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What do INCOTERMS refer to in shipping?

  1. International rules governing freight charges

  2. Standardized contractual terms for international shipping

  3. Guidelines for safety equipment on vessels

  4. Global regulations on carrier operations

The correct answer is: Standardized contractual terms for international shipping

INCOTERMS, short for International Commercial Terms, are standardized contractual terms that define the responsibilities of buyers and sellers involved in international shipping. These terms clarify who is responsible for various aspects of the shipment, such as costs, risks, and responsibilities during the transport process. By outlining these aspects, INCOTERMS help to mitigate ambiguities and misunderstandings that can arise in international trade, providing a common framework that parties can rely on. Each term has specific meanings and implications for the parties involved, making it crucial for businesses engaged in international trade to understand them fully. By using INCOTERMS, companies can ensure that transactions are conducted smoothly, with clear expectations set for both sellers and buyers regarding shipping responsibilities.