CFR Incoterms 2020: Cost and Freight
Under CFR the seller pays the ocean freight to the named destination port, but the risk passes to the buyer once the goods are on board at the port of shipment.
CFR Cost and Freight
Sea and inland waterway only
| Step | CFR |
|---|---|
| Export packing and marking | Seller |
| Loading at the seller's premises | Seller |
| Export customs clearance | Seller |
| Transport to the port or terminal | Seller |
| Terminal charges and loading at origin | SellerRisk passes to the buyer here |
| Main carriage (ocean or air freight) | Seller |
| Cargo insurance | Not required by the rule |
| Unloading at destination terminal | Buyer, unless in the freight contract |
| Transport to the named place | Buyer |
| Unloading at the named place | Buyer |
| Import clearance, duties and taxes | Buyer |
- CFR
- Risk passes: When the goods are on board the vessel at the port of shipment, even though the seller pays freight to destination.
- Costs: The seller pays freight to the named port of destination. The buyer pays unloading (unless in the freight contract) and import costs.
What does CFR mean in Incoterms?
CFR Incoterms means Cost and Freight. The seller loads the goods on board the ship at the port of shipment and pays the freight to the named port of destination. Risk passes to the buyer when the goods are on board at origin, even though the seller has paid for the voyage. CFR is for sea and inland waterway transport only. Older contracts write it as C&F, CNF or C+F.
Write it with the destination port and the edition, for example "CFR Jebel Ali, Incoterms® 2020".
Two critical points
CFR splits cost and risk at two different places:
- Risk passes at the port of shipment, when the goods are on board.
- Cost passes at the port of destination: the seller pays the freight to get there.
So if the ship sinks, the buyer bears the loss, even though the seller booked and paid the freight. The buyer needs its own cargo insurance from the port of shipment.
Seller and buyer obligations under CFR
| Seller | Buyer |
|---|---|
| Books and pays the sea freight to the named destination port | Bears the risk from on board at the port of shipment |
| Loads the goods on board and clears export | Insures the cargo if it wants cover (no obligation either way) |
| Gives the buyer the transport document, usually a bill of lading | Pays unloading at destination, unless the freight contract includes it |
| Tells the buyer the goods are shipped | Clears import and pays duties and taxes |
Example
An Indian rice exporter sells "CFR Jebel Ali, UAE, Incoterms® 2020". The exporter books the ship from Mundra and pays the freight. Once the bags are on board in Mundra, they are the buyer's risk. The buyer in Dubai insures the shipment, receives the bill of lading, pays the destination charges and clears import.
CFR vs FOB
Under both rules, risk passes at the same moment: when the goods are on board at the port of shipment. The difference is who books and pays the ship. Under FOB the buyer does. Under CFR the seller does, and adds the freight to the price. Buyers who have good freight rates of their own often prefer FOB. Buyers who want one landed price to the port, with less work, often prefer CFR.
FOB vs CFR vs CIF at a glance
| FOB | CFR | CIF | |
|---|---|---|---|
| Who books and pays the ship | Buyer | Seller | Seller |
| Who must insure the cargo | Nobody (buyer usually does) | Nobody (buyer usually does) | Seller, minimum cover for 110% of the price |
| Where risk passes | On board, port of shipment | On board, port of shipment | On board, port of shipment |
| Named place in the contract | Port of shipment | Port of destination | Port of destination |
| Price includes | Goods, export clearance, loading | FOB price + sea freight | CFR price + insurance |
How to calculate a CFR price
Start from your FOB price and add the sea freight to the destination port: CFR price = FOB price + ocean freight. Include any charges in the carrier's freight contract, such as origin terminal fees or destination unloading.
Example: a lumber exporter in Vancouver has an FOB Vancouver price of USD 24,000. The forwarder quotes USD 2,100 for the container to Yokohama. The quote becomes "CFR Yokohama, Incoterms® 2020: USD 26,100".
To quote CIF instead, add insurance on 110% of the CIF value. With a premium rate of 0.25%, CIF = 26,100 ÷ (1 minus 1.1 × 0.0025) = 26,100 ÷ 0.99725 = USD 26,171.97. Ask your insurer for the real rate. Build the quote in a proforma invoice with the rule and port written on it.
CFR vs CIF
The only difference is insurance. Under CIF the seller must also buy cargo insurance for the buyer's benefit. Under CFR nobody has to insure, so the buyer should arrange cover from the port of shipment. Buyers in some countries prefer CFR because they must or want to insure with local insurers.
CFR Incoterms 2010 vs 2020
The core rule did not change in 2020: the seller pays freight to the destination port and risk passes on board at origin. Incoterms® 2020 mainly made the text clearer, with all costs listed in one place for each side and more detail on security checks for export. Always name the edition in the contract, because a contract can still use 2010 if both sides agree.
Containers: use CPT instead
For container shipments the ICC recommends CPT, the any mode version of CFR. Under CPT risk passes when the container is handed to the first carrier at the terminal, which reflects when the seller actually loses control of it.
Whatever the rule, the seller provides a commercial invoice that names the Incoterm and place, and usually a packing list. For quotes before the order, use a proforma invoice with the same rule written on it.
Features
- Who does each step under CFR
- Where risk passes, marked on the chart
- Compare CFR with CIF or any other rule
- Link to the Incoterms chooser
Frequently asked questions
What does CFR mean in shipping?
CFR means Cost and Freight. The seller pays the sea freight to the named destination port, but risk passes to the buyer once the goods are on board at the port of shipment.
Who pays freight under CFR Incoterms?
The seller books and pays the ocean freight to the named port of destination. The buyer pays from there on, including import clearance and duties.
Who pays insurance under CFR?
Nobody is obliged to. Because the buyer bears the risk from loading, the buyer usually buys cargo insurance. Under CIF the seller must insure.
Is CFR the same as C&F or CNF?
Yes. C&F and CNF are older, informal ways of writing Cost and Freight. The official Incoterms code is CFR.
What is the difference between CFR and DDP?
Under CFR the risk passes at the port of shipment and the buyer clears import. Under DDP the seller carries the goods to the buyer's named place, bears the risk until then and pays import duties and taxes. DDP works for any mode of transport.
Is there a CFR Incoterms 2024 or 2025?
No. Incoterms® 2020 is the current edition, in force since 1 January 2020. It stays current until the ICC publishes a new one.
What does CFR free out (CFR FO) mean?
It is a trade add-on, not an Incoterms rule. It usually means the sea freight the seller pays does not include unloading at the destination port, so the buyer pays it. Spell out who pays unloading in the contract.
Who pays destination port charges under CFR?
The buyer, unless the seller's freight contract includes them. If the seller has paid unloading costs under its contract of carriage, it cannot charge them to the buyer unless agreed.
Can CFR be used for air freight or containers?
CFR is for sea and inland waterway only. For air freight, use CPT. For containers, the ICC also recommends CPT, because risk then passes when the box is handed to the carrier at the terminal.