What is CFR Incoterm, and How is it Checked?

The CFR delivery term is a commercial contract frequently used, especially in maritime transport. So, what is the CFR delivery term and how is it applied? All the details now await you in the rest of the article!

What is CFR Delivery Term?

CFR delivery term is a legal term used in foreign trade contracts. Its abbreviation stands for "Cost and Freight". In a contract specifying that the sale is cost and freight, the seller is obliged to arrange for the carriage of the goods by sea to a port of destination and to provide the buyer with the documents necessary to obtain them from the carrier.

In a cost and freight sale, the seller is not responsible for obtaining marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used for cargo transported by sea or inland waterways.

How is CFR Delivery Term Applied?

International transport contracts often include abbreviated trade terms indicating the place and time of delivery, payment, conditions under which the risk of loss passes from seller to buyer, and the party responsible for freight and shipping costs.

If a buyer and a seller agree to include cost and freight in their transaction, the seller must arrange and pay for the transportation of the cargo to a specified port. The seller must deliver the goods, clear them for export, and load them onto the shipping vessel.

Once the seller loads the goods onto the vessel, but before the main carriage takes place, the risk of loss or damage passes to the buyer. This provision means that the seller is not responsible for insuring the cargo against loss or damage during transit.

The CFR delivery term is an international commercial term, also referred to as an Incoterm. To facilitate foreign trade, the ICC publishes and regularly updates this globally recognized set of terms, which helps establish a standard for the terms of foreign trade contracts.

Delivery Terms with Similar Principles to CFR

For goods transported by international sea or inland waterways, there are three other Incoterms closely related to CFR and frequently used in trade contracts.

• FAS Delivery Term: Means that the seller is only required to deliver the cargo to the port alongside the vessel, at which point responsibility for the goods passes to the buyer.

• FOB Delivery Term: Also requires the seller to load the goods onto the vessel.

What Does Cost and Freight (CFR) Cover?

CFR delivery term is a cost related to cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for the transportation of the cargo to a designated port.

The seller is also obliged to deliver the goods, clear them for export, and load them onto the shipping vessel. However, once the shipment is loaded onto the vessel, the risk of loss or damage lies with the buyer. This means that the seller is not responsible for insuring the cargo during transit.

What is the Difference Between CIF and CFR?

Cost and freight (CFR) and cost, insurance, and freight (CIF) are similar. Both relate to the transport of goods by sea and divide transport responsibilities between the buyer and the seller.

Where they differ is that CIF requires the inclusion of marine insurance at the seller's expense. Under CFR, the seller is not obliged to insure the goods until they reach the port of destination.