Cost and Freight (CFR)

Understanding Cost and Freight (CFR) in International Trade

Deciphering Cost and Freight (CFR)

Unraveling the Concept
Cost and freight (CFR) stands as a pivotal term in foreign trade contracts, dictating the responsibilities of both buyers and sellers in international transactions. When CFR is stipulated in a contract, the seller is obligated to arrange and cover the expenses of transporting goods by sea to a designated port. This includes clearing the goods for export and loading them onto the transport vessel. Importantly, once the goods are loaded onto the ship, the risk of loss or damage shifts to the buyer, absolving the seller of the need to secure insurance for the cargo during transit.

Navigating International Commercial Terms
CFR falls under the umbrella of International Commercial Terms (Incoterms), standardized by the International Chamber of Commerce (ICC) to streamline global trade practices. These terms not only elucidate the obligations of both parties regarding transportation and export clearance but also delineate the point at which risk transfers from the seller to the buyer.

Comparing CFR with Other Incoterms
While CFR is specific to sea and inland waterway transportation, other Incoterms offer similar frameworks for trade contracts. Free alongside ship (FAS) involves the seller delivering the cargo to the port adjacent to the vessel, with loading responsibilities resting on the buyer. Free on board (FOB) mandates the seller to load the goods onto the ship. Meanwhile, cost insurance and freight (CIF) parallel CFR but additionally require the seller to insure the goods until they reach the destination port.