The following article describes everything you need to know about the Incoterm “Cost and Freight” (CFR). In case of any questions or unclarities, do not hesitate to contact us.
Cost and Freight (CFR) – Incoterms® 2020 in detail
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Group C: Main Carriage Paid – Cost and Freight (CFR)
Cost and Freight (CFR) is a trade term that is part of the Incoterms 2020, and is applicable only to sea and inland waterway transport. The term states that the seller is obligated to transport goods by sea at their expense to a port of destination and provide the buyer with the documents that are needed to pick up the goods at their destination. Even though the seller is obligated to carry the costs of transporting the goods, they are not required to arrange insurance for the cargo (unless negotiated with the buyer), which differentiates the Incoterm CFR from the Incoterm Cost, Insurance and Freight (CIF). The buyer on the other hand, is responsible for arranging the unloading and transportation of the goods in the country of destination. Additionally, the buyer must cover the customs clearance fees, import duties and taxes in the country of destination. Important to mention is, that the risk of damage and loss transfers to the buyer as soon as the goods are loaded onto the ship.
Examples of Cost and Freight (CFR) in action
Let’s say a Dutch company sells 50,000 bike tires under the CFR shipping term to a Canadian company. The seller must pack and deliver the goods to be loaded onto the ship and clears them for export. Meaning, the Dutch company arranges transport with a freight forwarder and pays for the shipping until the port of destination in Canada. As soon as the goods have been loaded onto the ship, the risk transfers to the Canadian company. The Canadian company needs to pay the import fees and customs as well as covering the unloading, destination handling charges, delivery and unloading of the goods at the port of destination.
What are the Incoterms Obligations for CFR in Shipping?
There are different obligations for the seller and the buyer when using the CFR shipping term:
Seller’s Obligations:
- Export packaging
- Loading Charges
- Delivery to port/place
- Export duty, taxes and customs clearance
- Terminal handling charges at origin
- Loading on carriage and freight charges
Arranges and bears the cost for transporting the cargo to the buyer's port.
Buyer’s Obligations:
- Payment for goods as specified in sales contract
- Handling charges at destination
- Delivery to destination and unloading at destination
- Import duty, taxes and customs clearance
Please note that in terms of Insurance costs, this can be arranged and paid for by either party as stated In the contract.
How ALS can support you with the complexity of international commerce
ALS is an innovative, neutral, and globally active customs broker. We operate as a unified entity, where every member of our team, from your dedicated contacts to our board of directors, is committed to meeting your specified needs.
We are here to guide you through the process of international trade. Whether it’s speaking to one of our sales team, or requiring further guidance with our consultants, we offer everything to help facilitate your complete end-to-end customs solution. By law, we are not able to provide you with advice on which Incoterm you should use. However, we can provide you with information which you can use to make your decision.
What are the various Incoterms? Learn more!
Incoterms – short for international commcerial terms – are being used to clarify rules and terms of the international customs trade.
Learn more in our other articles about incoterms:
- Ex Works (EXW)
- Free Carrier (FCA)
- Carriage Paid To (CPT)
- Carriage and Insurance Paid To (CIP)
- Delivered at Place (DAP)
- Delivered at Place Unloaded (DPU)
- Delivery at Frontier (DAF)
- Delivery ex-Ship (DEX)
- Delivered Duty Paid (DDP)
- Deliver Duty Unpaid (DDU)
- Free Alongside Ship (FAS)
- Free on Board (FOB)
- Cost and Freight (CFR)
- Cost, Insurance, and Freight (CIF)