How ‘Carriage Paid To’ Works – Incoterm CPT


Birds eye view of sea freight shipping goods from China

The Incoterm Carriage Paid To (CPT) is one of 11 International Commercial Terms (Incoterms). It has its pros and cons for both the buyer and seller. The standardised international trade terms are published by the International Chamber of Commerce. Incoterms have simplified the complicated transactions of international trade for over 100 years.    

CPT is one of seven Incoterms suitable for any mode of transport, sea, road, rail, air or a combination of these. Four Incoterms Free Alongside Ship (FAS), Free on Board (FOB), Cost and Freight (CFR) and Cost Insurance and Freight (CIF) can only be used when goods are transported via sea or inland waterway.    

What is Carriage Paid To?

Carriage Paid To requires the seller to deliver the goods to the carrier chosen and also pay for transport charges. The buyer is responsible for any costs incurred after delivery of the goods. The seller obtains the export licence and the buyer organises the import licence. Transfer of risk and responsibility of goods transfers from the seller to the buyer as soon as the goods are delivered to the first carrier.

CPT is often used in conjunction with a destination, so both parties are clear which terminal the goods will arrive at.  

The Pros and Cons of CPT

There can be winners and losers in a CPT transaction but it can be a mutually beneficial Incoterm for both parties. Below are the pros and cons for the buyer and seller.

Pros of CPT for the Seller

  • No need to organise insurance.

  • Once the seller delivers the goods to the local terminal is where their responsibility ends.

  • The seller can use their preferred transport company.

Cons of CPT for the Seller

  • The seller is responsible for organising and paying for the transport of the goods.

  • The seller needs to gain quotes and calculate fees and costs to provide a total cost to the buyer and accept the risk that they may make an error.

Pros of CPT for the Buyer

  • There are fewer risks than other Incoterms for inexperienced buyers.

  • The buyer need not organise transit to the named place.

  • The buyer need not calculate export fees and taxes.

  •  By organising insurance, the buyer can be confident the policy will be adequate in covering the cost of the goods during transit.

Cons of CPT for the Buyer

  • The buyer takes responsibility for the goods early when the goods are taken in by the terminal operator. The risk transfer before the journey begins but the buyer isn’t the transit operator’s customer.

  • It’s not always obvious if Terminal Handling Charges (THC) are included in the freight rates. If the buyer doesn’t check if terminal costs are included in the CPT price, the charges can be a nasty surprise.

Which Incoterm is Right For You?

The 11 Incoterms can be categorised into four groups. The buyer and seller can agree on the Incoterm based on the preferences of each party.  

  • Seller arranges main transport, risk passes after main transport – DPU; DAP; DDP

  • Seller arranges main transport, but risk passes before main transit occurs – CFR; CIF; CPT; CIP

  • Buyer responsible for all carriage – EXW

  • Buyer arranges main carriage – FAS; FOB; FCA

Knowing the potential pitfalls of CPT for a buyer or seller, will ensure the goods arrive without an unwanted incident or unexpected costs. If you need help with sourcing a manufacturer in China, contact Vara Allied online.