Carriage Paid To: Meaning and Costs of CPT 2020

Carriage Paid To incoterms: definition, costs, customs

CPT, short for Carriage Paid To, is one of the 11 Incoterms created by the ICC (International Chamber of Commerce) to ease international cargo transport. Learn all about the CPT Incoterms in 2022, shipping prices, customs and what are the responsibilities of the seller and the buyer when using Carriage Paid To. Get ready to ship your cargo internationally more efficiently.

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CPT Incoterms definition: responsibilities for seller and buyer

When using CPT terms for shipping, the seller is responsible for preparing the goods and clearing them for export at the country of origin. When using CPT in logistics operations, the seller must also organise and pay for all freight charges to ship the cargo to a previously designated location.

When using Carriage Paid To Incoterms in logistics operations, the seller must also organise and pay for all freight charges to ship the cargo to a previously designated location (agreed between seller and buyer). This previously designated location is usually but not limited to a port, warehouse or hub at the country of destination.

Responsibilities of the seller vs the buyer when using CPT: a summary

Seller duties when using CPT incoterms for freight shipping
  • Packing the goods and getting them ready for inspection
  • Export clearance, duties, documentation and taxes at the country of origin
  • Loading charges and origin/destination Terminal Handling Charges (THC)
  • Transport from the seller’s warehouse to the named location
Buyer duties when using CPT incoterms for freight shipping
  • Pay for the merchandise price
  • Import clearance, documentation, taxes and duties at the country of destination
  • Unloading the goods
  • Any transport charges from the named location to another address, including last-mile deliveries

INSURANCE COVERAGE

Who pays for insurance when using CPT Incoterms?

Unlike CIP (Carriage and Insurance Paid to), when using the Carriage Paid to Incoterms, the seller is not obligated to purchase insurance for the goods. Because the buyer holds the risk of the goods from the moment they are handed over to the first carrier, the seller might not be interested in purchasing insurance, as they will be liable only for a short part of the process. From this perspective, the buyer may be advised to purchase freight insurance valid from the point of handover of the goods to the carrier.

SHIPPING COSTS

How does freight pricing work under CPT?

When shipping under CPT shipping terms, the invoice must contain the named address for the points of destination and delivery and the freight costs with the carrier or carriers selected by the seller. The seller is responsible for covering the transport charges up to the point of destination. If that location is in the seller’s country, all international freight charges will be covered by the buyer.

For example, an Irish company sells 100k units of merchandise to a US buyer under CPT shipping terms. The US buyer names the port of New York as the point of destination. Both parties agree on the port of Dublin as the point of delivery.

  • The Irish company packs and clears the goods for export. The company arranges and pays transport costs from the port of Dublin to the named point of destination, the port of NY.
  • The Irish company hands over the goods to the first carrier at the port of Dublin, the point of delivery. Following 2020 CPT Incoterms regulations, the goods are considered delivered, and the risk is transferred to the buyer.
  • The carrier brings the goods to the point of destination at the port of New York.
  • The buyer clears the goods for import and covers unloading charges. The US company must also cover all domestic shipping costs in the US.

See other Incoterms for international shipping

You can read more about all other Incoterms for intermodal and all modes of transport:

CPT shipping term: point of delivery vs destination

CPT trade terms are not very common because both the seller and the buyer must agree on two different locations: the point of delivery and the point of destination. When using CPT shipping terms, the seller is obligated to pay for the transport charges until the previously agreed point of destination. However, the risk transfers to the buyer at the point of delivery. In multimodal shipments, the point of delivery is where the cargo is picked up by the first carrier.

CPT point of delivery vs point of destination

  • The point of delivery: under CPT shipping terms, the point of delivery is the point where the seller hands the cargo to the first selected carrier. This marks when the risk of the goods transfers from seller to buyer.
  • The point of destination: the named location. This is the point where the selected carrier hands the goods over to the buyer.
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CPT CUSTOMS CLEARANCE

CPT customs for export and import

When using CPT incoterms for export and import, the seller must cover all export expenses in the country of origin. The seller must prepare the goods for inspection and pay all export taxes and duties at the country of origin. Following the CPT Incoterm, the buyer is responsible for import clearance and paying all taxes, duties and charges generated by the cargo after it is handed over to the carrier at the point destination.

Although it is not specified in Incoterms 2020 CPT customs regulations, it is customary that the seller helps the buyer by providing any necessary documents for import. You can read below our page about customs regulations when shipping freight for more information.
More about freight customs

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More about CPT freight terms for import and export

Can the named address be in the exporter’s country when using CPT shipping?
Yes, when using CPT shipping terms, the seller and buyer must agree on the named location or delivery point to hand over the goods to the carrier. This location can be the port of origin in the seller’s country, the port of destination in the buyer’s country or any other location agreed upon by both parties. It is essential to specify the location when drafting the contract because, following the CPT Incoterm definition, the risk of the goods transfers from seller to buyer the moment the cargo reaches the designated point of delivery.
Who pays for insurance under CPT shipping terms?
When using Carriage Paid To Incoterms, the buyer is advised to purchase insurance for the goods, as they carry the risk during most of the trade. However, neither party has the responsibility of adding insurance coverage.
If the buyer uses CPT Incoterms, does it mean the shipping is free?
Using CPT freight terms means that the price already includes shipping from the seller’s location to the point of destination. It does not mean that the shipping is free, but that the final price already includes all transportation costs. For example, if the contract indicates “CPT London, Container Terminal”, the final price includes transportation costs until that point. The seller will contact and contract the freight forwarder or carrier, and the buyer will not have to pay for any extra shipping costs.
What are the advantages of using Carriage Paid To incoterms?
For the seller, using CPT freight terms means that the seller releases all responsibility early in the process. It can also be beneficial for the seller when they can negotiate good freight prices and do not want to handle import processes in the country of destination.
For the buyer, using CPT terms in logistics operations means that they do not have to negotiate freight prices with an international carrier and can designate the point of destination where the cargo will be delivered to.