Unlike several other common Incoterms, such as Cost, Insurance, and Freight (CIF), Carriage To places a greater responsibility on the seller. But what is the meaning of Carriage Paid To (CPT) and how does it impact global trade?
This means the seller assumes all risks, including potential loss, until the goods are safely in the hands of the nominated party. The carrier could be any entity responsible for the transportation of goods, whether by ocean, rail, over-the-road or air.
It's essential to note that CPT contract terms might include Terminal Handling Charges (THC) in their freight rates. Let’s take a closer look at when to use CPT, its benefits and drawbacks, and its overall implication for improved transportation management.
Did you know? When using multiple carriers, risks and costs transfer to the buyer upon delivery to the first carrier.
CPT is ideal for buyers who want to reduce transportation risks. Since the seller assumes all responsibilities until the goods are handed over to the first carrier, the buyer is shielded from potential damages or losses during this phase. Additionally, CPT is beneficial for buyers who prefer not to handle export requirements and associated fees, as the seller takes care of these aspects.
While CPT offers several advantages, it's not suitable for all scenarios. For instance, if a buyer has specific insurance requirements or needs more control over the transportation process, CPT might not be the best choice.
Using CPT in contracts greatly reduces the confusion over liability and responsibility for costs, but it carries additional benefits shippers should know:
The seller handles export requirements and associated fees.
It simplifies the buying process, especially for international buyers unfamiliar with export regulations.
CPT might not be the most cost-effective option if the buyer can secure cheaper freight rates.This may be particularly true for those operating in high-niche industries, such as automotive or even aerospace.
Since the buyer assumes responsibility after the goods are handed over to the first carrier, the transfer of liability can be confusing. Here is an example.
Assume that the buyer has arranged transportation across multiple borders and across a singular waterway. If the same carrier is used for this process, even if technically switching between modes, the seller still carries the liability and cost responsibility.
However, if the carrier switches in the middle, the buyer assumes responsibility at this point. Simultaneously, the onus is on both parties to agree to the point at which the buyer has “received” the shipment. It is therefore plausible that if both parties agree to receivership occurring later in the process, this Incoterm isn’t truly correct.
Instead, a different term, Delivered at Place (DAP), is more appropriate. Clearly, there are many situations at which any Incoterm’s specifications could be manipulated to include a degree of liability that isn’t standardized within the specific term. That’s why it’s crucial to work with experts in transportation management to ensure the right terms are used in each situation.
Consider a scenario where a business in Germany is purchasing specialty equipment from a supplier in Japan.
The buyer isn't familiar with Japanese export regulations and is concerned about potential damages during sea transport.
The seller, having extensive experience shipping such equipment, offers to handle all export formalities and ensures safe delivery to the first carrier, a shipping company in Tokyo.
Given the buyer's concerns and lack of familiarity with Japanese export procedures, opting for CPT is the right choice, ensuring a smooth transaction and reduced risks. But if the buyer wants the buyer to be responsible for the transportation of goods to another point after reaching the destination port, DAP or additional Incoterms may be necessary.
Carriage Paid To is a versatile Incoterm that offers numerous benefits, especially for buyers looking to reduce transportation risks and avoid the complexities of export procedures. While it's an excellent option in many scenarios, it's crucial for both buyers and sellers to evaluate their specific needs, potential costs, and the nature of the goods being transported before opting for CPT.
Like all Incoterms, understanding the intricacies of CPT is essential for making informed decisions in international trade. And Crane Worldwide Logistics can help to achieve that goal. Request a quote to get started today.
With all incoterms it is important to understand the obligations of both the buyer and seller. There are eleven incoterms covering international shipments, are you aware of all the different options?
Crane Worldwide Logistics has prepared a comprehensive overview of all you need to know about Incoterms® 2020 shipping rules as well as free incoterms training video here
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FREE DOWNLOAD: You can download our free Incoterms chart which provides simple explanations of all eleven incoterms here
Click below for more information on shipping terms:
FCA (Free Carrier)
CPT (Carriage Paid To)
CIP (Carriage and Insurance Paid To)
DAP (Delivered at Place)
DPU (Delivered at Place Unloaded)
DDP (Delivered Duty Paid)
FAS (Free Alongside Ship)
FOB (Free On Board)
CFR (Cost And Freight)
CIF (Cost, Insurance And Freight)