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.

All 11 Incoterms for Air Freight: What Do They Mean?

Transshipment & Freight Costs: How Exporters Can Save Money

Transshipment and freight cost optimization for exporters

For importers, exporters, manufacturers, and logistics managers, mastering ocean freight costs is not just about negotiating base rates—it is about understanding the pivotal role of transshipment. This process—transferring cargo between vessels at intermediate hubs—directly impacts your total landed costs, supply chain resilience, and competitive edge. Let us break down how transshipment shapes your bottom line.

Why Transshipment Matters in Modern Logistics

Global trade relies on hub and spoke networks centered around mega ports like Singapore, Rotterdam, or Dubai. For businesses shipping containerized freight, transshipment is not optional—it is foundational. It enables access to deep sea shipping routes, connects emerging markets via feeder vessel networks, and turns fragmented cargo into cost-efficient consolidated shipments. Yet its impact on shipping expenses is double-edged.

The Cost Drivers: Where Transshipment Adds Expense

Port Handling and Terminal Fees: Each transfer triggers charges for cranes, labor, and storage. At busy hubs like Colombo or Tanjung Pelepas, these fees compound quickly.
Extended Transit Times: Longer journeys mean higher inventory carrying costs and capital tied in transit—critical for just-in-time manufacturing.
Risk Escalation: More handling raises exposure to damage, loss, or pilferage, inflating cargo insurance premiums.
Hidden Ancillary Fees: Demurrage and detention penalties surge if delays hit transshipment ports. Customs clearance issues or documentation errors add friction.

For high-value or perishable goods, these costs often justify pricier direct routes.

The Savings Engine: How Transshipment Reduces Freight Costs

LCL Consolidation Power: Transshipment hubs merge less-than-container-load (LCL) shipments into full containers, cutting per unit rates by 15–30%.
Vessel Optimization: Carriers use ultra-large container vessels (ULCVs) on trunk routes and smaller feeders, improving per TEU cost efficiency.
Route Flexibility: Ports like Ho Chi Minh City or Chittagong become accessible via feeder networks, avoiding costly overland shipping.
Network Efficiency: Strategic redirection across shipping alliances minimizes empty repositioning moves and maximizes container use.

Example: A Thai electronics manufacturer shipping to Hamburg might save 22% by routing via Singapore transshipment hub versus a rare or expensive direct service.

Key Considerations for Logistics Decision Makers

Cost vs Speed Trade-offs: Transshipment reduces costs but may extend delivery by 7–14 days. Consider if your cargo is time-sensitive.
Hub Reliability: Port congestion in places like Los Angeles or Shenzhen can cause delays. Work with forwarders offering hub performance insights.
Incoterms Alignment: FOB places transshipment risk on buyers, while CIF shifts responsibility to sellers.
Sustainability Impacts: Additional voyages increase emissions. ESG-conscious brands may prefer direct shipping.

Optimizing Transshipment for Your Supply Chain

Audit Routing Guides: Ensure carriers use efficient transshipment hubs with reasonable costs.
Leverage Analytics: Use freight audit tools to compare total landed costs of transshipped vs direct routes.
Strengthen Partnerships: Work with freight forwarders that have volume leverage to secure discounts.
Buffer Strategically: Adjust safety stock for transshipped goods during peak season or uncertain transit windows.

The Bottom Line: Is Transshipment Worth It?

For most B2B shippers, transshipment is a net cost saver—but only with active management. The consolidation efficiencies and global scale it enables often outweigh added fees. High-volume FCL shippers may avoid it; LCL importers of retail or machinery parts benefit most.

Pro Tip: Run a total landed cost analysis:

Base Freight + Transshipment Fees + Inventory Holding Cost + Risk Premium

Direct Route Cost + Accessorial Charges

Future-Proofing Your Strategy

With carriers like Maersk and MSC investing in smart transshipment hubs (e.g., Oman’s Duqm Port), handling costs will decline and AI routing will improve reliability. For now, align use of transshipment with:

Product profile (commodity vs premium)
Supply chain urgency
Trade lane stability

Key Takeaways for Logistics Buyers and Sellers

Transshipment cuts base freight via consolidation and mega vessel efficiency
Manage added costs (port, handling) and risks (delays, damage)
Review routing quarterly with freight forwarders
Favor reliable hubs like Singapore over congested ones

Final Thought: Optimize your global shipping not by avoiding transshipment—but by mastering it.

How Transshipment Affects Shipping Costs?

For importers, exporters, manufacturers, and logistics managers, mastering ocean freight costs is not just about negotiating base rates—it is about understanding the pivotal role of transshipment. This process—transferring cargo between vessels at intermediate hubs—directly impacts your total landed costs, supply chain resilience, and competitive edge. Let us break down how transshipment shapes your bottom line.

Why Transshipment Matters in Modern Logistics

Global trade relies on hub and spoke networks centered around mega ports like Singapore, Rotterdam, or Dubai. For businesses shipping containerized freight, transshipment is not optional—it is foundational. It enables access to deep sea shipping routes, connects emerging markets via feeder vessel networks, and turns fragmented cargo into cost efficient consolidated shipments. Yet its impact on shipping expenses is double edged.

The Cost Drivers: Where Transshipment Adds Expense

Port Handling and Terminal Fees: Each transfer triggers charges for cranes, labor, and storage. At busy hubs like Colombo or Tanjung Pelepas, these fees compound quickly.
Extended Transit Times: Longer journeys mean higher inventory carrying costs and capital tied in transit—critical for just in time manufacturing.
Risk Escalation: More handling raises exposure to damage, loss, or pilferage, inflating cargo insurance premiums.
Hidden Ancillary Fees: Demurrage and detention penalties surge if delays hit transshipment ports. Customs clearance snares or documentation errors add friction.

For high value or perishable goods, these costs often justify pricier direct routes.

The Savings Engine: How Transshipment Reduces Freight Costs

LCL Consolidation Power: Transshipment hubs merge less than container load LCL shipments into full containers. This slashes per unit shipping rates by 15 to 30 percent versus direct LCL services.
Vessel Optimization: Carriers deploy ultra large container vessels ULCVs on trunk routes such as Asia to Europe and smaller ships on feeders. This maximizes vessel utilization, cutting per TEU costs.
Route Flexibility: Serving ports without deep water access such as Ho Chi Minh City or Chittagong becomes viable via feeder networks, avoiding costly overland transshipment.
Network Efficiency: Redirecting containers across global shipping alliances like 2M or Ocean Alliance balances trade lane imbalances, minimizing empty repositioning moves.

Example: A Thai electronics manufacturer shipping to Hamburg might save 22 percent by routing via Singapore transshipment hub versus a rare or expensive direct service.

Key Considerations for Logistics Decision Makers

Cost vs Speed Trade offs: Transshipment cuts ocean freight expenses but extends lead times by 7 to 14 days. Is your cargo time sensitive
Hub Reliability: Congestion at ports like Los Angeles or Shenzhen can cascade delays. Partner with freight forwarders offering visibility into hub performance.
Incoterms Alignment: If you are on FOB terms, transshipment risks such as delays or damage fall on you—not the supplier. CIF shifts liability to sellers.
Sustainability Impacts: Extra voyages increase carbon emissions. Brands with ESG mandates may prioritize direct routes despite higher costs.

Optimizing Transshipment for Your Supply Chain

Audit Your Routing Guides: Are carriers using efficient hubs Track lanes where transshipment adds disproportionate cost versus value.
Leverage Data Analytics: Use freight audit tools to compare all in costs including port fees and transit time of transshipment versus direct routes.
Strengthen Partnerships: Work with freight forwarders who have volume commitments at key hubs to secure priority handling and fee discounts.
Buffer Strategically: For transshipped goods, adjust safety stock levels to mitigate delays—especially during peak season port congestion.

The Bottom Line: Is Transshipment Worth It

For most B2B shippers, transshipment is a net cost saver—but only with proactive management. The consolidation efficiencies and network scalability it enables typically outweigh added handling fees. Manufacturers shipping high volume FCL may minimize transshipment; importers of fragmented goods such as retail or machinery parts depend on it.

Pro Tip: Run a total landed cost analysis

Base Freight plus Transshipment Fees plus Inventory Holding Cost plus Risk Premium
vs
Direct Route Cost plus Accessorials

Future Proofing Your Strategy

With carriers like Maersk and MSC investing in automated transshipment hubs such as Omans Duqm Port, handling costs will fall while AI driven routing boosts predictability. For now, align transshipment use with:

Product Profile commodity vs premium
Supply Chain Urgency
Trade Lane Volatility

Key Takeaways for Logistics Buyers and Sellers

Transshipment cuts base freight costs via consolidation and mega vessel economies
Manage added fees such as port charges and handling and risks like delays and damage
Audit routing efficiency quarterly with your freight forwarder
Prioritize hub reliability such as Singapore over congested alternatives

Optimize your global shipping costs not by avoiding transshipment but by mastering it.