COST AND FREIGHT (CFR)
Back to GlossaryDefinition
An Incoterms rule where the seller pays costs and freight to a named port, while risk transfers to the buyer when goods are onboard the vessel.
Summary
Cost and Freight (CFR) is one of the 11 Incoterms that defines the responsibilities between buyers and sellers in international trade. Under CFR, the seller must arrange and pay for shipping the goods to the buyer's designated port, including all costs and freight charges. However, there's a crucial distinction: while the seller pays for transportation, the risk of loss or damage transfers to the buyer as soon as the goods are loaded onto the ship at the origin port. This means the buyer should purchase marine insurance to protect against potential losses during transit, even though they're not paying for the shipping itself.
Usage Context
Understanding CFR is essential when studying international trade terms, export/import procedures, risk management in global supply chains, and international sales contracts. It's particularly important when analyzing shipping cost allocation and insurance responsibilities in maritime commerce.
Common Confusions
- Thinking that CFR includes insurance (it doesn't - that's CIF)
- Assuming the seller bears risk during ocean transport (risk transfers at loading)
- Confusing CFR with FOB regarding who pays freight costs
- Believing CFR can be used for all modes of transport (it's only for sea/inland waterway)
- Misunderstanding when title to goods transfers versus when risk transfers
