotton Council International. Cotton Trade Reference Manual. cottoninc.com — fiber-specific examples of PI and OC clauses used in cotton textile shipments.
- Woolmark. Wool Trade Documentation Guide. wool.com — wool-specific quantity tolerance, inspection, and quotation norms for PI drafting.
- The Textile Institute. Textile Trade and Export Documentation Handbook. textileinstitute.org — research reference for documentation control in textile and apparel trade.
This article is the working reference for order confirmation and proforma invoice documentation in the textile trade. Editorial by Mohammad Yousuf (Anik), TextileTuts. Sources: ISO 9001:2015, ASTM D3776, ASTM D3774, AATCC Test Method 8, AATCC Test Method 16.3, Cotton Council International, Woolmark, Textile Institute.
