International shipments demand clarity in both logistics and the financial and legal responsibilities at each stage. Incoterms (International Commercial Terms), defined by the International Chamber of Commerce, are a critical part of contracts. They spell out who pays for what, when risk shifts, and who handles logistics, import and export, and insurance.
When it comes to air freight, Incoterms are especially important. Fast transport means small timing or cost missteps can become expensive and disruptive.
Key air freight Incoterms and what they really mean
EXW – Ex Works (buyer pays almost everything)
What it means: The seller makes the goods available at their premises. From there, you handle export, transport, customs, insurance, and delivery.
What you are paying for: Almost all logistics costs, plus the risk once goods are collected.
FCA – Free Carrier (named place)
What it means: The seller delivers goods to a carrier or place you specify and handles export clearance.
What you are paying for: Everything from that delivery point, including air freight, insurance, and import clearance.
Why choose it: Good visibility and control over the main carriage.
CPT – Carriage Paid To (seller covers transport, buyer takes risk)
What it means: The seller pays the cost of freight to a named destination, but risk transfers once goods are handed to the first carrier.
What you are paying for: Predictable transport cost, but you assume risk early, so consider separate insurance.
CIP – Carriage and Insurance Paid To (seller covers more)
What it means: Like CPT, but the seller must also provide insurance for the journey.
What you are paying for: Transport plus insurance. Check coverage limits carefully to ensure they meet your needs.
DAP – Delivered At Place (buyer clears import)
What it means: The seller delivers goods to a named place and bears costs and risks up to that point, excluding import clearance.
What you are paying for: Convenience to delivery, then you handle duties and final customs.
DDP – Delivered Duty Paid (seller handles everything)
What it means: The seller covers logistics, duties, import customs, and risks until delivery to your site.
What you are paying for: Maximum convenience when you do not want to manage customs or transport yourself.
Incoterms at a glance
| Incoterm | Seller pays | Buyer pays | Risk transfers at |
|---|---|---|---|
| EXW | Nothing beyond making goods available | Export, air freight, insurance, import | Seller premises |
| FCA | Up to delivery to carrier | Main carriage, import processing | Delivery to first carrier |
| CPT | Transport to named destination | Insurance, import | Hand-over to first carrier |
| CIP | Transport and insurance | Import | Hand-over to first carrier |
| DAP | All costs to named place | Import clearance | Before unloading at named place |
| DDP | End to end including duties | None | Final delivery point |
Why these Incoterms matter in air freight
- Cost clarity: Know exactly who pays for which part of the journey and avoid surprise fees.
- Risk management: Faster transit shifts risk earlier in the chain, so define when liability begins.
- Customs handling: Air freight moves quickly, but customs can slow it. Incoterms define who manages paperwork and duties.
- Insurance oversight: Some terms include insurance by default, but limits may be basic. Confirm coverage fits your risk profile.
FAQ:
Are all Incoterms valid for air freight?
No. Terms used for sea only, such as FAS, FOB, CFR, and CIF, are not suitable for air. The most relevant for air freight are EXW, FCA, CPT, CIP, DAP, and DDP.
Does CIP mean I am fully insured?
Not necessarily. CIP requires the seller to provide insurance, often to a minimum level. Many buyers choose extra cover for higher value or sensitive goods.
I want the seller to handle as much as possible. Is DDP best?
Yes. DDP places maximum responsibility on the seller, including duties and customs, and delivers goods to your location ready for unloading.
How do I match the right Incoterm to my needs?
Consider your ability to handle import customs, your preference for cost transparency, your risk tolerance, and how much control you want over transport. Choose the term that balances these factors.