Advantages and disadvantages of Carriage Paid To (CPT)
The pros and cons of CPT depend on which side of the deal you are on: the buyer or the seller. The advantage of CPT to the buyer is that it significantly reduces the risk of transporting the goods. On the contrary, it increases the risk of transporting the goods for the seller, as the carrier is liable for any loss or damage before the goods reach them.
However, CPT may be beneficial to sellers because it may make buyers more inclined to buy. For example, if a buyer wants to purchase a product but is hesitant to do so because of the risk of shipping from a distant supplier, they may not, or they may purchase from a supplier that is closer but not necessarily better. If the supplier bears all the costs until they reach the carrier, reducing the buyer's risk, the buyer may be more inclined to buy.
CPT is also good for the buyer because it eliminates all the paperwork and bureaucracy. The seller will handle all legal aspects of transporting the goods, such as arranging carriers, handling duties, taxes and other formalities related to exporting the goods.
Carriage Paid To advantages
Reduce buyer's transportation risk
Helps the seller make a sale by assuming a greater share of the shipping risk
Buyer is not responsible for handling export requirements and export charges
Carriage Paid To disadvantages
Increase the seller's risk
If it is by sea or air, the buyer's risk is higher because the buyer bears the risk from the first carrier (usually the truck)
The buyer is responsible for transit clearance
CPT and Cost, Insurance and Freight (CIF)
Cost, insurance and Freight (CIF) are similar to CPT but slightly different. The main difference is that, according to Incoterms, CIF is only applicable to sea transportation. The seller is responsible for the cost, insurance and freight of transporting the goods until they are loaded at the port. From then on, the onus is on the buyer.
The International Chamber of Commerce (ICC) defines a total of 11 Incoterms. CPT, on the other hand, covers multiple modes of transport, such as land and air, including sea, and imposes liability on the seller only before the goods are transferred to the first carrier during transit.
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