What do incoterms govern in international trade?

Incoterms, or International Commercial Terms, serve as a universally recognized set of rules that define the responsibilities of buyers and sellers in international trade. Their primary focus is on shipping terms and the responsibilities each party holds regarding the transport of goods. Incoterms clarify aspects such as who is responsible for the transportation costs, insurance, and the point at which the risk transfers from seller to buyer. This clarity helps prevent disputes and misunderstandings between trading partners by explicitly outlining the obligations of each party involved in the shipment of goods.

In contrast, payment methods are independent of the shipping responsibilities laid out in incoterms. While payment is a crucial part of international trade, it is not the focus of these terms. Taxes and tariffs are related to customs regulations and trade policies but they also fall outside the scope of incoterms. Finally, quality standards for products are typically governed by product specifications and regulatory compliance, rather than by the shipping terms provided by incoterms. Therefore, recognizing that incoterms specifically govern shipping terms and responsibilities is essential for understanding their role in international trade.