What is CPT or “Carriage Paid To”

CPT is an Incoterms term under which the seller undertakes to organise and pay for the transportation of the goods to a destination agreed with the buyer. However, the risk of loss or damage to the goods transfers to the buyer at the moment the goods are handed over to the first carrier. The term frequently appears in international contracts as “carriage paid to Incoterms” or “CPT Incoterms 2020” and stands for Carriage Paid To.

CPT Incoterms apply to any mode of transport, including multimodal shipments. When choosing CPT delivery terms, the parties must clearly define the final destination point, as it affects the allocation of costs between the seller and the buyer.

CPT defines the parties’ obligations with respect to transportation, costs, and risk allocation but does not regulate the transfer of ownership.

CPT Delivery Terms

CPT (Carriage Paid To) means that the seller arranges and pays for transportation of the goods to the location specified by the buyer and completes export formalities. However, the risk of damage or loss passes to the buyer once the goods are handed over to the first carrier. In effect, the seller pays for delivery, but the buyer bears responsibility for the goods during transit.

CPT is often used when purchasing goods on the local market for subsequent resale internationally. For example, a trader may purchase grain from a farmer under CPT Odesa Commercial Sea Port terms. In this case, the farmer delivers and pays for transportation to the port and completes the export formalities. The trader, in turn, assumes the risks during transportation to the port and, once export formalities are completed, can freely resell the customs-cleared goods under other Incoterms (e.g., FOB or CFR) to foreign buyers.

Let us examine the obligations of the parties in more detail.

Seller’s Obligations

1. Prepare the goods in the agreed quality and quantity as per the contract and hand them over to the carrier.
2. Conclude, at their own expense, a contract of carriage to the agreed place of destination.
3. Complete all export customs formalities (where required).
4. Timely notify the buyer of the shipment and provide the documents necessary to receive the cargo (transport documents, invoices, etc.).
5. Bear all transportation costs up to the agreed destination, including loading charges.
6. Upon request and at the buyer’s expense, provide information necessary to obtain insurance.
7. Where needed, assist the buyer in obtaining documents and information required for import (at the buyer’s expense).

Buyer’s Obligations

1. Pay for the goods in accordance with the terms of the contract.
2. Obtain all necessary licences and permits for import and complete customs clearance of the goods.
3. Accept the documents from the seller and receive the goods upon delivery.
4. Bear all costs related to unloading (unless otherwise provided in the carriage contract).
5. Pay all customs duties, taxes, and other official charges for import.
6. Bear the risks of damage or loss of the goods from the moment they are handed over to the first carrier.
7. Where needed, provide the seller, at their request, with information required for export (at the seller’s expense).

It should be noted that under CPT terms, the seller is not required to insure the goods. If the parties wish to include cargo insurance, this must be expressly stated in the contract, or they should consider using CIP (Carriage and Insurance Paid To), which includes a mandatory insurance obligation.

When using CPT terms, it is essential to clearly define:

• The precise place of CPT delivery (e.g., specific terminal, port, or airport)
• The time of delivery
• Allocation of loading/unloading costs
• Responsibility for quality and quantity inspection

Transfer of Ownership and Risks

One of the most important aspects of the CPT terms is the transfer of ownership and risks. Unlike some other Incoterms conditions, under CPT Incoterms, the moment of risk transfer does not coincide with the actual receipt of goods by the buyer at the destination, which can create unexpected situations for parties unfamiliar with these terms.

Risk Transfer

According to CPT Incoterms 2020, the risk of loss or damage to the goods passes from the seller to the buyer at the moment the goods are handed over to the first carrier. This means that even if the goods are still in transit and have not yet arrived at the agreed destination, the buyer already bears the risks.

For example, if the goods are initially handed over to a road carrier for delivery to the port, and then to a sea carrier for further transportation, the risks pass to the buyer as soon as the goods are handed over to the road carrier.

It is important to consider this when planning CPT deliveries, as:

• If the goods are damaged during transit, the buyer is responsible, not the seller.
• The buyer must pay for the goods even if they are damaged or lost during transport.

Transfer of Ownership

It is important to understand that CPT Incoterms only regulate the allocation of risks and responsibilities, not the transfer of ownership. The transfer of ownership is governed by the terms of the contract and applicable law. Typically, ownership passes after full payment for the goods or at another moment defined in the contract.

This creates a situation where:

• Ownership may remain with the seller, while the risks have already passed to the buyer.
• The buyer may bear the risks for goods they do not legally own yet.

Documentary Confirmation of Risk Transfer

To clearly define the moment of risk transfer, proper documentary evidence is necessary. Such documents include:

• Waybills with the date and time of the goods being received by the carrier
• Goods receipt and transfer documents
• Bills of lading or air waybills
• Other documents confirming the transfer of goods to the carrier

Advantages and Disadvantages of CPT Terms

When concluding international contracts, it is important to weigh the advantages and disadvantages of using CPT Incoterms. Understanding the strengths and weaknesses of these terms helps the parties make an informed decision about the appropriateness of using CPT terms in a specific situation.

Advantages of CPT Terms

1. For the Seller:
   • Clear limitation of liability for transport to the agreed destination point
   • Risks pass to the buyer immediately after the goods are handed over to the first carrier
   • Ability to control the transportation process and choose optimal logistical routes
   • No obligation to insure the goods (unlike CIP terms)
   • Easier cost planning, as transportation costs are known in advance
2. For the Buyer:
   • No need to organise transportation independently
   • All logistics to the destination point are the seller’s responsibility
   • Opportunity to obtain a better price for the goods, as the seller may have better terms with carriers
   • Less administrative burden related to organising delivery and export

Disadvantages of CPT Terms

1. For the Seller:
   • Need to organise and pay for transportation to the agreed destination
   • Responsibility for selecting a reliable carrier
   • Possible difficulties with export documentation
2. For the Buyer:
   • Risks related to transportation pass to the buyer at an early stage
   • Limited control over the transportation process
   • Responsibility for goods damaged during transportation, even if the buyer did not choose the carrier

Comparison of CPT with Other Incoterms

To better understand the specific features of CPT Incoterms, it is helpful to compare it with other commonly used Incoterms:

CPT (Carriage Paid To) vs CIP (Carriage and Insurance Paid To)

• Main difference: Under CIP, the seller is obliged to provide insurance for the goods, whereas under CPT, there is no such obligation.

CPT vs DAP (Delivered at Place)

• Under CPT, the risks transfer to the buyer once the goods are handed over to the carrier.
• Under DAP, the risks transfer to the buyer only upon delivery of the goods at the place of destination.

CPT vs FCA (Free Carrier)

• Under CPT, the seller pays for the transportation to the agreed place of destination.
• Under FCA, the buyer pays for transportation after the goods have been handed over to the carrier.

Key Differences Between CPT Incoterms 2020 and CPT Incoterms 2010

The updated CPT Incoterms 2020 include several important changes and clarifications compared to the 2010 version:

1. Reorganisation of the structure: In the 2020 edition, the order of the clauses has been changed. Sections dealing with delivery (A2/B2) and risk transfer (A3/B3) now appear at the beginning of the document, emphasising their importance. In the 2010 version, this information appeared later.
2. Increased focus on transport security: The 2020 edition places greater emphasis on security. Clause A4 (Carriage) explicitly states: “The seller must comply with any transport-related security requirements for transport to the destination”. This specific wording did not appear in the previous version.
3. More transparent cost allocation: In Incoterms 2020, all costs are listed in a single section (A9/B9), making the allocation more transparent. In the 2010 version, costs were spread across several different clauses.
4. Visual presentation: CPT Incoterms 2020 include schematic illustrations and improved visual formatting to make the rules easier to understand, particularly in terms of the division of responsibilities, costs, and risks. The obligations of the parties are now also laid out in a mirrored format (first the seller, then the buyer), making comparisons easier.

Conclusions

CPT (Carriage Paid To) has the following key features:

• The seller pays for delivery to the agreed destination and completes export formalities
• Risk transfers upon delivery to the first carrier, not upon arrival at the destination
• The buyer arranges insurance (if required) and handles import formalities
• Suitable for all modes of transport, including multimodal shipments

This Incoterm is particularly effective when purchasing goods on the domestic market for subsequent export, or in cases where the seller wishes to control logistics but not bear transport-related risks. When applying CPT Incoterms 2020, it is essential to clearly define the place of destination and the moment of risk transfer in the contract.

If you need legal advice regarding the use of CPT terms in international trade contracts, feel free to contact me by email, Telegram, or WhatsApp – I will help you structure the deal in a way that best protects your interests.