Cabotage refers usually to the transport of passengers and goods. Initially, it referred specifically to shipping, but cabotage also applies to airlines, trucking, and trains. Many nations have cabotage laws which say the terms which carriers must follow when transporting people or materials within their borders. Many of these laws are designed to promote the growth of domestic transport companies, and some cabotage laws have been criticized because they can restrict free trade.

The word derived from the French caboter, which means "to sail along a coast".While the word primarily referred to navigation and trade in coastal waters, it has come to refer also to the right of a country to restrict its airspace. Cabotage rights are guaranteed to all nations because a threat to national airspace can make threats national security, and therefore countries need to be able to protect themselves by protecting their airspace. In addition to keeping themselves safer, many nations used cabotage laws to protect their economies and to encourage a strong national shipping industry.

Several countries give preference to domestic carriers in the air and in ports. The United States is one such example; airlines in service domestic flights in the United States must be American, although foreign carriers may fly into American airports. In ports, under the Jones Act, domestic cabotage must be carried out by American ships, though foreign carriers are welcome in international ports with trade goods and passengers.

As an example of how cabotage works, if you board a plane in Peru which is operated by a Peruvian airline, the plane will be allowed to fly you to any international airport in the United States. If the plane land in Chicago however continues on to New York, you can choose to disembark in either city. Though, the plane may not take on new passengers in Chicago, because this would violate cabotage laws by transporting passengers domestically within the United States.