What is the primary function of incoterms in international trade?

The primary function of incoterms in international trade is to clarify the responsibilities of the parties involved in a trade agreement. Incoterms, or International Commercial Terms, are a set of predefined international trade terms published by the International Chamber of Commerce (ICC). They establish who is responsible for costs, risk, and logistics related to the transportation of goods.

By specifying each party's obligations regarding the delivery of goods, including transportation, insurance, and customs duties, incoterms help prevent misunderstandings and disputes between buyers and sellers. They define critical aspects such as when the responsibility for the goods transfers from the seller to the buyer, which is essential for planning and operational purposes in global trade scenarios.

The other options, while related to aspects of trade, do not capture the essence of what incoterms are designed to accomplish. Standardizing language used in contracts and outlining shipping documentation requirements are important, but they are secondary functions and not the primary goal of incoterms. Regulating domestic trade practices is outside the scope of incoterms, as they specifically address international trade transactions.