CPT (Carriage Paid To) is the Incoterms® 2020 rule under which the seller hands the goods over to a carrier of its choice and pays the freight up to the named place of destination. Although the freight stays with the seller, the risk of loss and damage passes to the buyer as soon as the goods are handed over to the first carrier; the seller has no insurance obligation.
Why do costs and risk split at different places under CPT?
Like the other rules in the C group, CPT involves two separate points. The first is the place of delivery: the goods are handed over to the carrier here and the risk passes to the buyer. The second is the place of destination: the freight paid by the seller ends here. Contracts often state only the place of destination, for example "CPT Tbilisi". If the place of delivery is left blank, the risk passes on delivery to the first carrier chosen by the seller; the buyer ends up bearing the risk at a point it cannot control. The ICC therefore recommends that both points be stated in the contract as clearly as possible. A comparison of the transfer of risk with the other rules is in the entry transfer of risk under Incoterms.
What do the seller and the buyer each take on?
| Obligation | Seller | Buyer |
|---|---|---|
| Concluding the contract of carriage and paying the freight to the destination | Yes | No |
| Export customs formalities | Yes | No |
| Risk of loss and damage after delivery | No | Yes |
| Cargo insurance | Not obligatory | Not obligatory, but in the buyer's interest since the risk lies with the buyer |
| Unloading at destination | If included in the contract of carriage | In other cases |
| Transit and import customs, taxes | No (the seller, if transit costs are included in the freight) | Yes |
If the unloading cost at destination is included in the contract of carriage made by the seller, the seller cannot claim this amount separately from the buyer; the parties may agree otherwise.
For which types of transport is it used?
CPT is suitable for every mode of transport and for multimodal transport combining more than one mode: full truckload, part load, container, rail, air cargo. The ICC's Incoterms® 2020 checklist recommends CPT for an uninsured price and CIP for an insured price in containerised, multimodal or inland-terminal delivered shipments. For bulk or conventional cargo loaded onto a vessel, CFR and CIF are more suitable; the difference is explained in detail in the entry difference between CFR and CPT.
Example: a full truckload from Bursa to Tbilisi
The contract states "CPT Tbilisi, buyer's warehouse, Incoterms® 2020; place of delivery the seller's factory in Bursa". The seller has the truck loaded at the factory, the CMR is issued and the risk passes to the buyer at that moment. If the truck has an accident on the way to Georgia, the seller, who has paid the freight, is not liable for the loss. The buyer claims compensation from its own cargo insurance or from the CMR carrier. Had the same cargo been transferred in a container onto a ship in Mersin and then onto rail, the risk would still have passed at the first delivery at the factory.
The difference between CPT and CIP
The only difference between the two rules is insurance. Under the CIP rule, the seller must take out insurance at the level of Institute Cargo Clauses (A) "all risks". Under CPT there is no such obligation; the question of who holds the insurance is dealt with rule by rule in the entry who arranges insurance under Incoterms.
Common mistakes
- Thinking that the risk passes at the place of destination and therefore not taking out insurance on the buyer's side
- Not stating the place of delivery; the transfer of risk becomes disputable
- In a letter of credit sale, not keeping the date of the transport document consistent with the delivery date
- Using CPT for bulk cargo loaded directly onto a vessel; the risk passes when the goods are handed to the carrier at the terminal before being loaded on board, and CFR is more suitable for such cargo
How does Voltim Global support you?
In the international road transport of exporters selling on CPT terms, the moment of delivery to the first carrier is recorded with the loading date and place in the CMR; this record is used as evidence if the transfer of risk is disputed. Support with the places of delivery and destination to be written into the contract is available through regulatory consultancy.