The latest official publication by the International Chamber of Commerce (ICC) includes 11 Incoterms. Of those, four are meant for waterway transport only. The other seven can be used with any mode of transport, including air freight.
Before the 2020 publication, the ICC categorized the Incoterms rules according to their initial letter: for example, FCA was part of the F-group, CPT of the C-group, and DDP of the D-group.
Now, whilst such classification still exists, the ICC has decided to emphasize the distinction between maritime Incoterms and intermodal Incoterms.
Who has not received a quote saying, “our prices are CIF by air”? Yet, this is totally wrong, as CIF is a maritime Incoterm and should not be used for air freight.
If you are looking to ship goods by air, you should use one of the seven intermodal Incoterms. You will find them in the first part of the Incoterms 2020 publication, but here we provide you a synthesis of what they are and what you can do with them if you are shipping by air.
EXW Ex Works
Ex Works is the only Incoterm whereby delivery occurs away from a port, airport, train station, or any place of long-distance departure. Once the buyer has collected the goods at the seller’s premises, it is up to him to decide the most appropriate means of transport.
FCA Free Carrier
Free Carrier is the only Incoterm whereby delivery can take place anywhere at origin. It can be a port, the seller’s premises, or an airport.
Therefore, if you are shipping by airway, you can even set the place of delivery as the departure airport, or the seller’s premises, and then bring the goods with your own truck to the airport.
CPT Carriage Paid To
Carriage Paid To is a C-Group Incoterms rule, which entails all the idiosyncrasies of that group of Incoterms. The place of delivery must be at origin, but the seller must arrange for transportation up to the place of destination. This can be anywhere in the buyer’s country.
Delivery occurs after the goods are loaded on the truck that collects the goods at the seller’s premises. After that, it is the seller who has to ship the goods, using any means of transport, including air freight.
CIP Carriage And Insurance Paid To
Carriage And Insurance Paid To is almost identical to CPT, with the difference that CIP requires the seller to provide for insurance for the goods. The insurance is set according to clause A of the Institute Cargo Clauses.
DAP Delivered At Place
All three Incoterms of the D-Group are intermodal Incoterms. Under Delivered At Place, delivery can take place anywhere at destination, i.e. in the buyer’s country, with the goods not unloaded and not cleared for import.
That means that if you ship under DAP by airway, the buyer must pay duties and taxes at the airport where the goods have arrived, even if you have to arrange for transportation.
DPU Delivered At Place Unloaded
Delivered At Place Unloaded substitutes DAT Delivered At Terminal. Under DAT, delivery took place at the port, airport, train or truck station of destination, with the goods unloaded but not cleared for import.
Under the current DPU the place of delivery can be anywhere at destination, with the goods still delivered unloaded but not cleared for import.
DDP Delivered Duty Paid
Delivered Duty Paid is the Incoterm that places the heaviest burden on the seller. Delivery takes place anywhere at destination with the goods unloaded and cleared for import.
Therefore, if you ship goods by airway to Munich, Germany, you will have to arrange for air transport up to Munich airport, pay import duties to Germany, arrange for road transport in Germany up to the agreed place of delivery and place the goods at the buyer’s disposal unloaded off the truck.
Globartis Research Center