CFR Incoterm

What is CFR (Cost and Freight)?

CFR(Cost and Freight) is a term used in international trade. With CFR, the seller is responsible for getting the goods to the agreed destination port and paying for transport, but not the cost of insurance or import clearance once the goods arrive. So, as soon as the goods are loaded onto the ship, the risk is passed to the buyer. That means they have to decide whether to take out insurance to reduce the risk of the shipment in transit.

Incoterm CFR: division of responsibility

In a CFR transaction, the responsibilities of the seller and the buyer are divided:

• Seller’s responsibilities: Export customs clearance, shipping costs, and the cost of transporting the goods to the designated port of destination by sea.
• Buyer’s responsibilities: All risks after the goods are loaded on the ship, including the cost of unloading at the destination port, import customs clearance, tariffs, and final delivery.

This distinction makes CFR a common choice for buyers and sellers in international trade and is especially suitable for Ocean Freight bulk commodities such as ores, grains, crude oil, etc.

The difference between CFR and other trade terms

CFR is clearly distinguished from other common trade terms, for example:

• CIF (cost, insurance, and freight): Unlike CFR, CIF requires the seller to insure the goods to ensure the buyer can be compensated if they are lost in transit.
• FOB (free on board): Under FOB conditions, the seller is only responsible for loading the goods on the ship, and the buyer is responsible for the freight and insurance afterward.
• DAP (Delivered at Place): The seller is responsible for delivering the goods to the place designated by the buyer, not just the port of destination.

Advantages and disadvantages of CFR

Advantages:

• The buyer does not need to bear the burden of organizing transport before Ocean Freight.
• Suitable for long-term Ocean Freight cooperation and conducive to cost control.

Disadvantages:

• The buyer must arrange insurance independently and is exposed to damage or loss of goods.
• Additional costs may be incurred due to higher port charges at the destination.

CFR Related FAQ

How is liability divided under CFR?

The seller is responsible for export customs clearance and freight. At the same time, the buyer is responsible for the risk after the goods are loaded on the ship, the unloading costs at the destination port, customs clearance, and distribution.

What is the main difference between CFR and CIF?

CIF includes cargo insurance, while CFR does not, and the buyer is responsible for purchasing insurance.

Which modes of transport are applicable under CFR?

CFR only applies to Ocean Freight and Inland Waterway Transport, not Air Freight or Land Transport.

When does the risk transfer under CFR?

The risk transfers from the seller to the buyer once the goods have been loaded on the ship.

Does CFR include the cost of unloading at the port of destination?

The buyer is responsible for unloading costs, customs clearance, and subsequent distribution.

Can the buyer require the seller to take out insurance?

Under CFR conditions, the buyer is responsible for insurance, but the parties can agree otherwise.

How can the risks of a CFR transaction be minimized?

The buyer can reduce the risk by taking out transport insurance, working with reliable suppliers, and arranging the logistics at the destination port.