What Is Carriage Paid To (CPT)?
CPT stands for Carriage Paid To and is an international trade term which means that 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 transport, 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.
- Carriage Paid To (CPT) is an International Commercial Term denoting that the seller incurs the risks and costs associated with delivering goods to a carrier to an agreed-upon destination.
- With multiple carriers, the risks and costs transfer to the buyer upon delivery to the first carrier.
- CPT costs include export fees and taxes.
- As an alternative, the buyer could opt for the Carriage and Insurance Paid To (CIP) arrangement, whereby the seller also insures the goods during transit.
Understanding Carriage Paid To (CPT)
Carriage Paid To (CPT) is one of the 11 current Incoterms (International Commercial Terms), a set of standardized international trade terms that are published by the International Chamber of Commerce.
In a CPT transaction, the seller must clear the goods for export and deliver them to a carrier or appointed person at a mutually agreed-upon (between the seller and buyer) destination. Also, the seller pays the freight charges to transport the goods to the specified destination. The risk of damage or loss to the goods is transferred from the seller to the buyer as soon as the goods have been delivered to the carrier. The seller is responsible only for arranging freight to the destination and not for insuring the shipment of the goods during transport.
The term CPT is typically used in conjunction with a destination. For example, CPT Chicago means that the seller pays freight charges to Chicago.
Example of CPT
The responsibility for freight costs also includes export fees or taxes required by the country of origin. However, the risk is transferred from the seller to the buyer as soon as the goods are delivered to the first carrier, even if multiple means of transportation (land, then air, for example) are employed. So, if a truck carrying a shipment to the airport encounters an accident in which the goods are damaged, the seller is not responsible for damages if the buyer has not insured the products because the goods had already been transferred to the first carrier. This can put the buyer at some risk in that the seller has an incentive to find the cheapest means of transportation without any special concern for the safety of the product while in transit. To offset this risk, the buyer may consider a Carriage and Insurance Paid To (CIP) agreement, by which the seller also insures the products during transit.
The seller may also choose an interim place to deliver the goods, rather than to the buyer’s final destination, provided it has been mutually agreed upon beforehand by the seller and buyer. The seller only pays freight charges for delivery to this interim place. This situation may arise if the buyer can arrange for freight to the eventual destination at a significantly cheaper rate than the seller or if the goods are in such demand that the seller can dictate terms.