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CPT Incoterms|Carriage paid to Meaning and Responsibilities

This guide will examine the CPT Incoterms "Carriage Paid To" and all its contents, So, let’s dive in!
CPT Incoterms: Carriage paid to Meaning and Responsibilities

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Clear communication is also essential for international trade. You never know when you may encounter a new problem. Having an agreement that is prewritten and every detail about every possible scenario is essential. It can save you much money at times.

The International Chamber of Commerce (ICC) made Incoterms for this reason. They ensure a smooth international goods transaction between sellers and buyers. These terms define the responsibilities of sellers and buyers.

Among these terms, we will look into CPT “Carriage Paid To” today. We will also learn the associated details.

So, let’s dive in!

What Does CPT Incoterms Mean

CPT reflects the responsibilities related to cost and risk associated with transporting goods from seller to buyer. As per CPT, the seller is responsible for arranging the transportation and paying to deliver goods to said location. The delivery location is typically the country of the buyer’s choice.

This agreement reflects the roles and responsibilities of buyers and sellers. It also reflects the point where responsibility shifts from seller to buyer.

Per this agreement, the seller bears all the costs of delivering the products or goods. These costs may include trucking company charges, loading and unloading charges, shipping or airline charges, and freight forwarders to deliver the goods through different ways such as sea, air, rail, or road.

It is essential to note that the seller’s responsibility includes the export fee and all associated taxes. In addition to goods, the seller’s total CPT price may include other costs, such as Terminal Handling Charges (THC). You need to calculate all these expenses for final pricing.

Even though the seller delivers the products, the risk shifts to the buyer when the seller hands over the items to the first carrier. It is an important point to note. The CPT rules precisely outline the circumstances under which one party may transfer risks and expenses to another.

CPT Incoterms:Carriage paid to Meaning and Responsibilities

Seller’s Responsibilities under CPT

Under the CPT agreement, sellers have numerous responsibilities. They range from terminal fees to taxes and transportation.

Following are some of the prime responsibilities of sellers:

  • One of the main advantages of CPT is that it clearly states the associated cost structure of the entire operation. It leaves no room for speculation and uncertainty.
  • Sellers bear transportation charges up to a certain point as agreed upon at the delivery point of the buyer’s choice.
  • The seller contracts and arranges the car, saving buyers from unnecessary issues and burdens.
  • The seller must pack the goods appropriately for export.
  • The seller must label the goods correctly to meet the export standards and requirements.
  • The seller must provide all necessary documents required to export the goods.
  • The seller must check that the goods conform to the quality and quantity specified in the contract.

Buyer’s Responsibilities under CPT

After the seller’s initial responsibilities, certain things are the buyer’s responsibility. The buyer must meet the set obligations as per the CPT agreement.

The following are the obligations of the buyer:

  • The buyer is responsible for receiving the goods once they reach the buyer’s station.
  • The buyer is responsible for paying for the goods or products as agreed.
  • Per the agreement, the buyer is liable when the goods or products reach the specified location.
  • Customs clearance is one of the buyer’s primary obligations
  • .
  • Now, the but he years are responsible for fetching goods and taking them to their location. The transportation changes from here onwards are the responsibility of the buyer.
  • The buyer must get import licenses or approvals required for the goods to be dispatched from the port. The buyer is also responsible for all the customs formalities.

Advantages and Disadvantages of Using CPT Incoterms

Like any other Incoterm, CPT has several advantages and disadvantages. It is essential to be aware of potential benefits and drawbacks to get the maximum of your deals at the international level.

The following are the advantages and disadvantages of CPT:

Advantages:

  • One of the main benefits of CPT is that it simplifies logistics and transportation for the buyer.
  • The seller is responsible for all transportation arrangements.
  • It reduces the need to coordinate complex shipping details.
  • The buyer can better predict the total cost of goods without worrying about fluctuating charges.
  • CPT agreement is versatile and can be used with any mode of transport.

Disadvantages:

  • The transfer of risk transfer from the seller to the buyer once the goods are handed over to the first carrier.
  • It places the burden on the buyer for most of the journey.
  • The buyer has limited control over the choice of carrier or shipping route.

Comparison with Other Incoterms

Following is the  comparison of different Incoterms:

FOB vs. CIF

Feature FOB (Free On Board) CIF (Cost, Insurance, and Freight)
Responsibility for Freight Buyer handles and pays for sea freight. The seller handles and pays for sea freight.
Responsibility for Insurance Buyer pays for insurance. The seller arranges and pays for minimum insurance coverage.
Risk Transfer Point When goods are on board, the ship is at the port of shipment. When goods pass the ship's rail at the port of shipment.
Costs Covered by Seller Transport to the port of shipment and loading on the ship. Transport to the port, vessel loading, sea freight, and insurance to the destination port.
Control Over Shipping The buyer has control over the shipping. The seller controls the shipping process.

DAP vs. CIF

Feature DAP (Delivered At Place) CIF (Cost, Insurance, and Freight)
Responsibility for Freight The seller pays for all transportation costs to the destination. The seller handles and pays for sea freight.
Responsibility for Insurance Buyer pays for insurance. The seller arranges and pays for minimum insurance coverage.
Risk Transfer Point When goods are ready for unloading by the buyer at a given destination. When goods pass the ship's rail at the port of shipment.
Costs Covered by Seller Includes all costs up to the destination. Includes the cost of transport and insurance.
Control Over Final Delivery The seller has control over the transportation. The buyer takes over responsibility after the goods are transferred over the ship's rail.

When to Use a CIF Agreement?

There are several scenarios in which a CIF agreement can be used. It is favorable when a buyer wants all the transportation risks covered through insurance.

You can choose this agreement for high-value shipments, as insurance, freight, and transportation costs are included.

Conclusion

CPT incoterm provides a necessary balance for both seller and buyer. It is a flexible model that helps both parties involved in specific ways. It is also beneficial for multiple transportation.

We recommend that anyone know sufficiently about CIF and how things work before finalizing their decision.

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