Do you know what CPT incoterm is? It is a trade term that puts major risks on the seller.
Getting your items out of China is the most daunting task. There are many processes involved. You have to arrange the transportation, documents, and whatnot. Carriage Paid To term saves you from that.
Leeline Sourcing has been operating in China for over ten years and in our experience, the best shipping term is the one that keeps you out of hectic processes.
This blog will tell you about the Carriage-Paid-To trade term and how you can use it in your contract.
What is CPT incoterms?
CPT stands for Carriage Paid To, which is an international shipping term. It got released by the International Chamber of Commerce (ICC) to make trade easier.
In this term, a seller must clear the goods for export. And deliver them to the carrier. Or, it can also be to the person nominated by the buyer.
The seller handles all the risks and delivers the product. The stakes are transferred to the buyer once the items have been loaded on the shipment carrier (Ship or truck).
When to use CPT incoterms?
Carriage Paid To (CPT) is getting a lot of attention because of its advantages. This is the reason business owners prefer this incoterm. But, the question is when to use this agreement.
CPT works better when transporting goods overland from one destination to another. Thus, it is the best solution if you are moving items in cross-border trade. In this, there will be only a first carrier. Since the seller will assume all the risks, it will be at your advantage.
What are the Buyers and Sellers’ Responsibilities with CPT incoterms?
- Handle Export Packaging: The manufacturer has to prepare the products in export-friendly packaging.
- Loading charges: Next, if the seller moves the products from the warehouse using trucks, he has to pay the loading charges of the shipment company.
- Delivery to Port: The seller is responsible for handling all charges when transporting goods to the shipment port.
- Orignal Terminal Handling Charges: The seller has to pay OTHC charges at the handling terminal.
- Loading and Freight Charges: The seller pays freight charges and loading costs of the shipping company.
- Destination terminal handling charges: Also, the seller will pay the DTHC charges when the items have reached the destination terminal.
- Insurance: It is not a requirement. But, if the buyer wants, he can add insurance. But, he has to pay that insurance.
- Delivery charges to the final destination: If the items have been loaded at the port, the buyer has to pay the charges to move those products from the shipping port to the final destination warehouse.
- Unloading charges: After delivery, the buyer will pay the unloading charges of the truck.
- Import Duty and Fees: The buyer handles paying the import fees, duty, and other costs.
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Do not hesitate to contact Leeline Sourcing at any time regarding your shipments from China.
Pros and Cons of CPT incoterms
The seller assumes the risks in Carriage Paid To (CPT) until the goods are delivered to the final destination. The buyer’s risk begins after that. That means the seller will account for the products if something happens to the items during transit. That is one of the advantages of this international trade term.
Other advantages are:
- Reduces the transport risk for the buyer.
- It helps the seller make big sales because he is taking transport risks.
- The buyer doesn’t have to pay export-fees.
- The buyer doesn’t have to arrange export requirements.
As for the disadvantage, the buyer has to handle the insurance and its fee because that will help protect the assets when they are in transit. Moreover, the seller will have to handle the risks.
Other disadvantages are:
- There is a chance of increased risk for the seller because he has to handle everything till the risk/costs transfer point.
- If the shipping line of the method is the sea shipment, the buyer has to assume the risks since it will be the first carrier.
- The buyer can face problems if there are multiple carriers involved.
- In this, the buyer is responsible for clearing the transit and arranging import documents/fees.
CPT incoterms Risks
Carriage Paid To (CPT) is changing how we conduct international trade. Yes, it has advantages, but we also have to consider the risks. This chapter contains the risks involved.
It is essential to discuss the destination port location accurately in trade terms such as this incoterms. When the items reach that destination, the risks get transferred. The critical part here is the point of delivery. At this point, the seller will give all matters to the buyer once the shipment is loaded. If not done correctly, the buyer will face problems.
Secondly, the risks get transferred as soon as the items get loaded into the carriage. If the shipping method is a sea or air freight, the buyer will face the risks. As soon as the products get loaded on the ship, the buyer will be responsible for any mishaps.
It is crucial to discuss both risks, the shipping method, and the point of delivery. And have to make sure everyone is agreed upon destination.
CPT incoterms Example
Carriage Paid To is when the risks are transferred to the buyer after loading the goods to the first carrier.
Suppose you are a South Korean buyer and buying small parcel shipments such as glass bottles from China. CPT incoterms will work best for this type of situation. Since it is cross-border trade, there will be one carriage involved. The shipping methods will be a truck or air freight to move the items most of the time. Once the items get loaded on the truck, the risks will be transferred, and you will be responsible.
FAQs about CPT
1. Does CPT incoterm include insurance?
CPT means the seller is responsible for handling all the processes until the items get delivered to the named destination. Then, the seller will also do the export clearance, pay export fees, and deliver the products. However, CPT does not include insurance. Therefore, the buyer will have to pay for that.
2. What is the difference between CIF and CPT?
Terms like CIF and CPT incoterms are somewhat the same. However, there is a difference. The seller is responsible for all processes and expenses, and CPT. It applies to all means of transportation and freight methods.
Whereas CIF only applies to containerized ocean freight. In this, the seller will do all steps, including insurance, to deliver the goods to the final place.
3. What is CPT pricing?
Carriage Paid To pricing is the total cost of delivering the products to the selected destination. Here is what the CPT price includes:
● Cost to make the product
● Cost of export packaging
● Export Fees
● Seller’s warehouse to port delivery charges
● Loading charges
4. What are the terms and conditions under the CPT contract?
The seller is responsible for:
● Arranging carriage to named port
● The seller will pay all expenses related to getting the goods out of the country.
● The seller will pay for the product packaging
● Arranging commercial invoice
● Arranging Transportation
● Checking and selecting freight rates
The buyer is responsible for:
● Arranging import documents and paying for import fees/taxes
● Paying the cost of insurance
● Paying unloading costs and charges
● Paying transportation costs to his warehouse
International Chamber of Commerce (ICC) has released a variety of incoterms that either put the significant responsibility on the seller or buyer. Talking about the Carriage-Paid-To term, the seller has an important role. He has to arrange everything till the point of the agreed destination. With this, the buyers can easily make a trade.
If you have questions about international trade, you can contact us to solve them.
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