Incoterms for Air Freight: Why FOB Does Not Work at Airports

You quote your buyer on air freight terms and write FOB on the sales contract. The forwarder issues an Air Waybill. Cargo gets damaged in transit. Nobody can agree on who bears the loss—because the Incoterm you used does not apply to air shipments.

This guide explains why FOB cannot be used for air freight, which Incoterms 2020 rules actually apply, and what to use instead when the buyer is arranging the flight.

Why can't you use FOB for air freight?

FOB (Free on Board) means the seller's risk ends when goods are loaded on board the vessel. The vessel. A ship. At a seaport. There is no vessel at an airport, no "on board" moment, and therefore no point at which FOB risk transfer can occur. The term is structurally incompatible with air transport.

According to the International Chamber of Commerce (ICC), FOB belongs to a specific group of Incoterms 2020 rules that apply only to sea and inland waterway transport. Using it for air freight does not just create confusion—it leaves the risk transfer point legally undefined.

How are Incoterms 2020 divided by transport mode?

The ICC divides all 11 Incoterms 2020 rules into two groups based on transport mode. Understanding this split prevents the most common Incoterm misuse in air freight.

• 7 rules for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, DDP

• 4 rules for sea and inland waterway only: FAS, FOB, CFR, CIF

Air freight falls under the first group. Every time you ship by air, you must choose from those seven rules. FOB, CFR, and CIF are not options—regardless of what both parties agree to in the contract.

According to the ICC Incoterms 2020 official guidance, the 2020 revision added stronger warnings about the misuse of FOB, CFR, and CIF for containerized and multimodal shipments, explicitly recommending FCA, CPT, or CIP as alternatives.

What happens when you use FOB on an air shipment?

When FOB is written on a contract for an air shipment, the risk transfer point becomes undefined. There is no vessel to load onto, so the condition that triggers the handover of risk never occurs. If damage or loss happens in transit, neither party can point to the exact moment responsibility changed hands.

The documentation mismatch compounds the problem. FOB implies a Bill of Lading (B/L) as the transport document. Air freight uses an Air Waybill (AWB)—a non-negotiable document that operates under entirely different legal rules. The B/L-based assumptions built into FOB do not transfer to air shipments.

The practical result: a dispute with no clear legal resolution, and a contract term that neither customs authorities nor courts can apply as written.

Which Incoterm should you use for air freight instead?

If the buyer is arranging and paying for the airfreight—the situation most sellers try to describe with "FOB"—the correct Incoterm is FCA (Free Carrier). Under FCA, the seller handles export clearance and delivers the goods to the carrier at the named place. Risk transfers at that point. The buyer then arranges and pays for the main carriage.

Same commercial logic as FOB. Correct term for air.

If the seller is arranging and paying for the airfreight to a named destination, use CPT (Carriage Paid To) or CIP (Carriage and Insurance Paid To). CIP additionally requires the seller to provide insurance coverage under Institute Cargo Clauses (A).

• Buyer arranges airfreight: FCA (named place: typically the cargo terminal at the export airport)

• Seller arranges airfreight, no insurance obligation: CPT (named place of destination)

• Seller arranges airfreight + insurance: CIP (named place of destination)

How do you write FCA correctly for an air shipment?

FCA requires a named place of delivery. For air freight, this is typically the cargo terminal at the export airport—the point where the seller hands goods over to the airline or freight forwarder acting as carrier.

A correctly written FCA term for an air shipment looks like this:

• FCA Incheon Airport Cargo Terminal, Incoterms 2020

The named place determines both where delivery occurs and where risk transfers. If you name the seller's warehouse instead, risk transfers when goods are loaded onto the buyer's collecting vehicle at that warehouse—before they reach the airport. Always confirm the named place with your buyer and forwarder before finalizing the contract.

According to the ICC Academy, specifying the Incoterms edition year (2020) in the contract is recommended to avoid disputes when parties in different countries reference different versions of the rules.

Air freight Incoterms: quick reference

• Check the ICC's two-group classification before selecting any Incoterm for air

• FOB, CFR, CIF, FAS — never use these for air freight

• Buyer arranges airfreight → FCA + named cargo terminal

• Seller arranges airfreight → CPT or CIP + named destination

• Always specify "Incoterms 2020" in the contract

• Confirm the named place with your forwarder before finalizing