What Is Carriage Paid To (CPT)?
CPT (Carriage Paid To) is an international term where the seller bears the risks and costs of delivering goods to a carrier and agreed destination. If multiple carriers are involved, the buyer takes over the risks and costs upon delivery to the first carrier. CPT covers export fees and taxes. Another option is CIP (Carriage and Insurance Paid To), which includes insurance during transit. Other similar arrangements are CIF (Cost, Insurance, and Freight) and DDP (Delivered Duty Paid).
Basics
CPT is an international trade term that signifies the seller's responsibility for delivering goods to a carrier or a nominated party. The seller assumes all risks until the goods are handed over to the designated party. The carrier can refer to the entity in charge of transportation by various means. Additional charges, such as THC (Terminal Handling Charges), may be included in the CPT price as part of the freight rates.
How Does CPT Work?
CPT is an internationally recognized trade term, part of a set of standardized terms known as Incoterms, published by the International Chamber of Commerce. In a CPT transaction, the seller is responsible for delivering the goods to a carrier or appointed person at a mutually agreed-upon destination. The seller covers the freight charges for transporting the goods to the specified destination. Once the goods are delivered to the carrier, the risk of damage or loss is transferred from the seller to the buyer. However, it's important to note that the seller is not responsible for insuring the shipment during transport. CPT is commonly used alongside a specific destination, indicating that the seller pays for freight charges up to that location.
CPT Example
Under CPT, the seller covers the costs of delivering the goods to a carrier and agreed on a destination, including any export fees or taxes. However, the risk of damage or loss shifts to the buyer as soon as the goods are delivered to the first carrier, even if multiple modes of transportation are used. This places some risk on the buyer, as the seller may prioritize finding the most economical transportation without considering the safety of the goods during transit. To mitigate this risk, the buyer may opt for a CIP agreement, wherein the seller also provides insurance for the goods during transportation. In addition, the seller and buyer can agree on an interim delivery location instead of the final destination, in which case the seller is only responsible for paying freight charges up to the interim place.
CPT’s Pros and Cons
CPT offers distinct advantages and disadvantages depending on whether you are the buyer or the seller. For the buyer, CPT significantly minimizes the risks associated with transporting goods. Conversely, for the seller, it increases the risks as they are liable for any loss or damage until the goods are handed over to the carrier.
However, CPT can benefit sellers by making buyers more inclined to make a purchase. When a buyer is hesitant about purchasing a product from a distant supplier due to transportation risks, they might either refrain from making the purchase or settle for a closer supplier, even if it's not the ideal choice. By assuming all expenses until the goods reach the carrier and reducing the risk for the buyer, the seller can encourage the purchase.
CPT also streamlines the process for buyers by eliminating paperwork and bureaucracy. The seller takes care of all legal aspects involved in shipping the goods, including arranging the carrier and handling customs duties, taxes, and other formalities related to exporting the goods.
Pros
- Reduces transportation risk for the buyer
- Seller assumes a larger portion of the transportation risk, facilitating sales
- Buyer is not responsible for export requirements and fees
Cons
- Increases risk for the seller
- Higher risk for the buyer when shipping by sea or air, as the buyer assumes risk from the first carrier (often a truck)
- The buyer is responsible for transit clearance
CPT vs. CIF
CIF is a trade term similar to CPT but with a slight difference. CIF specifically applies to maritime shipping, as per Incoterms. In CIF, the seller takes responsibility for the costs, insurance, and freight of transporting goods until they are loaded onto the shipping vessel at the port. After that point, the buyer assumes responsibility.
On the other hand, CPT encompasses various shipping methods, including land, air, and maritime. It holds the seller accountable only until the goods are handed over to the first carrier in the transportation process.
Frequently Asked Questions About CPT
What Makes CIF Different From CPT?
CPT indicates that the seller bears all expenses and risks of transporting goods until the goods are delivered to a carrier. CIF, on the other hand, is specific to maritime shipping and states that the seller assumes all expenses, including insurance, and risks until the goods are loaded onto the vessel at the port.
What Makes DDP Different From CPT?
DDP specifies that the seller assumes all risks and costs related to transporting goods until the buyer receives them at the designated destination. Unlike CPT, where the seller's responsibility ends when the goods are received by the first carrier, DDP goes further by keeping the risks and costs with the seller until the buyer has received the goods after the entire transportation process is completed.
What Makes CIP Different From CPT?
CIP goes beyond CPT by including insurance coverage. With CIP, the seller takes on the same responsibilities as in CPT, bearing all expenses and risks in delivering goods to a carrier. However, in CIP, insurance is added to provide coverage for the goods.
What Is CIP in Shipping Terms?
CIP in shipping implies that the seller covers the expenses of transporting goods, including insurance until the goods are delivered to the first carrier. The responsibility then shifts to the buyer. If the shipping vessel is the first carrier, the buyer assumes the risk upon delivery to the vessel. If the goods need to be transported by truck before loading onto the ship, the buyer takes responsibility when the goods are loaded onto the truck, as it serves as the first carrier.
Conclusion
The International Chamber of Commerce defines different transportation terms that determine the level of responsibility assigned to the buyer and seller. One such term is CPT, which places a significant burden on the seller. Under CPT, the seller is responsible for all costs and risks associated with the goods until they are delivered to the first carrier in the transportation process.