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Incoterm CPT: Definition, challenges and alternatives

What Is CPT, or Carriage Paid To?

In international trade, the phrase “Carriage Paid To” (CPT) denotes that the seller delivers the products at their expense to a carrier or another person whom the seller designates.

As long as the products are not in the designated party’s care, the seller is responsible for all risks, including loss.

The carrier may be the person or organisation in charge of transporting the products (by air, sea, rail, or other means) or the one hired to make the transportation arrangements.

An international commercial phrase (Incoterm) known as “Carrying Paid To” (CPT) designates that the seller bears the risks and expenses related to delivering the goods to a carrier to a specified location.

Risks and expenses associated with multiple carriers are transferred to the customer upon delivery to the first carrier.

Alternatives include the Carriage and Insurance Paid To (CIP) arrangement, in which the seller also insures the items while they are being transported.

 

Knowledge of Carriage Paid To (CPT)

Carriage Paid To (CT) is an Incoterm, which is a standard set of international trade terms published by the International Chamber of Commerce.

In a CPT transaction, the seller is responsible for clearing the products for export and delivering them to a carrier or designated person at a mutually convenient location.

As soon as the products are delivered to the carrier, the risk of damage or loss to the items is transferred from the seller to the buyer.

Typically, the phrase CPT is used in combination with a location. For instance, CPT Chicago denotes that the seller covers Chicago’s freight costs.

 

CPT: A Multimodal Incoterm

Unlike the maritime Incoterms, which only apply to trade by sea, the multimodal Incoterms are applicable to all types of goods transport. The CPT Incoterm code, which stands for “Carriage Paid To”, belongs to this group, as do the DAP Incoterm and the DDP Incoterm. In a sale based on this incoterm, the seller bears the costs of exporting the goods to the first carrier. However, the buyer assumes all risks associated with the transport and all costs incurred after the carrier receives the goods. Under this incoterm, the seller handles the export clearance and bears the costs. However, the buyer is responsible for the transit and import clearance procedures and costs.

 

Transfer of risk and costs

Forthe CPT Incoterm, the transfer of risk takes place when the goods are handed over to the first carrier. However, the transfer of costs only takes place when the goods arrive at their destination.

 

Precautions to be taken

The CPT is a general incoterm. It is symmetrical to the FCA incoterm. Thus, the same precautions apply to CPT. However, it is also necessary to specify the party responsible for the costs of parking at destination and the costs of unloading. With the CPT Incoterm, the seller is not obliged to take out transport insurance covering the goods from the place of delivery to the final destination.

 

CPT

 

CPT Incoterm: what are the obligations of each party?

In international transactions subject to the CPT Incoterm, the costs and risks are shared between the supplier and the customer.

 

The obligations of the supplier

The seller must :

  • Pack, label and mark the exported goods;
  • Load the goods onto the means of transport for the goods;
  • Transport the goods from the factory or warehouse of departure to the point of shipment in accordance with the terms of the sales contract;
  • Carry out the customs clearance procedure during which the customs value of the exported goods is calculated. The seller must complete the customs export formalities at the customs clearance office. However, the declaration of the nature of the goods must be made electronically. Export formalities do not apply to intra-Community trade (between two EU countries) unless the goods are sent to the overseas departments;
  • Completing export security formalities;
  • Organise the main transport from the point of shipment to the place of unloading.

 

Obligations of the customer

The buyer is responsible for :

  • Unloading the imported goods from the main means of transport;
  • Completing the customs formalities relating to the imports;
  • Ensuring the post-carriage of the goods to the final destination.
  • Unloading the goods from the delivery vehicle.

The parties must clearly state the Incoterm applicable to the trade in the sales contract, followed by the place of delivery. However, they are not obliged to detail the terms of delivery. To find out what they are, it is sufficient to consult the content of the incoterm.

 

Example of Carriage Paid To (CPT)

The cost of freight includes any export taxes or fees imposed by the nation of origin.

However, even if various modes of transportation are used (for example, land, then air), the risk is shifted from the seller to the buyer as soon as the items are delivered to the first carrier.

If a vehicle bringing a shipment to the airport crashes and damages the goods, the seller is not liable if the buyer has not insured the products because the commodities have already been transferred to the truck.

The vendor has an incentive to select the lowest method of delivery without regard to product safety, which puts the consumer at danger.

A Carriage and Insurance Paid To (CIP) agreement, in which the seller insures the products during transit, may mitigate this risk.

If the vendor and the buyer had already reached a consensus, the seller may also decide to deliver the products to a temporary location rather than the buyer’s final destination.

 

Pros of Carriage Paid To (CPT)

  • It lowers the buyer’s shipping risk.
  • Increases the seller’s ability to make a deal by taking up more of the transportation risk.
  • Buyer is not liable for managing export regulations and fees.

 

Cons of Carriage Paid To (CPT)

  • Increases the seller’s risk because the buyer accepts risk from the point of first carrier, which is typically a truck, shipment by sea or air has a larger risk for the buyer.
  • The buyer is in charge of transport clearance.

 

Cost, Insurance, and Freight (CIF) vs. CPT

Cost, Insurance, and Freight (CIF) is somewhat comparable to CPT. The main distinction is that, according to Incoterms, CIF only applies to maritime shipping.

Up until the products are loaded onto the shipping vessel at the port, the seller is liable for the charges, insurance, and freight for transporting the goods. From that point forward, the customer is in charge of accountability.

The CPT, on the other hand, only holds the seller responsible until the products are passed to the first carrier in the transportation process. CPT also includes a number of shipping methods, such as land, air, and sea.

 

What Distinguishes the CIF and PT?

According to CPT, the seller is in charge of all costs and hazards associated with shipping goods up until the point at which they are handed off to a carrier.

CIF applies to maritime shipping and specifies that up until the items are placed aboard the vessel at the port, the seller is in charge of all costs, risks, and insurance.

 

What in Shipping Terms does CIP Mean?

When items are shipped through CIP, the seller is in charge of all shipping costs, including insurance, up until they are handed off to the first carrier, at which point the buyer takes over.

In shipping, the risk is assumed by the buyer if the ship is the first carrier when the products are delivered to the shipping vessel.

The buyer is responsible once the items are loaded into the truck because it is the initial carrier, even if the products must be transported by truck before being placed onto a ship.

 

The distinction between CPT and CIP

CIP goes beyond PT and also incorporates insurance. Similar to CPT in that the seller bears all costs and hazards associated with delivering goods to a carrier, CIP also adds insurance to protect the products.

 

What Sets the DDP Apart from the СРТ?

DDP, or Delivered Duty Paid, states that the seller is in charge of all transportation-related risks and expenses up until the customer receives the goods at the point of destination.

While CPT mandates that the seller is accountable up until the products are picked up by the first carrier, which may occur before the buyer receives them, this varies from CPT in that way.

DDP goes a step further by placing all risks and expenses with the seller up to the buyer receives the products once all travel is finished.

 

The Conclusion

Various transportation agreements with varying degrees of duty carried by either the buyer or seller are outlined by the International Chamber of Commerce (ICC).

Carriage Paid To (CPT) requires that the seller bear all expenses and risks up until the products are delivered to the first carrier in the transportation chain, which lays the bulk of the burden and cost on the seller.

 

Frequently Asked Questions About The CPT Incoterm?

What is CPT in international trade?

CPT, or Carriage Paid To, is an international commercial term (Incoterm) that specifies that the seller delivers the goods at their expense to a carrier or another designated party. The seller is responsible for all risks, including loss, until the goods are in the care of the designated party. The carrier may be responsible for transportation or for making transportation arrangements.

What are the risks and expenses associated with CPT?

The seller is responsible for the risks and expenses related to delivering the goods to the carrier at a specified location. Risks and expenses associated with multiple carriers are transferred to the customer upon delivery to the first carrier.

How does CPT differ from other Incoterms?

CPT is a multimodal Incoterm, meaning it applies to all types of goods transport. In a sale based on CPT, the seller bears the costs of exporting the goods to the first carrier, but the buyer assumes all risks and costs associated with the transport and all costs incurred after the carrier receives the goods. The seller is responsible for export clearance and the costs associated with it, while the buyer is responsible for transit and import clearance procedures and costs.

When does the transfer of risk and costs occur in a CPT transaction?

In a CPT transaction, the transfer of risk occurs when the goods are handed over to the first carrier. The transfer of costs only occurs when the goods arrive at their destination.

What precautions should be taken when using CPT?

It is important to specify the party responsible for the costs of parking and unloading at the destination. The seller is not required to take out transport insurance covering the goods from the place of delivery to the final destination.

What are the obligations of each party in a CPT transaction?

The seller is responsible for packing, labeling, and marking the exported goods; loading the goods onto the means of transport; transporting the goods from the factory or warehouse to the point of shipment; carrying out customs and export security formalities; and organizing the main transport from the point of shipment to the place of unloading. The buyer is responsible for paying the agreed price and any additional costs incurred after the goods are delivered to the first carrier.

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