What is the Carriage Paid To (CPT) trade term?

What Is Carriage Paid To (CPT)?

Carriage Paid To (CPT) is an international trade term that means the seller delivers the goods at their expense to a carrier or another person nominated by the seller. The seller assumes all risks, including loss, until the goods are in the care of the nominated party.

The carrier could be the person or entity responsible for the carriage (by sea, rail, road, etc.) of the goods or the person or entity enlisted to procure the performance of the carriage. The CPT price might include Terminal Handling Charges (THC) in their freight rates.

The term CPT is typically used in conjunction with a destination. For example, CPT Chicago means that the seller pays freight charges to Chicago.

Illustration of Carriage Paid To (CPT)

The obligation concerning freight costs encompasses export duties or taxes mandated by the originating country. However, the transfer of risk transpires from the seller to the buyer immediately upon delivery to the initial carrier, irrespective of employing multiple transportation modes (e.g., land followed by air).

In the event of a mishap where a truck ferrying a consignment to the airport encounters an accident causing goods damage, the seller bears no responsibility for damages if the buyer hasn't insured the products. This is due to the goods transitioning to the first carrier—the truck.

Such circumstances may place the buyer at risk as the seller may prioritize seeking the most economical transportation mode without special consideration for product safety during transit. To counterbalance this risk, the buyer may contemplate a Carriage and Insurance Paid To (CIP) agreement, whereby the seller also insures the products during transit.

Furthermore, the seller may opt to deliver the goods to an interim location, as mutually agreed upon beforehand by both parties, rather than directly to the buyer's final destination. In such instances, the seller solely covers freight charges for delivery to this interim site. This scenario may arise if the buyer can arrange freight to the ultimate destination at a notably cheaper rate than the seller or if the goods are in high demand, empowering the seller to dictate terms.

Pros and Cons of Carriage Paid To (CPT)

The advantages and disadvantages of CPT hinge on the perspective of the transacting parties—buyer or seller. For the buyer, CPT substantially mitigates the transportation risk, albeit increasing the seller's exposure to loss or damage until the goods are in the carrier's possession.

Conversely, CPT may confer an advantage to the seller by potentially stimulating the buyer's purchasing inclination. For instance, if the buyer harbors transportation risk concerns from a distant supplier, assuming responsibility for all expenses until goods reach the carrier may sway the buyer towards making the purchase.

CPT also simplifies paperwork and bureaucratic processes for the buyer. The seller handles all legal aspects of shipping, encompassing carrier arrangement, customs duties, taxes, and other relevant exporting formalities.

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

Contrasting CPT with Cost, Insurance, and Freight (CIF), the latter primarily applies to maritime shipping, with the seller bearing costs, insurance, and freight until goods are loaded onto the vessel at port. In contrast, CPT spans diverse shipping modalities and holds the seller accountable until goods are transferred to the primary carrier in the transportation chain.

CPT FAQs

Various distinctions exist between CPT and other shipping terms. CPT stipulates the seller's responsibility and risk absorption until goods reach a carrier, while CIF pertains solely to maritime shipping, and DDP extends the seller's liability until goods are received by the buyer at the destination.

In conclusion, the International Chamber of Commerce (ICC) delineates diverse transportation terms, allocating varying degrees of responsibility between buyers and sellers. Carriage Paid To (CPT) primarily places responsibility and cost on the seller, mandating them to absorb all expenses and risks until goods are delivered to the first carrier in the transportation chain.