Cost and Freight (CFR)
The seller pays sea freight to the destination port but does not insure; risk passes once goods are on board. Sea/inland-waterway only.
Cost and Freight (CFR) means the seller loads the goods on board, clears them for export and pays the sea freight to the named destination port, but does not arrange insurance. The crux is the split between cost and risk: risk passes to the buyer when the goods are loaded on board at the port of shipment, while the seller pays the main freight through to destination. So a loss at sea falls on the buyer even though freight is already prepaid by the seller.
CFR is for sea and inland-waterway transport only. On the cost ladder it sits between FOB and CIF: versus FOB the seller additionally bears main freight; versus CIF the seller lacks the insurance cost. Practical notes: because risk has passed but no insurance is taken, the buyer must insure the main carriage itself or be unprotected against sea perils; Chinese exporters quoting CFR should account for lane-by-lane freight volatility and peak-season surcharges to avoid pricing below cost. A common pitfall is assuming "seller pays freight to destination = risk also transfers at destination" — the two points are not the same.
FAQ
- Under CFR, if goods are damaged at sea, is the seller liable?
- No. Under CFR risk passed to the buyer once the goods were on board at the port of shipment, so loss or damage during the voyage is the buyer's — independent of the fact that the seller prepaid the freight. The buyer should insure the main carriage to be protected.
- What is the price difference between CFR and CIF?
- The difference is the insurance premium. Under CFR the seller pays freight but not insurance; under CIF the seller adds marine insurance (minimum ICC(C)) on top of CFR. So a CIF quote is typically CFR plus the premium; quote CIF if the buyer wants the seller to cover insurance, CFR if the buyer insures itself.
Related terms
Sources: https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/