Incoterm CFR explained

What is Incoterm CFR?
Incoterm CFR is there specifically for waterborne transportation. This Incoterm is only used for goods transported by sea or inland waterways and not for other forms of transportation. The seller of the goods provides and pays for the transportation to the pre-arranged port of destination. What is important with CFR is that the seller has direct access to the ship that is to transport the goods.

Incoterm CFR meaning
CFR literally means "Cost and Freight. This Incoterm means that the selling party must ensure that the goods arrive at the port of destination agreed upon with the buyer. Incoterm CFR is used for both bulk goods and container shipping. This makes the Incoterm very versatile.

CFR transport
Transport with CFR is exclusively by water. Here the seller's job is to arrange the entire transport process. The goods must be delivered at the destination port on the buyer's ship. The seller is responsible for the transportation, costs and risk until the goods are delivered aboard the ship at the pre-arranged port of destination. It is not mandatory for either party to purchase insurance.

Incoterm CFR cost
The cost of transporting the goods to the agreed port of destination shall be borne by the seller. The seller provides a transportation agreement for the transportation of the goods to the port. Once the goods are delivered at the port, the rest of the transportation costs are for the buyer. Should the goods require further transportation, the buyer pays for it.

Seller's Obligations under CFR
Under Incoterm CFR, the seller is responsible for arranging the transportation of the goods to the port of destination. The costs for this are the seller's responsibility. The related export formalities are also the seller's responsibility. Consider export fees and licenses. The risk of damage or loss of the goods is the seller's responsibility until the goods are loaded on the ship at the port of shipment.

Buyer's Obligations at CFR
The risk of damage and loss of the goods is the responsibility of the buyer from the moment the goods are loaded on the vessel. If anything happens to the goods during transport on the ship, the buyer is liable for it. It is also the buyer's responsibility to unload the goods. The cost of any further transportation is also the buyer's responsibility. Costs associated with importing the goods must also be paid by the buyer. The buyer may decide whether to insure the goods.

Incoterm CFR vs. CIF
CFRand CIF are often confused. Both are only suitable for transporting goods by water and the selling party is responsible for the transportation. The transfer of risk also occurs at the same time; once the goods are loaded aboard the vessel at the port of shipment. The major difference between these Incoterms is that under CFR, the seller is not required to provide insurance for the buyer. Under CIF, however, the selling party is required to provide insurance. From the moment the goods are loaded on the ship at the port of shipment, the buyer bears the risk of damage and loss of the goods. However, the seller is not required to insure the goods for the buyer at CFR.

Sea freight or air freight shipments with customs obligation?
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