What Is Carriage Paid To (CPT)?
CPT (Carriage Paid To) is one of the incoterms that can reduce some risk for the buyer as they may not pay for goods until they have arrived at the agreed destination via any mode of transportation. CPT is where the vendor of the goods is financially responsible for delivering them to a carrier, forwarder, or whomever else they choose. They also bear all risks related to the shipment until they’ve been accepted by the carrier, forwarder, etc. In this case, the vendor covers all costs to get the goods to the buyer’s agreed destination and the buyer is only responsible for import and custom clearance expenses and local delivery once the goods have arrived.
Typically, CPT is to a specific location, so, for example, it may be ‘CPT to LA Long Beach.’ This means that the vendor pays all costs to get the goods to that specific port and is responsible for losses or damage until the carrier accepts the goods at their end.
![Carriage Paid To (CPT) [Incoterms]](https://www.sofeast.com/wp-content/uploads/2021/07/Carriage-Paid-To-CPT-Incoterms.jpeg "Carriage Paid To (CPT) [Incoterms]")
Who takes responsibility from the vendor for the goods?
The vendor’s responsibility ends once their nominated party accepts the goods. This might be a carrier, freight forwarder, or other individual or company who is arranging the shipping, and this can be via sea freight, air freight, rail, or road. At this point, the buyer takes over the risk of the goods.
What are the advantages of CPT for buyers?
It places the risk of loss or damage onto the vendor until the carrier receives the goods which gives buyers more peace of mind, especially when dealing with unfamiliar vendors in new locations.
It also reduces the amount of paperwork and red tape the buyer needs to take care of as the vendor will have to handle the legal and technical shipping processes on their side, such as arranging and paying for the carrier and the local export processes and costs, such as customs duties, taxes, handling charges, and more.
What are the disadvantages of CPT for buyers?
The buyer’s risks during transit are increased, as the vendor’s responsibility ends as soon as the carrier has accepted the goods at their end, meaning that the goods are the buyer’s responsibility as soon as the first carrier picks up the goods (this may merely be he truck delivering the goods to the port or airport).
The buyer will need to arrange insurance for the goods during transit.
The buyer will probably need to pay the vendor for the goods after they’ve been handed over to the carrier unless agreed otherwise, meaning that you’re out of pocket while the goods are in transit and have yet to arrive at your destination.
Although the vendor will handle local export clearance and costs, the buyer must bear the costs of the import clearance and handle any paperwork required.
The vendor chooses the carrier. This may not be the buyer’s preferred option for different reasons (such as time or cost) and the vendor may well select the cheapest possible options which could result in more risk or loss or damage (as they’re not affected by this).
What does the vendor have to handle if the CPT incoterm is chosen?
The vendor needs to handle:
- Packaging
- The cost of loading to the chassis locally
- Delivery to the port on their side
- Origin Terminal Handling Charges (OTHC)
- Loading on carriage
- Freight costs (such as for air or sea freight)
- Destination Terminal Handling Charges (DTHC)
It may be that the vendor will include some of the above costs in the cost that the buyer pays for the goods, such as terminal handling charges, packaging, etc.
Are there alternatives to CPT?
Yes, if carriage paid to isn’t right for you, you may prefer CIP (carriage and insurance paid to) which, as the name suggests, reduces a buyer’s risk more as the vendor must add additional insurance for the goods (of 110% of the contract value) during transit as well as handling the costs and paperwork to get the goods to the agreed destination.
CIF (Cost, Insurance, and Freight) is also similar to CIP, but, specifically, for sea freight only, and the vendor is responsible for the costs, insurance, and freight for transporting goods up until they are loaded on the vessel at the port, so there’s a little more security for the buyer here.
DDP (Delivered Duty Paid) takes the protection for the buyer to the next level as the vendor must bear responsibility for delivering the goods to the named place in the country of the buyer and pays all costs in bringing the goods to the destination including import duties and taxes. In this case, the buyer only pays for unloading and final destination delivery.
Read more about DDP shipping here.
Disclaimer
We are not lawyers. What we discussed above is based only on our understanding of legal requirements and regulations. Sofeast does not present this information as a basis for you to make decisions, and we do not accept any liability if you do so.
