Carriage Paid To (CPT) Incoterm
What is the definition of the Carriage Paid To Incoterm?
Carriage Paid To (CPT) is an international commercial term which stipulates the seller’s responsibility for delivering goods to a carrier or another nominated party at a mutually agreed destination.
Under CPT, the seller assumes all costs and risks up to the point where the goods are handed over to the carrier.
The key aspect of the CPT incoterm is that the risk transfers from the seller to the buyer once the goods are with the first carrier, even if multiple carriers are involved in the transportation process.
What are the CPT responsibilities for a buyer?
The carriage paid to Incoterm makes the buyer liable for the following:
- Receiving the goods
- Handling import formalities (including managing all import-related processes, such as obtaining necessary licences and paying duties and taxes)
- Arranging insurance
- Assuming risks and costs from the moment the goods are delivered to the first carrier
- Accepting proof of delivery
- Notifying the seller if they are entitled to specify the shipping time or delivery point within the destination
- Covering post-delivery costs (including extra costs incurred due to failing to designate the delivery location or provide adequate notice, including unloading costs)
- Inspecting the goods upon arrival
What are the CPT responsibilities for a seller?
The buyer, on the other hand, is responsible for:
- Export clearance (including obtaining any necessary licences and permits)
- Transportation arrangements to the agreed destination (including selecting a suitable carrier)
- Delivery to carrier
Freight costs (including loading charges) - Providing proof of delivery to the buyer
- Packaging and marking the goods according to relevant regulations
- Notifying the buyer when the goods are delivered to the carrier
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When is a Carriage Paid To agreement used?
The CPT incoterm, meaning carriage is paid up until the goods reach the seller’s nominated carrier, is highly advisable for shippers in the following circumstances:
Cross-border trade:
CPT agreements are particularly advantageous in cross-border trade. They offer a clear structure where the seller is responsible for arranging and paying for the transportation to a named place of destination, possibly across international borders.
Letter of credit:
CPT is often used in transactions involving a letter of credit. A letter of credit is a financial instrument that requires the seller to provide proof of shipment to receive payment. By using CPT, sellers can take charge of the shipping process up to the named destination, thus safeguarding the payment process.
Multimodal shipments:
The carriage paid to incoterm is particularly useful in complex logistics scenarios where goods need to be transferred between different types of carriers, such as a combination of sea, air, and land transportation.
What are the benefits of Carriage Paid To terms?
Reduced transport risk for the buyer
As the seller is responsible for delivering the goods to the first carrier, this clear transfer of duties reduces the potential for disputes over damage or loss during the initial stages of transport.
No buyer responsibility for export requirements/fees
Under CPT terms, the seller handles all export-related processes, including obtaining necessary export licences, completing customs formalities, and paying export fees.
As a result, CPT shipping relieves the buyer from the complexities and costs associated with exporting goods from the seller's country.
Helpful for bigger importers with agents
CPT terms can be particularly beneficial for larger importers who have established agents or logistics partners in the seller’s country. These agents can ensure that the goods are handled efficiently and delivered to the carrier as per the agreement.
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What are the drawbacks of Carriage Paid To terms?
Increased risk for the seller
Under CPT terms, the seller assumes significant risk until the goods are handed over to the first carrier at the named place of shipment.
As such, the seller is responsible for any loss or damage that occurs during this initial leg of the journey: this can increase the potential costs for the seller, particularly if the goods are fragile or high-value.
Buyer responsible for transit clearance
Once the goods are handed over to the first carrier, the buyer becomes responsible for clearing the goods during transit. They must manage any customs formalities, import duties, and taxes in the destination country.
Undertaking these responsibilities can lead to additional costs and delays if the buyer is unfamiliar with the import regulations and procedures in the seller's country.
Complications with multiple carriers
Goods shipped under the carriage paid to Incoterm are the buyer’s responsibility once they are handed over to the first carrier.
If issues arise later in the transportation process (e.g., damage or loss occurring during a subsequent leg of the journey), this can cause issues for the buyer. They must then deal with these complications, which can be difficult to manage without direct control over the initial transport arrangements.
CPT Frequently Asked Questions
What is the difference between CIF and CPT?
CIF is exclusively used for sea and inland waterway transport.
Under CIF terms, the seller is responsible for the cost of freight and insurance up to the port of destination. The seller pays for the transport of the goods while also insuring them against potential risks during the voyage.
CPT, on the other hand, can be used for any mode of transport, including air, road, and rail.
Under CPT terms, the seller pays for the transportation costs to the named place of destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.
Under CIF terms, the seller is responsible for the cost of freight and insurance up to the port of destination. The seller pays for the transport of the goods while also insuring them against potential risks during the voyage.
CPT, on the other hand, can be used for any mode of transport, including air, road, and rail.
Under CPT terms, the seller pays for the transportation costs to the named place of destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.
Does CPT incoterm include insurance?
CPT does not include insurance. Once the goods are handed over to the first carrier, the risk transfers to the buyer, and it is up to the buyer to arrange and pay for any insurance they deem necessary.
What is the difference between DDP and CPT?
Under DDP terms, the seller takes on almost all responsibilities and costs associated with delivering the goods to the buyer’s premises (or another agreed destination). These include export and import duties, taxes, and customs clearance.
Essentially, the seller delivers the goods ready for unloading at the final destination, bearing all risks and costs along the way.
Essentially, the seller delivers the goods ready for unloading at the final destination, bearing all risks and costs along the way.
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