CFR : Cost and Freight

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Cost and Freight ... (named port of destination)

In Cost and Freight, the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods past the ship's rail at the port of shipment (not destination).

The seller is also responsible for paying for the costs associated with transport of the goods to the named port of destination. However, once the goods pass the ship's rail at the port of shipment, the buyer assumes responsibility for risk of loss or damage as well as any additional transport costs.

The Cost and Freight term is used only for ocean or inland waterway transport. The "named port of destination" in Cost and Freight and all "C" terms is domestic to the buyer.

Normal payment terms for Cost and Freight transactions include cash in advance, open account, and letters of credit.

The Cost and Freight term is commonly used in the sale of oversize and overweight cargo that will not fit into an ocean freight container or exceeds weight limitations of such containers. The term is also used for LCL (less than container load) cargo and for the shipment of goods by rail in boxcars to the ocean carrier.

*Insurance Note
While the seller may not be legally responsible for the goods once they pass the ship's rail in the port of shipment, he may have "insurable interest" during the voyage. Prudence may dictate purchase of additional insurance coverage.

Examples
CIF Cost and Freight Port-au-Prince Haiti
CIF Cost and Freight Bombay India

Incoterm Category
CFR is a "C" Incoterm where the seller is responsible for contracting and paying for carriage of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been shipped. C terms evidence "shipment" (as opposed to "arrival") contracts.

Modes of Transport Covered
Used only for ocean or inland waterway transport.

Seller's Responsibilities (summary)

  1. Goods - Provide the goods, commercial invoice or electronic message, and other documentation as required by the sales contract.
  2. Licenses and Customs Formalities - Obtain at own risk and cost any export licenses and authorizations and carry out all export formalities and procedures.
  3. Carriage and Insurance - Contract for and pay all costs of carriage by sea vessel to the named port of destination. No obligation to provide insurance.
  4. Delivery - Deliver the goods on board the named vessel at the named port and on the date or within the time period stipulated in the sales contract.
  5. Risk Transfer - Assume all risks of loss or damage to the goods until they have passed over the ship's rail at the port of shipment.
  6. Costs - Pay all costs until the goods have been delivered to the named port of shipment and passed over the ship's rail plus costs of loading, carriage to the port of destination and normal unloading. Also to pay all costs relating to export including duties, taxes and customs formalities.
  7. Notice to the Buyer - Provide sufficient notice to the buyer that the goods have been delivered on board the named vessel.
  8. Proof of Delivery, Transport Documents - Provide the buyer with a transport document that will allow the buyer to claim the goods at the destination and (unless otherwise agreed) allow the buyer to sell the goods while in transit through the transfer of the transport document or by notification to the sea carrier.
  9. Checking, Packing, Marking - Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide appropriate packing (unless the goods are traditionally delivered unpackaged) as required for the transport of the goods, to the extent that the buyer has made transport circumstances known to the seller prior to the execution of the sales contract. Provide marking appropriate to the packaging.
  10. Other - Provide the buyer at the buyer's request, risk and expense any and all assistance in securing documentation originating in the country of export or of origin required for import and transshipment (as necessary). Provide the buyer at the buyer's request information necessary to obtain insurance.

Buyer's Responsibilities (summary)

  1. Payment - Pay for the goods as provided in the sales contract.
  2. Licenses and Customs Formalities - Obtain and pay costs of all import licenses and authorizations and carry out all import formalities.
  3. Carriage and Insurance - No obligation to the seller.
  4. Taking Delivery - Take delivery of the goods at the port of destination as provided in the sales contract.
  5. Risk Transfer - Assume all risk of loss or damage from the time the goods have passed over the ship's rail at the port of shipment.
  6. Costs - Pay all additional costs for the goods once they have passed over the ship's rail at the port of shipment, including unloading, lighterage and wharfage at the port of destination. Pay all costs relating to import formalities including duties, taxes and other charges including transshipment.
  7. Notice to Seller - If, according to the sales contract, the buyer is able to specify a time for shipping and/or specify a port of destination, to give the seller sufficient notice.
  8. Proof of Delivery, Transport Document - Accept the seller's transport document so long as it is in conformity with the sales contract.
  9. Inspection(s) - Pay for the costs of pre-shipment inspection except inspections required by the country of export.
  10. Other - Pay all costs of securing documentation from the country of origin or export as required for import. Reimburse seller for costs in providing such documentation or assistance.
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© World Trade Press. Reproduced with permission.