When choosing between sea and air freight, you don’t just compare rates and times: you also need an Incoterm that fits the mode of transport and clearly defines who pays, who handles the paperwork, and when you assume the risk. Using the wrong term for the actual mode of transport is one of the most common, and most expensive, mistakes in international trade.
For air shipments, a multimodal Incoterm such as FCA, CPT, CIP, DAP, or DDP is usually suitable. For sea freight, however, you can use specific terms like FAS, FOB, CFR, or CIF, but only when the goods travel directly by ship.
Understanding these differences helps avoid unexpected costs, documentation errors, and misallocated responsibilities. Here are the essentials:
Key points
Multimodal Incoterms are best suited for air freight.
FAS, FOB, CFR, and CIF are for sea freight.
The choice affects costs, documentation, and risk.
Scope of Terms According to Mode of Transport
You must choose the Incoterm according to the actual journey of the goods and the point where you deliver or receive the shipment. The main difference is between terms exclusive to maritime transport and those that work with any mode, including air and multimodal transport.
Terms Applicable to Maritime and Inland Waterway Transport
The Incoterms reserved for maritime or inland waterway transport are FAS, FOB, CFR, and CIF. Use them when delivery occurs alongside the ship or when the cargo is already on board, but not when the shipment combines several modes before arriving at the port.
Term
Delivery Point or Transfer of Risk
FAS
When you place the goods alongside the ship at the port of shipment.
FOB
When the goods are loaded on board the ship.
CFR
When the goods are on board; you pay the freight to the port of destination.
CIF
Similar to CFR, but you also purchase insurance with the minimum required coverage.
With FOB, CFR, and CIF, the risk passes to the buyer when the cargo is on board the ship.
Important: If you deliver containers to a terminal first, it’s usually better to use FCA, because the seller delivers the cargo to the carrier before loading it onto the ship. FOB, CFR, and CIF can be ambiguous regarding who is responsible for damages that occur at the terminal.
You can consult this comparison of Incoterms for sea and air freight to review these scenarios.
Terms valid for air and multimodal transport
The terms applicable to any mode of transport are EXW, FCA, CPT, CIP, DAP, DPU, and DDP. You can use them for air, road, rail, sea container shipments, or combinations of several modes.
FCA is often suitable for air exports because the seller delivers the goods to the carrier at an agreed-upon location. CPT and CIP, on the other hand, allow the seller to pay for transport to the specified destination, although the risk passes to the buyer when they deliver the cargo to the first carrier. CIP also requires insurance with broader coverage than CIF.
With DAP, you deliver the goods ready for unloading; with DPU, you must also unload them. DDP, however, places maximum responsibility on the seller, including import duties, taxes, and customs formalities in the destination country.
Classifying Incoterms by mode of transport helps avoid using a maritime term for an air or multimodal operation.
Delivery Point and Transfer of Risk
The place named in the contract determines when your responsibility for the risk ends. Don’t confuse paying for transport with the transfer of risk: you can pay the freight to the destination and still transfer the risk much earlier.
For example, in CIP Madrid, you pay for transport and insurance to Madrid, but the risk passes to the buyer when you deliver the goods to the first carrier. In DAP Madrid, however, the risk remains with you until the cargo arrives at the agreed location and is ready for unloading. And in FOB Valencia, the risk passes to the buyer when the goods are loaded onto the ship.
Important: Always write the point precisely, such as “FCA Seller’s Warehouse, Monterrey, Incoterms® 2020,” and indicate the applicable version. The term alone does not define the port, terminal, local costs, or insurance requirements. The role of Incoterms in each mode of transport provides examples of these responsibilities.
Costs, Documentation, and Operational Choice
Cost allocation depends on the delivery point and the chosen mode of transport. You should also review the required documentation for each shipment and ensure the agreed-upon term matches the actual delivery method.
Allocation of Freight, Insurance, and Port Charges