CFR Shipping Explained [Get To Know Your International Trading Terms] (2024)

FAQs

CFR Shipping Explained [Get To Know Your International Trading Terms]? ›

What is CFR in shipping? 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.

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.

Last Updated: September 28, 2023. 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 ...

CFR is almost identical to the Cost, Insurance, and Freight (CIF) Incoterm. However, the difference is that insurance is mandatory under CIF and must be provided by the seller. On the other hand, insurance is optional for the CFR Incoterm.

For CFR specifically the ownership transfers to the buyer at the port, airport or terminal at destination when the product is unloaded from the vessel, the aircraft or the train.

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 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. It is divided into 50 titles that represent broad areas subject to Federal regulation.

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.

CFR differs from FOB in that the seller bears the costs of transporting the goods by ship to the port of destination. However, the risk of damage and loss is already transferred to the buyer as soon as the goods are on board the ship.

Cost of goods, labour, packaging, labelling, insurance, transportation, customs, checks, paperwork, taxes, fees and port fees are usually factored into CFR price. Does CFR include customs clearance? An importer is responsible for paying any applicable import customs fees in addition to the CFR price.

Is CFR prepaid or collect? ›

One of the hallmarks of CFR is freight prepaid. In the world of CFR, the seller pays the shipping costs upfront. This payment strategy offers both parties peace of mind, with the seller ensuring that goods are in transit, and the buyer assured that no surprise costs arise mid-journey.

Currently, there are 11 Incoterms, each delineating distinct responsibilities and obligations between the buyer and seller. These terms fall into two main categories: those applicable to any mode of transportation (such as EXW, FCA, CPT) and those designed for sea and inland waterway transport (like FOB, CIF, DAT).

As discussed above, the buyer pays for insurance in CFR. He'll be liable for the goods right from the place of origin.

One notable disadvantage for buyers in CFR shipping is the limited control they have over the shipping process. Since the seller manages the transportation logistics, buyers might find themselves with minimal visibility into the intricacies of the shipping timeline and progression.

The risk of goods is transferred to the buyer as soon as the goods are loaded onboard by the seller. As such, any extraneous charges or levies imposed on the goods due to neglect or delays, such as shipping demurrage charges, unforseen taxes etc are to be borne by the importer.

Terminal Handling Charges (THC) are fees charged by the terminal operator. These costs may or may not be included by the carrier in their freight rates - the buyer should inquire if the CFR price includes THC, to avoid surprises.

The Council on Foreign Relations (CFR) is an American think tank specializing in U.S. foreign policy and international relations. Founded in 1921, it is an independent and nonpartisan 501(c)(3) nonprofit organization.

Code of Federal Regulations.

Cost of goods, labour, packaging, labelling, insurance, transportation, customs, checks, paperwork, taxes, fees and port fees are usually factored into CFR price. Does CFR include customs clearance? An importer is responsible for paying any applicable import customs fees in addition to the CFR price.

Free on Board means the seller is responsible for the product only until it is loaded on board a shipping a vessel, at which point the buyer is responsible. With CFR, the seller must arrange and pay all costs to ship the product to a destination port, at which point the buyer becomes responsible.