Incoterms are standardized trade terms published by international bodies that define the responsibilities of buyers and sellers in global trade transactions.
How It Works:
- Buyer and seller agree on a specific term.
- The term defines who handles transport, risk, and costs.
- Responsibilities are clearly divided.
- The term is mentioned in contracts and invoices.
Benefits:
- Reduces confusion in international trade
- Clearly defines responsibilities
- Minimizes disputes
- Standardizes global trade practices
Example:
A contract specifies FOB or CIF to define whether the buyer or seller is responsible for shipping and insurance.