Incoterms 2020
CFR Incoterm (Cost and Freight) – Meaning, Risk & Costs
CFR (Cost and Freight) under Incoterms 2020: where risk transfers, who pays for carriage, and seller and buyer obligations.
- Rule
- CFR – Cost and Freight (named port of destination)
- Transport mode
- Sea and Inland Waterway
- Insurance required
- No
- Export clearance
- Seller
- Import clearance
- Buyer
- Main carriage
- Seller
Cost and Freight (CFR) means the seller delivers the goods on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
Like FOB, risk transfers when goods are on board at the port of shipment, not at destination. This creates a split between risk transfer (origin) and cost transfer (destination).
CFR is commonly used when the seller has favorable ocean freight rates but the buyer doesn't need or want to pay for insurance separately.
When risk transfers under CFR
When goods are on board at port of shipment
When costs transfer under CFR
At named port of destination
Seller obligations under CFR
- Deliver goods on board vessel
- Contract and pay for freight to destination
- Clear goods for export
- Provide transport documents
- Pay loading costs
Buyer obligations under CFR
- Accept delivery at destination port
- Handle import customs clearance
- Pay import duties and taxes
- Pay unloading/discharge costs
- Bear risk from shipment
Who is responsible for what under CFR
- Export customs clearance: Seller
- Import customs clearance: Buyer
- Loading: Seller
- Main carriage: Seller
- Unloading: Buyer
- Delivery to destination: Buyer
Common uses of CFR
- Sea freight when seller pays freight
- Commodity trades
- When seller has better freight rates
- Bulk cargo
CFR is best for
- When seller has ocean freight contracts
- Regular sea freight shipments
- Commodity exports
Risks to watch with CFR
- Risk transfers at origin, not destination
- Buyer should arrange insurance
- Only for sea freight
More in this directory
- CIF Incoterm (Cost, Insurance and Freight) – Meaning, Risk & Costs
- CIP Incoterm (Carriage and Insurance Paid To) – Meaning, Risk & Costs
- CPT Incoterm (Carriage Paid To) – Meaning, Risk & Costs
- DAP Incoterm (Delivered at Place) – Meaning, Risk & Costs
- DDP Incoterm (Delivered Duty Paid) – Meaning, Risk & Costs
- DPU Incoterm (Delivered at Place Unloaded) – Meaning, Risk & Costs
Frequently asked questions
What does CFR mean in shipping?
CFR stands for Cost and Freight. Cost and Freight (CFR) means the seller delivers the goods on board the vessel.
When does risk transfer under CFR?
When goods are on board at port of shipment
Who pays for main carriage under CFR?
The seller pays for main carriage under CFR.
Who handles customs clearance under CFR?
Under CFR, the seller handles export clearance and the buyer handles import clearance.
Is insurance required under CFR?
No. CFR does not require either party to buy insurance, though either may choose to arrange it.