Difference between CPT and DAP Incoterms 2020
Delivery At Place (DAP) and Carriage Paid To (CPT) are two very similar Incoterms that often cause confusion among shippers. Although both DAP and CPT can be used for all modes of transport, it is important to know the differences between CPT and DAP before deciding which Incoterm is better for your particular situation. This guide will clear all doubts and help you choose between CPT and DAP when shipping.
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CPT vs DAP Incoterms: What are the differences?
The tricky part of choosing between CPT and DAP when shipping is that both Incoterms share many similarities. In general terms, in both CPT and DAP, the seller is responsible for arranging and paying for the transport of the goods to the named location defined under the contract.
However, the main difference between the CPT and DAP Incoterms is that the point where the risk transfers from the seller to the buyer are different in each case.
- Under DAP shipping terms, the seller is responsible for the costs and risks until the goods are delivered to the named place of destination, usually the buyer’s warehouse or distribution hub.
- Under CPT, the seller is responsible for the costs until the goods are delivered to the named place of destination, but the risks are transferred to the buyer early on, at the moment when the goods are loaded and handed to the selected carrier.
This difference in risk transfer between CPT and DAP may seem small, but it has a significant impact in case something goes wrong. Under CPT, if there is any problem or loss during the main carriage of the goods, the seller is not held responsible for them. The buyer will have to cover the costs of the loss.
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CPT vs DAP: Locations defined under the contract
When shipping under the CPT or DAP Incoterms, the contract established between both parties must include the important locations that determine the cost and risk transfer points.
For shipping under CPT:
The agreement must establish the delivery point and the named destination. The delivery point is where the seller will deliver the goods to the carrier, and it marks the point where the risk transfers from the seller to the buyer.
The named destination is the final location where the goods must be delivered, normally a location defined by the buyer. This is the point that marks where the costs transfer from the seller to the buyer.
For shipping under DAP:
In this case, only one location needs to be named: the delivery place. This is the point where the goods must be delivered and where the costs and risks transfer from the seller to the buyer. In most cases, it is a location in the country of destination, either a warehouse or hub defined by the buyer.
When to use the CPT or DAP Incoterms
Both CPT and DAP Incoterms can be used for any mode of transport, but when it comes to practical terms, there are different situations in which they are advised as the best solution.
The CPT is an Incoterm that can bring quite some risks since the costs and risks are transferred at different points of the operation. For this reason, CPT is mostly used when transporting cargo overland from one place to another, for example, when moving goods from warehouse to warehouse.
On the other hand, the DAP Incoterm is often used when shipping by sea or air freight from the seller’s premises to the buyer’s.
Differences between CPT and DAP Incoterms 2020: a summary
| CPT | DAP | |
|---|---|---|
| Type of transport | All modes of transport | All modes of transport |
| Export duties | Costs: Seller Risks: Seller | Costs: Seller Risks: Seller |
| Loading the goods | Costs: Seller Risks: Seller | Costs: Seller Risks: Seller |
| Freight charges | Costs: Seller Risks: Buyer | Costs: Seller Risks: Seller |
| Import charges | Costs: Buyer Risks: Buyer | Costs: Buyer Risks: Buyer |
| Unloading and handling upon arrival at the named place | Costs: Buyer Risks: Buyer | Costs: Buyer Risks: Buyer |
| Risk transfer | Once goods are loaded on the carrier at the origin | When goods are made available for unloading at the destination |
Want more information about Incoterms?
As you have seen, the differences between CPT and DAP Incoterms 2020 may seem small, but they can have a significant impact on your operations. Understanding the shipping terms is crucial before arranging the international transport of goods. To help you understand the Incoterm topic better, check our dedicated guides below:
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FAQ – Comparison and differences between CPT vs DAP Incoterms
Is it mandatory to add insurance when using CPT or DAP shipping terms?
Neither the seller nor the buyer has an obligation to purchase insurance when shipping under CPT or DAP delivery terms. However, both parties are advised to add insurance coverage to the cargo to avoid loss and complications during the parts where the responsibility falls on them.
What is cheaper, CPT or DAP?
When comparing CPT vs DAP, it is hard to say which one is cheaper. It depends on the type of cargo, the total freight charges and the local import taxes.
What are the advantages of CPT vs DAP for the seller?
The main advantage for the seller to ship under the CPT Incoterm instead of DAP is that the risk transfers to the buyer at the named point of delivery. This minimises the risk for the seller because any problem or loss during transit is at the buyer’s expense.
Who pays for import and export fees when shipping under CPT and DAP?
The responsibilities of each party when shipping under CPT and DAP are very similar:
- The seller is responsible for the export procedures in the country of origin, including any costs associated with it.
- The buyer is responsible for the import procedures in the country of destination, including any costs associated with it.
The seller or the buyer may require additional information from the other party for organising the necessary customs documents or authorisations.