To provide safety and security to both the sellers and the buyers, the ICC, the international chamber of commerce, has included several terms based on different levels of responsibilities.
Both CPT and CIF imply that the sellers should bear the responsibility. In CIF, the sellers are supposed to bear the risks, and besides, insurance is added to the goods.
CIF vs CPT
The difference between CIF and CPT is that CIF includes insurance, whereas the latter does not. During the transportation of goods, especially while shipping them, either the seller or the buyer is supposed to bear the risks along with the responsibilities. The company or the organization that transports the goods doesn’t usually make any commitments, and they transport goods at the own risk of either seller or buyer.
Cost insurance freight (CIF) applies only to maritime shipping and per incoterms. According to this, the seller should bear the responsibility for the insurance and cost of the freight. Until the freights are securely handed over to the buyer, it is the responsibility of the seller.
Carriage paid To (CPT) hands over the significant responsibility and the price of the goods upon the seller. It implies that the seller must take care and bear the risks until the goods are carefully transported. Until the goods are handed over securely to the destined buyer, the sellers are responsible for any unfortunate damage or loss.
Comparison Table Between CIF and CPT
|Parameters Of Comparison||CIF||CPT|
|Insurance||CIF includes insurance.||CPT does not include insurance.|
|Risk||Comparatively reduces the risk of the seller as the goods are insured.||Increases the risk of the seller as he takes charge of the goods.|
|Definition||The seller is responsible for the safety of the freight and also for the insurance of the goods.||The seller is responsible for the damage, loss, and any risk of the freight but not for the insurance.|
|Payment responsibility||The seller pays only a part of the insurance, and the buyer pays the rest.||The seller is at stake for the transport payment, and the buyer needs not to make any additional payment.|
|Negotiation||The buyer can negotiate with the seller regarding the insurance payment.||In CPT, by default, the buyer is responsible for the insurance of the goods.|
What is CIF?
Carriage and insurance paid is the policy in which the seller pays the transportation or carriage fee of the goods, including a part of the entire insurance fee. The seller pays an amount of the insurance of the goods. If the buyer requires additional safety for the goods, it is their responsibility to avail that the buyer makes the payment.
It is one among the 11 incoterms, and it is one of the series of globally agreed trade terms. CIP is typically used along with the mutually agreed destination, which implies the seller pays the freight charges along with the insurance charges.
For example, CIP Chicago means the seller pays insurance and freight charges to deliver the goods to Chicago. The seller pays only a part of the insurance, and it is the task of the buyer to pay the extra insurance to protect their goods from other risks.
The buyer also has the privilege to bargain with the seller and make them make the entire payment for the insurance. If the buyer doesn’t take the necessary precautions, their goods will suffer many damage or risks, which might cause a lot of trouble for the buyer.
What is CPT?
CPT is an international trade policy that implies that the goods are under the responsibility of the seller until the goods reach the destined location. The CPT service sometimes includes the terminal handling charges.
CPT denotes that the entire responsibility is taken up by the seller until the freights reach the destined location that the seller has agreed with the carrier. It may also have multiple carriers during which until the goods reach the first carrier, the risks and any damages or loss are owned by the seller.CPT is inclusive of the taxes and export fees.
The transport fee for the goods is paid by the seller so that the goods are securely delivered to the buyer at a mutually agreed destination. Once the goods have been delivered in the hands of the buyer, the responsibility and the risk is handed over to the buyer.
Any damage, risk, or loss is taken care of by the buyer. Here the seller has only the responsibility of the goods, and he has nothing to do with the insurance of the goods.
The term CPT typically conveys the destination. For instance, the phrase CPT Barcelona means the goods are destined to be delivered in Barcelona. The seller would pay the cost of transportation and carriage and take responsibility for the goods.
Main Differences Between CIF and CPT
- In CIF, the seller pays the insurance, but in CPT, the seller doesn’t.
- CIF means carriage and insurance to freight, whereas CPT means carriage to the paid.
- The risk is lesser for the seller in CIP as the goods are insured, whereas the risk is more for the buyer in CPT.
- The insurance cost is shared by the seller in CIF, but in CPT, the insurance is the responsibility of the buyer.
- The buyer can negotiate with the seller regarding the insurance in CIP, but in CPT, the buyer cannot negotiate.
When goods are traded or transported, both the buyer and the seller should take steps to secure the goods and make sure the journey is secure and safe.
The goods should be insured and protected well until it reaches the mutually agreed location to the hands of the buyer. Either the seller or the buyer or both should take or share the responsibility of their goods.
From the several available trade policies and terms, the appropriate term should be chosen. Both CPT and CIF are almost the same except that in CIF, the seller takes charge of the freight insurance.
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