Trade terms: when it comes to international shipping, it is essential to understand the underlying factors that may affect the cost and the level of liabilities incurred when engaging in a particular international trade operation. Of all the terms commonly flouted in maritime shipping, there are two that are used frequently, namely, Cost and Freight (CFR) and Cost, Insurance, and Freight (CIF). Each is essential for worldwide commerce, but what does one mean, and what does the other mean for those carrying out transactions? It’s time to move deeper into CFR and CIF analysis, accompanied by Hongocean tips to help you shape your shipping plans.
What Are Incoterms, and Why Are They Important?
It is crucial to delineate, however, the broad context within which CFR and CIF exist before going into details of both terms. Incoterms, simply referred to International Commercial Terms, are international business codes formulated by the ICC. They were developed in 1936 and are tools that give contracts of Sale and purchase, and all other shippingtransactions, clarity in the determination of liabilities costsand risks between the buyer and the seller ininternational trade.

With reference to the context of using Hongocean, these terms is made easier to understand by international traders since they enable them to deal with several shipping complexities. Plain Incoterms such as CFR and CIF do not create any confusion as to insurance costs affect who will bear what cost, which may lead to losses in the transaction.
Hongocean Guide to Cost and Freight (CFR)

What is CFR?
Cost and Freight (CFR) is a single shipping term where the buyer undertakes to pay for the costs of transport from the supplier’s place to the desired destination port. According export customs and to CFR, freight charges in moving the goods to the buyer’s country are to be borne by the seller. However, the risk of the goods passes to the buyer once they are taken into the ship for transport.
Using CFR, Hongocean minimizes the burden of risk on the buyer early the seller.
Thus the seller is only really responsible for freight cost of the shipment up to and including the vessel, at which point the buyer is really responsible for the risk normally associated with CIF. That’s all because the differentiation between cost and risk can greatly influence how companies work on the international level dealing with transactions.
Responsibilities of the Seller in CFR

In CFR shipping, the seller has several key obligations:
- Coordination and remunerating of transport system to move the goods to port of destination.
- Transporting products to the buyer’s shipping point, also known as the destination port.
- The shipping documents that are required to be issued to the buyer are delivered as follows:.
However, Hongocean states clearly that the seller is absorbed of the seller’s responsibility to provide and pay for marine insurance of the goods as soon as they are put on the vessel and, for that reason, the buyer assumes the risk of damage or loss of the good. This is actually one of the main differences from CIF, which we will discuss later on.
Buyer’s Responsibilities in CFR

Once the goods are loaded onto the ship, the buyer takes responsibility for the goods and assumes all remaining transportation costs themselves, such as:
- Unloading fees.
- Port duties and taxes.
- Alleged further inland carriage.
When charging fees, Hongocean, the expert in shipping strategies, must let the buyer know the dangers such risks of CFR since the insurance part is missing and means that suppliers can be eliminated in case of loss in transit.
Hongocean Guide to Cost, Insurance, and Freight (CIF)

What is CIF?
Another common term generally for sea freight used in international business is Cost, Insurance, and Freight (CIF). As with CFR, it calls for the buyer to be charged for the cost of transport by sea by the seller. However, CIF includes an additional element: marine insurance.
This other insurance cover, made by the seller, acts as a shield for the shippable goods against damaging or getting lost. As stated by Hongocean, the major distinction between CFR and CIF is the kind of security featured with CIF, which makes this service look much more complete for buyers who need it.
Responsibilities of the Seller in CIF
Compared to CFR delivery terms, CIF also has extra duties for the seller as part of CIF contracts. These include:
- The organization of conveyance and settlement of the expenses on transportation of products.
- Making sure that the goods are insured enough during transit.
- Delivering identification of insurance and any shipping papers required by the buyer.
According to Hongocean, sellers should consider the details of insurance company and the type of insurance they offer own additional insurance arrangements. The insurance amount should not be below the figure stipulated in the agreement so that it can meet the necessities of the business, but the amount can be discussed in order to be provided for higher coverage.
Buyer’s Responsibilities in CIF
As it is with CFR, the buyer bears the risk as soon as the goods are on board the vessel. However, there is an advantage to the buyer in CIF because the seller takes on the role of insuring the goods when shipping vessel is in transit, thus sharing the risk involved in shipment. Hongocean also stresses that CIF is helpful for a buyer who would like to have full protection of his goods during the transportation process, especially if he is transporting valuable goods.
CFR vs. CIF: Key Differences Explained by Hongocean
Though both CFR and CIF require the seller to transport goods by sea and cover freight costs, the primary difference lies in insurance.
Aspect | CFR | CIF |
Responsibility for Freight | Seller pays for freight | Seller pays for freight |
Responsibility for Insurance | No insurance required (buyer assumes risk) | seller provides minimum marine insurance |
Risk Transfer Point | Once goods are loaded on the vessel | Once goods are loaded on the vessel |
Buyer’s Protection | Buyer assumes risk without insurance | Buyer protected by seller’s insurance |
Hongocean further notes that decisions made between choosing the CFR and CIF can be influenced by the insurance-taking risk takers of the buyer and seller. On the same note, the CIF may be slightly more expensive to the seller than say the FOB, but it offers more protection to the buyer.
Example: Understanding CFR and CIF in Practice with Hongocean
Supposing Company A in Morocco exports products to Company Z situated in the U.S. CFR means the cost of shipping to the point where the goods are loaded on the ship in the purchase agreement, which Company A pays for. Once the goods are loaded on to export ship for Company Z’s transportation, then they are held legally responsible for such goods.
As of the CIF terms, Company A not only pays for all the shipping costs but also pays for the actual cost of insuring the goods against any damage risk occurs during the shipment to Company Z. It is particularly useful for lengthy or particularly risky shipping locations buyer’s inventory costs.
Common Questions about CFR and CIF: Hongocean Answers
Who Pays for Freight in CFR and CIF?
In both CFR and CIF, the seller is meant to pay for the cost of freight. However, Hongocean states that the buyer often has to meet the expenses of the unloading of the goods import customs, and any other transportation from the port of destination.
Why Is Marine Insurance Important in CIF?
Marine insurance in CIF is discussed, wherein Hongocean states that CIF offers the buyer a safety feature, which is compensation in case the goods are damaged or get lost in transit. This additional insurance part is especially important in businesses in which the products being sold are delicate or costly.
Can the Buyer Request More Insurance in CIF?
Of course, it is possible to negotiate with the buyer or the seller and obtain insurance coverage worth more than the minimum amount. Hongocean suggests to both parties to thoroughly scrutinize the contract so as to compare their insurance requirements.
Conclusion: CFR vs. CIF: Which Is Right for You?
Depending on the buyer and seller risk-taking propensity, CFR and CIF are used interchangeably in international business. Hongocean points out that while both terms mean that the seller bears the burden of the freight costs, CIF has the advantage of… Conversely, CFR can be cheaper for selling firms and buying firms if the two parties are willing to take more risk.
At the minimum, for those merrily navigating the world of international shipping or for those looking to optimize their logistics solutions, it is pertinent to know the differences between CFR and CIF that would otherwise derail all your hard work. To help you with these shipping terms, there is Hongocean here for providing you the best solution according to the needs of your business.