CPT (Carriage Paid To) Incoterms

When it comes to international trade, understanding Incoterms® is crucial for avoiding confusion and ensuring smooth transactions. One of the most commonly used terms in global trade is CPT (Carriage Paid To). This Incoterm defines the responsibilities of the buyer and seller in a shipping agreement. In this article, we’ll explore what CPT means, how it works, who bears the risk and cost at each stage, and how it compares with other Incoterms.

What Does CPT Mean?

CPT stands for Carriage Paid To. Under CPT Incoterms, the seller is responsible for arranging and paying for the carriage of goods to a named destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.

CPT is used for any mode of transport, including multimodal transport such as sea and road or rail combinations.

Key Characteristics of CPT (Carriage Paid To)

• Mode of Transport: Any mode (air, sea, road, rail, multimodal)

• Risk Transfer Point: When the goods are handed over to the first carrier

• Cost Transfer Point: Seller pays for carriage to named destination

• Export Duties: Paid by the seller

• Import Duties: Paid by the buyer

• Insurance: Not mandatory for seller to provide

• Unloading at Destination: Usually buyer’s responsibility

Seller’s Obligations Under CPT

1. Packaging & Marking: Properly pack and label goods for export

2. Export Clearance: Handle all export formalities and customs documentation

3. Transport Arrangement: Contract and pay for transportation to the agreed destination

4. Delivery to Carrier: Deliver goods to the first carrier at a place agreed upon (risk transfers here)

5. Proof of Delivery: Provide the buyer with transport documents (e.g., bill of lading, waybill)

6. Costs: Bear all costs up to the named place of destination, excluding import duties and unloading

Buyer’s Obligations Under CPT

1. Import Clearance: Handle import customs clearance and duties

2. Insurance: Although not required, the buyer should arrange insurance from the point risk transfers

3. Unloading: Pay for unloading unless otherwise agreed

4. Delivery from Destination Point: Organize and pay for final transport if needed

5. Risk Bearing: Responsible for any damage or loss after the goods are handed over to the first carrier

Risk vs. Cost in CPT

A common point of confusion in CPT is the separation of cost and risk. The seller pays for the transportation to the named place. However, the risk passes to the buyer once the goods are handed over to the first carrier, not when they reach the destination.

Example: A seller in Germany agrees to CPT New York. The seller arranges and pays for the transport to New York. However, if the goods are damaged during ocean transit, the buyer bears the loss, since the risk passed at the port of Hamburg when the goods were handed to the carrier.

CPT vs Other Incoterms®

Best Use Cases for CPT

• Containerized shipments via sea, rail, or road

• Multimodal transport

• When the buyer has stronger insurance or risk management

• Situations where the seller has better access to or rates from local carriers

Transport Documents in CPT

Common documents involved:

• Bill of Lading (B/L) if shipped by sea

• Air Waybill (AWB) if shipped by air

• CMR Consignment Note if transported by road

• Railway Bill if by train

The seller must provide these documents to the buyer to prove shipment and allow the buyer to claim the goods.

Insurance Considerations

Under CPT, the seller is not obligated to provide insurance. Therefore, buyers should arrange cargo insurance starting from the point where risk transfers. If insurance is a concern, buyers might prefer CIP (Carriage and Insurance Paid To), which obligates the seller to insure the goods.

CPT in the Latest Incoterms® 2020

The Incoterms® 2020 update, released by the International Chamber of Commerce (ICC), reaffirmed the provisions of CPT with minor clarifications:

• Clearer separation of cost and risk responsibilities

• Emphasis on the need to specify the exact point of delivery within the named place

• Reinforcement of the seller’s obligation to provide transport documents that enable the buyer to take delivery

Tips for Using CPT in Contracts

1. Specify the named place clearly (e.g., “CPT New York, Terminal 3”)

2. Agree on who handles unloading at the destination

3. Buy insurance if you’re the buyer

4. Understand the moment of risk transfer—make sure the first carrier and location are well-defined

5. Ensure documentation is complete—proof of delivery is essential for customs and payments

CPT: Pros and Cons

Advantages:

• Flexibility across transport modes

• Seller arranges and pays for freight

• Streamlined export process for buyers

Disadvantages:

• Risk transfers early to the buyer

• Insurance not included

• Buyer may still have to manage destination logistics

Conclusion

CPT (Carriage Paid To) is a flexible and widely used Incoterm for international trade involving multiple modes of transport. While it simplifies shipping arrangements for the buyer, it’s important to remember that the risk shifts much earlier in the journey. Understanding the division of costs and risks is key to using CPT effectively and avoiding unexpected liabilities.

When negotiating contracts, always define the named place of destination, clarify who handles unloading, and ensure proper insurance coverage from the point of risk transfer.