Carriage Paid To (CPT)

What is “Carriage Paid To” (CPT)? 

“Carriage Paid To” (CPT) is an Incoterm used in maritime shipping and international trade. It places the responsibility on the seller to arrange and pay for the transportation of goods to a specific destination. The seller assumes the risk and cost of delivering the goods to the carrier or designated location, after which the buyer takes over the responsibilities for further transportation and associated expenses.

Understanding The Role of “Carriage Paid To” in the Maritime Industry

Carriage Paid To (CPT) is one of eleven Incoterms, a set of international trade terms created by the International Chamber of Commerce. It creates a standardized definition of the different responsibilities and risks for buyers and sellers, helping to facilitate a smooth and well-defined shipping process. In a Carriage Paid To arrangement, the buyer and seller each have specific roles and responsibilities they must carry out. Here are the terms for each party:

Seller’s responsibilities under CPT:

• Delivery to the carrier: the seller is responsible for delivering the goods to the carrier, or the agreed-upon place of delivery. This involves preparing and packaging the goods for transport and ensuring that they are loaded onto the vessel or other means of transport.
• Main carriage arrangement and payment: the seller takes care of arranging and paying for the main carriage of the goods to the specified destination. This includes transportation costs, handling fees, and any necessary documentation for shipping.
• Risk transfer: the seller carries the risk of loss, or damage to the goods during transportation, until they have been delivered to the carrier or the agreed-upon location. The seller should ensure appropriate insurance coverage until this point.

Buyer’s responsibilities under CPT:

• Payment: the buyer is responsible for paying the agreed-upon price for the goods to the seller. This payment is typically made before or upon the delivery of the goods.
• Customs clearance and import duties: once the goods have been delivered to the buyer’s destination country, the buyer assumes responsibility for customs clearance and any applicable import duties or taxes.
• Subsequent transportation and delivery: the buyer is responsible for organizing and covering the costs of any transportation, if necessary, beyond the initial main carriage. This includes arranging for the goods to be delivered from the destination port or terminal, to the final destination.

Pros and Cons of Carriage Paid To

In the maritime industry, CPT is particularly beneficial for multimodal shipments (shipments that involve various modes of transport), including ocean freight. Due to its standardized framework that establishes agreed-upon responsibilities and costs associated with shipping goods, it enables smoother trade operations between buyers and sellers, which might otherwise be complicated due to cultural expectations, or language barriers.

In addition, CPT delivers specific benefits for both the buyer and seller. 

Pros for the buyer:

• Simplified logistics: with the seller taking responsibility for transport to the agreed-upon destination, buyers can wait for their deliveries without having to learn about new shipping routes 
• No-risk purchases: buyers don’t take on any risk until the goods are delivered to the agreed-upon location, typically in an area that the buyer is familiar with

Con for the buyer:

• Limited control: the buyer often lacks visibility into the shipment and might not be aware of issues that will ultimately delay delivery

Pro for the shipper:

• Increased sales: by accepting more risk, the seller is often able to sell more goods

Con for the shipper:

• Increased risk: sellers must extend their exposure until the point where the buyer accepts the delivery and takes over everything relating to the shipment

As with any shipment, there are risks associated with CPT, but they can be reduced by taking proper precautions. Obtaining insurance coverage, ensuring accurate export documentation, and establishing clear loading guidelines are all critical steps to address counterparty risk and promote successful transactions under Carriage Paid To shipping terms.

The Difference Between Carriage Paid To (CPT) and Carriage and Insurance Paid To (CIP)

The main difference between Carriage Paid To (CPT) and Carriage and Insurance Paid To (CIP) centers on the seller’s responsibility to provide insurance coverage. 

With a CPT agreement, the seller is responsible for arranging and paying for the shipment of the goods and the risk of loss, or damage to the goods, until the delivery is made. 

But, the seller is not obligated to provide insurance coverage for the goods during transit.

Under a Carriage and Insurance Paid To contract, the seller is also responsible for arranging and paying for the shipment.The key difference is that now the seller is also responsible for providing insurance coverage against the buyer’s risk of loss or damage to the goods during transit. The insurance coverage should be obtained by the seller and must protect the goods until they are delivered to the buyer. This ensures that the buyer has added protection against potential loss or damage during the journey of the goods.