Customs
Incoterms 2020 for Air Freight: Who Pays, Who Tracks, Who Clears
The Incoterms rule on a sales contract decides which party pays for the flight, which party bears the risk if cargo is damaged, and which party deals with customs at each end. It also decides, in practice, who receives the air waybill and therefore who can track the shipment. This guide explains the Incoterms® 2020 rules published by the International Chamber of Commerce (ICC) from an air freight point of view.
Key takeaways
- Seven of the eleven rules can be used for any mode, including air: EXW, FCA, CPT, CIP, DAP, DPU and DDP. FAS, FOB, CFR and CIF are intended for sea and inland waterway transport.
- For air shipments, FCA, CPT and CIP are the correct counterparts to FOB, CFR and CIF.
- Whoever books the main carriage normally holds the AWB. If you are on the other side of the contract, ask for it explicitly.
- CIP in Incoterms 2020 requires a higher level of insurance cover than CIF.
- Incoterms do not deal with transfer of ownership or payment terms.
What Incoterms do and do not cover
Each rule allocates three things between seller and buyer: costs (who pays for which leg), risk (at what point loss or damage becomes the buyer's problem), and tasks (who arranges carriage, insurance, export and import clearance). They do not determine when ownership of the goods passes, what the price is, how and when payment is made, or what happens if one side breaches the contract. Those belong in the sales contract and, where used, the letter of credit.
Always state the rule with a precise named place and the version, for example FCA Seller's warehouse, Belgrade, Incoterms® 2020. "FCA Serbia" is too vague to be useful when something goes wrong.
Why FOB and CIF are the wrong choice for air
Under FOB, CFR and CIF, risk passes when the goods are on board the vessel at the port of shipment. There is no vessel in an air shipment, so the rule does not describe what actually happens. In practice, the seller hands the goods to a forwarder or airline at a warehouse, often a day or more before departure, and loses physical control at that moment. With FOB, the seller would technically keep the risk during a period when it cannot protect the goods.
FOB and CIF still appear on air freight invoices out of habit, and some companies' systems default to them. The rules that fit air cargo are:
- FCA instead of FOB or FAS: buyer arranges and pays the main carriage, seller delivers to the carrier.
- CPT instead of CFR: seller pays the main carriage, risk passes at handover to the first carrier.
- CIP instead of CIF: as CPT, plus the seller insures the goods.
The seven any-mode rules, seen from the airport
EXW – Ex Works
The seller makes the goods available at its premises, not loaded. Risk passes there. The buyer arranges everything else, including export clearance, which can be a problem because the buyer may not be able to act as exporter in the seller's country. The buyer's forwarder issues the AWB, so the buyer can track; the seller usually cannot unless it is given the number. Many practitioners prefer FCA for this reason.
FCA – Free Carrier
The seller clears the goods for export and delivers them to the carrier or forwarder nominated by the buyer. If the named place is the seller's premises, delivery happens when the goods are loaded onto the buyer's collecting vehicle. If it is elsewhere, such as the forwarder's warehouse near FRA, delivery happens when the goods arrive on the seller's vehicle ready for unloading. The buyer books the flight and holds the AWB.
Incoterms 2020 added an option under FCA for the buyer to instruct its carrier to issue the seller a transport document with an on-board notation. This exists mainly for sea shipments financed by letters of credit and is rarely relevant for air.
CPT – Carriage Paid To
The seller pays carriage to the named destination, such as CPT Doha Airport, and clears the goods for export. Risk passes to the buyer when the goods are handed to the first carrier at origin, not when they arrive. That split between cost point and risk point is the most misunderstood feature of the C rules. The seller books the flight and holds the AWB; the buyer handles import clearance.
CIP – Carriage and Insurance Paid To
As CPT, but the seller must also take out cargo insurance for the buyer's benefit. Under Incoterms 2020, CIP requires cover complying with Institute Cargo Clauses (A), which is broad "all risks" type cover, unless the parties agree otherwise. CIF still requires only the minimum cover of Clauses (C). For valuable air cargo such as electronics or pharmaceuticals, that difference matters.
DAP – Delivered at Place
The seller bears the cost and risk until the goods are at the buyer's disposal at the named place, on the arriving means of transport, ready for unloading. The buyer unloads and handles import clearance and duties. If the named place is the buyer's door in Athens, the seller's forwarder handles the flight, the airport transfer and delivery; the seller holds the AWB.
DPU – Delivered at Place Unloaded
DPU replaced DAT (Delivered at Terminal) in Incoterms 2020. The seller is responsible until the goods are unloaded at the named place, which can be any place, not just a terminal. It is the only rule that requires the seller to unload at destination. The buyer clears import.
DDP – Delivered Duty Paid
The seller does everything, including import clearance and payment of duties and taxes. That can be hard for a foreign seller, particularly where import VAT must be registered or recovered locally. Before agreeing to DDP into a country such as Switzerland or Türkiye, confirm that your forwarder or broker can act as importer on your behalf.
Summary table
| Rule | Risk passes | Books main carriage | Export clearance | Import clearance | Usually holds the AWB |
|---|---|---|---|---|---|
| EXW | Seller's premises, not loaded | Buyer | Buyer | Buyer | Buyer |
| FCA | Handover to buyer's carrier at named place | Buyer | Seller | Buyer | Buyer |
| CPT | Handover to first carrier | Seller | Seller | Buyer | Seller |
| CIP | Handover to first carrier | Seller (plus insurance) | Seller | Buyer | Seller |
| DAP | At named destination, ready for unloading | Seller | Seller | Buyer | Seller |
| DPU | At named destination, unloaded | Seller | Seller | Buyer | Seller |
| DDP | At named destination, ready for unloading | Seller | Seller | Seller | Seller |
| FAS, FOB, CFR, CIF | Sea and inland waterway only. Use FCA, CPT or CIP for air. | ||||
Who can track, in practice
The party that books the flight receives the AWB from its forwarder or the airline. The other party often sees nothing until it asks. When a forwarder consolidates, there are two numbers: the master AWB issued by the airline, which you can track on the airline's system, and the house AWB issued by the forwarder, which only the forwarder's system recognises. Our guide to master AWB vs house AWB explains the difference.
- Buyers on EXW or FCA: you control the booking, but ask your forwarder for both the MAWB and HAWB numbers as soon as the cargo is accepted, plus the planned flights. Share them with the seller if it needs proof of delivery to the carrier.
- Sellers on CPT, CIP, DAP, DPU or DDP: send the AWB number to the buyer once the flight is booked. Under CPT and CIP, risk has already passed to the buyer at origin, so the buyer has a real interest in watching the shipment and filing any claim.
- Both sides: check the number is valid before passing it on. The AWB check digit guide shows how to catch typing errors.
Incoterms decide who pays for customs clearance, not how it is done. For the documents and steps involved, see our air cargo customs clearance guide.
Common mistakes to avoid
- Writing "FOB Frankfurt Airport". Use FCA with the forwarder's warehouse or the airline terminal as the named place.
- Assuming CPT or CIP means the seller carries the risk until arrival. It does not.
- Choosing EXW when the buyer cannot legally act as exporter in the seller's country.
- Agreeing to DDP without checking who will be importer of record and how import VAT is handled.
- Leaving the named place vague, which makes it unclear where risk passed if cargo is damaged at the airport.
Following the shipment on AWBTracking.net
Whichever side of the contract you are on, once you have the master AWB you can follow the flight milestones in our free tracking lookup for supported airlines. If the airline prefix is unfamiliar, the airline prefixes list shows which carrier issued it.