What term specifies how buyers and sellers share the costs of freight and insurance?

The term that specifies how buyers and sellers share the costs of freight and insurance is Incoterms. Incoterms, short for International Commercial Terms, are a set of predefined commercial terms that are widely used in international trade. They outline the responsibilities of buyers and sellers regarding the delivery of goods, including who is responsible for transportation costs, insurance, and risks at each stage of the shipping process.

By using specific Incoterms, parties can clearly communicate and legally define their obligations, thereby reducing misunderstandings and disputes. For example, terms like FOB (Free On Board) or CIF (Cost, Insurance, and Freight) dictate the extent of costs each party will bear for shipping and insurance, thus creating a mutual understanding in a transaction.

In contrast, a commercial invoice is a document that itemizes goods sold, a bill of lading serves as a receipt for goods being shipped, and an airway bill is specific to air transport, serving a similar purpose as a bill of lading but for air freight. While these documents are important for the logistics and documentation of a sale, they do not define the sharing of costs like Incoterms do.