Incoterms® 2020 · Sea and inland waterway only
CFR (Cost and Freight) under Incoterms® 2020
Under CFR the seller contracts and pays for carriage to the named port of destination, but risk passes to the buyer as soon as the goods are on board at the port of shipment. The seller has no duty to insure, so the buyer needs its own cover for the sea voyage.
- Risk transfer
- Risk passes to the buyer when the goods are on board the vessel at the port of shipment, not at the destination port.
- Cost transfer
- The seller pays costs until the goods are on board plus ocean freight to the named destination port; the buyer pays destination charges (unless included in the contract of carriage) and all costs thereafter.
- Mode of transport
- Sea and inland waterway only
- Insurance
- Not required, agreed between the parties
Who does what along the delivery chain
- 1Loading at seller's premisesSeller
- 2Export clearanceSeller
- 3Transport to port/terminal of departureSeller
- 4Loading onto main carriageSeller
- 5Main carriageSeller
- 6Cargo insuranceNot required / negotiable
- 7Unloading at destinationBuyer
- 8Import clearanceBuyer
- 9Import duties & taxesBuyer
- 10Delivery to final destinationBuyer
Seller's obligations
- Provide the goods, a commercial invoice and suitable packaging.
- Carry out and pay for export clearance.
- Contract and pay for carriage to the named port of destination by the usual route.
- Load the goods on board at the port of shipment within the agreed period.
- Provide the usual transport document, such as a bill of lading, enabling the buyer to claim the goods at destination.
- Notify the buyer of shipment so it can insure and prepare to receive the goods.
Buyer's obligations
- Pay the price.
- Bear risk from the moment the goods are on board at the port of shipment.
- Take delivery from the carrier at the destination port.
- Pay unloading and destination charges, unless included in the seller's contract of carriage.
- Carry out and pay for import clearance and import duties.
- Arrange its own cargo insurance if it wants protection during transit.
Use it when
- Bulk or directly loaded cargo where the seller has competitive freight rates.
- The buyer insures under its own annual open cover.
- The seller wants to control sailing dates to meet the L/C shipment deadline.
Avoid it when
- Containers delivered at the yard, where CPT fits better.
- The buyer is not used to arranging its own insurance.
- The buyer cannot control destination charges collected by the carrier's agent.
Common mistakes
- Believing the seller bears risk to the destination port because it paid the freight.
- The buyer fails to insure because it confuses CFR with CIF.
- Not naming the port of shipment, leaving the buyer unsure where risk passes.
- Being surprised by high destination charges because the seller chose the cheapest carrier.
Practice in Vietnam
Many Vietnamese importers buy CFR, for example "CFR Hai Phong" or "CFR Cat Lai", because overseas suppliers quote a delivered price to a Vietnamese port. Watch the destination local charges, such as THC, delivery order (D/O) fee, container imbalance charge (CIC), container cleaning and demurrage, which are collected directly from the consignee by the carrier's agent or forwarder in Vietnam. These can be unusually high when the seller has chosen low freight, especially for LCL. When declaring imports bought CFR, the importer must add insurance to arrive at a CIF customs value.
Worked example
An animal feed company in Dong Nai buys 5,000 tonnes of soybean meal from Argentina on "CFR Phu My Port, Vietnam, Incoterms® 2020". The seller charters a bulk carrier, loads at Rosario and pays freight to Phu My. Once the cargo is on board in Argentina the risk belongs to the Vietnamese buyer, so the buyer takes out ICC (A) marine cover with a local insurer. At Phu My the buyer pays discharge costs (unless included in the charter terms), clears import customs and pays duties.
Frequently asked questions
How does CFR differ from CIF?
Both have the same risk point and freight allocation. The difference is that under CIF the seller must buy at least ICC (C) insurance for the buyer, while under CFR it does not.
Who pays unloading at the destination port under CFR?
The buyer, unless unloading costs are included in the seller's contract of carriage; in that case the seller cannot recover them from the buyer unless otherwise agreed.
Who bears loss at sea under CFR?
The buyer, because risk passed when the goods were loaded at the port of shipment. The buyer needs its own insurance to be compensated.
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This content is for general guidance and does not replace legal or banking advice for a specific transaction.
Incoterms® 2020 responsibility matrix
| Rule | Loading at seller's premises | Export clearance | Transport to port/terminal of departure | Loading onto main carriage | Main carriage | Cargo insurance | Unloading at destination | Import clearance | Import duties & taxes | Delivery to final destination |
|---|---|---|---|---|---|---|---|---|---|---|
| EXW | B | B | B | B | B | – | B | B | B | B |
| FCA | S | S | S | B | B | – | B | B | B | B |
| FAS | S | S | S | B | B | – | B | B | B | B |
| FOB | S | S | S | S | B | – | B | B | B | B |
| CFR | S | S | S | S | S | – | B | B | B | B |
| CIF | S | S | S | S | S | S* | B | B | B | B |
| CPT | S | S | S | S | S | – | B | B | B | B |
| CIP | S | S | S | S | S | S* | B | B | B | B |
| DAP | S | S | S | S | S | – | B | B | B | S |
| DPU | S | S | S | S | S | – | S | B | B | S |
| DDP | S | S | S | S | S | – | B | S | S | S |
- S Seller
- B Buyer
- S* Seller obligation (insurance)
- – Not required / negotiable
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