Here is a line I have read on real quotations more times than I can count.
FOB Shanghai Airport
There is a mistake in those three words, and it is not a typing error. FOB cannot happen at an airport. Neither can CIF, CFR or FAS. Those four codes are written for ships, and only for ships.
That does not stop anybody. People use them on air shipments every day, the goods usually arrive fine, and nobody notices. Then one shipment goes wrong, somebody reads the paperwork properly, and two companies discover they never actually agreed on anything.
This essay is the air freight half of the picture. If you have not read the first one on what these codes are, start there, because this assumes you know that a trade term answers three questions: who pays for what, where the risk changes hands, and who deals with customs.
Why four of the eleven do not work for air
There are eleven trade terms in the current set. Seven of them work for any kind of transport. Four of them are written for sea and inland waterway only.
The four sea-only ones are FAS, FOB, CFR and CIF.
The reason is simple once you see it. Each of those four defines the handover point using a ship. FAS means alongside the vessel, on the quay. The other three turn on the goods being on board the vessel.
An aircraft is not a vessel. There is no quay, there is no loading onto a ship, and cargo is handed over to an airline's ground handler at a warehouse, often a day or two before it flies and sometimes at a building several kilometres from the runway. The moment those codes describe does not exist in an air shipment.
So "FOB Shanghai Airport" is describing a thing that never happens. If a dispute ever went to arbitration, somebody would have to guess what the two parties meant.
What people usually mean when they write it is: the seller gets the cargo to the airport, ready to fly, and the buyer pays the air freight from there. There is a correct code for exactly that. It is FCA.
The seven that work for air
| Code | In one line | Who pays the air freight | Who pays import duty |
|---|---|---|---|
| EXW | Collect it from my factory | Buyer | Buyer |
| FCA | I hand it to your carrier, cleared for export | Buyer | Buyer |
| CPT | I pay the freight to a named place | Seller | Buyer |
| CIP | I pay the freight and insure it properly | Seller | Buyer |
| DAP | I deliver to your address, you clear it | Seller | Buyer |
| DPU | I deliver to your address and unload it | Seller | Buyer |
| DDP | I deliver everything, duty included | Seller | Seller |
Those seven cover every air shipment that has ever been sent. The four sea codes are not needed and should not be used.
What each one actually looks like at an airport
EXW, Ex Works. The seller puts the cartons by their own door. Everything from that point is yours: the loading, the trucking to the airport, export clearance in their country, the flight, and everything at your end.
It reads as the cheapest number on a price list, and it very often is not, because you have inherited costs you cannot see from where you are sitting. There is also a legal snag: export clearance in the seller's country usually has to be done by somebody registered there, which a foreign buyer is not.
FCA, Free Carrier. This is the workhorse of air freight and the term most air shipments should use.
The seller delivers the goods to a named place and clears them for export. From that handover, cost and risk are the buyer's.
The named place decides how much work the seller is doing:
- FCA seller's premises means your forwarder collects from their factory. The seller loads, and everything after is yours.
- FCA the origin airport, or the forwarder's warehouse there means the seller trucks it there and does the export paperwork. More work for the seller, and a higher price.
Both are FCA. They are different deals. This is why the place after the code is not decoration.
CPT, Carriage Paid To. The seller books and pays the flight to a named destination. Risk passes to you much earlier, when the goods are handed to the first carrier, which on a door pickup can be a truck in the seller's home town.
So under CPT the seller is paying for a flight on cargo that is already at your risk. Same structure as CFR at sea, same surprise.
CIP, Carriage and Insurance Paid To. Everything CPT does, plus the seller must insure the cargo, and under the current rules that insurance is the wider all-risks style cover, not a minimum.
For a buyer who wants the seller to arrange the flight and wants real insurance behind it, CIP is usually the right answer for air. It is the closest air equivalent of what people wrongly ask for when they say "CIF airport", and it is actually better, because the cover is wider.
DAP, Delivered At Place. The seller brings it all the way to your address. You clear it through customs and you pay the duty and taxes.
DAP is the term most people mean when they say DDP. If a supplier offers "door delivery" and has not mentioned duty, DAP is almost certainly what they are describing, and you should confirm it in writing.
DPU, Delivered at Place Unloaded. As DAP, and the seller also unloads at your end. It is the only one of the eleven where unloading at destination is the seller's job. Worth using when the cargo is heavy or awkward and you do not have a forklift.
DDP, Delivered Duty Paid. The seller pays absolutely everything, including your country's import duty and taxes.
Convenient for the buyer, and heavier than most sellers realise. To pay duty in your country the seller generally has to be able to act as importer there, which a foreign company often cannot. And if customs values the goods higher than the invoice, the extra falls entirely on the seller, who has already fixed the price.
The traps that belong specifically to air
The airway bill is not the trade term. The airway bill is the transport document. Whose name is on it as consignee is a separate question from who carries the risk under your Incoterm. People treat one as proof of the other and they are not connected. Get both right, separately.
Origin charges and destination charges are two different bills. Air freight quotes are usually split into what happens before the flight, the flight itself, and what happens after. A term that stops at the airport of departure leaves you exposed to all three of the destination charges: terminal handling, storage, the handling agent's fee, and clearing.
Ask for the quote to be laid out that way, in three blocks. It makes the gap obvious.
Chargeable weight is where the surprise usually lives. Air freight is priced on the greater of the real weight and the space taken up. If your cargo is light and bulky, you pay on the space. A pallet of foam or empty bottles weighs almost nothing and costs a fortune.
The Incoterm decides who pays. It does not protect anybody from the number being three times what they expected. If you are buying on CPT or CIP, the seller absorbed that risk. If you are buying on FCA or EXW, it is yours.
"CIF airport" is an insurance gap dressed as insurance. CIF cannot apply to air, so a buyer who accepted "CIF" on an air shipment and believes he is insured may well have no cover at all, or cover on terms nobody agreed. If insurance matters, ask for CIP and ask what level of cover, in writing.
Express courier is quietly DDP, until it is not. When you order something on a courier service and the price includes everything to your door, that is effectively DDP behaviour. But many courier services deliver on terms where you are billed for duty afterwards, which is DAP behaviour with a friendly interface. On a low-value parcel nobody cares. On a commercial shipment worth thousands, know which one you agreed.
Air storage is expensive and it starts fast. Airport storage typically begins after a much shorter free period than a seaport, and the daily rate is high relative to the value of what is sitting there. Whoever holds responsibility at the destination airport under your term is the one paying for every day the paperwork is not ready.
Which one should you use
If you are the buyer
| What you want | Use |
|---|---|
| The cheapest headline price, and you have a good forwarder | FCA at the origin airport |
| The seller to arrange the flight, and real insurance | CIP to your destination airport or city |
| Delivery to your door, but you keep control of customs and duty | DAP your address |
| Somebody else to handle absolutely everything | DDP your address, but confirm they can legally clear in your country |
If you are the seller
Quote FCA unless there is a reason not to. It ends your responsibility at a clean, provable moment, it keeps you out of a foreign customs system, and it is honest about what your price covers.
Quote DDP only when you have checked that you can actually be the importer in that country, and only with a written clause allowing you to re-price if customs classifies or values the goods differently.
Never quote FOB, CFR, CIF or FAS on an air shipment. If a customer asks for one of them, the useful reply is: "I think you mean FCA at the airport. Here is what that covers."
The habit worth building
Write the code, name the place, then say what the price covers in one sentence of plain English.
Term: CIP Murtala Muhammed International Airport, Lagos. Our price covers the goods, export clearance, the air freight and all-risks insurance to Lagos airport. Import duty, taxes, handling and clearing at Lagos are payable by you.
Nobody has ever been annoyed by that paragraph. Plenty of people have been annoyed by its absence.
Where to check the terms
The Quotation Builder on this site lists every trade term in plain English, calculates chargeable weight correctly for air, and warns you when your chosen term contradicts how you have priced the duty. Free, and nothing you type leaves your device.
The sea freight version of this essay covers the four codes this one told you to avoid, when they are correct, and the container mistake that most of the world makes.
The short version
Air freight has seven usable trade terms and four that cannot apply. FCA is the honest one for a seller, CIP is the safe one for a buyer who wants it arranged, and DAP is what most people mean when they say DDP.
If you see FOB, CFR, CIF or FAS on an air quotation, nobody is cheating you. But nobody has agreed anything either, and that is worse.