CPT Incoterms 2020: Carriage Paid To – Full Explanation with Case Study
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CPT (Carriage Paid To) is one of the 11 Incoterms 2020 rules published by the International Chamber of Commerce (ICC). This term is applicable to all modes of transport — especially relevant in global trade where multimodal transport is used.
What Does CPT Mean?
CPT – Carriage Paid To means the seller is responsible for arranging and paying for the transport of goods to a named destination (e.g., a port or terminal). However, the risk transfers to the buyer as soon as the goods are handed over to the first carrier. This distinction between cost and risk is what makes CPT unique.
Key Responsibilities of the Seller Under CPT:
- Packing and labeling goods for export
- Export documentation and formalities
- Transportation to the agreed destination (main carriage)
- Paying freight charges to the named place of destination
Key Responsibilities of the Buyer Under CPT:
- Import clearance and duties at the destination
- Insurance (optional but recommended, as risk shifts early)
- Unloading and onward transport after destination
Risk vs. Cost in CPT
Although the seller pays for freight, the risk of loss or damage transfers to the buyer once the goods are delivered to the first carrier. This is a critical point to understand for cargo insurance and responsibility handling.
Real-World Case Study: Exporting Garments from Bangladesh to France
Scenario: A garment manufacturer in Dhaka exports 1,000 units of ready-made garments to a fashion retailer in Paris under CPT Incoterms.
- Named place of destination: Charles de Gaulle Airport (CDG), Paris
- Seller’s obligation: The seller arranges air freight via DHL and pays all charges up to CDG.
- Risk transfer point: When DHL receives the goods in Dhaka
Outcome: During transit, a portion of the cargo is damaged. Since the goods were damaged after being handed to the carrier, and CPT was agreed upon, the buyer bears the risk and must handle insurance claims.
This example shows how important it is for buyers to arrange insurance when using CPT terms.
When Should You Use CPT?
CPT is suitable when the seller has better access or cheaper rates with carriers and can manage export formalities. It is often used for air freight, road transport, or multimodal shipments where control over main carriage is needed.
Advantages of CPT:
- Sellers can optimize freight cost through preferred carriers
- Works well with consolidated or multimodal logistics
- Applicable to both domestic and international trade
Disadvantages of CPT:
- Buyers bear risk earlier than expected
- Insurance is not the seller's responsibility
Difference Between CPT and CIF/CIP
- CPT vs. CIF: CIF is only for sea freight and includes insurance (from seller). CPT is for all transport modes and doesn’t include insurance.
- CPT vs. CIP: CIP is similar to CPT but includes seller-paid insurance.
Risk Transfer Under CPT Incoterms 2020
Correct and precise explanation:
Under CPT (Carriage Paid To), the risk transfers from the seller to the buyer once the goods are handed over to the first carrier at the agreed place of shipment. This risk transfer happens even though the seller pays for transportation to the named place of destination.
It is essential to understand that the first carrier may be a freight forwarder, trucking company, or logistics provider who collects the goods from the seller’s warehouse or facility.
Example:
If a seller in Dhaka ships garments to Paris using DHL under CPT terms, the risk passes to the buyer the moment DHL receives the goods in Dhaka—not when they arrive in Paris.
Suggested contract phrase:
"Risk shall pass to the buyer when the goods are handed over to the first carrier at the agreed place of shipment, in accordance with CPT Incoterms® 2020."
When handling payments under CPT (Carriage Paid To) terms using a Letter of Credit (LC), things are generally smoother compared to FCA. That’s because under CPT, the seller arranges and controls the carrier, especially within their own country, making documentation and compliance easier.
In the LC (using SWIFT MT700), the place of receipt should still be clearly stated in Tag 44A—this is important because that’s where delivery is considered to have taken place under CPT. As for timing, the latest shipment date (Tag 44C) or shipment period (Tag 44D) should ideally be extended by a few days—often about 21 days. This is because CPT focuses on when the seller hands over the goods to the carrier, not when the goods physically leave the country.
Since the seller controls the transport arrangement, they can easily get a transport document from the carrier, showing themselves as the shipper or consignor. If it’s a sea shipment, they can even get an onboard bill of lading—though the onboard date might be later than the date when they handed over the goods. According to ICC Incoterms 2020 guidelines... source (e.g., iccwbo.org)
Frequently Asked Questions (FAQ)
What does CPT stand for in Incoterms?
CPT stands for "Carriage Paid To". It means the seller pays for transport to the agreed destination, but risk shifts to the buyer once goods are handed over to the first carrier.
Is CPT applicable to sea freight only?
No, CPT applies to all modes of transport, including road, rail, air, and sea — especially useful in multimodal shipping.
Does the seller need to provide insurance under CPT?
No, under CPT, the seller is not obligated to provide insurance. It's the buyer's responsibility to insure the goods if necessary.
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