What is a core function of Incoterms in international contracts?

Incoterms, or International Commercial Terms, serve as a standardized set of rules that define the responsibilities of buyers and sellers in international trade, particularly regarding the delivery of goods. A core function of Incoterms is to outline the points at which risk and responsibility transfer from the seller to the buyer throughout the delivery process. This aspect is critical as it provides clarity on who is liable for goods at various stages of transportation, thus helping to prevent disputes.

For example, under certain Incoterms, the seller might be responsible for risks and costs until the goods reach a specified location, while at other times, the responsibility may shift to the buyer much earlier in the logistics chain. This clear delineation enhances understanding and reduces ambiguity, which is essential in international trade where various factors can complicate transactions.

The other options do not accurately represent the primary role of Incoterms. Pricing strategies are influenced by market conditions and negotiations but are not defined by Incoterms. Tariffs on imports are government-imposed duties that pertain to trade regulations rather than contract terms. Lastly, while product quality standards are essential in international trade, these are usually established through separate agreements and industry standards, not directly defined by Incoterms themselves.