CPT vs EXW Incoterms

CPT vs EXW Incoterms
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CPT vs EXW Incoterms: What is the Difference?

CPT vs. EXW Incoterms: What is the Difference?

Effectively managing international trade requires familiarity with Incoterms. These terms establish a framework that defines the responsibilities of buyers and sellers in global transactions.

In this post, we’ll discuss two commonly used Incoterms: CPT (Carriage Paid To) and EXW (Ex Works). Our objective is to provide business owners and logistics managers with a clear understanding of the key differences between these two terms and how they impact your shipping operations. Furthermore, we will discuss how working with a digital freight forwarder like Ship4wd can streamline your shipping processes under specific Incoterms.

What are Incoterms?

Incoterms are a set of standardized terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade. They outline which party is responsible for arranging transportation, handling insurance, and dealing with customs procedures at various stages of the shipping process. By providing standardized terminology and clear guidelines for global trade, Incoterms help minimize misunderstandings and disputes between trading partners.

The ICC regularly updates Incoterms to reflect changes in international trade practices. The most recent version, Incoterms 2020, consists of 11 terms:

  1. EXW (Ex Works)
  2. FCA (Free Carrier)
  3. FAS (Free Alongside Ship)
  4. FOB (Free On Board)
  5. CFR (Cost and Freight)
  6. CIF (Cost, Insurance, and Freight)
  7. CPT (Carriage Paid To)
  8. CIP (Carriage and Insurance Paid To)
  9. DAP (Delivered at Place)
  10. DPU (Delivered At Place Unloaded)
  11. DDP (Delivered Duty Paid)

What Is CPT (Carriage Paid To)?

CPT (Carriage Paid To) is an Incoterm that requires the seller to arrange and pay for the transportation of goods to a designated destination, which can be any agreed-upon location such as a port, airport, or the buyer’s premises. Under CPT, the risk transfers from the seller to the buyer once the goods have been handed over to the first carrier at the point of shipment, even though the seller continues to cover the freight costs to the named place of destination.

This Incoterm applies to all modes of transport, including multimodal shipping. The seller is responsible for export procedures and delivering the goods to the first carrier, while the buyer assumes all risks and obligations from that point forward, including arranging cargo insurance (when necessary) and handling import customs clearance.

What Is EXW (Ex Works)?

EXW (Ex Works) is an Incoterm that places minimal responsibility on the seller. The seller’s obligation is fulfilled when they make the goods available at their premises or at another agreed-upon designated location. From that point, the buyer assumes all risks and costs involved with transporting the goods to the final destination, including loading, shipping, cargo insurance (when necessary), and customs clearance procedures.

EXW can be applicable to all modes of transport, and it gives the buyer the most control over the shipping process, as they are responsible for arranging all logistics from the seller’s location onward.

CPT vs. EXW: What’s the Difference?

Now that we have a basic understanding of CPT and EXW let’s examine a few of the main differences between these two Incoterms.

CPT vs. EXW: Differences in Responsibilities

CPT and EXW assign different responsibilities to buyers and sellers during international transactions.

CPT Responsibilities

Under CPT, the seller is responsible for arranging and paying for transporting the goods to the named place of destination; however, the risk is transferred from the seller to the buyer as soon as the goods are handed over to the first carrier.

Seller Responsibilities Under CPT:
  • Prepare and package goods for transportation.
  • Deliver goods to the first carrier at the point of shipment.
  • Provide necessary documentation.
  • Handle export customs clearance and associated costs.
  • Arrange and pay for transportation to the named place of destination.
Buyer Responsibilities Under CPT:
  • Assume risks once goods are delivered to the first carrier.
  • Arrange and pay for cargo insurance (not mandatory).
  • Handle import customs clearance and associated costs.
  • Coordinate and cover costs for final delivery from the named place of destination (if applicable).

EXW Responsibilities

EXW places the majority of responsibility on the buyer, with the seller only required to make the goods available at their premises or another named place.

Seller Responsibilities Under EXW:
  • Make goods available at the seller’s location or another named place.
  • Provide necessary documentation.
Buyer Responsibilities Under EXW:
  • Arrange for the collection of goods from the seller’s premises.
  • Handle export duties and other compliance-related procedures at the country of origin.
  • Obtain cargo insurance (optional).
  • Handle import customs clearance and pay any applicable duties or taxes.
  • Manage all transportation costs and risks from the seller’s location to the final destination.

CPT vs. EXW: Comparison of Risk Transfer

  • CPT (Carriage Paid To): The seller’s risk ends once the goods are delivered to the first carrier at the point of shipment. From that moment, the buyer bears all risks related to the transportation of the goods, despite the fact that the seller still pays for the transportation costs to the named place of destination.
  • EXW (Ex Works): The buyer assumes all risks from the moment the goods are made available at the seller’s premises or another designated location. This includes risks related to loading, transportation, customs clearance, and final delivery.

CPT vs. EXW: Cost Implications

Cost considerations play a major role in deciding whether to choose CPT or EXW.

  • CPT (Carriage Paid To): Under CPT, the seller covers all costs associated with transporting the goods to the named place of destination. This includes packaging, export customs clearance, and freight charges. The risk, however, shifts from the seller to the buyer at the moment that the goods are handed over to the first carrier at the point of shipment. The buyer bears responsibility for import customs clearance, cargo insurance (if desired), and final delivery expenses after the goods reach the named place of destination.
  • EXW (Ex Works): The seller bears minimal costs, as their responsibility ends when the goods are made available at their premises. The buyer is responsible for all costs from that point forward, including loading, transportation, customs clearance, insurance (if desired), and final delivery expenses.

CPT vs. EXW: Comparison of Control Over Freight

Control over freight is another crucial factor to consider when choosing between CPT and EXW.

  • CPT (Carriage Paid To): The seller maintains control over the goods until they are delivered to the first carrier. The seller arranges transportation to the named place of destination and handles export formalities. However, once the goods are handed over to the first carrier, the buyer assumes control, even though the seller continues to pay for the main carriage.
  • EXW (Ex Works): The buyer has full control over the freight from the moment the goods are made available at the seller’s premises. The buyer is responsible for arranging the collection of goods, handling export duties and import customs clearance, and managing all transportation to the final destination.

The Bottom Line: CPT vs. EXW

CPT and EXW Incoterms offer different levels of responsibility and control for buyers and sellers in international trade transactions. CPT places more responsibility on the seller, who arranges and pays for transportation to a named place of destination while transferring risk to the buyer once goods are delivered to the first carrier. In contrast, EXW puts the majority of the burden on the buyer, who assumes all risks, costs, and control from the moment the goods are made available at the seller’s premises.

Choosing the appropriate Incoterm depends on various factors, such as the nature of the goods, the desired level of control over the shipping process, and the allocation of risks and costs between the trading partners. Understanding the nuances of each Incoterm and how they impact your business is crucial for successful international trade.

Ship4wd: Your Trusted Partner for Streamlining Shipping Operations

As soon as you have found a reliable supplier and agreed on the most appropriate Incoterm based on your requirements, you must ensure that your logistics are coordinated effectively. 

By partnering with an experienced digital freight forwarder like Ship4wd, you can simplify and streamline virtually every aspect of the shipping process. Ship4wd offers a comprehensive solution for business owners and logistics managers, making international shipping more efficient and cost-effective.

By signing up on the Ship4wd platform, you gain access to instant quotes and the ability to book air and ocean freight, including FCL (Full Container Load) and LCL (Less than Container Load) shipments. Additionally, our platform also offers cargo insurance to protect your goods and pre-shipment inspections to ensure your shipments meet your expectations before they depart.

Moreover, Ship4wd assists with customs clearance, handles the necessary documentation, and arranges for the final delivery of your cargo. 

Our 24/7 customer support is here at any time to answer your questions, assist with tracking shipments, and help you navigate through our user-friendly interface.

Sign up with Ship4wd today and discover how our digital freight forwarding platform can help streamline your shipping operations.

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