CPT Incoterm 2020: Transfer of Risk vs. Transfer of Cost Explained Simply
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| Infographic illustrating CPT (Carriage Paid To) Incoterms 2020, showing seller responsibility up to delivery to the carrier with truck, cargo, ship, and airplane icons. |
Seller’s Responsibilities under CPT:
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Prepare, pack, and check the goods.
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Pay for transportation up to the named destination.
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Deliver the goods to the first carrier (even if multiple carriers are involved).
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Handle all export formalities, such as:
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Obtaining export licenses.
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Paying export duties.
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Provide the buyer with the usual transport document, like a freight-paid waybill, if customary.
Risk Transfer Point:
The risk of loss or damage passes to the buyer when the goods are handed over to the first carrier, not when they reach the final destination.
Buyer’s Responsibilities:
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Arrange and pay for insurance (if desired).
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Obtain any import licenses and pay import duties/taxes.
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Reimburse the seller for any documents requested additionally, such as:
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Certificate of origin
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Inspection certificates
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Other custom-specific documents.
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Documents typically provided by the seller:
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Freight-paid waybill or transport document
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Commercial invoice
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Other agreed documents required by the buyer (e.g., certificate of origin)
Frequently Asked Questions (FAQ) about CPT Incoterms 2020
1. What does CPT (Carriage Paid To) Incoterms 2020 mean?
CPT means the Seller is responsible for arranging and paying for the transportation (carriage) of the goods to a specified, named place of destination.
However, the Risk of loss or damage transfers from the seller to the buyer much earlier: when the goods are handed over to the first carrier contracted by the seller.
2. When does the risk transfer from the seller to the buyer under CPT?
The risk transfers from the seller to the buyer when the goods are delivered to the first carrier (e.g., the trucking company that picks up the goods).
This is a critical distinction, as the transfer of risk happens at the point of delivery (usually in the seller's country) and not when the goods arrive at the named destination.
3. Who pays for cargo insurance under CPT terms?
Under CPT Incoterms 2020, the seller is NOT obligated to purchase insurance for the main carriage.
Therefore, the Buyer is strongly advised to arrange and pay for insurance coverage from the point the risk transfers (delivery to the first carrier) to protect against loss or damage during transit.
4. Can CPT be used for sea freight only?
No. CPT (Carriage Paid To) is an Incoterm for any mode of transport, including air, road, rail, and sea freight, or a combination of these (multimodal transport).
Incoterms that are specific to sea and inland waterway transport include FOB, CFR, FAS, and CIF.
5. Who is responsible for import and export clearance under CPT?
Seller's Responsibility: The seller handles and pays for all export clearance formalities, duties, and taxes.
Buyer's Responsibility: The buyer handles and pays for all import clearance formalities, duties, and taxes in the country of destination, as well as any transit country formalities.
6. What is the key difference between CPT and CIP (Carriage and Insurance Paid To)?
The key difference is insurance:
CPT (Carriage Paid To) does not require the seller to purchase insurance.
CIP (Carriage and Insurance Paid To) requires the seller to purchase insurance cover for the goods in transit (minimum of Institute Cargo Clauses (A) or all-risks cover).
| Question | Answer |
| Q: When does the risk of loss or damage transfer from the seller to the buyer under CPT? | A: The risk transfers when the seller delivers the goods to the first carrier (or another person nominated by the seller) at the agreed-upon place of delivery, which is typically in the seller's country. |
| Q: Does risk transfer when the goods arrive at the named destination? | A: No. This is the most crucial distinction of CPT. Risk transfers early (at the first carrier), but the seller still pays the cost of carriage until the final named destination. |
| Q: If the goods are damaged during the main carriage, who is financially responsible? | A: The buyer is responsible. Since the risk transferred upon delivery to the first carrier, the buyer must file a claim with their insurance company (if they purchased one). |
| Question | Answer |
| Q: Is the seller obligated to purchase insurance under CPT? | A: No. CPT does not require the seller to purchase insurance. This is a key difference between CPT and CIP (Carriage and Insurance Paid To). |
| Q: Who should purchase cargo insurance in a CPT transaction? | A: The buyer is strongly advised to purchase insurance because they bear the risk from the moment the goods are handed over to the first carrier. |
| Q: What modes of transport can CPT be used for? | A: CPT is a multimodal Incoterm and can be used for any mode of transport, including air freight, rail, road, and containerized sea freight. ICC Publication No. 723E – Incoterms® 2020, page 49 (CPT section) |
| Question | Answer |
| Q: When does the risk of loss or damage transfer from the seller to the buyer under CPT? | A: The risk transfers when the seller delivers the goods to the first carrier (or another person nominated by the seller) at the agreed-upon place of delivery, which is typically in the seller's country. |
| Q: Does risk transfer when the goods arrive at the named destination? | A: No. This is the most crucial distinction of CPT. Risk transfers early (at the first carrier), but the seller still pays the cost of carriage until the final named destination. |
| Q: If the goods are damaged during the main carriage, who is financially responsible? | A: The buyer is responsible. Since the risk transferred upon delivery to the first carrier, the buyer must file a claim with their insurance company (if they purchased one). |