In international trade, CPT is an important trade term. When using CPT, the buyer and seller will clarify their respective responsibilities, costs and risk transfer points. The following is an introduction to CPT in international trade to help you better understand and apply CPT.

Learn more: The 11 Common International Trade Terms

What is CPT

CPT, or Carriage Paid To, is one of the international trade terms. It means that the seller completes the delivery obligation after handing over the goods to the designated carrier, and the seller is responsible for arranging transportation and paying the freight for transporting the goods to the designated destination.

Allocation of Responsibilities Between Buyers and Sellers Under the CPT Agreement

Seller’s responsibilities

• Conclude a transport contract: The seller is responsible for concluding a transport contract for transporting the goods to the designated destination and paying the relevant freight.
• Handle export formalities: The seller must handle all customs formalities required for the export of goods and pay relevant taxes and fees.
• Provide transport documents: The seller must provide documents proving that the goods have been handed over to the carrier.
• Ensure the integrity of the goods: The seller must ensure the integrity of the goods during transportation and meet the contract requirements.

Buyer’s responsibilities

Handle import formalities: The buyer needs to obtain an import license or other official approval documents, handle customs formalities required for the import of goods, and pay relevant taxes and fees.
Bear post-delivery risks: The buyer needs to bear all risks and costs after the goods arrive at the destination.
Accept documents and goods: The buyer needs to accept the transport documents provided by the seller and pay the purchase price.

Characteristics and Applicable Scenarios of CPT Agreement

Characteristics of CPT

• Clear costs: The seller only needs to pay the freight to the designated destination, and other costs are borne by the buyer, which is convenient for cost control.
• Clear responsibilities: CPT clearly divides the responsibility and risk transfer points to reduce the possibility of disputes between the two parties.
• Uneven risk sharing: The seller pays the freight to the destination, but the risk of the goods is borne by the buyer after loading, which may bring additional risks to the buyer.
• Potential disputes: In the event of cargo damage or cargo delay, liability disputes may arise due to uneven risk division.

Applicable scenarios

CPT terms are particularly suitable for goods that arrive at the destination by multiple modes of transportation, and the following situations apply:

• The buyer has strong logistics operation capabilities at the port of destination or destination.
• The buyer and seller want to clarify the sharing of transportation costs and the transfer of risks.
• Freight settlement needs to be completed before the designated place, but the risk is expected to be transferred to the buyer after loading.

Operational Process of Using CPT

The actual operation steps of CPT are as follows:

Signing the contract
Both parties confirm the CPT terms and sign the contract.

Prepare the goods
About 10 days before the departure date, ask the freight forwarder of the foreign customer for the standard form of the booking order, fill it out as required and send it back to the shipping company for booking.

Delivery and transportation
Within the specified period, the seller will deliver the goods to the designated carrier and pay the freight.

Risk transfer
The risk of the goods is transferred to the buyer after loading the transport vehicle.

Transportation and delivery
When the goods arrive at the designated location, the buyer is responsible for receiving the goods and paying the relevant fees (such as import tariffs and customs clearance fees).

Comparison of CPT with other trade terms

CPT is very different from other common international trade terms such as CIF (Cost, Insurance, and Freight) and FOB (Free On Board). The following is a comparison between them:

Difference between CPT and CIF

• CPT: The seller bears the transportation costs, but is not responsible for insurance. The risk is transferred to the buyer when the goods are handed over to the carrier.
• CIF: The seller not only bears the transportation costs, but also needs to insure the goods. The insurance coverage usually includes the risks during transportation, and the seller is responsible for the costs and risks until the goods arrive at the designated port of destination.

Difference between CPT and FOB

• CPT: The seller is responsible for the transportation costs, but the risk is transferred to the buyer after the goods are handed over to the carrier.
• FOB: The seller is responsible for delivering the goods to the ship at the designated port. The transportation costs are usually borne by the buyer, and the risk is transferred to the buyer when the goods cross the ship’s rail.

Problems Faced by CPT

First of all, as an importer you must purchase freight insurance because it is not included in the contractual clause of the transportation agreement “Transportation and insurance payable to CPT” because CPT does not obligate suppliers or importers to purchase insurance policies, however, you as an importer Additional insurance for your goods can be decided and paid for.

Remember that as an importer, under CPT conditions, the risk is transferred to the buyer once the goods are loaded on the means of transport. Therefore, damage to the goods during transportation is usually borne by the buyer. Therefore, if you encounter some problems with your goods, you must resolve it yourself with the transport company.

As a clear international trade clause, CPT enables buyers and sellers to share responsibilities more clearly in terms of costs and risks. CPT terms are applicable to a variety of modes of transportation, which helps to improve the transparency and efficiency of transactions and enable transactions to proceed smoothly.