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What does CPT Term Mean in Shipping

If you are planning a shipping operation soon, you are definitely looking for a shipping method that relieves you of obligations, whether related to the material aspect or what is related to the protection of goods, and the best solution in these cases is to follow a method that helps you divide responsibilities between you and the supplier.

One of the best ways to help you share the responsibility of the goods with the supplier is “Group C” in incoterms, as the latter is obliged to bear all costs of transporting the goods to the agreed destination, while you as an importer bear all risks, losses or damages to the goods.

In this article, we will show you in some detail one of the terms of “group C”, which is the term “shipping and insurance paid_CPT” in shipping, while trying to complete all the aspects that may be useful to you in this term.

What does CPT Term Mean in Shipping

The meaning of CPT in shipping

CPT Meaning of Shipping: It is an abbreviation of the English word “Carriage Paid To” (Shipping and Insurance Paid To), which means the delivery of goods with transportation fees to the final destination, meaning that when you choose this term to carry out your shipping process, the supplier must pay the transportation fees until the place of arrival agreed with you, except for cargo insurance fees that fall under your responsibility as an importer.

For example, let’s say you import a container of solar panels from China and have an agreement with your supplier that shipping is done under a CPT agreement. In this case, the supplier will be obligated with you to ship the goods from the country of import to your country and to the place agreed upon between you, whether the port, your warehouses or any other place, but he is not responsible for the fate of the goods during the shipping trip, and you will be responsible for insuring the goods during the shipping process.

The shipping agreement “CPT is often used in the land and air freight process, so that the responsibility of the supplier ends when he delivers the goods to the means of transport, and then the risk passes to you as an importer, and this method is often used for bulk shipments that adopt the same shipping method.

Obligations of Importers and Suppliers under CPT Shipping Agreements

1. Obligations and fees borne by the importer

Importer’s Obligations: As an importer, there are obligations under the CPT “Carriage and Insurance Paid To” that you should know, namely:

  • Obligation to unload the cargo at the port of arrival.
  • Obligation to unload the cargo from the truck at the supplier’s port.
  • Commitment to transport goods after their arrival at the agreed port.
  • Obligation to bear all risks of loss or damage to the goods once the supplier delivers them to the port, even if the importer does not inform the supplier about the point of receiving the goods, for example: Suppose you did not tell the supplier where the goods were sent, how can the supplier send them? In this case, the supplier prepares the goods and sends them to the port, so the risks pass to you starting from the date agreed upon in the contract.

Documents and paperwork: Regarding the papers required to complete the shipping process for you as an importer:

  • Receive the transport documents for the shipment submitted by the supplier as long as it conforms to the contract.
  • Commitment to issuing the required licenses and permits, namely: the required import licenses and permits, import clearance, security clearance for transit and import, pre-shipment inspection, and any other official permits and approvals.

Fees: As an importer, you bear the bulk of the costs related to the shipping process through the CPT shipping agreement “transportation and insurance paid to”, including:

  • Obligation to pay for goods as specified in the contract of sale.
  • Obligation to pay the cost of customs clearance inspection of goods before shipment.
  • Obligation to pay taxes incurred on the shipping process.

2. Obligations and fees borne by the Supplier

Supplier Obligations: Under the CPT shipping agreement “Carriage and Paid To” the Supplier is committed to:

  • Commitment to the work of transporting and unloading goods at the port of shipment.
  • Commitment to the loading work of the container belonging to the port of shipment.
  • Commitment to the preparation, packaging and labeling of goods.
  • Obligation to bear the risks, losses or damages that may be caused to the goods until they are delivered to you.

Documents and paperwork: With regard to the papers required to complete the shipping process, the supplier is committed to the following:

  • Commitment to issuing export licenses and customs procedures related to the shipping process.
  • Commitment to prepare commercial invoices, documents and proof of delivery.

Fees: The supplier bears some costs related to the shipping process via the CPT shipping agreement “Transportation and Insurance Paid To”, including:

  • Obligation to pay the loading fees of the goods, and the cost of delivery at a specific place of destination.
  • Commitment to the cost of inspecting the goods before the shipment process.
  • The obligation to pay any costs related to the provision of the usual proof of delivery of the goods, so if the contract between the parties provides for this evidence as a transport document, the fees are on the supplier.
  • Obligation to pay any costs, fees or taxes related to the clearance of exports.
  • Obligation to pay the costs necessary to provide information or documents in connection with export clearance, if such information is requested.

Advantages and Disadvantages of CPT Shipping Agreement

When choosing any shipping agreement, you must first identify the advantages and disadvantages that it has in a way that ensures that you choose the optimal shipping method for your goods, and in this section we will introduce you to the advantages and disadvantages of the CPT shipping agreement “transport and insurance paid to”.

Features of using CPT shipping agreement “Carriage and insurance paid to”:

  • Reduces transportation risk for you.
  • You will not be responsible for handling shipping requirements and charges.
  • As an importer, you can benefit from the low prices included in the shipping process, when the supplier has better shipping purchasing power than the importer, although the supplier has the right to add its own profit margin.

Disadvantages of using CPT shipping agreement “Carriage and Insurance paid to”:

  • Increases the risk to the supplier.
  • If the shipping process is to be done by air, the risks will be greater for you as an importer, because you will take care of the shipment from the point of the first carrier and usually a truck.
  • You will bear the risk when the goods are in the possession and control of the supplier’s carrier, and you will not be aware of delivery until they arrive at the agreed destination.

Examples of CPT shipping agreements

The possibility of transporting goods subject to the CPT “Paid Transportation and Insurance To” by any means of transport, including multimodal transport, makes this agreement an ideal option for you if you want to have the field open to you regarding the shipping method you wish to adopt, as the CPT “Paid Transportation and Insurance To” shipping agreement works well when transporting goods by road from one place to another.

However, the “Paid To Transportation and Insurance” agreement has its drawbacks, as importers who import their goods from China and ship them to countries such as Saudi Arabia, UAE, Oman, Australia, Europe (Germany, France, Italy, Spain), and North America (USA, Canada) do not recommend using the CPT “Carriage and Insurance Paid To” agreement.

Importers may use the CPT “Paid To” agreement when importing goods from China and transporting them by truck to a neighboring country.

A CPT “Paid Transportation and Insurance To” shipping agreement can work well for cross-border trade, for example: if you want to ship your goods from Mainland China to Hong Kong, and sell these goods domestically, the “Carriage and Insurance Paid To” shipping agreement option will be beneficial for you in this case.

Q&A about the shipping agreement “transportation and insurance paid to”:

1. What is the difference between CIF and CPT in shipping?

The Freight Agreement “Carriage and Insurance Paid to CPT” states that the supplier is responsible for all expenses and risks of transporting the goods until they are delivered to the carrier, while the “Cost, Insurance and Freight” agreement “CIF” states that the supplier is responsible for all expenses of the goods including insurance and risks, until they are loaded onto the vessel at the port.

The CIF is applicable only to sea shipments and inland waterways, and requires the supplier to deliver the insured goods to the port of destination, whereas in the CPT the supplier does not need to purchase insurance, can deliver to any agreed point, and is not bound by sea freight.

2. What is the difference between “Delivery Fee Paid DDP” and “Transportation & Insurance Paid To_CPT”?

The supplier is obligated in the shipping agreement “delivery fee paid DDP” to deliver the shipment to the agreed destination, usually your own warehouse, and once the goods arrive at this destination, the responsibility for bearing the risk and ownership passes to you, while in the “Carriage and Insurance Paid to CPT” agreement the risks pass to you early once the goods are delivered to the carrier designated by the supplier.

With regard to customs duties and import duties, the “Delivery Fee Paid DDP” agreement includes these duties, while the “Transport and Insurance Paid to CPT” agreement does not cover them.

If you are interested in information about DDP Shipping from China to different countries, you can click on the following post links for the corresponding countries:

DDP Shipping From China To The UK

DDP Shipping From China To USA

DDP Shipping From China To Canada

DDP Shipping From China To Saudi Arabia

DDP Shipping From China To UAE

DDP And Door To Door Shipping From China To Kuwait

How to insure your goods when using CPT Shipping terms?

First of all, as an importer you must purchase freight insurance, as it is not included in the terms of the contract in the shipping agreement “Transport and insurance paid to CPT”, as CPT does not oblige the supplier or importer to purchase the insurance policy, however, you as an importer can decide and pay for additional insurance on your goods.

Remember that as an importer you are responsible for your goods from the moment the supplier delivers these goods to the carrier, so if you encounter some problems with your goods, you have to implement them with the shipping company yourself.

In conclusion, after you know the meaning of CPT in shipping, when dealing with any shipping method, you have to discuss the delivery points with the supplier and agree on all the details within registered and documented contracts, and you should realize that not understanding the shipping agreement “transportation and insurance paid to CPT” accurately may impose on you or the supplier additional fines and costs, due to the transfer of risks and cost at different points.

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