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
When dealing with CFR terms, here’s what the buyer should keep in mind:
- Assumption of Risk: Once the goods are safely loaded onto the vessel at the port of shipment, the responsibility for any loss or damage shifts from the seller to the buyer. In other words, from this point forward—even while the goods are on their way—the buyer takes on the risk.
- Payment of Destination Port Expenses: The buyer is responsible for all costs incurred at the destination port. This includes charges such as unloading fees, import duties, taxes, and any additional transportation required to deliver the goods to their final destination.
- Purchase of Insurance: Since the seller isn’t required to provide marine insurance under CFR terms, it’s a good idea for the buyer to arrange insurance on their own. This way, you’ll have peace of mind knowing your goods are protected throughout their journey.
When Is CFR Commonly Used?
CFR can be a great option in the following situations:
- The buyer feels confident handling import procedures and logistics at the destination port.
- Both parties appreciate having clear cost transparency up to the point of arrival at the destination port.
- The seller prefers not to handle logistics beyond loading the goods at the port of origin.
