Incoterms for Air Freight: FCA, CPT, CIP or DAP, Not FOB or CIF

Why FOB and CIF do not fit air shipments

Under FAS, FOB, CFR and CIF the seller delivers alongside or on board a vessel, and the risk passes there. An aircraft is not a vessel, and air cargo is handed to a forwarder or an airline's cargo terminal hours or days before it is loaded, so "FOB Incheon Airport" leaves it unclear where delivery and risk pass. The Incoterms 2020 rules point to FCA, CPT and CIP for goods handed to a carrier before loading, which is how air freight works.

Which rule to choose

Choose by who books and pays the air freight and where you hand the goods over:

• FCA (Free Carrier): the buyer books the air freight. You clear the goods for export and hand them to the buyer's forwarder at the named place. At your premises you load them onto the forwarder's truck; at the forwarder's warehouse you deliver them on your truck, ready for unloading.
• CPT (Carriage Paid To): you book and pay the air freight to the named place of destination, but the risk passes to the buyer when you hand the goods to the first carrier at origin.
• CIP (Carriage and Insurance Paid To): as CPT, and you also insure the goods, with cover at least as wide as Institute Cargo Clauses (A), for at least 110% of the price.
• DAP, DPU or DDP: you carry the goods to the destination and bear the risk until delivery there. Under DAP and DPU the buyer pays the import duty and taxes; under DDP you pay them. Express couriers often run shipments this way, door to door.
• EXW (Ex Works): the buyer collects from your premises and handles everything, including export clearance, which it may not be able to do in your country. FCA at your premises is usually the safer choice.

Payment and control of the goods

Air cargo usually arrives within days and is released at destination to the consignee named on the air waybill, so once the goods fly the seller has little time or control left. Agree payment terms that protect you before shipping, such as payment in advance or a letter of credit, and make sure the consignee, the invoice and the packing list match.

Pricing an air freight quote

Air freight is charged on the chargeable weight: the higher of the actual gross weight and the volumetric weight, which air cargo usually works out as length × width × height in cm ÷ 6000 and express couriers ÷ 5000. Add fuel and security surcharges and origin handling to the rate, and under CPT or CIP include the destination charges the carrier bills to you. Under CIP add the insurance premium. Quote the rule, the place and "Incoterms 2020" together with the price.