Incoterms play a central role in trade logistics. They define clear rules for the responsibilities between buyer and seller.

Knowing the correct Incoterms is particularly important for air freight. This helps to avoid misunderstandings and additional costs.

In this article, we will explain the most important Incoterms for air freight in detail. We will help you to make the best choice for your needs.

• Incoterms define obligations, costs and risks in international trade.
• Specific requirements and application of Incoterms in air freight.
• Explanation of the most important clauses: EXW, FCA, CPT, CIP, DAP, DDP.
• Importance of precise naming of transfer points and destinations.
• What Incoterms do not cover and which supplementary regulations are necessary.

What are Incoterms?

Incoterms, also known as International Commercial Terms, are standardized trade terms. They are issued by the International Chamber of Commerce (ICC).

They serve to define the obligations, costs and risks between buyers and sellers. The first version of the Incoterms was published in 1936. Since then, they have been regularly updated, most recently in 2020, to meet the changing requirements of global trade.

Origin and development of the Incoterms

The Incoterms were first introduced by the ICC in 1936. They were intended to avoid misunderstandings in sales contracts and facilitate global trade.

The regular updates of the Incoterms reflect the changing requirements of global trade. The latest version from 2020 takes into account the latest developments in logistics and trading practices.

Basic concepts of Incoterms

Incoterms define clear rules for the obligations, costs and risks. These are divided between buyer and seller.

You determine who is responsible for transportation, insurance and Customs clearance is responsible. These rules are essential to ensure clarity and transparency in business relationships. In this way, misunderstandings can be avoided.

Another important aspect is the distinction between the different versions of the Incoterms. These include 2000, 2010 and 2020, and each version contains different provisions.

Importance of Incoterms for air freight

Specific requirements for air freight

The Incoterms are particularly important for air freight. They define the responsibilities and costs from the beginning to the end of the supply chain.

Air freight is generally faster and more expensive than other types of transportation. A clear regulation of responsibilities is essential.

Fast and efficient processing requires precise agreements on the obligations of the parties involved. In this way, delays and additional costs can be avoided.

Application of Incoterms in air freight

The application of Incoterms in air freight differs from other types of transportation. This is mainly due to the speed and specific requirements of air transport.

For example, safety regulations and special customs procedures must be observed. Choosing the right Incoterms can help to improve the efficiency of the supply chain. This can minimize the risk of delays and additional costs.

Typical air freight scenarios include the direct transportation of goods from the seller's airport to the buyer's airport. More complex routes with several stopovers are also possible.

The most important Incoterms for air freight

Explanation of the 11 Incoterms clauses

The Incoterms 2020 comprise a total of 11 clauses. These are divided into four main groups: E, F, C and D clauses.

Each of these groups is based on the obligations of the seller and the buyer. They are suitable for different means of transportation and types of goods. Within the groups, the clauses have the same initial letter. This facilitates classification and understanding.

Note: The Incoterms 2020 are clearly structured and help to clearly allocate responsibilities and risks.

EXW (Ex Works)

EXW, or "ex works", means that the seller makes the goods available to the buyer at his business premises. The buyer bears the responsibility from the moment of collection.

He takes over all costs and risks, including transportation and insurance. This clause represents the minimum obligation for the seller. The buyer must take care of the entire logistics chain.

It is important to specify the delivery location as precisely as possible. The seller bears the costs and risks up to this point. The buyer bears all further costs and risks.

FCA (Free Carrier)

With FCA, or "Free Carrier", the seller delivers the goods to a carrier nominated by the buyer at an agreed location. The seller assumes the costs and risks up to this point.

The buyer assumes responsibility for the main transportation. This clause is particularly suitable for air freight. It offers flexibility regarding the place of delivery.

The seller must clear the goods for export. The buyer is responsible for import clearance. This arrangement offers both parties a clear division of responsibilities.

In addition, the goods can be transported using the seller's own means of transportation.

CPT (Carriage Paid To)

CPT, or "Carriage Paid", means that the seller hands over the goods to a carrier and assumes the transportation costs to a named destination. However, the risk is transferred to the buyer as soon as the goods are handed over to the first carrier.

This regulation requires a precise designation of the place of delivery. In this way, misunderstandings can be avoided. The seller bears the costs up to the agreed destination. The buyer assumes the further risks and costs from this point.

If there are several carriers for the transportation, the main place of delivery must be clearly defined.

CIP (Carriage and Insurance Paid To)

CIP is similar to CPT, but also includes insurance cover for the goods. This is taken out by the seller. The seller bears the costs of transportation and insurance to the named place of destination.

The risk is transferred to the buyer from the time of handover to the carrier. This clause provides additional protection for the buyer. The seller takes out comprehensive insurance against possible damage or loss during transportation.

This insurance must include comprehensive cover for all possible losses.

DAP (Delivered at Place)

DAP, or "Delivered At Place", means that the seller makes the goods available at an agreed place ready for unloading. The seller bears all costs and risks up to this point. The buyer is responsible for unloading and further transportation.

This clause makes it easier for the buyer to coordinate the import formalities. The seller organizes the main transport and brings the goods to their destination. It is important to specify the exact destination, as the risks up to this point are borne by the seller.

DDP (Delivered Duty Paid)

DDP, or "Delivered Duty Paid", represents the maximum obligation for the seller. The seller assumes all costs and risks, including Customs clearance and import duties.

The goods shall be made available ready for unloading at the named place of destination. This clause is particularly suitable for buyers who wish to outsource the entire logistics process. The seller assumes all logistical and customs-related tasks.

It is also important to precisely define the destination in the purchase contract.

Choosing the right Incoterm

Analysis of transportation requirements

The choice of the right Incoterm depends on various factors. These include the type of goods, the destination country and the logistics strategy.

It is important to specify the exact handover and destination locations in the purchase contract. In this way, misunderstandings and additional costs can be avoided.

Different countries have different customs procedures and requirements. These must be taken into account when selecting the Incoterm. For example, customs guarantees in the USA or import duties in the UK may play a role.

Note: The consideration of country-specific requirements can be decisive for choosing the right Incoterm.

Influence of letters of credit on the choice of Incoterms

When using letters of credit, preference should be given to Incoterms that meet the banks' requirements. Letters of credit are payment instruments that are primarily used for international trade transactions.

They minimize the risk for both parties. They require specific documentation. The choice of Incoterm can influence the process and release of payment.

The C conditions (CPT, CIP) are often the best options here. They require clear documentation.

Cooperation with a logistics partner

Working with an experienced logistics company like Dörrenhaus can help you choose the best Incoterms for your requirements. Dörrenhaus offers comprehensive consulting and logistics services.

These ensure that all aspects of your supply chain run efficiently and smoothly. A competent logistics partner can help you make the right decisions and minimize potential risks. They develop customized solutions.

Practical examples and case studies

Successful application of Incoterms in air freight

The successful application of Incoterms in the Air Freight is reflected in numerous Dörrenhaus projects. For example, Dörrenhaus has helped a medium-sized company to optimize its supply chains.

The appropriate Incoterms were selected and clear agreements were made regarding duties and responsibilities. This led to more efficient processing and a reduction in transportation costs.

Another example is the support of a discount store logistics project. The precise choice of Incoterms made it possible to increase efficiency. Costs were also reduced.

• Optimization of supply chains through precise selection of Incoterms
• Increasing efficiency and reducing costs through clear agreements
• Support for discount store logistics projects with customized solutions

Common mistakes and how to avoid them

A typical error in the application of Incoterms is the inaccurate specification of the places of delivery and destination in the sales contract. This can lead to misunderstandings and additional costs.

Another mistake is the wrong choice of Incoterm. This may not suit the specific requirements of the trade transaction. These mistakes can be avoided by informing yourself thoroughly and seeking professional advice.

Other errors can be caused by inadequate documentation or incorrect insurance policies. However, these can be avoided through precise planning and consultation.

• Clear indication of transfer and destination locations in the purchase contract
• Selection of the appropriate Incoterm for specific trade requirements
• Precise planning and consultation to avoid errors

Special considerations when selecting the Incoterms

Designation of precise transfer and destination locations

It is crucial to specify precise handover and destination locations in the purchase contract. This clearly defines costs and risks.

The handover location for EXW should be specified precisely. This creates clarity regarding responsibilities.

Destinations for DAP and DDP should be clearly defined. This ensures that the goods are unloaded at the correct location. Errors in naming can lead to considerable delays and additional costs.

What Incoterms do not cover

Incoterms do not regulate everything. Property rights, force majeure and breaches of contract are not covered. These should be specified separately in the purchase contract.

It is important to deal with these aspects in detail in the purchase agreement. This ensures legal certainty and clarity for both parties.

In addition, regulations on possible force majeure situations and specific liability issues should also be included. This will ensure comprehensive protection.

FAQs

What are the most important Incoterms for air freight?

The most important Incoterms for air freight are EXW, FCA, CPT, CIP, DAP and DDP. These clauses regulate the transfer of responsibilities and costs between buyer and seller. They are specially tailored to the requirements and special features of air freight.

How do I choose the right Incoterm for my air freight?

The choice of the right Incoterm depends on various factors. These include the type of goods, the destination country and your logistics strategy. Precise naming of the transfer and destination locations and consideration of country-specific customs procedures are crucial. In addition, working with an experienced logistics partner like Dörrenhaus can help you make the best choice.

What happens if the Incoterms are not precisely defined in the sales contract?

If the Incoterms are not precisely defined in the purchase contract, this can lead to misunderstandings and additional costs. An imprecise designation of transfer points and destinations can lead to delays and disputes. It is therefore essential to formulate the Incoterms clearly and precisely in the purchase agreement. Both parties must understand and accept the regulations.