CFR - Cost and Freight

What is the CFR Incoterm (Cost and Freight)

Under the CFR Incoterm, the seller is obligated to deliver the goods to the port chosen by the buyer and bear all costs until they have been delivered. Thus, it only applies to ocean freight shipping.

The CFR may look similar to the CIF Incoterm and they are the same except that in the latter, insurance is required to be obtained by the seller. In the CFR Incoterm, insurance is only optional. However, it is highly recommended for international ocean freight shipments.

If the buyer can obtain better insurance than the seller can provide, it’s recommended that the parties make use of the CFR Incoterm. But the shipment can be covered either by one insurance or two separate insurances obtained by both the buyer and the seller.

The Seller’s Obligations Under the CFR Incoterm

• Deliver the goods and documents required
• Bear all risks of loss of or damage to the goods until they have been delivered
• Contract of carriage
• Transport-related security requirements
• Checking, packaging, marking
• Customs and handling fees
• Origin charges
• Export clearance
• Assist the buyer in obtaining import clearance
• Provide notice to the buyer that the goods have been delivered
• No obligation to obtain contract of insurance

The Buyer’s Obligations Under the CFR Incoterm

• Payment for the goods
• Take the delivery of the goods
• Bear all risks of loss of or damage to the goods from the time of delivery
• Import clearance
• Assist the seller in obtaining export clearance
• Customs and handling fees
• Duties and taxes
• No obligation to contract a carrier
• No obligation to obtain insurance

What Does the Seller Pay For Under the CFR Incoterm?

• All costs relating to the goods until they have been delivered
• Freight and loading of the goods
• Transport-related security requirements
• Charges for unloading, if for the seller’s account under the contract of carriage
• Costs of transit, if for the seller’s account under the contract of carriage
• Costs of providing usual proof that the goods have been delivered
• Duties and taxes

What Does the Buyer Pay For Under the CFR Incoterm?

• All costs relating to the goods from the time they have been delivered
• Costs of transit
• Unloading costs
• Duties and taxes

Is the CFR Incoterm Suited for Containerized Cargo?

No, the CFR Incoterm is unsuited for containerized cargo because of the risk transfer point, which is when the goods are loaded on the shipping vessel. Containerized cargo are not loaded directly to a vessel and instead are dropped off in a terminal. Hence, it’s not best to use the CFR Incoterm for containerized cargo.