The purpose of this article is provide a general background to one of the most important terms in international contract drafting, Incoterms 2010 CPT.
General Provisions of CPT
CPT (Carriage Paid To) means that the seller delivers the goods to the carrier of another person nominated by the seller at an agreed place and that the seller must contract and pay the costs of carriage necessary to bring the goods to the named place of destination. This means that the seller fulfils his obligation to deliver at the point when he hands the goods over to the carrier, not when the goods reach the place of destination.
The most important issue here is to understand that the risk and costs are transferred at different places. The risk passes to the buyer at the point of delivery to the carrier, whereas the costs are covered by the seller up to the agreed place of destination. This is why It is crucial for the parties to identify as precisely as possible in the contract both the place of deliver and the place of destination.
What if several carriers are used for the carriage to the agreed destination point and the parties failed to agree on a specific point of delivery? The default position under the Incoterms rules is that the risk passes when the goods have been delivered to the first carrier at the place that the seller chooses (i.e. buyer has no control). In order to override the default rule, the parties must specify in their contract the stage or place at which the risk should pass to the buyer.
Also, note that if the seller incurs costs under his contract of carriage related to unloading at the named place of destination, the seller cannot recover such costs form the buyer (unless otherwise agreed between the parties).
Seller’s Export Clearance Obligations
CPT requires the seller to clear the goods for export, but not import (including any import duty or paperwork). The export clearance obligation means that the seller will have to obtain, at his own risk and expense, any export license and carry out all custom formalities necessary for the export of the goods as well as for their transport through any country prior to the point of delivery.
Seller is Obligated to Procure the Carriage Contract, but Not Insurance
While the seller is obligated to procure a contract for the carriage of the goods from the agreed point of delivery to the named place of destination at his own expense, no such obligation for the insurance contract exists. The seller is not obligated to make a contract of insurance, but the seller must provide the buyer, at the buyer’s request (as well as the buyer’s risk and expense) with information that the buyer needs for obtaining insurance.
Other Seller’s Obligations
In addition to the obligations above, Incoterms 2010 spell out other obligations of the seller under the CPT, such as: delivery obligations, allocation of costs, notices to the buyers, delivery documents, packaging, assistance with information, et cetera.
Let’s look now at the buyer’s obligations.
Buyer’s Obligation to Pay
The buyer’s first and foremost obligation is to pay the price of the goods as provided in the contract of sale.
Buyer’s Import Clearance Obligations
One of the other principal obligations of the buyer is to obtain, at its own risk and expense, any import license or other official authorization and carry out all customs formalities for the import of the goods.
The buyer must also ensure that everything is done in order for the goods to pass through any third country after they have been shipped from the seller’s country. The chief exception is if such obligation is for the seller’s account under the contract of carriage.
Other Buyer’s Obligations
In addition to the obligation’s above, Incoterms 2010 set forth other important obligations of the buyer under the CPT, including: taking delivery, inspection of goods, notices to the seller, assistance with information and other obligations. Some of these obligations may have important consequences with respect to the allocation of costs and transfer of risk under the CPT.
Contact Sherayzen Law Office NOW for Help with International Contracts
Obviously, the article above only gives some broad background information on CPT and should not be relied upon to make a legal determination in your particular situation. Rather, if you are about to engage in a transaction involving an international delivery of goods, contact Sherayzen Law Office for legal help. Our experienced international contract firm can assist you at every stage of your contract: negotiation, drafting and enforcement. We will provide a rigorous representation of your interests, protect your contractual rights, and strive to ensure that the contemplated transaction goes as smoothly as planned.