Even long term exporters get confused when they see a word document full of Incoterms. In fact, we’d go as far to say Incoterms for air freight are quite difficult to get your head around. Luckily, we’ve got over 60 years of experience assisting you with export packing, freight forwarding and documentation so we should be able to help.
The more you use air freight Incoterms, the easier it will be to remember what each of the terms mean. Do you know your FOB from your DAF? This Incoterm glossary gives you the definitions for all 11 abbreviations commonly used in air freight and logistics.
The 11 Incoterms are:
- FAS
- FOB
- CFR
- CIF
- EXW
- FCA
- CIP
- CPT
- DDP
- DAP
- DPU
And of this list, 7 of the terms relate to any mode of freight transportation (air freight, sea freight, land freight or multimodal) and 4 are only used to describe the transport of goods by sea freight.
The 4 terms for sea freight are:
- FAS
- FOB
- CFR
- CIF
And the 7 Incoterms for sea, land and air freight are:
- EXW
- FCA
- CIP
- CPT
- DDP
- DAP
- DPU
Keep reading to find out what these abbreviations stand for and what they mean when talking about your freight forwarding.
The Incoterms Glossary
In 2020, The International Chamber of Commerce (ICC) updated their world-renowned Incoterms to help businesses like yours manage global trade. They act as a set of rules that clearly outline the responsibilities of both the seller and the buyer when it comes to the transportation of goods.
Bookmark this page so you’ve always got access to your handy glossary of Incoterms and so that you always know where your responsibility lies when shipping goods overseas.
Here is exactly what each of the abbreviations stands for, as well as a handy description.
Sea Freight Only Incoterms
While a lot of the Incoterms for air freight, sea freight and land freight can be used to describe the roles of the buyer and seller during any mode of transportation, these 4 terms are specifically used in sea freight forwarding.
FAS: Free Alongside Ship
The Incoterm FAS stands for Free Alongside Ship and means the seller has delivered once the goods arrive at the named port of shipment. While it is the seller’s duty to clear the goods for export, the buyer takes all liability for costs and risks of damage or loss from that moment onwards. Like DES, this term is used in sea freight as opposed to air freight.
FOB: Free On Board
The Incoterm FOB stands for Free On Board and means that the seller has delivered when the goods pass the ship’s rail at the named port of shipment. Once the goods have passed this point, the buyer takes full responsibility, bearing all costs and risks of loss or damage during transit. This is another Incoterm that is used in sea freight only.
CFR: Cost and Freight
The Incoterm CFR stands for Cost and Freight and is very similar to CIP (Cost, Insurance, Freight) except the seller does not have to source marine insurance. The buyer takes full responsibility for any costs and the risk of loss or damage once the goods are onboard the ship. This term is only applicable in sea or ocean shipping.
CIF: Cost, Insurance, Freight
The Incoterm CIF stands for Cost, Insurance, Freight and is only used in sea freight forwarding. In this situation, the seller is responsible for the costs and risks of loss/damage until the goods arrive at the port of destination. They are also responsible for sourcing marine insurance to cover any loss or damage to the goods onboard.
Sea, Land, or Air Freight Incoterms
EXW: ExWorks
The Incoterm EXW stands for ExWorks and means that the seller has the least obligation of any of the listed terms. The seller is only responsible for placing the goods at the disposal of the buyer. The buyer then takes over, managing all of the export and import duties. The cost of carriage and insurance is also to be arranged by the buyer.
FCA: Free Carrier
The Incoterm FCA stands for Free Carrier and means that the seller should deliver the goods to the carrier at the buyer’s named place. The seller is responsible for clearing the goods for export and covers the costs of carriage to a named place.
CIP: Carriage and Insurance Paid
The Incoterm CIP stands for Carriage and Insurance Paid and means that the seller is responsible for arranging the delivery of goods to the carrier and pay the fee for carriage to the named destination. Used in sea, land and air freight, this term can be used for any mode of transport. The seller also must procure insurance against the risk of loss or damage during transit.
CPT: Carriage Paid To
The Incoterm CPT stands for Carriage Paid To and is very similar to CIP (Carriage and Insurance Paid) except the seller is not obligated to procure insurance. The seller must deliver the goods to the carrier and cover the costs of carriage to a named destination. The buyer takes over after the goods have been delivered. This term can be used in any mode of transport, including multimodal.
DDP: Delivered Duty Paid
The Incoterm DDP stands for Delivered Duty Paid and represents the maximum obligation to the seller of all the terms defined. The seller must obtain the import license for the goods. They will also bear all costs and risks associated with carrying out customs formalities. This includes documentation and the payment of duties, taxes and customs fees.
DAP: Delivered at Place
The Incoterm DAP stands for Delivered at Place and means that the seller must pay for carriage to any named place. The seller also becomes liable for any risk of loss or damage to the goods until ready for unloading by the buyer. The only costs not covered by the seller are related to import clearance.
DPU: Delivered at Place Unloaded
The Incoterm DPU stands for Delivered at Place Unloaded and means that the seller must cover the costs of carriage to the terminal, assuming all risks up to the point that the goods are unloaded. The seller is not responsible for any costs related to import clearance, even if these occur during transit to the terminal. DPU replaced the old DAT (Delivered at Terminal) with the additional responsibility to the seller for unloading the goods at the destination.
The Glossary of Incoterms for Air Freight, Sea Freight and Land Freight
This is the only glossary you need to get to terms with the 11 Incoterms outlined by the ICC. Each term is used in freight forwarding and defines the role of both the seller and the buyer when it comes to the transportation of goods.
Understanding what they mean can help you identify things like:
- Who is responsible for the risk of loss
- Who is responsible for the risk of damage
- Who will cover the cost of duties, custom fees and taxes
- Who is responsible for procuring insurance
As well as many other useful points.
By bookmarking this page, you not only have access to our handy glossary of Incoterms for air freight, sea freight and land freight… you also have something to refer back to if anything does go wrong during the transportation of goods.
John Pipe International have over 60 years of experience dealing with export packing, freight and logistics management. Our dedicated account managers are always on hand to discuss your needs. Our team are on hand to assist you with export documentation and tell you exactly what the air freight Incoterms mean.
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FAQ
What are common Incoterms used for sea freight?
For sea freight, common Incoterms include FOB (Free On Board), CIF (Cost, Insurance, and Freight), and CFR (Cost and Freight). These terms specify the cost responsibilities and risk transfer points between the buyer and seller.
What Incoterms are typically used for air shipments?
Air shipment Incoterms often include CIP (Carriage and Insurance Paid To) and CPT (Carriage Paid To). These terms define the responsibilities for freight charges, insurance, and delivery, with the seller assuming most of the risk until the destination airport.
What does FCA in Incoterms stand for and how is it used?
FCA (Free Carrier) is an Incoterm where the seller delivers the goods, cleared for export, to the carrier chosen by the buyer at a specified location. This term is versatile and can be used regardless of the chosen transport mode, including multimodal transport.
