CPT Incoterms 2020 – what does the Carriage Paid To rule mean?
In the dynamic world of international trade, precisely defining the rules of transport and settlement is key to transaction security. This is precisely why the Incoterms 2020 rules were created, which organise the responsibilities of the parties involved in the delivery of goods.
One of the Incoterms formulas is CPT (Carriage Paid To), which is used for shipments by various means of transport. Understanding how CPT works allows you to avoid disputes over costs and risks, as well as to properly prepare a sales contract or transport order.
And if you want to learn more about other Incoterms rules, read the article: What are Incoterms? International sales terms in practice >>>
Definition and meaning of the CPT rule: Carriage Paid To
The CPT Incoterms 2020 rule means that the seller delivers the goods to the first carrier and covers the costs of transport to a specified destination, while the risk passes to the buyer from the moment the above-mentioned cargo is handed over to the carrier.
This is a clear division: one party pays for the transport, the other bears the risk from that moment on.
In practice, CPT is used in situations where the parties want to combine the flexibility of different modes of transport, including maritime transport, with simple cost settlement. The seller is obliged to conclude a contract of carriage and hand over the goods together with the required transport document, e.g. a consignment note or bill of lading. The buyer, on the other hand, is responsible for any risk of loss or damage from the moment the goods are delivered to the carrier.
In summary, CPT is a rule whereby the seller covers the transport costs, but the risk of loss passes to the buyer at the time of loading onto the first carrier.
When to use CPT in international trade?
CPT Incoterms are worth using when the parties want to clearly divide the costs of transport and risk in international trade, especially for shipments carried out by different means of transport. This formula is flexible and can be easily adapted to the logistics chain – from road and rail transport, through air freight, to sea transport.
The Carriage Paid To rule works well in transactions where the seller has better access to carrier services or more favourable freight rates. In this arrangement, the seller can conclude a favourable transport contract, and the buyer benefits from a simplified purchasing process, as they do not have to organise the transport of goods themselves.
CPT is also often chosen when multimodal transport is involved, such as a combination of a lorry with a container at the port and further transport by ship. This allows the seller to ensure consistent transport from the point of dispatch to the agreed destination, while the risk of loss or damage is transferred to the buyer as soon as the shipment is handed over to the first carrier.
Who benefits from CPT Incoterms 2020 delivery terms?
The CPT Incoterms 2020 delivery terms are primarily beneficial for sellers who want to retain control over the organisation of transport and can offer their customers more attractive freight rates. This allows the seller to conclude a favourable transport contract, organise the transport of goods to the agreed destination and assist the buyer in obtaining all transport documents.
For buyers, CPT is a good solution when they prefer to simplify the purchasing process and do not have to look for a carrier themselves. However, the buyer assumes the risk of loss or damage to the goods as soon as the shipment is handed over to the first carrier. Therefore, this formula works best in relationships where the buyer trusts the seller’s experience and accepts that the risk passes to the buyer at an early stage of transport.
CPT can be particularly attractive for companies that prefer to entrust the seller with the organisation of transport, especially when several modes of transport are required. In this arrangement, the seller coordinates the entire process, and the buyer can focus on the price of the goods and the efficient receipt of the shipment at the designated destination.
Division of costs and risks in CPT Incoterms 2020
In CPT Incoterms 2020, the seller covers the costs of transport to the agreed destination, but the risk of loss or damage to the goods passes to the buyer when the cargo is handed over to the first carrier. This division allows for a clear demarcation of the parties’ responsibilities and limits disputes over liability.
The seller finances transport to the designated point, including the cost of loading the goods onto the carrier’s vehicle, and the buyer is responsible for unloading at the place of delivery and any costs and risks after the shipment is handed over to the carrier.
When does the risk pass to the buyer?
Under CPT Incoterms 2020, the risk passes to the buyer when the seller delivers the goods to the carrier at the agreed point. From that moment on, any loss or damage to the goods is borne by the buyer, even if the seller continues to cover the costs of transport to the destination.
It is worth remembering that if the seller uses several carriers, the key moment is when the shipment is handed over to the first carrier – then the risk passes to the buyer, regardless of the further course of transport.
Seller’s obligations in CPT Incoterms
The seller in CPT must conclude a contract of carriage with the selected carrier and pay all transport costs to the designated destination. They should also provide the buyer with a consignment note or other customary transport document confirming the loading of the goods.
In addition, the seller is responsible for the proper preparation of the cargo: proper packaging, possible marking of goods, as well as export customs formalities. They must ensure that the goods are delivered in accordance with the contract and within the required time limit, and that the consignment is handed over to the carrier in such a way that the buyer can easily collect it at the destination.
Buyer’s obligations under CPT Incoterms
The buyer is obliged to collect the goods at the agreed destination and, from the moment the cargo is handed over to the carrier, bears all risks of loss or damage. They must also cover the costs of unloading at the point of collection, import duties and customs formalities in the country of destination.
If the buyer wants the shipment to be insured during transport, it is up to them to decide whether to take out additional insurance – CPT does not require this from the seller.
It is also important that the buyer provides the seller with any instructions or guidelines regarding transport if they have specific requirements regarding the route or handling of the shipment.
Types of transport in CPT
CPT Incoterms 2020 can be used for almost all types of transport, which makes this rule extremely flexible. The seller can arrange for the transport of goods by lorry, rail, aeroplane, as well as by sea or multimodal transport.
In the case of container transport, the seller often hands over the shipment to the first carrier at a terminal or consolidation warehouse. From that moment on, the risk passes to the buyer. This makes CPT a good choice when it is necessary to combine several modes of transport in a single logistics process.
Summary
The CPT Incoterms 2020 (Carriage Paid To) rule is a practical solution in international trade that allows for a precise division of costs and responsibilities between the parties to a sales contract, regardless of the type of transport used.
In CPT, the seller concludes the contract of carriage and pays the costs of transport to the agreed destination, while the buyer bears the full risk of loss or damage from the moment the goods are handed over to the first carrier.
CPT is particularly advantageous for companies that want to benefit from the seller’s knowledge and freight rates, while at the same time valuing predictable transport costs. This formula facilitates the organisation of goods transport by various means of transport and allows for a clear definition of the obligations of both parties.
Frequently asked questions
What is CPT Incoterm?
CPT Incoterm is one of the 11 rules belonging to Incoterms 2020. It specifies that the seller will deliver the goods by handing them over to the carrier and pay for transport to the agreed destination. From the moment the goods are delivered to the carrier, all risk of loss or damage passes to the buyer.
How does CPT differ from CIF?
CPT covers any means of transport and does not require the seller to take out insurance, while CIF mainly applies to sea transport and requires the seller to protect the cargo during the voyage.
In CPT, the key factor is the place where the goods are handed over to the carrier, while in CIF it is the moment of loading onto the ship.
Read also: CIF Incoterms 2020 – what does the Cost Insurance and Freight rule mean? >>>
Is the CPT rule the same as DAP?
No, CPT and DAP differ in the scope of the parties’ obligations.
In CPT, the seller covers the transport costs, but the buyer’s liability for risk begins when the shipment is handed over to the carrier. In DAP, the seller bears the risk and costs up to the place of delivery where the recipient takes over the goods.