Table of Contents
For air freight, use the seven any-mode Incoterms rules only. FAS, FOB, CFR and CIF turn on loading a vessel, an event that never happens on an air shipment. FCA suits buyer-controlled freight, CPT and CIP suit seller-paid freight, and DAP, DPU or DDP carry risk to destination. Name the exact airport facility or address.
Incoterms® 2020 · May 2026 · 8 min read
Incoterms and Air Freight: Which Rules Apply and How Risk and Cost Split on Air Shipments
Air freight accounts for a small fraction of international cargo by volume but a disproportionately large share by value — around 35% of world trade by value moves by air, despite representing less than 1% by weight. For high-value goods, time-sensitive shipments, perishables, and emergency supply chain replenishment, air freight is the mode of choice. And yet the Incoterms applied to air freight shipments are frequently the same terms used for sea freight — sometimes correctly, often not.
The good news for air freight is straightforward: all seven any-mode Incoterms® 2020 rules apply fully and work correctly for air shipments. The four sea-only terms — FAS, FOB, CFR, and CIF — do not. The practical question is which of the seven any-mode terms best fits a specific air freight transaction, and how the named place should be specified to reflect the reality of air cargo logistics.
This article explains how each of the relevant Incoterms works for air freight, what the named place should specify for airport and inland deliveries, how insurance obligations apply, and the specific documentary considerations that arise when air freight is combined with a letter of credit.
Why the sea-only terms do not apply to air freight
FAS, FOB, CFR, and CIF define obligations around physical events that are specific to sea transport: placing goods alongside a vessel, loading on board a ship, and naming a port of shipment or destination. None of these events occur in air freight. There is no vessel, no ship’s rail, no port of shipment, and no bill of lading — the standard sea freight document of title. Applying these terms to an air shipment creates an immediate definitional problem: the key events the term references simply do not happen.
In practice, businesses occasionally quote “FOB airport of departure” or “CIF airport of destination” for air freight shipments. These formulations are not recognised by Incoterms® 2020. They create ambiguity about which obligations apply, which risk transfer point governs the transaction, and which transport document is required. The ICC’s guidance is unambiguous: for air freight, use any-mode terms only.
The seven any-mode terms applied to air freight
EXW — Ex Works
Under EXW, the seller makes goods available at their named premises and the buyer handles everything from that point — including collection, export clearance, delivery to the airport, air freight, and import clearance at destination. For air freight, EXW creates the same export clearance problem it creates for all international trade: the buyer must complete export formalities in the seller’s country, which is operationally difficult without a locally-licensed agent. For most air freight transactions, FCA is the more appropriate starting point.
FCA — Free Carrier
FCA is the primary recommended term for air freight where the buyer controls the freight arrangement. Under FCA, the seller delivers goods to the buyer’s nominated carrier at the named place, completes export clearance, and the buyer’s airline or freight forwarder takes responsibility from that point.
For air freight, the named place under FCA is typically one of two options:
- The seller’s own premises. The seller loads the goods onto the buyer’s collecting vehicle. Risk transfers on loading. The buyer’s freight forwarder or courier collects and delivers to the airport.
- An airport cargo facility. The seller delivers the goods to the named airport cargo terminal or airline cargo handling agent. Risk transfers when the goods are placed at the carrier’s disposal at that facility.
In most air freight transactions where the buyer has a freight forwarder or courier account, FCA with the named place being either the seller’s premises or the origin airport cargo facility is the cleanest and most accurate term.
CPT — Carriage Paid To
Under CPT, the seller arranges and pays for air freight to the named destination. Risk transfers to the buyer when the goods are handed to the first carrier at origin — typically when the seller delivers to the freight forwarder or cargo handling agent at the origin airport. The seller pays the airfreight bill but bears risk only to that first carrier handover moment. From that point, the buyer bears transit risk even though they did not arrange or pay for the freight.
For air freight, CPT is appropriate when the seller has preferential air freight rates or carrier relationships and wants to offer a freight-included price — while the buyer accepts the transit risk and arranges their own cargo insurance from the point of carrier handover.
CIP — Carriage and Insurance Paid To
CIP is identical to CPT except that the seller must also arrange Institute Cargo Clauses (A) all-risks cargo insurance for the buyer’s benefit, at a minimum of 110% of the contract value. For high-value air freight shipments — electronics, pharmaceuticals, precision instruments, jewellery — CIP with Clauses (A) all-risks cover is the most comprehensive seller-controlled freight option. Risk transfers at the first carrier handover, the seller pays freight and arranges insurance, and the buyer receives goods with meaningful transit cover in place.
CIP is the replacement for CIF in any-mode and air freight transactions — it provides the same freight-and-insurance bundled price that CIF offers for sea freight, but with a stronger insurance standard and a risk transfer point that accurately reflects air cargo logistics.
DAP — Delivered at Place
Under DAP, the seller arranges and pays for air freight and bears transit risk all the way to the named destination. For air freight, DAP is commonly used when the seller wants to offer a door-to-airport or door-to-door price with risk retained until delivery. The named place can be the destination airport cargo facility, the buyer’s customs clearance agent’s premises, or the buyer’s own address — provided it is specified precisely.
A specific consideration for DAP air freight is the import clearance responsibility. Under DAP, import clearance is the buyer’s obligation. For time-sensitive air freight where goods need to clear customs quickly to avoid storage charges at the airport warehouse, the buyer must have their customs broker ready to file an entry immediately on arrival. Delays in import clearance under DAP generate airport storage costs that fall entirely on the buyer.
DPU — Delivered at Place Unloaded
DPU requires the seller to deliver and unload at the named destination. For air freight, DPU is most naturally applied when the named place is an airport cargo terminal — where the airline and ground handling agent automatically unload cargo from the aircraft as part of the standard cargo process. In this context, DPU with the named place being the destination airport cargo terminal accurately reflects what happens: the seller’s transport chain delivers and unloads at the terminal, and the buyer collects after import clearance.
DDP — Delivered Duty Paid
Under DDP, the seller handles everything including import clearance and payment of all import duties and taxes. For air freight, DDP is used in time-sensitive B2B transactions and consumer e-commerce where the seller wants to offer a fully landed, duty-paid delivery experience. The compliance considerations — legal entity or VAT registration in the destination country, or a professional importer of record arrangement — are identical to DDP for any other transport mode, and are if anything more pressing for air freight where speed of delivery is the primary commercial value and any customs delay negates the transit time advantage.
The airway bill: the key air freight transport document
The transport document for air freight is the airway bill (AWB) — a non-negotiable document issued by the airline or freight forwarder confirming that goods have been accepted for carriage. Unlike a sea freight bill of lading, the airway bill is not a document of title. The buyer does not need to present the original airway bill to collect the goods at the destination airport — the goods are released to the consignee named on the airway bill.
This has significant implications for letter of credit transactions involving air freight. A standard sea freight LC requires an original bill of lading as the document of title enabling the bank to control the goods. For air freight, the airway bill is not a title document — the bank cannot control the goods through the airway bill in the same way. Letters of credit for air freight shipments must therefore be structured differently from sea freight LCs, typically accepting an airway bill as the transport document while relying on other mechanisms to manage payment risk.
Under FCA and CIP for air freight, the seller can obtain an airway bill issued by the airline or freight forwarder confirming acceptance of the goods for carriage. This airway bill can be presented to the bank under an LC that is structured to accept it. The FCA on-board bill of lading provision introduced in Incoterms® 2020 applies specifically to sea freight and does not affect air freight documentary requirements.
Insurance for air freight shipments
Air freight is generally considered a lower-risk transit mode than sea freight — shorter transit times, less exposure to weather, less handling at intermediate points. However, air cargo losses do occur — damage during ground handling, theft at cargo terminals, and temperature excursions for temperature-sensitive goods are all documented causes of air freight claims.
The insurance obligations by term for air freight are identical to any other mode:
- Under CIP, the seller must arrange Clauses (A) all-risks cover for the buyer’s benefit — the only term that mandates insurance for air freight.
- Under all other any-mode terms, neither party is obligated to arrange insurance. The party bearing the risk should arrange appropriate cover.
- Under FCA, the seller bears risk to the named carrier handover point and should ensure cover for that period. The buyer bears risk from carrier handover and should arrange an open cargo policy covering air freight shipments from that point.
- Under CPT, the seller pays freight but the buyer bears risk from first carrier handover — the buyer must arrange their own all-risks air cargo insurance.
- Under DAP, DPU, and DDP, the seller bears risk for the entire air journey and should arrange all-risks cover from origin to the named destination, explicitly covering the ground handling operations at origin and destination airports.
One consideration specific to air freight insurance is temperature and condition-sensitive cargo. Pharmaceuticals, biologics, fresh produce, and certain chemicals require temperature-controlled handling throughout the air freight chain. Standard cargo insurance policies may exclude losses arising from temperature excursion or failure of temperature control systems. Shippers of temperature-sensitive goods should ensure their cargo policy specifically covers temperature-related loss and includes coverage for the cold chain handling requirements of their cargo.
The named place for air freight: airport or door?
A common ambiguity in air freight Incoterm contracts is whether the named place is the destination airport or the buyer’s final address. For D terms in particular, this distinction affects whether the seller’s obligation includes inland delivery from the airport or ends at the airport cargo facility.
| Named place | What the seller pays for | What the buyer pays for |
|---|---|---|
| Origin airport cargo facility (FCA) | Inland transport to origin airport, export clearance | Air freight, import clearance, inland delivery at destination |
| Destination airport cargo facility (CPT/DAP) | Inland transport to origin airport, air freight | Import clearance, inland delivery from destination airport |
| Buyer’s premises (DAP/DDP) | Inland transport to origin airport, air freight, inland delivery from destination airport | Import clearance (DAP) or nothing (DDP) |
The inland delivery leg from the destination airport to the buyer’s final address is significant in cost terms — particularly for destinations where the buyer is located far from the airport. A seller quoting DAP to a buyer’s warehouse in an inland city must include the cost of road delivery from the destination airport in their price. A seller quoting DAP to the destination airport cargo facility does not. The named place must be specific enough that both parties understand exactly which costs each is absorbing.
Frequently asked questions
Can FOB be used for air freight?
No. FOB is a sea-only Incoterm that applies exclusively to sea and inland waterway transport. It defines obligations around loading goods on board a vessel — an event that does not occur in air freight. Using FOB for air freight creates an immediate definitional problem because the key event the term references simply does not happen. The correct replacement for FOB in air freight is FCA, which transfers risk at the carrier handover point — in air freight, typically the airport cargo facility or freight forwarder’s premises.
What is the transport document for air freight and how does it differ from a bill of lading?
The air freight transport document is the airway bill (AWB). Unlike a sea freight bill of lading, the airway bill is not a document of title — it cannot be endorsed and transferred to give the holder the right to claim the goods. The goods are released to the consignee named on the airway bill at the destination airport, without presentation of the original document. For letter of credit transactions involving air freight, the LC must be structured to accept an airway bill rather than requiring a bill of lading, and the bank’s ability to control the goods is more limited than under a sea freight LC.
Which Incoterm provides the best insurance cover for air freight?
CIP is the only Incoterm that requires the seller to arrange cargo insurance for air freight — at the Institute Cargo Clauses (A) all-risks level. Under all other any-mode terms, neither party is obligated to arrange insurance. For high-value air freight shipments, CIP provides the most comprehensive built-in insurance obligation. Under FCA and CPT, the buyer should arrange their own all-risks air cargo policy from the point of carrier handover. Under DAP, DPU, and DDP, the seller should arrange all-risks cover for the full air journey including ground handling at both origin and destination airports.
How should the named place be specified for an air freight FCA contract?
The named place under FCA for air freight should identify the specific location where the seller hands goods to the buyer’s carrier — either the seller’s own premises (if the buyer’s courier or freight forwarder collects) or the specific airport cargo facility or airline cargo handling agent’s premises at the origin airport. A named place of “FCA London Heathrow Airport, UK, Incoterms® 2020” is adequate for most purposes. “FCA UK” is not — it leaves the specific handover point ambiguous.
Does DAP for air freight include inland delivery from the destination airport?
It depends on what the named place specifies. If the named place is the destination airport cargo facility, the seller’s obligation ends there — inland delivery from the airport to the buyer’s final address is the buyer’s responsibility. If the named place is the buyer’s premises or another inland address, the seller must arrange and pay for inland delivery from the destination airport as part of their DAP obligation. The named place must be specific enough that both parties understand exactly where the seller’s delivery obligation ends.
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