Seller pays ocean freight to destination — but risk passes to the buyer when goods are on board at origin.
Cost and Freight (CFR) requires the seller to arrange and pay for ocean freight to the named destination port. Like FOB, however, risk transfers from seller to buyer when the goods are placed on board the vessel at the port of shipment. This means cost and risk are deliberately split: the seller pays freight all the way to the destination port, but the buyer bears the risk of loss or damage during the ocean voyage. CFR is a sea-and-inland-waterway-only term. The buyer must arrange cargo insurance to cover their risk during the ocean leg. CFR is similar to CIF, except that under CIF the seller also arranges minimum cargo insurance.
CFR suits buyers who have their own cargo insurance arrangements (e.g., an annual open cover policy) and want the seller to include freight in the quoted price while maintaining control over their own insurance. It is also used when the buyer's country has local insurance requirements (some countries mandate that imports be insured with domestic insurers). CFR is standard in many commodity trades where buyers have existing insurance facilities.
CFR is not appropriate for containerised freight — use CPT instead (the multimodal equivalent). Do not use CFR if the buyer does not understand that they bear transit risk despite the seller paying freight: the split can create disputes if cargo is damaged en route. If you want to include insurance, use CIF. If the buyer wants to control all freight costs and insurance, use FOB.
CFR and CIF are identical except that under CIF, the seller must arrange and pay for minimum cargo insurance (Institute Cargo Clauses C). Under CFR, insurance is the buyer's responsibility. If the buyer already has an open cover insurance policy, they may prefer CFR so they can insure the goods themselves under their own terms.
Under FOB, the buyer nominates the vessel and pays ocean freight. Under CFR, the seller pays ocean freight. In both cases, risk transfers to the buyer when goods are on board at the export port. CFR shifts freight cost responsibility from the buyer to the seller while keeping risk transfer at the same point as FOB.
No. Despite paying ocean freight, the seller's risk ends when the goods are loaded on the vessel at the export port. The buyer bears all risk of loss or damage during the ocean voyage. The buyer should arrange marine cargo insurance to cover this risk.
No. CFR is restricted to sea and inland waterway transport. The multimodal equivalent is CPT (Carriage Paid To), which can be used for any transport mode including air, road, and sea.
The named port of destination is where the seller's freight cost obligation ends — typically the destination country's sea port. For example: CFR Port of Lisbon, CFR Rotterdam, CFR Houston. The seller pays ocean freight to this port; the buyer arranges and pays for all costs from there onwards.
CFR stands for Cost and Freight. Under CFR, the seller pays for export customs and the ocean freight to the named destination port. However, risk transfers to the buyer when goods are loaded on board the vessel at the export port — not at the destination. This means the buyer bears transit risk even though the seller is paying for the freight.
A tile manufacturer in Portugal sells 20 tonnes of ceramic tiles on CFR Houston terms to a US distributor. The seller arranges export clearance in Portugal, books a container ship from Leixões to Houston, and pays the ocean freight. Once the tiles are loaded in Leixões, risk passes to the American buyer, who must arrange their own marine insurance for the Atlantic crossing.
CFR appears in Incoterms 2020 (the current ICC edition, effective 1 January 2020) unchanged in its core structure: seller pays freight to the named port, risk transfers on loading at origin. Incoterms 2020 reinforces guidance that CFR (like FOB) is not appropriate for containerised cargo — CPT should be used instead for multimodal or container shipments.
Destination port charges, including terminal handling charges (THC), unloading, and any storage costs, are the buyer's responsibility under CFR. These costs can be substantial and should be factored into the buyer's landed cost calculation. If the seller is to cover destination port charges, the parties should agree this separately in the contract.
The buyer bears the loss, since risk passed when goods were loaded at the export port. If the buyer has not arranged marine insurance, they have no cover. This is one of the most significant practical risks of CFR — buyers sometimes assume that because the seller is paying freight, the seller also bears transit risk, which is incorrect.
CFR and CPT are structurally similar but for different transport modes. CFR applies only to sea and inland waterway transport; CPT applies to all modes including road, air, rail, and multimodal. Under both terms, the seller pays freight to the named destination. For containerised freight or air shipments, CPT is the correct Incoterm — not CFR.
The buyer is responsible for import customs clearance and paying import duties under CFR. The seller's obligation ends with paying ocean freight to the destination port. Buyers should ensure they have a customs broker or freight forwarder in the destination country to handle clearance on arrival.
No. CFR does not require the seller to arrange any cargo insurance. The buyer bears risk from the moment goods are loaded at the origin port and must arrange their own marine cargo insurance for the voyage. If buyers want the seller to also arrange insurance, they should negotiate CIF terms instead.
No. CFR is restricted to sea and inland waterway transport. For road freight within Europe — for example, Portugal to Germany — CPT is the correct Incoterm. Under CPT, the seller pays road freight to the named destination; risk still transfers to the buyer when goods are handed to the first carrier at origin.
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