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Incoterms for Air Freight: 2025 Guide for Traders and Logistics Professionals
Introduction
In international trade, clear definition of responsibilities between buyers and sellers is critical for efficient operations. Air freight, with its rapid transit times and global connectivity, presents unique logistical considerations. The International Chamber of Commerce's Incoterms® 2020 rules provide the standardized framework for allocating costs and risks in these transactions.
While references to "2025" appear in industry discussions, it is important to note that the current Incoterms® 2020 edition remains the authoritative version, with no revisions scheduled until approximately 2030. This guide examines the most relevant Incoterms for air freight operations and their proper application in contemporary trade.
Understanding Incoterms Structure
Incoterms serve three primary functions in international contracts:
Defining the point of risk transfer between parties
Allocating transportation and ancillary costs
Specifying documentation responsibilities
The eleven Incoterms are divided into two categories:
Rules for any mode of transport (including multimodal): EXW, FCA, CPT, CIP, DAP, DPU, DDP
Rules for sea and inland waterway transport only: FAS, FOB, CFR, CIF
Air freight transactions should exclusively use the multimodal rules, as air shipments typically involve combined transport modes (road-air or air-road).
Key Incoterms for Air Freight Operations
EXW (Ex Works)
The seller makes goods available at their premises. The buyer assumes all transportation responsibilities and costs, including:
Export packaging and loading
Pre-carriage to airport
Export clearance procedures
Main air carriage
Import clearance and final delivery
Risk transfers when goods are made available at seller's location. This term places maximum obligation on the buyer and is generally not recommended unless the buyer has strong logistics capabilities in the seller's country.
FCA (Free Carrier)
The seller delivers goods, cleared for export, to the carrier or another party nominated by the buyer at a named place. This could be:
The seller's premises
A freight forwarder's warehouse
Airport cargo terminal
Risk transfers when goods are handed to the first carrier. FCA is particularly suitable for air freight as it:
Allows flexible carrier selection
Clearly defines export clearance responsibility
Provides balanced risk allocation
CPT (Carriage Paid To)
The seller pays for carriage to the named destination but risk transfers when goods are delivered to the first carrier at origin. Key characteristics:
Seller arranges and pays for main carriage
Buyer assumes risk during transit
Buyer handles import clearance
This term is useful when sellers want to control transportation costs while buyers manage destination procedures.
CIP (Carriage and Insurance Paid To)
Similar to CPT but with added requirement for seller to procure minimum insurance coverage (110% of cargo value). Important considerations:
Insurance must cover the buyer's risk during transit
Policy terms should be clearly specified in contract
Recommended for high-value or sensitive shipments
DAP (Delivered at Place)
The seller delivers goods to a named place in the buyer's country, ready for unloading. Critical aspects:
Seller bears all risks and costs until arrival at destination
Buyer responsible for import clearance and unloading
Useful when sellers have strong destination logistics networks
DPU (Delivered at Place Unloaded)
Replaced DAT in Incoterms 2020. The seller must unload goods at the named destination. Key features:
Seller assumes unloading costs and risks
Risk transfers only after successful unloading
Requires seller to have unloading capabilities at destination
DDP (Delivered Duty Paid)
The seller bears maximum responsibility, including:
All transportation costs
Export and import clearance
Duty and tax payments
Final delivery to buyer's premises
This term is complex but provides turnkey solution for buyers. Sellers must have thorough knowledge of import regulations in buyer's country.
Operational Considerations for Air Freight
Documentation Requirements
Air Waybill (replaces Bill of Lading)
Commercial invoice with correct Incoterm
Packing list
Certificates of origin
Special permits (for restricted items)
Risk Management
Verify insurance coverage terms
Confirm liability limits with carriers
Document cargo condition at each transfer point
Cost Allocation
Clearly define responsibility for:
Fuel surcharges
Security fees
Airport handling charges
Storage demurrage
Regulatory Compliance
Stay current on:
Export control regulations
Customs modernization acts
Security requirements (e.g., ACC3 for EU)
Dangerous goods regulations (IATA)
Conclusion
Proper selection and application of Incoterms is essential for efficient air freight operations. While the 2020 rules remain current, their effective implementation requires:
Clear contractual specification of chosen term
Precise naming of delivery locations
Alignment with payment terms and insurance provisions
Understanding of local regulatory requirements
FCA and CIP generally provide the most balanced solutions for air shipments, while DAP and DDP offer more comprehensive seller-managed options. Regardless of term selected, all parties should ensure complete understanding of their respective obligations to avoid disputes and delays in this time-sensitive transport mode.
Understanding Incoterms is essential when dealing with international air cargo. These rules, published by the International Chamber of Commerce (ICC), define responsibilities between buyers and sellers. This guide focuses on the key Incoterms relevant to air freight in 2025.
🔑 Key Incoterms for Air Freight
- EXW (Ex Works): Buyer handles everything from the seller's premises onward.
- FCA (Free Carrier): Seller delivers goods to the carrier at a named location, commonly used for air freight.
- CPT (Carriage Paid To): Seller pays freight to destination airport, but risk transfers once goods are handed to the first carrier.
- CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also covers insurance.
- DAP (Delivered At Place): Seller delivers to destination; buyer handles import clearance.
- DDP (Delivered Duty Paid): Seller handles everything including duties and taxes.
📌 Best Incoterm for Air Freight
FCA and CPT are commonly preferred in air cargo transactions due to their flexibility and clarity in responsibility division. CIP is beneficial when insurance is critical.
✈️ Real-World Case Study: Exporting Electronics from Bangladesh to Germany
A Dhaka-based electronics company exports 500 units of consumer electronics to Berlin under the CPT Incoterm.
- Named Place: Berlin Brandenburg Airport (BER)
- Seller’s Obligation: The seller arranges air freight via Qatar Airways and pays all transport charges up to BER.
- Risk Transfer Point: When Qatar Airways receives the goods in Dhaka
- Outcome: The goods arrive safely. If damage had occurred during transit, it would be the buyer’s risk under CPT.
📖 Why Incoterms Matter in Air Freight
- Avoids disputes over shipping responsibilities
- Clarifies customs, insurance, and delivery duties
- Boosts efficiency and transparency in global logistics
❓FAQs About Air Freight Incoterms
Which Incoterms are not suitable for air freight?
Incoterms like FAS (Free Alongside Ship) or FOB (Free on Board) are intended for sea freight and are not appropriate for air cargo.
Does CIP require insurance?
Yes, under CIP, the seller must provide insurance coverage with minimum conditions (as per ICC Clause A, unless otherwise agreed).
Can DDP be used for air freight?
Yes, but sellers must be familiar with the import rules and taxes of the buyer’s country to fulfill DDP obligations.
Is EXW risky for buyers?
Yes, because the buyer bears all costs and risks from the seller’s premises onward, including export formalities.
🌐 Learn More
Explore the full Incoterms 2020 rules at the official ICC website: ICC Incoterms 2020
and more on Incoterms.
