If you're involved in international shipping, you've likely encountered Incoterms®-those three-letter trade terms that define responsibility for costs and risks between buyers and sellers. But when it comes to air freight, many businesses wonder: do these same rules apply?
The short answer is yes, Incoterms absolutely apply to air freight, but you need to choose the right ones. Using ocean-specific terms for air shipments can create confusion, unnecessary costs, and legal vulnerabilities.
What Are Incoterms and Why Do They Matter for Air Shipping?
Incoterms® (International Commercial Terms) are globally recognized trade rules established by the International Chamber of Commerce (ICC) that define responsibilities of buyers and sellers for delivery of goods . These standard terms clarify who handles what tasks-from transportation costs and insurance to customs clearance and risk management .
For air freight, using the correct Incoterm is crucial because:
- They determine cost responsibility - which party pays for air freight, fuel surcharges, and handling fees
- They pinpoint risk transfer - exactly when responsibility for goods moves from seller to buyer
- They clarify customs obligations - who handles export and import documentation
- They prevent disputes - clear terms avoid misunderstandings in international transactions
Incoterms Designed for Air Freight and All Transport Modes
Seven of the eleven Incoterms® 2020 rules work perfectly for air shipments because they're designed for "any mode of transport," including air, road, rail, and multimodal shipments :
1. EXW (Ex Works)
The seller makes goods available at their premises, and the buyer handles everything else-packaging, loading, export clearance, and all transportation costs . This term places maximum responsibility on the buyer.
2. FCA (Free Carrier)
The seller delivers goods to a named place (often an airport) and clears them for export . This versatile term works well when the seller handles pre-airport logistics while the buyer arranges and pays for the main air carriage.
3. CPT (Carriage Paid To)
The seller pays transportation costs to the specified destination, but risk transfers to the buyer once the goods are delivered to the first carrier (typically at departure airport) .
4. CIP (Carriage and Insurance Paid To)
Similar to CPT, but the seller must also purchase insurance covering the goods during transit . This provides better protection for the buyer compared to CPT.
5. DAP (Delivered at Place)
The seller bears all costs and risks until goods arrive at the named destination, ready for unloading by the buyer . The buyer handles import clearance and duties.
6. DPU (Delivered at Place Unloaded)
The seller delivers goods to the named place and assumes all costs and risks-including unloading . This is the only Incoterm where the seller bears unloading responsibility.
7. DDP (Delivered Duty Paid)
The seller assumes maximum responsibility, covering all costs and risks to the final destination, including import duties and taxes . Ideal for sellers who want complete control of the supply chain.
Incoterms to Avoid for Air Freight
These four terms are specifically designed for sea and inland waterway transport and should not be used for air freight :
- FAS (Free Alongside Ship) - Specific to port operations
- FOB (Free On Board) - Centers on "passing the ship's rail"
- CFR (Cost and Freight) - Designed for sea transport with risk transfer at port
- CIF (Cost, Insurance and Freight) - Maritime-specific with traditional ocean insurance requirements
Using these sea-focused terms for air shipments creates ambiguity about critical moments of risk transfer that don't translate well to air logistics.
Choosing the Right Incoterm for Your Air Shipment
Selecting the best term depends on your priorities and capabilities:
- For buyer control: Choose EXW or FCA if you want to manage and pay for transportation
- For seller simplicity: DAP or DDP work well when sellers want to provide door-to-door service
- For balanced risk: CPT or CIP split responsibilities reasonably between parties
- For e-commerce: DAP and DDP are popular for direct-to-consumer shipments
Always specify the exact location and Incoterms version in contracts-for example: "FCA Shanghai International Airport, Incoterms® 2020" .
Why Getting It Right Matters for Your Business
Using appropriate Incoterms for air freight isn't just paperwork-it directly impacts your bottom line. Proper Incoterm selection can:
- Reduce unexpected costs by clearly allocating responsibilities
- Minimize disputes with clear risk transfer points
- Streamline operations with defined tasks for each party
- Improve supply chain visibility through well-defined handoff points
Key Takeaways for Air Freight Shippers
- Incoterms definitely apply to air freight-you just need to choose the right ones
- Stick to the 7 "any mode" terms and avoid the 4 sea-specific terms
- FCA is often ideal for air shipments as it's flexible and clearly defines the handoff point
- Always specify the version year (Incoterms® 2020) in your contracts
- Consider your logistical capabilities when choosing terms rather than automatically using what's familiar
By selecting the appropriate Incoterms for your air freight shipments, you'll create clearer agreements, prevent costly misunderstandings, and build stronger international trade partnerships.
