Final answer:
Incoterms are standardized international trade terms that define the responsibilities and obligations of buyers and sellers. They establish rules for delivery, risk transfer, and cost allocation.
Step-by-step explanation:
Incoterms are a set of standardized international trade terms that define the responsibilities and obligations of buyers and sellers in a contract for the delivery of goods. They establish the rules for the delivery of goods, the transfer of risk, and the allocation of costs between the parties involved in the transaction. Some commonly used Incoterms include FOB (Free on Board), CIF (Cost, Insurance, and Freight), and EXW (Ex Works).
For example, if a buyer in the United States wants to import goods from China and agrees to use FOB Incoterms, it means that the seller is responsible for delivering the goods to the port of departure in China, while the buyer is responsible for the costs and risks associated with transporting the goods from the port of departure to the buyer's destination.