CFR “Cost and Freight” is a less recognizable, but actually commonly used incoterm, it is basically a variation of its more recognizable big brother CIF. This is another incoterm that officially is not supposed to be used for air shipments, but I have seen its usage in both air and ocean shipments. Officially CFR is only to be used for ocean or inland waterway transport.
SPECIAL NOTE: You may see a number of variations of CFR used in documentation. For example, the term CFR was previously denoted as “C&F” and is still commonly used in this way. Also, the proper way to denote this incoterm is the usage of “CIF – Cost and Freight (named port of destination)” which leads many to confuse CFR with CIF, which is another incoterm very similar to CFR except that insurance is included. Still others will denote cost and freight as “CFR – Cost and Freight (named port of destination)”. “C&F” is still very commonly used, but don’t be surprised to see variations of “CIF……” or “CFR…..” used as well.
In CFR, the seller/exporter arranges for the goods to be delivered to the named port of destination. The seller’s risks end the moment the goods have been delivered onto the vessel at the port of departure, yet the seller is responsible for all costs until the goods have been unloaded at the named port of destination. In this case, the named port of destination is domestic to the buyer, meaning that the named port must be a port in the buyer’s country. For example, if I was exporting cherries to Thailand and the port of destination was Laem Chabang, I would sell it based on “CIF Cost and Freight Laem Chabang, Thailand”.
Under CFR terms, the sellerâ€™s risks end the moment the goods are delivered onto the vessel at the named port at origin, but the seller is responsible for all costs up to the named port of destination :
1) Produces the goods and commercial documents as required by the sales contract.
2) Arranges for export clearance and all export formalities.
3) Arranges and pays for all costs for the transportation of the goods up to the named port of destination.
4) Assumes all risk to the goods (loss or damage) only up to the point they have been delivered onto the vessel at the port of departure, place, and time stipulated in the sales contract. SPECIAL NOTE: While the seller has NO obligation under CFR to insure the goods and may not be legally responsible for the goods once they are placed on the vessel at the port of departure, he may have a vested interest in the goods during the voyage. It may be a wise decision to purchase additional insurance coverage in the case of a loss.
5) Seller must advise the buyer of the location and time that goods have been delivered onto the named vessel.
6) Seller has to provide the buyer with transport documents that will allow the buyer to take possession of the goods at the named port of destination.
1) Buyer must pay for the goods as per the sale contract
2) Buyer must obtain all commercial documentation, licenses, and authorizations required for import and arrange for import clearance and formalities at own risk and cost.
3) Buyer takes delivery of the goods after they have been delivered by the seller to the named port of destination.
4) Buyer must assume all risks for the goods from the time the goods have been delivered onto the vessel to delivery into the buyer’s warehouse or other specified location.
5) Buyer pays for all costs of transportation, import customs formalities and duty fees, and all other formalities and charges related to the transportation of the shipment from the time the goods have been delivered to the named port of destination. Buyer should take note that the seller is under no obligation to insure the goods during transit and is responsible for all costs relating to loss or damage of goods or non-delivery from the time the goods have been delivered onto the vessel. It would be wise for the buyer to purchase cargo insurance that covers the goods from the time they are loaded onto the vessel at the port of departure until they arrive into the buyer’s possession.
6) Buyer would accept the seller’s transport documents provided they conform with the sales contract and will allow the buyer to take possession of the goods after arrival at the named port of destination.
This interpretation is provided as a guide only.
Incoterms are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms 2000″. For a complete and official overview please refer to the ICC’s publication.