CFR Incoterms 2020 | Cost and Freight Incoterms Explained - SeaRates (2024)

FAQs

CFR Incoterms 2020 | Cost and Freight Incoterms Explained - SeaRates? ›

CFR Incoterms 2020: Meaning & Explanation

Under CFR terms (short for “Cost and Freight”), the seller is required to clear the goods for export, deliver them onboard the ship at the port of departure, and pay for transport of the goods to the named port of destination. The risk passes from seller to buyer when the seller delivers the goods onboard the ship.

The main difference between CIF and CFR shipping terms is insurance. On both CFR and CIF shipping terms, the risk of the cargo transfers from seller to buyer once the goods are loaded on the selected vessel at the port of origin, but under CIF, the seller must purchase insurance for the cargo.

CPT is similar to the Incoterms^® 2020 rule CFR, except that CFR only applies to goods shipped by sea, whereas the CPT rule can be used for any form or forms of transport, including land and air, as well as ocean.

The CFR Incoterm or “Cost and Freight” is an Incoterm that is exclusive to ocean freight shipping. It states that the seller is not only responsible for delivering the goods to the port specified by the buyer, but also bears the transportation costs of the goods to the destination port.

Under a cost and freight (CFR) agreement, the seller has a weightier responsibility for arranging and paying for transportation the ordered products. For goods shipped CFR, the shipper is responsible for organizing and paying for the shipping of the products by sea to the destination port, as specified by the receiver.

Key Takeaways. Carriage Paid To (CPT) is an international commercial term (Incoterm) denoting that the seller incurs the risks and costs associated with delivering goods to a carrier to an agreed-upon destination. With multiple carriers, the risks and costs transfer to the buyer upon delivery to the first carrier.

CFR incoterm is a universal trade term used internationally and was recently reviewed under Incoterms 2020 by the ICC. This is specifically used for sea and ocean freight transits.

Advantages of CFR for Online Businesses

Under CFR, the seller is responsible for transportation costs up to the destination port. This clarity in cost allocation allows online businesses, especially those operating on tight budgets, to strategise their financial planning more effectively.

Does CFR include customs clearance? ›

When goods are bought or sold Cost and Freight (CFR) it means that the Seller is responsible for the delivery of the goods to a ship and loading the goods onto the ship. The seller is also responsible for any customs export documentation and export licences if needed.

List of Incoterms explained. Incoterms are categorized into two main groups to facilitate understanding and application in international trade: 7 rules for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP). 4 rules for sea and inland waterway transport (FAS, FOB, CFR, CIF).

What does cost and freight (CFR) entail? Cost and freight (CFR) is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port.

The Code of Federal Regulations (CFR) is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government.

The key difference in cost implications between CFR and DAP is that under CFR, the seller's cost responsibility ends at the port of destination, while under DAP, the seller's cost responsibility extends until the goods arrive at the named place of destination.