Definition of the CFR Incoterm (Cost and Freight)

The CFR Incoterm applies exclusively to maritime or inland waterway transport and remains unchanged in the Incoterms 2020. Under this term, the seller bears the costs up to the destination port, but the risk transfers to the buyer once the goods are loaded on board the ship at the port of origin.

Key difference from CIF: Unlike the CIF Incoterm, the seller is not obligated to provide insurance under CFR, making it a preferred choice for buyers who wish to handle their own insurance coverage.

Seller's Obligations (CFR)

• Delivery of the goods and commercial documentation
• Proper packaging and preparation
• Inland transport in the country of origin
• Export customs clearance
• Port charges at origin
• Booking and payment of international sea freight up to the destination port

Buyer's Obligations (CFR)

• Payment for the goods as per the contract
• Port charges at destination (unloading, handling, fees)
• Import customs clearance
• Payment of duties, VAT, and other taxes
• Inland transport to the final destination

Insurance under CFR Terms

Insurance is not mandatory under CFR. However, it is strongly recommended that the parties agree to insure the cargo during the transport. Common options include:

• The buyer contracts a comprehensive policy covering the journey from origin to final delivery
• Each party insures the leg of transport corresponding to their responsibility (up to or from the point of risk transfer)

In any case, it is advisable to clearly specify the insurance terms in the international sales contract to avoid conflicts in case of loss or damage.

Why is CFR Not Suitable for Containerized Cargo?

• Risk transfers once the goods are loaded on board the vessel
• With containers, goods are often delivered to the terminal days before loading, leaving the seller without visibility or control over potential damage
• This creates a gray area of responsibility, where it’s unclear whether the damage occurred before or after the risk transfer

Therefore, CFR is best suited for bulk or conventional cargo, where the seller has direct access to the vessel. For container shipments, using CIP or FCA is more appropriate as they allow for clearer allocation of responsibilities.