Cabotage is simply the legal way of saying transporting people and things within a country. If that country is not your own, you may need permission to do that. The penalty for making a mistake here can be severe, so you need to be smart about the subject if you plan on making multiple stops in a country with people and things you didn't bring with you in the first place.
Cabotage is banned by U.S. Law: 49 USC and 41703 and 294.81 of the DOT's Economic Regulations. I will get to extracting these. In the past I was using references in an advisory circular that was cancelled in 2016. So I will get to this, but for now you should realize many countries prohibit cabotage.
Everything here is from the references shown below, with a few comments in an alternate color.
Photo: 1944 Signatories, Chicago Convention (Public Domain).
Cabotage: air transport of passengers and goods within the same national territory.
Generally speaking, you cannot fly to some foreign countries, pick up local citizens and transport them within that country. Not all countries have cabotage restrictions and many that do will allow exceptions if the citizens are employees of a company associated with the airplane. The rules vary by country and you need to ensure you follow them.
So what is this convention we hear so much about? During World War II it became obvious that having a bunch of airplanes from different countries share the same airspace wouldn't work if they all used the operating rules and standards from their home countries. The powers that be met in Chicago and agreed upon a set of rules that became known as the Convention on International Civil Aviation Done at Chicago on the 7th Day of December 1944.
[ICAO Chicago Convention Article 7]. Each contracting state shall have the right to refuse permission to the aircraft or other contracting States to take on in its territory passengers, mail and cargo carried for remuneration or hire and destined for another point within its territory. Each contracting State undertakes not to enter into any arrangements which specifically grant any such privilege on an exclusive basis to any other State or airline of any other State, and not to obtain any such exclusive privilege from any other State.
The State Pages of your Jeppesen manuals do mention cabotage in a few places but the coverage isn't complete. The next step is to the particular country's International Flight Information Manual (IFIM), but those aren't easy to come by. I've found the best course of action is to use an international handler, like Air Routing or Universal, with boots on the ground in country. Tell them what you plan to do and ask "is it legal? and "will the local authorities object?"
You might be tempted to blow the entire topic off, thinking you are not operating for remuneration or hire. Think again, many countries have expanded the definition to include just about any business purpose.
Thankfully, many countries consider an employee of a multinational a part of a U.S. branch of the same company. I've done this as a pilot for Compaq Computer, for example: flown German nationals employed by Compaq in Germany within points in Germany. We asked the local authorities first who did not object. Ask first!
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