What Is Carriage Paid To?

Carriage Paid To (CPT) is an Incoterm defined by the International Chamber of Commerce (ICC) in its Incoterms® rules, which govern the delivery terms used in international trade contracts. CPT sets out the responsibilities of the seller and buyer for the delivery of goods, especially in relation to transportation costs, risk transfer, and delivery obligations. CPT can be used with any mode of transport, including multimodal shipments.

Definition and Core Responsibilities

Under the CPT term, the seller is responsible for arranging and paying for the carriage of goods to a named destination agreed upon in the sales contract. However, the transfer of risk from the seller to the buyer occurs earlier—once the goods are handed over to the first carrier, not upon arrival at the final destination. This separation of cost and risk is a defining characteristic of CPT and distinguishes it from terms like Delivered at Place (DAP) or Delivered Duty Paid (DDP), where the seller also retains risk for longer.

Once the goods are delivered to the first carrier nominated by the seller, the buyer assumes all risks associated with the shipment, even though the seller continues to bear the transportation costs to the final point.

Key Obligations of the Seller

The seller must deliver the goods, cleared for export, to the carrier or another person nominated by the seller at an agreed place. The seller is also required to contract for the transportation of goods to the named destination. If multiple carriers are used for successive legs of the journey, the risk still transfers upon delivery to the first carrier, unless otherwise specified in the contract.

Additionally, the seller must bear the cost of export clearance procedures, including duties, licenses, and customs formalities in the country of origin. The seller is not obligated to insure the goods during transit, but may choose to do so. If the buyer requires insurance coverage, it must be arranged and paid for separately by the buyer or negotiated explicitly with the seller.

Key Obligations of the Buyer

Under CPT, the buyer must accept delivery at the named place of destination and bears the risk once the goods are handed over to the first carrier. The buyer is responsible for import clearance, payment of import duties and taxes, and any costs incurred after the point of delivery to the first carrier.

Although the seller pays for carriage, the buyer should carefully consider arranging insurance to cover the period from when the risk transfers. This is particularly important in high-value or sensitive shipments, where damage, theft, or delay can result in significant loss.

Use in Practice

CPT is often used in containerized shipments where the seller has better access to transportation services or wishes to control logistics up to a specified point. It is frequently chosen in international transactions where the buyer prefers the seller to handle the logistics up to the destination port, terminal, or another agreed location, but is willing to take on the risk earlier in the supply chain.

One common example of CPT in action might involve a manufacturer in Germany selling machinery to a buyer in Brazil. The contract specifies "CPT São Paulo." In this case, the German seller must deliver the machinery to the first carrier (likely at a port or logistics hub in Germany), pay for the shipment to São Paulo, and handle export formalities. However, if the shipment is damaged en route, even while under the care of the shipping line paid for by the seller, the buyer bears the risk and must pursue a claim if needed.

Comparison with Similar Incoterms

CPT is closely related to Carriage and Insurance Paid To (CIP), another Incoterm where the seller must also provide insurance in addition to arranging transportation. The primary difference lies in the insurance requirement. CPT does not obligate the seller to provide insurance coverage, while CIP does, with a minimum level defined by the Institute Cargo Clauses (A) or a similar standard.

It also differs from Free Carrier (FCA), where the buyer typically arranges the main carriage, and Delivered at Place (DAP), where the seller bears both the cost and risk of transporting the goods to the final destination.

Contractual Considerations

When using CPT, it is essential that the sales contract or commercial invoice clearly defines the named place of destination. Ambiguity about this location can lead to confusion about responsibilities for delivery, unloading, and the transfer of risk. Parties should also document when the goods were handed over to the first carrier, as this moment defines when the buyer assumes risk.

Buyers should consider requesting a copy of the transport contract or transport document (e.g., bill of lading or airway bill) as evidence that goods were dispatched as agreed. This is particularly relevant in transactions involving letters of credit or other forms of trade finance.

The Bottom Line

Carriage Paid To (CPT) is a commonly used Incoterm in international trade that provides clarity on transportation costs and risk allocation. While the seller arranges and pays for transport to a named destination, the buyer bears the risk once the goods are handed over to the first carrier. CPT is versatile and suitable for various modes of transport but requires careful coordination between the parties to ensure that responsibilities and expectations are clearly defined in the sales contract.