CFR Incoterm
What Is CFR Incoterm?
CFR (Cost and Freight) means that the seller is responsible for delivering the goods to the designated port of destination and covering the freight charges to that point. However, once the goods are loaded onto the vessel at the port of shipment, the risk of loss or damage transfers immediately to the buyer. This term applies exclusively to goods transported by sea or inland waterways.
Seller’s Responsibilities Under CFR Terms
When trading under CFR terms, the seller has the following key responsibilities:
- Pay Freight: The seller is responsible for covering all freight charges necessary to transport the goods to the designated port of destination.
- Arrange Transportation: The seller must enter into a contract for ocean or inland waterway transportation to ship the goods.
- Handle Export Formalities: The seller is responsible for properly packaging the goods and completing all export customs clearance procedures.
- Deliver On Board: The seller must load the goods onto the vessel they have arranged at the port of shipment. The bill of lading typically indicates “freight prepaid.
- Provide Documents: The seller must supply the buyer with all necessary documents to enable them to claim the goods from the carrier at the destination port.
Buyer’s Responsibilities and Transfer of Risk Under CFR Terms
Under CFR terms, the buyer assumes the following responsibilities:
- Assumption of Risk: The risk of loss or damage to the goods passes from the seller to the buyer once the goods are loaded onto the vessel at the port of shipment. This means that even while the goods are in transit, any risk of loss or damage is borne by the buyer from that point forward.
- Payment of Destination Port Expenses: The buyer is responsible for all costs incurred at the destination port, including unloading charges, import duties, taxes, and any additional transportation expenses required to move the goods to their final destination.
- Purchase of Insurance: Since the seller is not required to provide marine insurance under CFR terms, it is strongly advised that the buyer purchase insurance coverage independently. This protects the buyer against potential loss or damage to the goods during the shipping process.
When Is CFR Commonly Used?
CFR is often a suitable choice in the following situations:
- The buyer has sufficient experience and control over import procedures and logistics at the destination port.
- Both parties seek cost transparency up to the point of arrival at the destination port.
- The seller prefers not to be involved in logistics beyond loading the goods at the port of origin.
