Incoterms CPT - Carriage Paid To - explained

TransferWise
06.25.20
3 minute read

The Incoterms® rules are 11 rules maintained by the International Chamber of Commerce. They specify who is responsible for what during international trade – whether the buyer or seller takes on the cost and risk of each stage of the process.

In this article, you’ll find out all about the CPT Incoterms® rule, and when it is and isn’t a good idea to use it.

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CPT Incoterms® meaning

CPT stands for “Carriage Paid To,” and it should be followed by the place of destination – some place agreed by the buyer and seller in the buyer’s country.

With CPT, the seller has responsibility for:

  • Arranging all transportation up to the place of destination – including the main carriage
  • Export formalities.

The buyer, meanwhile, is responsible for:

  • Risk from as soon as the goods are handed over to the carrier
  • Import formalities
  • Anything after the goods have arrived at the place of destination.

Neither party is obligated to get insurance under this rule. That should be dealt with separately in the contract.

The key thing to note about CPT is that cost and risk transfer at different times. The buyer pays for the transportation all the way through to the place of destination – but the seller is shouldering the risk during the main carriage.

It’s therefore necessary to agree not only the place of destination, but also the place of delivery – that’s the place in the seller’s country where the goods are handed over to the carrier. If you don’t specify the place of delivery, it won’t be clear exactly when and where risk transfers from seller to buyer.¹ ² ³ ⁴

CPT Incoterms® 2010 and 2020

The Incoterms® rules are updated once a decade by the ICC – most recently in 2020. The previous set was in 2010.

There’s no legal obligation to use the latest set of Incoterms® rules. The contract just has to specify clearly which set is being referred to – so include the relevant year (i.e. 2010 or 2020).

The Incoterms® rules weren’t updated in 2015, 2016, 2017, or any other year between 2010 and 2020. If you see any references to Incoterms® rules 2015 and so on, they’re not accurate.

CPT wasn’t substantially changed in the 2020 rules.⁵ ⁶

CPT Incoterms®: when should you use it?

CPT is intended for use with containerized freight.

It’s worth taking care with this rule. Do bear the following in mind:

  • The buyer may not want to take on risk during the main carriage if they haven’t been involved in arranging the carriage or loading the goods. One alternative is FCA, where the buyer arranges the main carriage.¹ DAP, DPU and DDP are some options that give the seller the risk as well as the cost of the main carriage.
  • The CPT rule doesn’t specify about insurance: buyer and seller have to decide about that for themselves. CIP, by contrast, is essentially the same as CPT but gives the seller responsibility for sorting out insurance.²
  • CFR is a similar rule to CPT, but specifically for transportation by sea or waterway. It could be worth considering for non-containerized freight.⁷ ⁸
  • Handling charges may be a factor at the terminal. It’s worth planning ahead and making sure these costs are accounted for.²

Overall, CPT is more complex than some Incoterms® rules, but it often ensures for a smooth process in the seller’s country, as the seller alone oversees the delivery at that stage.

To make sure you opt for the right Incoterms® rule, don’t forget to brush up on the full list.


Sources:

  1. Trade Finance Global - CPT Carriage Paid To - Incoterms® 2020 Rule
  2. Incoterms Explained - Carriage Paid To
  3. AIT Worldwide - Incoterms CPT - Carriage Paid To
  4. Freightos - CPT Incoterms: Carriage Paid To Incoterms
  5. International Chamber of Commerce (ICC) - Incoterms® 2020
  6. ICC - What are the key changes in Incoterms® 2020? - ICC
  7. Incoterms explained - Cost & Freight
  8. Freightos - CFR Incoterms: Cost and Freight Shipping

All sources checked on 23 June 2020


This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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