What Are Incoterms and Why Do They Matter for Air Freight?
Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international transactions. They determine who pays for freight, who handles customs clearance, who bears the risk during transport, and at what point risk transfers from seller to buyer.
Choosing the right Incoterm for your air freight shipment affects your total cost, your level of control over the shipping process, and your risk exposure. The wrong choice can leave you paying unexpected customs charges, holding liability for damaged goods, or dealing with unfamiliar logistics at a foreign airport.
The current version, Incoterms 2020, includes 11 terms. Not all are commonly used in air freight — this guide focuses on the terms most relevant to air cargo shipments.
Most Common Incoterms for Air Freight
EXW — Ex Works (Seller’s Premises)
The buyer takes responsibility for everything from the seller’s warehouse door. The seller only needs to make the goods available for collection. The buyer arranges and pays for: pick-up transport, export customs clearance, freight to airport, air freight, import customs clearance, duties and taxes, and delivery to final destination.
Best for: Buyers with strong logistics capabilities and established freight forwarder relationships who want maximum control over the shipping process. Common when the buyer’s freight forwarder offers better rates than the seller’s.
Watch out: The buyer handles export clearance in the seller’s country — this can be complicated if you are not familiar with local regulations. Many exporters prefer FCA for this reason.
FCA — Free Carrier (Named Place of Delivery)
The seller delivers the goods, cleared for export, to a carrier nominated by the buyer at a named place (typically the seller’s premises or a freight forwarder’s warehouse). From that point, the buyer takes over all costs and risk.
Best for: The most practical and widely recommended Incoterm for air freight. The seller handles export clearance (which they know best), and the buyer manages the air freight and import process (which they control best). Clean division of responsibility.
Watch out: Ensure the named place of delivery is clearly specified — "FCA Shanghai" is ambiguous; "FCA Shanghai Pudong Airport cargo terminal" is precise.
CPT — Carriage Paid To (Named Place of Destination)
The seller pays for freight to the named destination (typically the destination airport or the buyer’s premises). However, risk transfers to the buyer when goods are handed to the first carrier at origin. The seller handles: export clearance, freight cost to destination. The buyer handles: import customs, duties and taxes, and bears the risk from origin handover.
Best for: When the seller has better freight rates or preferred carrier relationships on the route. Common in established supplier relationships where the seller manages logistics as part of the service.
Watch out: Risk and cost transfer at different points — the seller pays for freight but the buyer bears the risk during transit. This means the buyer should arrange cargo insurance even though the seller is paying for shipping.
CIP — Carriage and Insurance Paid To (Named Place of Destination)
Same as CPT, but the seller must also provide cargo insurance covering at minimum the value of the goods plus 10% (per Incoterms 2020, the insurance must meet Institute Cargo Clauses A, the broadest coverage). This addresses the CPT gap where risk and cost transfer at different points.
Best for: High-value shipments where insurance is essential. Provides the buyer with guaranteed insurance coverage for the transit period. Useful when the buyer is in a market where arranging insurance is difficult.
Watch out: The seller’s insurance may not be the best available — check the coverage terms. Buyers with their own cargo insurance policies may prefer CPT and handle insurance independently.
DAP — Delivered at Place (Named Place of Destination)
The seller delivers the goods to the buyer’s named place (warehouse, factory, or other address) — unloaded from the arriving transport but not cleared through import customs. The seller handles: all transport and freight costs, export clearance. The buyer handles: import customs clearance, duties, taxes, and unloading.
Best for: Buyers who want a near-door-to-door service without handling freight logistics but need to control their own customs process (perhaps for duty optimization, use of deferment accounts, or AEO benefits).
Watch out: If the buyer is slow on customs clearance, the seller’s cargo sits in a bonded warehouse accruing storage charges — but the seller still bears the risk until delivery at the named place.
DDP — Delivered Duty Paid (Named Place of Destination)
Maximum seller responsibility: the seller delivers goods to the buyer’s premises, cleared through import customs, with all duties and taxes paid. The buyer simply receives the goods — no logistics or customs involvement needed.
Best for: E-commerce and B2C shipments where the end customer should not deal with customs or duty charges. Also useful when the seller wants to offer a fully inclusive landed price for competitive advantage.
Watch out: The seller must register for VAT/import tax in the destination country to pay duties. This can create significant tax compliance obligations. DDP also means the seller bears ALL risk until final delivery — maximum exposure.
Less Common but Relevant Terms
FCA vs. FOB for Air Freight
FOB (Free on Board) is technically a maritime-only term, but some air freight contracts still reference it informally. For air shipments, FCA is the correct equivalent and should always be used instead. Using maritime terms for air freight creates legal ambiguity about when risk transfers.
CFR and CIF
Like FOB, these are maritime-only terms. Use CPT (instead of CFR) and CIP (instead of CIF) for air freight.
Choosing the Right Incoterm for Your Shipment
If you want maximum control over logistics: EXW or FCA — you manage the freight forwarder, airline selection, and routing.
If you want the seller to handle shipping: CPT or CIP — the seller arranges and pays for freight, you handle import customs.
If you want door-to-door with minimal involvement: DAP or DDP — the seller manages nearly everything.
For regular trade relationships: FCA is the most balanced and widely used term for air freight — clean risk transfer, practical division of responsibilities, and flexibility for both parties.
For e-commerce or consumer deliveries: DDP provides the smoothest customer experience but requires seller VAT registration in the destination country.
When requesting a quote from AirFreightPrice.com, specify your preferred Incoterm so we can provide pricing that matches your needs — whether that is airport-to-airport (FCA), port-to-port freight (CPT), or full door-to-door delivered (DAP/DDP).
For detailed cost breakdowns including customs charges, see our air freight cost estimation guide and customs clearance guide.
Frequently Asked Questions
What is the most commonly used Incoterm for air freight?
FCA (Free Carrier) and CPT (Carriage Paid To) are the most commonly used Incoterms for air freight. FCA is preferred when the buyer wants to control the shipping process and has their own freight forwarder. CPT is used when the seller manages logistics. For e-commerce, DDP is increasingly common. The key rule: always use Incoterms designed for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) rather than maritime-only terms (FOB, CFR, CIF, FAS) for air freight.
Who pays for customs clearance under each Incoterm?
Export customs is paid by the seller under all terms except EXW (where the buyer handles everything). Import customs is paid by the buyer under all terms except DDP (where the seller pays everything including import duties and taxes). Under DAP, the seller delivers to the buyer’s premises but the buyer handles import clearance and pays duties. This is an important distinction — many disputes arise from misunderstanding who is responsible for import customs charges.
Can I use FOB for air freight shipments?
Technically, no. FOB (Free on Board) is defined by the ICC as a maritime-only term that applies when goods pass the ship’s rail. Using FOB for air freight creates legal ambiguity. The correct air freight equivalent is FCA (Free Carrier). However, in practice, some industries and regions still use “FOB” informally for air shipments — if you encounter this, clarify the exact responsibilities in writing to avoid misunderstandings about risk transfer and cost allocation.