If you want to become a real international trading pro, you have to achieve a clear vision of various terms, rules, laws, practices.
One of such practices is using Incoterms 2010 (International commercial terms) when deciding delivery obligations between parties.
In this article, we try to put under the microscope one of such Incoterms – CPT. Continue reading to learn more about this set of rules.
What is CPT in Incoterms?
CPT stands for Carriage Paid To.
It is one of the Incoterms 2010, which can be used by trading parties.
If you do not familiar with Incoterms concept, please, pay attention to our comprehensive guide on this topic.
So, Carriage Paid To contract states that the seller pays for the carriage of the goods to the named destination.
The named destination can be any place (warehouse, home, other facilities) in the country of the buyer.
Let’s find out how other terms of CPT contracts should be carried out.
Who is the carrier in the CPT Incoterms contract?
Carrier is basically any person or company who undertakes the performance of the carriage.
It can be made by rail, road, sea, air, inland transports, or by the combination of them.
Parties can use the services of several carriers.
Who pays for shipping under the CPT Incoterms rules?
If you look through the obligations of parties under the CPT Incoterms, you’ll find clear instructions about the payment responsibilities.
The seller is the party which has to pay for freight.
Also, he has to pay for all the costs of loading the goods and any charges for unloading at the place of destination.
What is the difference between CPT and DDP Incoterms?
DDP is an abbreviation for Delivered Duty Paid.
DDP has more obligations for the seller than CPT terms.
Under Delivered Duty Paid rules the seller has to perform all the procedures to deliver the goods to your doorsteps.
This includes freight costs, import/export customs fees, the carriage in the country of origin and destination, as well as fees connected with obtaining licenses, documents, and so on.
Basically, DDP terms are better for the buyer than CPT rules.
But, DDP sale contracts cost more as well.
What is the responsibility of the buyer and seller under CPT Incoterms?
In addition to obligations connected with costs of freight, under CPT rules the seller must:
- Provide the goods and the commercial invoice following the sale agreement (as well as any other pieces of evidence of conformity which may be required by the contract).
- Obtain any needed export licenses or other official authorizations.
- Carry out all export customs formalities.
- Pay all costs and duties needed to clear export customs.
- Deliver the goods to the selected carrier (if there are multiple carriers, the seller is obliged to transfer the goods to the first one).
- Provide the buyer with the usual transport document (for example, a negotiable bill of lading, a non-negotiable sea waybill, an inland waterway document, an air waybill, a railway consignment note, a road consignment note, or a multimodal transport document).
- Pay all fees connected with checking procedures (such as checking the quality, measuring, weighing, counting).
- Provide packaging service which is required for the transport of the goods. Packages have to be marked in the appropriate way.
The buyer also has a strict set of obligations following the CPT rules.
Here are the most important of them:
- Pay the prices connected with the contract of sale.
- Obtain any needed import licenses or other official authorization and carry out all customs formalities for the importation of the goods.
- Bear all risks of loss of or damage to the goods from the time they have been delivered to the carrier.
- Pay all costs relating to the goods from the time they have been put into the custody of the carrier.
- Pay all duties, taxes and other official charges connected with importation of the goods, as well as with transfer inside the country of delivery.
- Whenever the buyer is obliged to determine the time for dispatching the goods, he must give the seller corresponding notice.
- Accept the transport documents from the seller (e.g. an air waybill, bill of lading, etc.)
- Pay the costs of pre-shipment inspection in the country of importation.
- Pay all fees connected with obtaining the documents or equivalent electronic messages.
What is the difference between CPT and CIF Incoterms?
Both CPT (Carriage Paid To) and CIF (Cost, Insurance and Freight) are rules mentioned in the last edition of Incoterms (for the 2010 year).
The first and most important difference between CIF and CPT Incoterms lies in that the CPT terms can be used for all types of vehicles (road, rail, air, sea freight).
On the contrary, the CIF rules can only be used for sea and inland methods of transportation.
Also, the CIF Incoterms oblige the seller to pay for insurance, while CPT rules don’t have such clauses at all.
What is the difference between DAP and CPT Incoterms?
DAP stands for Delivered at Place.
Both DAP and CPT rules oblige the seller to deliver some products at a certain place in the buyer’s country.
However, there is still a significant difference between them.
They lie in the transfer of risks connected with loss or damage of goods.
In simple words, according to the CPT delivery terms, the risks of loss or damage to the goods pass after the seller transfers the goods to the carrier (i.e., loading the goods onto the vehicle/vessel).
According to the basis of DAP delivery, risks of loss or damage to the goods pass from seller to the buyer at the final point of destination.
Note: in practice, all responsibilities connected with the security of goods during the transportation lie on the carrier. So the Incoterms only decide which party has to regulate controversial situations with the carrier if such occurs.
What is the difference between CFR and CPT Incoterms?
Despite the common misconception, CFR means Cost And Freight (not Cost Of Freight).
CFR is very similar to the CIF rules, just without the insurance obligations for parties.
The first difference between CFR and CPT rules lies in the modes of transport which can be used.
As you already know, CPT terms apply to all modes of transport.
And the CFR Incoterms can be used only for sea or inland waterway transport.
What is the difference between CPT and CIP Incoterms?
CIP is an abbreviation for Carriage and Insurance Paid.
As you may assume, the CIP terms have clauses about insurance procedures, which is the main difference if you compare CIP and CPT rules.
So, under the CIP rules the seller is the party which is obliged to pay for the insurance policy.
Otherwise, CIP and CPT rules are the same.
What is the difference between FCA and CPT?
FCA is an abbreviation for Free Carrier.
Both FCA and CPT are rules of delivery introduced in the Incoterms 2010.
Free carrier rules state that the seller is obliged to transfer the goods to the carrier at the named place in the country of origin.
Such products have to be ready for export customs clearance.
When the goods are transferred to the carrier, the seller’s obligations under the FCA rules are considered as completed.
Does CPT Incoterms include insurance?
CPT Incoterms do not oblige parties to buy the insurance policy.
If the seller pays for insurance then this would be CIP Incoterms.
However, as a buyer, you can decide and pay for additional insurance even under CPT.
What kind of Incoterms were used before CPT?
The delivery conditions of CPT are a part of the Incoterms 2010 edition, which is the latest one and is relevant in 2020.
Previously, instead of the term CPT, the DCP (Delivered Costs Paid) delivery basis was used.
The first mention of DCP delivery rules was at Incoterms 1953.
What are the main challenges I’m facing while using CPT Incoterms?
As a buyer, to have to think of several important points while using CPT Incoterms:
- Transfer of responsibility for your goods happens when the seller delivers the goods to the carrier. From this point, if some issues with your products occur, you have to carry them out with the shipping company by yourself.
- There is no insurance mentioned in the CPT rules. If you want to secure your goods, you can either ensure them yourself or choose the CIP/CIF rules.
- Under the CPT rules, the seller is obliged to perform export customs clearance only. You have to be sure that you’ll be able to clear products in import before choosing to use CPT.
What is the Bansar role based on the CPT Incoterms?
In fact, choosing our services will help to avoid practically any hassle.
What kind of transportation modes can be used in the case of CPT Incoterms?
CPT Incoterms can be performed by any mode of transport including multimodal transport.