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Import 101 - Chapter 5/7: International Sales Agreement (Purchase Agreement)

We’ve gone through more than half of the journey to import goods:

Deciding what to import

Choosing a country to source the goods from

Understanding the basic concepts in importation

Sourcing suppliers abroad 

The next step is that you and your supplier will exchange multiple documents all of which are parts of your sales agreement. In this post we’ll share how that should go: the names, flow, and order of these documents. First, check out this handy diagram:


It is important to note that this process is common when you have isolated purchase transactions with your suppliers. Isolated purchase transactions happen when you buy on an infrequent basis, or when you only order samples before committing to a larger amount over a period of time. When you enter such a commitment with your supplier, a more comprehensive agreement should be in place, with important provisions that you do not usually see in a domestic contract.

Request for quotations (RFQ): The process usually starts with the buyer sending the seller a Request for Quotation, asking for a quotation for a specific quantity of products, and a shipping date. If you are a buyer on Alibaba, Alibaba has a platform for you to open a RFQ which multiple suppliers can respond to. RFQ can be an informal document, but you should still give as many details as possible about your products (quantity, color, materials, standards) and shipping requirements (destination port, incoterms).

Quotation: In response to a request for a quotation, the seller will send you his Quotation which usually includes his terms and conditions (T&C) of sales. You should carefully review these terms and clarify any discrepancies or any terms that were referred to but not expressly stated in the quotation. It’s to your benefit to clear anything up that concerns you now, before going any further in the process. You may also want to check the validity of the quotation; it is common that the quotation is only valid within a certain period of time or under special conditions.

Purchase Order (PO) is issued by the buyer. Although PO can also be informal just like the RFQ, it is actually your most important document. The PO should contain all of the additional T&C you want the seller to agree to and include in the purchase agreement. To prevent the seller from using only his terms and conditions to govern the agreement, you should specify that the PO is effective only with the T&C you agree on; any other PO with different T&C will be invalid unless your acceptance is in writing. You may want to give the seller a deadline to accept your PO. One last note, It is to your benefit to make clear that the PO is governed by the law of the state where you do business as well as the United States, and is not governed by the Convention on Contracts for the International Sales of Goods  (CISG)

Purchase Order Acknowledgements and Acceptance and Sales Confirmation: Upon receiving the PO, the seller will issue a PO Acknowledgement or PO Acceptance to acknowledge that he has received the PO and is now evaluating it. A Sales Confirmation serves the same purpose as a PO Acceptance. Check this document carefully, as it may once again include only the seller’s T&C. It is important for you to make sure that both sides – you and the seller – have reached a common agreement regarding T&C; especially if this is your first time working with the seller.

Pro-forma invoice (PI): Pro-forma invoice, issued by the seller, can be understood as an initial or draft version of the invoice. It is not as effective as a Commercial Invoice since the numbers in a pro-forma invoice may not be final, but it does give the buyer an idea about the estimated costs and charges, quantity of goods, their values, weight, etc.

Commercial Invoice (CI): CI is the formal statement for payment which is issued by the seller to the buyer once the goods are manufactured and ready for shipment. The main difference between PI and CI is that PI is not a request for payment, while CI is. CI includes T&C, and it is always important to check that the T&C in the CI are consistent with what was agreed on by both parties. The CI usually comes with a Packing List – a document that specifies how the shipment is packed and labeled. When packaging and labeling is done appropriately, it will facilitate customs’ inspection and examination and minimize delays in the shipment’s release from customs.

When you’re putting together a sales agreement with your foreign supplier, here are the most vital things you should remember from this post:

  • Always review the T&C in every document: RFQ, Quotation, PO, PO Acceptance, and CI.
  • Never commit to a purchase if you have not reached an agreement with your seller regarding T&C.
  • Pay attention to the validity of the Quotation and PO, and the governing law of the whole agreement.

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