Air Freight Incoterms: Complete Guide for Exporters and Importers
In international trade, the shipping terms you choose determine far more than just who pays the freight bill. They define control, costs, and — most critically — risk at every stage of transport. While many professionals associate Incoterms® with sea freight, several terms are equally applicable to air cargo transactions, and misusing them can lead to costly disputes.
This guide explains which Incoterms apply to air freight, which do not, and how exporters and importers can make the right choice to balance efficiency, cost, and risk.
What Are Incoterms®?
Incoterms® (International Commercial Terms) are standardized rules published by the International Chamber of Commerce (ICC). They are recognized globally and remove ambiguity in cross-border trade by defining:
-
Transport & Insurance: Who arranges and pays.
-
Risk Transfer: When responsibility shifts from seller to buyer.
-
Customs & Documentation: Who handles export and import clearance.
For exporters and importers, knowing the right Incoterm is not optional — it is a strategic necessity that ensures clarity, reduces disputes, and protects margins.
Air Freight vs. Sea Freight: Why It Matters
Air cargo differs fundamentally from ocean shipping:
-
Speed vs. Cost: Air is faster but significantly more expensive.
-
Handling Points: Airports, not seaports, dictate logistics.
-
Insurance Needs: Higher per-unit value often makes coverage essential.
Because of these differences, not all Incoterms are suitable. For example, terms like FOB or CIF — rooted in maritime practices — have no place in air freight.
Incoterms® Suitable for Air Freight
When negotiating air freight shipments, choosing the right Incoterm is crucial. Below is a breakdown of the most commonly used terms, highlighting responsibilities, risk points, and benefits for both parties.
1. EXW (Ex Works)
-
Seller’s role: Makes goods available at their premises (factory/warehouse).
-
Buyer’s role: Arranges all transport, export clearance, insurance, and import formalities.
-
Risk transfer: At the seller’s premises, once goods are made available.
-
Customs formalities: Buyer is responsible for both export and import clearance.
-
Seller’s benefit: Minimal responsibility and cost.
-
Buyer’s benefit: Maximum control over transport, forwarder selection, and costs.
-
Best for: Experienced buyers with a strong local presence in seller’s country.
2. FCA (Free Carrier)
-
Seller’s role: Delivers goods, cleared for export, to the carrier at the named airport or forwarder’s facility.
-
Buyer’s role: Arranges main carriage, insurance, and import clearance.
-
Risk transfer: At handover to the carrier.
-
Customs formalities: Seller handles export clearance; buyer handles import clearance.
-
Seller’s benefit: Control over export process without bearing international transport risk.
-
Buyer’s benefit: Lower cost than EXW (since seller manages export clearance) and more practical for air freight.
-
Why it works for air freight: The most flexible and widely recommended Incoterm when using freight forwarders.
3. CPT (Carriage Paid To)
-
Seller’s role: Pays freight up to the destination airport.
-
Buyer’s role: Handles insurance (optional), import clearance, and onward delivery.
-
Risk transfer: At delivery to the first carrier in the origin country.
-
Customs formalities: Seller handles export clearance; buyer handles import clearance.
-
Seller’s benefit: Competitive offer since international freight is prepaid.
-
Buyer’s benefit: Predictable freight cost, while retaining flexibility on insurance.
4. CIP (Carriage and Insurance Paid To)
-
Seller’s role: Same as CPT but must also provide cargo insurance (under Incoterms® 2020, minimum = Institute Cargo Clauses A).
-
Buyer’s role: Handles import clearance and delivery after arrival.
-
Risk transfer: At delivery to the first carrier.
-
Customs formalities: Seller handles export clearance; buyer handles import clearance.
-
Seller’s benefit: Attractive to buyers as it includes insurance, making offers more competitive.
-
Buyer’s benefit: Maximum security with freight and insurance prepaid.
5. DAP (Delivered At Place)
-
Seller’s role: Bears transport cost and risk until goods arrive at buyer’s named place (airport or warehouse).
-
Buyer’s role: Handles import clearance, duties, and taxes.
-
Risk transfer: At the agreed place of destination (before customs clearance).
-
Customs formalities: Seller manages export clearance; buyer manages import clearance.
-
Seller’s benefit: Strong selling point — smooth logistics up to buyer’s door/airport.
-
Buyer’s benefit: Hassle-free receipt of goods with reduced operational burden.
6. DDP (Delivered Duty Paid)
-
Seller’s role: Handles everything — freight, insurance, export & import customs clearance, duties, and delivery to buyer’s premises.
-
Buyer’s role: Simply receives the goods.
-
Risk transfer: At final place of delivery (buyer’s warehouse).
-
Customs formalities: Seller manages both export and import formalities.
-
Seller’s benefit: Strongest competitive edge, offering a fully managed solution.
-
Buyer’s benefit: Maximum convenience and no hidden costs.
-
Caution: Risky for sellers if unfamiliar with foreign customs regimes, local duties, or tax systems.
-
-
-
-
Key Takeaway
After 20 years in the Trade Finance Department, working closely with exporters, importers, and freight forwarders, I’ve learned one thing: Incoterms may look neat on paper, but in real air freight operations, some terms just work better than others.
-
FCA (Free Carrier): Hands down, the most practical and widely used term for air freight. The seller handles export clearance, while the buyer takes over the main carriage. Forwarders like it because responsibilities are clear at the airport handover. It keeps things simple and avoids confusion.
-
CPT and CIP (Carriage Paid To / Carriage and Insurance Paid To): These work best when sellers want to offer a complete freight package. With CPT, the seller pays for transport to the destination airport, while risk transfers to the buyer once goods are handed over to the first carrier. CIP adds cargo insurance, giving buyers extra peace of mind. Sellers can make their offer more attractive without holding international risk, and buyers enjoy hassle-free freight (and insurance in CIP).
-
DAP and DDP (Delivered At Place / Delivered Duty Paid): These are very buyer-friendly, often helping close deals with less experienced buyers. But here’s the catch: sellers take on much more operational responsibility. With DDP, they even handle foreign customs and duties — which can get tricky if they don’t have local support.
Practical Advice:
If I were advising an exporter who’s new to air freight, I’d say this: start with FCA. It keeps responsibilities clear, limits risk, and helps you learn the ropes without getting overwhelmed. Once you’ve built solid logistics support — both in your country and abroad — you can consider DAP or DDP to offer buyers a more seamless, fully managed solution. Think of it as stepping stones: start simple, gain experience, and then take on more operational responsibility confidently.
Airfreight Incoterms:
Best Incoterms for air freight:
FCA Incoterms:
FCA (Free Carrier) – Trade Finance Perspective
Definition:
FCA (Free Carrier) is an Incoterm under Incoterms® 2020 that obliges the seller to deliver the goods, cleared for export, to a carrier or another party nominated by the buyer at a specified place. This place can be the seller’s premises, a warehouse, or a transport hub. Once delivery occurs, risk transfers from the seller to the buyer.
Key Responsibilities:
-
Seller Responsibilities:
-
Prepare and pack the goods appropriately for transport.
-
Arrange export clearance, including licenses, customs documentation, and duties.
-
Deliver the goods to the agreed location, which could be the seller’s premises or a named carrier.
-
Provide the buyer with proof of delivery (e.g., transport receipt, waybill) that can be used for trade finance purposes.
-
-
Buyer Responsibilities:
-
Nominate the carrier and bear all transportation costs from the delivery point onwards.
-
Assume risk once the goods are delivered to the carrier.
-
Arrange import clearance, including duties, taxes, and customs documentation.
-
Trade Finance Implications:
-
Documentary Credits (LCs): In a letter of credit transaction, FCA requires careful specification of the delivery point. Banks examine transport documents such as the carrier’s receipt or airway bill to ensure compliance. Incorrect or vague terms can lead to discrepancies and delayed payments.
-
Risk Mitigation: FCA is favored when the seller can manage export procedures but the buyer wants control over international transport. The risk passes at the point of delivery, reducing the seller’s liability for sea, air, or multimodal carriage beyond the delivery location.
-
Multimodal Flexibility: Unlike FOB, which is sea-specific, FCA applies to all transport modes, making it ideal for air freight, rail, or road shipments in addition to maritime transport.
Practical Tips for Exporters:
-
Always specify the exact delivery point (e.g., “FCA, Dhaka Warehouse” or “FCA, Chittagong Port Terminal”) to avoid disputes.
-
Ensure export customs clearance is completed properly; banks and buyers often insist on documentation confirming this.
-
For LC transactions, request that the issuing bank accepts the carrier’s receipt as proof of delivery to satisfy compliance.
Summary:
FCA (Free Carrier), an Incoterm defined by the International Chamber of Commerce (ICC), is a highly flexible Incoterm that balances risk and responsibility between seller and buyer. From a trade finance standpoint, its key advantage is clarity in document handling and risk transfer at a defined location, making it compatible with letters of credit, bank guarantees, and modern multimodal logistics.
CFR air freight: CFR (Cost and Freight) is an Incoterm specifically for sea and inland waterway transport and cannot be used for air freight. For air freight, the International Chamber of Commerce (ICC) suggests using Incoterms like CPT (Carriage Paid To) instead.
Here are the three most common and appropriate Incoterms® 2020 rules for air shipments, presented clearly and concisely.
1. FCA (Free Carrier)
Definition: The seller fulfills their obligation by delivering the goods, cleared for export, to the carrier nominated by the buyer at a named place.
Risk Transfer: From seller to buyer at the moment the goods are handed over to the carrier at the named place (e.g., the origin airport).
Why for Air: Efficiently splits responsibilities. The seller handles export formalities and gets the goods to the air carrier. The buyer is responsible for the main air freight cost and all import processes.
2. CIP (Carriage and Insurance Paid To)
Definition: The seller pays for carriage and insurance to the named destination. The seller clears the goods for export.
Risk Transfer: From seller to buyer when the goods are handed over to the first carrier (e.g., at the origin airport), not at the destination.
Why for Air: The seller arranges and pays for the air freight and provides insurance (with broad coverage) to the destination airport. The buyer handles all import clearance and costs.
3. DAP (Delivered at Place)
Definition: The seller delivers the goods to the named destination, ready for unloading by the buyer. The seller bears all risks and costs involved in bringing the goods to that place.
Risk Transfer: From seller to buyer when the goods are available for unloading at the named destination (e.g., the buyer's warehouse).
Why for Air: Provides a "door-to-door" service where the seller manages the entire air freight journey to the final location. The buyer is only responsible for unloading and import clearance.
Key Consideration:
Always specify the exact location (e.g., FCA [Address of Origin Airport Warehouse], CIP [Destination Airport], DAP [Buyer's Warehouse Address]). Vague terms lead to disputes.
The Critical Role of Air Imports in Bangladesh’s Economy
Air import means bringing goods into a country by air cargo, a fast and reliable mode of transport. For Bangladesh, air imports are not just convenient — they are vital to sustaining its fast-growing economy.
In 2023, Bangladesh’s airports handled 83.7 million tons of cargo, reflecting the sector’s central role in trade. Businesses rely on air freight when time and reliability outweigh cost. Perishables, medical supplies, critical spare parts, and product samples all depend on timely delivery by air. High-value shipments such as electronics, luxury goods, and machinery also move faster and safer through air imports.
The rise of e-commerce adds to this demand, as online retailers need rapid inventory replenishment from global suppliers. Key industries like RMG, pharmaceuticals, and electronics also depend heavily on air cargo, where even minor delays can disrupt production and competitiveness.