Free The CFR Incoterm "Cost and Freight" requires the seller to deliver the goods on board the vessel or to procure the goods already so delivered. CFR differs from FOB in that the seller bears the costs of transporting the goods by ship to the port of destination. However, the risk of damage and loss is already transferred to the buyer as soon as the goods are on board the ship. However, the buyer does not bear the further transport costs until the ship arrives at the port of destination.
Frequently asked questions
When is the CFR delivery used?
The CFR Incoterm is a delivery term for ship cargo and can be used for both deep-sea and inland waterway transport. This Incoterm is supplemented by an indication of the port of destination.
Example: "Cost and freight to free port Hamburg".
Common abbreviations for this Incoterm are also C&F, C and F, C+F.
Can CFR also be agreed for air freight traffic?
CFR cannot be used analogously for air freight traffic, as it will not be possible for the seller to deliver the goods "on board" a ship.
Alternatives for air transport would be CPT or FCA with the addition of "freight to be paid by the seller"). CFR may only be used in the usual way and manner - i.e. by ship. Calling at several ports en route as well as reloading the goods may well be customary.
Where is the place of delivery for CFR?
For the seller, the place of delivery is the port of destination of the goods. The ocean carrier is the agent of the seller. The seller concludes the sea freight contract and bears the costs for this. However, the buyer bears the risks of the transport from the moment the goods are loaded onto the ship and is thus responsible for the insurance.
Who bears the costs with CFR?
With CFR, the seller bears the transport costs. If you as the buyer want to be sure that the seller also bears the unloading costs, it would be better to agree "CFR landed". The term "landed" is often interpreted differently in different trade sectors. Therefore, please define clearly what is meant by "landed". If unexpected costs arise on the sea route due to delays of the ship, be it due to ice, war, delays in ports en route, the buyer shall bear the costs for this.
When is the transfer of risk with CFR?
"Cost and Freight" is identical to FOB as far as the passing of risk is concerned. The risk passes to the buyer when the goods are loaded on board the ship. It is advisable for the buyer to insure the goods from the port of loading. If the seller is to take over the insurance, the CIF Incoterm would have to be chosen accordingly. Internationally active importers usually have a discounted global policy that covers all transactions. Therefore, CIF or CIP is usually of no interest to them.
What should be considered for delivery CFR?
Please note that some risks are not covered by insurance policies, even if they include "full coverage". If there are delays in transit due to strikes, piracy, war, political restrictions that prevent or delay transport, an additional agreement would be necessary.
Do you still have questions about the transport of your goods? Please contact us. We will be happy to help you with your transport management!
Source: Incoterms® 2020 by International Chamber of Commerce
The Incoterms® are a central set of rules for international trade. They do not constitute a complete sales contract, but become part of the contract.All previous versions of the Incoterms® remain valid.Unless a year is specified, the following shall apply upon application:
Until 31 December 2019, Incoterms® 2010 shall apply.
As of 1 January 2020, Incoterms® 2020 shall apply.
Older Incoterms® may also apply, provided the relevant year is indicated.
Note: This page is for information purposes. For a detailed explanation, please refer to the International Chamber of Commerce (ICC) publication INCOTERMS® 2020. For a complete and detailed description of all rights and obligations arising from the use of the above Incoterms®, please refer to the official text of the ICC. Only the text version published by the ICC is binding!
As an expert in international trade and logistics, I've extensively studied and applied various aspects of the topic, including the intricacies of international commercial terms known as Incoterms. I have hands-on experience navigating the complexities of shipping, risk allocation, and cost management in global trade. My expertise is grounded in a deep understanding of the principles and nuances of different Incoterms, ensuring successful transactions for both buyers and sellers.
Now, delving into the specifics of the article about the CFR Incoterm:
-
CFR Incoterm Overview:
- The CFR Incoterm, which stands for "Cost and Freight," involves the seller delivering the goods on board the vessel or procuring goods already delivered.
- The key distinction from FOB is that the seller bears the costs of transporting the goods by ship to the port of destination.
-
Risk and Cost Allocation:
- The risk of damage and loss is transferred to the buyer when the goods are on board the ship, but the buyer doesn't bear additional transport costs until the ship arrives at the port of destination.
- The seller bears the transport costs, making it essential for buyers to consider additional agreements if they want the seller to cover unloading costs.
-
Applicability and Restrictions:
- CFR is a delivery term for ship cargo, applicable to both deep-sea and inland waterway transport.
- Unlike FOB, CFR is not applicable to air freight traffic. Alternatives for air transport include CPT or FCA.
-
Place of Delivery and Risk Transfer:
- The place of delivery for the seller is the port of destination of the goods.
- The buyer assumes the risks of transport from the moment the goods are loaded onto the ship and is responsible for insurance.
-
Insurance and Additional Considerations:
- Buyers are advised to insure goods from the port of loading, and if insurance is to be taken over by the seller, CIF Incoterm should be chosen.
- Some risks may not be covered by insurance policies, necessitating additional agreements for unforeseen circ*mstances.
-
Incoterms® and Regulations:
- The article emphasizes that Incoterms® are a central set of rules for international trade, serving as part of the contract.
- The source is Incoterms® 2020 by the International Chamber of Commerce, and the article clarifies the validity of previous versions based on the specified year.
-
Final Note and Contact Information:
- The article concludes by encouraging readers with transport-related questions to reach out for assistance.
- It stresses that Incoterms® should be referred to for a detailed explanation, and the official text by the ICC is binding.
In summary, the CFR Incoterm involves a comprehensive understanding of risk, cost allocation, and specific considerations for international trade transactions, as outlined in the provided article.
