CPT Carriage Paid To and CFR Cost and Freight Incoterms 2020 are both part of the C-Group Incoterms, that strange breed of Incoterms whereby delivery and transportation occur at two different points.
Notwithstanding the similarities, CPT and CFR have four major differences that are important to know for both buyers and sellers involved in international transactions.
CPT Vs CFR: Mode of Transport
The first difference is quite straightforward and entails the fact that while CPT can be used with any mode of transport, CFR is eligible only for waterway shipments.
This is because CFR is one of the original Incoterms published by the ICC back in 1936; at the time, waterway transport was basically the only way to move goods around the globe.
CPT instead can be used with anything you want: air freight, railway, road, and of course waterway transport.
CPT Vs CFR: Containerized Cargo
The second difference is more nuanced, and refers again to the fact that CFR is quite an old Incoterm, if I can call it that way.
The point here is that CFR was devised in the 1930s, before the invention of the container, which occurred in the 1950s.
As such, the entire Incoterms rule is designed for goods that cannot be stored in a container, such as commodities or out of gauge (OOG) cargo.
In fact, delivery takes place when the goods are placed on board of the ship contracted by the seller for transport.
But that cannot happen with containerized cargo, because in that case it is the container, not the goods, that is delivered!
CPT instead identifies any place of delivery: therefore, goods are delivered when they are presented to the carrier at the container yard of the port (in the case of waterway transport).
No issue of “what is delivered” occurs with CPT, therefore it can be used with containerized cargo.
CPT Vs CFR: Place of Delivery
If CPT is more flexible than CFR, why should people use CFR in the first place?
Apart from the case of goods that cannot fit into a container, the allure of CFR stems from the fact that the place of delivery is straightforward: delivery takes place when the goods are placed onboard the ship.
With CPT the story is more complicated.
Essentially, delivery, i.e transfer of risk, can take place anywhere at origin: it can be a port, an airport, but also a warehouse, or the seller’s premises.
Because delivery means the moment when the risk shifts to the buyer, it is in the interest of the latter to precisely identify a place at origin when this occurs.
Otherwise, the default rule is that delivery takes place when the goods are loaded on the first carrier contracted by the seller.
Suppose that a Milan-based clothing factory sends apparel to a British retailer from the Milan airport.
Now, the parties may agree that the place of delivery be the Milan airport. In that case, anything that happens to the goods during transport from the factory in Milan to the airport is on the seller.
Yet if the place of delivery is not specified, it will be automatically the moment when the Italian firm loads the goods on the truck contracted to carry the goods to the terminal.
This time, anything that happens to the goods in between is on the buyer.
CPT Vs CFR: Point of Destination
A similar issue applies to the point of destination.
Now, you might remember that under the Incoterms of the C-Group, delivery as per transfer of risk and delivery as per physical transportation at destination occur at two different points.
Under CFR, the point of destination can be one place only: the port of arrival.
Suppose that a Tunisian farm sends dates to a French food manufacturer under CFR. The contract states:
CFR Cost and Freight (Marseille).
The point of destination is for sure the port of Marseille.
Now let us say that the Tunisian firm sends canned food that can be containerized. This time the parties decide to use CPT:
CPT Carriage Paid To (French company’s warehouse, Marseille).
Had they just wrote «Marseille», it could have been anywhere in Marseille. Actually, the default rule is that the point of destination, if not specified, can be chosen by the seller at his own convenience.
Therefore, it is again in the buyer’s interest to be as specific as possible in where he wants the goods to be delivered at destination, and make it explicit in the contract.
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