CFR incoterms only appeal to sea and inland waterways. When a sales contract includes an Incoterms, it creates legal obligations for the buyer and seller, if any part breaks, it can have costly implications. 

Today, let's learn the CFR Incoterms, and understand the responsibilities and risks between buyers and sellers.

What is CFR?

CFR incoterms are short for “Cost and Freight”, the seller should clear the goods for export, deliver them onboard the ship at the port of destination, and pay for the freight to the port of destination. 

Once the goods are on board, the risk transfer, the buyer is responsible for bearing the risk. Insurance is not included in CRF incoterms, so the buyer must arrange for insurance if needed.

The risk transfer point differs from the cost transfer point.

If the freight is containerized and to be delivered to a terminal only, please use CPT to instead.

Seller’s obligations of CFR incoterms

Prepare goods, commercial invoice and documentation

Export packaging and marking

Cost of pre-shipment inspection

Export licenses, customs and export procedures

Loading charges

Delivery at the port of destination

Buyer’s obligations of CFR incoterms

Payment for goods

Risk from board and insurance

Discharge and next carriage

Import formalities and duties


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Incoterms CFR is suited for bulk goods, oversized or overweight goods not fit into a standard container.

CFR incoterms insurance responsibility

In CFR incoterms, the seller is responsible for arranging and paying for the shipment of the goods, but insurance is not mandated. If the goods are lost or damaged in shipping and no insurance has been purchased by the buyer, the buyer bears the risk of loss.

The buyer is responsible for insurance CFR incoterms, but trade terms only help to divide the responsibilities between the buyer and the seller. Generally, the buyer can ask the seller to help with insurance, it is a safer method.

CFR corresponds to CPT, the main difference is the type of transport, CPT is used for any mode of transport, but CFR is only suit for sea freight.

CIF vs CFR incoterms

CFR: Buyer Insurance

CIF: Seller Insurance

CIF is based on CFR, with an additional insurance obligation borne by the seller.

More incoterms 2024:

FAQ

Is CFR door to door?

No, CFR (Cost and Freight) is not door-to-door. CFR is a shipping term used for sea freight where the seller covers the cost and freight to transport goods to the port of destination.
If you want door-to-door service, consider using DDP (Delivered Duty Paid) or CIP instead.

Who pays terminal handling charges in CFR?

In CFR (Cost and Freight), the buyer is responsible for paying the terminal handling charges (THC) at the destination port.
While the seller covers the cost of shipping goods to the port of destination, the buyer assumes responsibility for charges related to unloading, customs clearance, and further handling at the port.

Can l use CFR for air freight?

No, CFR (Cost and Freight) is specifically designed for sea freight and cannot be used for air freight.
For air shipments, the correct Incoterms would be CPT (Carriage Paid To) or CIF (Cost, Insurance, and Freight), depending on whether insurance is included.

How to calculate CFR price?

CFR Price = Cost of Goods + Freight Charges + Additional Costs
Cost of Goods: The price of the product itself (also known as the ex-works price or EXW price).
Freight Charges: The cost of shipping the goods from the seller's location to the port of destination.
Additional Costs: Any other costs associated with getting the goods to the destination port, such as loading charges at the seller’s port.

What is the difference between CPT and CFR incoterm?

The main difference between CPT (Carriage Paid To) and CFR (Cost and Freight) lies in the type of transport and the responsibility for the cost and risk.
CPT can be used for any mode of transport (land, air, sea, etc.). /CFR is used only for sea freight.
CPT: Risk transfers to the buyer when the goods are handed to the carrier. /CFR: Risk transfers when the goods are loaded onto the vessel.

What is CFR vs DAP Incoterms?

CFR (Cost and Freight) and DAP (Delivered at Place) differ in delivery point and responsibility:
Mode of Transport:
CFR is for sea freight only.
DAP can be used for any transport mode.
Delivery:
CFR: Seller delivers goods to the port of destination; buyer handles unloading and import duties.
DAP: Seller delivers goods to the agreed destination, ready for unloading.
Risk Transfer:
CFR: Risk transfers when goods are loaded on the vessel.
DAP: Risk transfers when goods are made available at the destination.

Does CFR include customs clearance?

No, CFR (Cost and Freight) does not include customs clearance. Under CFR, the seller is responsible for the cost of shipping the goods to the destination port, but the buyer is responsible for import customs clearance and any duties or taxes at the destination. The seller only handles export customs clearance at the origin port, not import procedures at the destination.

What are 11 Incoterms?

FOB(Free on Board), CFR(Cost and Freight), CIF(Insurance, and Freight), FCA(Free Carrier), CPT(Carriage Paid to), CIP(Carriage and Insurance Paid to), FAS(Free Alongside Ship), DAP(Delivered at Place), DDP(Delivered Duty Paid), DPU(Delivered at Place Unloaded), EXW(Ex Works).

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