CFR, or Cost and Freight, is an Incoterms rule for sea and inland-waterway transport under which the seller contracts and pays for carriage to the named destination port, while risk transfers when the goods are placed on board the vessel at the port of shipment.
What does the seller handle under CFR?
The seller supplies the goods, completes export formalities, delivers them on board and pays freight to the named destination port. The seller does not have to purchase cargo insurance for the buyer.
What does the buyer handle?
The buyer bears transit risk after loading, arranges insurance if desired, completes import clearance and pays duties, taxes and destination costs not included in the seller’s freight contract.
Why are cost and risk split?
CFR separates the point where risk transfers from the point through which the seller pays freight. The destination-port name describes the paid carriage, not the risk-transfer point.
How should landed cost be calculated?
Start with the CFR price, then add buyer-paid insurance, destination handling, customs duty, import tax, brokerage and inland delivery. Confirm which terminal and unloading costs are already included.
For example, a $40,000 CFR price plus $300 insurance, $2,000 duty, $700 destination charges and $1,000 inland delivery produces an illustrative landed cost of $44,000, excluding recoverable taxes.
When is CFR appropriate?
CFR is intended for goods delivered on board a vessel, such as bulk or non-containerized cargo. For container shipments handed to a carrier before loading, CPT may better match the operational handoff.
