When air freighting goods to the customer’s designated airport, the applicable trade terms must clearly define the responsibilities of both buyer and seller regarding transportation, risk transfer, and cost assumption.
Below, Weefreight will share two of the most commonly used terms and their explanations, hoping they will be helpful.
- FOB (Free On Board): Free on Board
Core Meaning: Once the seller loads the goods onto the aircraft at the designated port of shipment (e.g., Shanghai Pudong Airport, China), the risk transfers to the buyer. The buyer is responsible for arranging all subsequent steps and costs, including air freight, customs clearance (import), insurance, etc., from the port of shipment to the destination airport.
Suitable Scenario: The buyer has strong logistics control capabilities and wishes to independently select an airline or freight forwarder to control transportation costs.
Division of Responsibilities:
Seller: Responsible for transporting the goods to the port of shipment and loading them onto the aircraft, handling export customs clearance, providing basic documents such as the commercial invoice and packing list, and assuming all costs and risks prior to loading the goods onto the aircraft.
Buyer: Responsible for booking air freight space, paying air freight, handling import customs clearance, paying import taxes and fees, assuming all risks after the goods are loaded onto the aircraft (such as loss or damage during transportation), and arranging pickup at the destination airport.
II. CIF (Cost, Insurance, and Freight): Cost, Insurance, and Freight
Core Meaning: The seller is responsible for transporting the goods to the destination airport, paying freight and insurance. Risk transfers to the buyer after the goods pass the gangway at the destination airport; the buyer is responsible for import customs clearance and related fees.
Suitable Scenarios: The seller is more familiar with air freight procedures, or the buyer requires the seller to arrange transportation and basic insurance to reduce operational complexity.
Division of Responsibilities Between the Parties:
Seller: Bears the cost of the goods, air freight from the port of shipment to the destination airport, and minimum-risk cargo insurance (such as FPA). Export customs clearance is handled. Risks until the goods pass the gangway at the destination airport are the seller’s responsibility.
Buyer: Responsible for import customs clearance, import duties and taxes, assumes risks after the goods cross the ramp at the destination airport (such as losses during airport storage), and arranges for delivery.
III. Other Optional Terms (Less commonly used in air freight, but important to be aware of)
CIP (Carriage and Insurance Paid to): Freight and Insurance Paid to
Similar to CIF, but with a wider scope of application (not limited to airports), the seller must hand the goods over to a carrier (such as an airline) and pay the freight and insurance to the destination airport. Risk transfers upon delivery to the carrier (prior to the “cross the ramp” point in CIF).
FCA (Free Carrier): Free Carrier
Risk transfers after the seller hands the goods over to the carrier designated by the buyer (such as an airline or its agent). The buyer assumes all costs and risks after taking over the goods from the carrier, including air freight and insurance.
Summary and Recommendations
If the buyer wishes to control the transportation process (such as appointing a freight forwarder or controlling freight costs), FOB is the preferred option.
If the seller is responsible for arranging transportation and basic insurance, CIF is preferred to simplify the buyer’s process. (For air freight, the difference between CIP and CIF is minimal and can be chosen based on mutual agreement.)
The choice of terms should be clearly stated in the contract to avoid disputes arising from ambiguity regarding “cost allocation” and “risk transfer points.”
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