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CFR (Cost and Freight)

CFR (Cost and Freight)

Incoterms, also known as international commercial terms, are set to eliminate or decrease confusions and conflicts between buyers and sellers in international trade and to facilitate the trade and commerce process globally. Incoterms were created by the International Chamber of Commerce (ICC) in 1936 and since then, they are updated on a regular basis to suit changing trade trends.
EXWFCACPTCIPDAPDPUDDPFASFOBCFRCIF
Free CarrierCarriage Paid ToCarriage Insurance Paid ToDelivered at PlaceDelivered at Place UnloadedDelivered Duty PaidFree Alongside ShipFree On BoardCost & FreightCost, Insurance & Freight
Charges/FeesEx Works
At a named place, the seller transfers the goods to the buyer; the buyer is responsible for all risks.1.) when seller loads goods to buyer’s carrier or 2.) when goods are at the buyer’s disposal & ready for unloading at a named placedwhen the goods are handed over to the seller’s nominated carrier at a named placewhen the goods are handed over to the seller’s nominated carrier at a named placewhen the goods are placed at the buyer’s disposal at a named place or agreed point within that placewhen the goods are delivered and unloaded at a named place or agreed point within that placewhen the goods are placed at the buyer’s disposal at a named place or agreed point within that placewhen goods are alongside the vessel nominated by the buyer at named portwhen goods are on board the vessel nominated by the buyer at named portwhen the goods are on board the vessel nominated by the seller at originwhen the goods are on board the vessel nominated by the seller at origin
Risks Transfer
Commercial InvoiceSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Packaging & QCSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Loading & DeliveryBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Export Duty & TaxesBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Origin Terminal HandlingBuyerBuyerSellerSellerSellerSellerSellerBuyerSellerSellerSeller
Cargo InsuranceNegotiableNegotiableNegotiableSellerNegotiableNegotiableNegotiableNegotiableNegotiableNegotiableSeller
Carriage ChargesBuyerBuyerSellerSellerSellerSellerSellerBuyerBuyerSellerSeller
Destination Terminal HandlingBuyerBuyerSellerSellerSellerSellerSellerBuyerBuyerBuyerBuyer
Delivery to DestinationBuyerBuyerSellerSellerSellerSellerSellerBuyerBuyerBuyerBuyer
Unloading at DestinationBuyerBuyerBuyerBuyerBuyerSellerBuyerBuyerBuyerBuyerBuyer
Import Duty & TaxesBuyerBuyerBuyerBuyerBuyerBuyerSellerBuyerBuyerBuyerBuyer
Incoterms 2020
CFR

According to CFR, the seller clears the products for export, transfers them onboard at the port of destination, and pays for transportation of the commodities to the stated port of destination. When the seller delivers the goods to the ship, the risk is transferred to the buyer. Remember that this incoterm is only used for ocean or inland waterway shipping.

All additional transportation costs from the port of destination, including import clearance and tariffs, are the responsibility of the buyer.

Use CPT instead if the freight is containerized and will only be delivered to a terminal.

Cost and Freight incoterm is absolutely similar to CIF, with the exception that, unlike CIF, insurance is optional with this incoterm.

Seller’s Responsibility Under CFR

  • Delivery of goods
  • Preparing invoices and documents
  • Packaging and marking
  • Transportation of the goods in the country of origin
  • Customs handling fees in the country of origin
  • Charges in the country of origin
  • Proof of delivery
  • Customs formalities and export licenses

Buyer’s Responsibility Under CFR

  • Goods payment according to the sales contract
  • Customs formalities and import licenses
  • Charges in the destination country
  • Transportation of the goods in the destination country
  • Customs handling fees in the destination country
  • Payment of taxes and duties

Cargo Insurance in CFR

Despite the fact that Incoterms regulations do not require cargo insurance under Cost & Freight incoterm, it is strongly advised that international ocean freight shipments have insurance.

The shipments may be wholly covered by a single policy purchased by either the buyer or the seller, or by two separate policies issued by both the buyer and seller to cover their respective duties.

When negotiating your sales contract, make sure the insurance terms and conditions are fully stated and described.

FAQ

What does CFR mean in Incoterms?

It means cost and freight. According to this term, the seller should clear goods at customs for export, transport them to the departure port and then pay for the shipment of goods to the named port of destination.

Who is CFR suitable for?

It can be used by novice and professional importers and exporters. According to Cost & Freight, the buyer takes his own risks and responsibilities, but the seller has to take the risks of cargo until it arrives at the vessel.

What’s the difference between CFR and CIF?

Unlike  CIF, insurance is optional in CFR.

Is CFR used for containerized cargo?

Cost & Freight incoterm is suitable for uncontained cargo.

How is CFR different from CPT?

In case you want to transport containerized cargo, you can use CPT instead of CFR.

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