CFR Explained: Cost and Freight Delivery Term
CFR (Cost and Freight) is a sea freight Incoterms term where the seller pays goods cost and ocean freight to the destination port. Unlike CIF, CFR does not include insurance. Risk transfers at the origin port ship's rail.
What Is CFR?
CFR (Cost and Freight) is an Incoterms 2020 delivery term for sea freight where the seller pays the goods cost and ocean freight to the destination port. The seller does not arrange insurance (that distinguishes CFR from CIF). Risk transfers at the origin port when goods are loaded on board.
CFR vs CIF
| Factor | CFR | CIF |
|---|---|---|
| Freight | Seller pays | Seller pays |
| Insurance | Not included | Seller arranges (min ICC-C) |
| Risk transfer | Ship's rail | Ship's rail (same) |
| Price | Slightly lower | Slightly higher |
The price difference is minimal (just the insurance premium, typically 0.3-0.5% of cargo value).
When to Use CFR
- Buyer has their own marine insurance policy
- Seller wants to quote without insurance
- Sea freight with freight included but insurance separate
Frequently Asked Questions
Can CFR be used for road?
No, sea only. Multi-modal equivalent is CPT.
Should buyer get insurance?
Strongly recommended since risk transfers at origin port.
CFR price vs CIF?
Difference is only the insurance premium (0.3-0.5% of value).
CFR vs FOB?
CFR includes freight; FOB does not. Risk transfer point is the same.
References
- ICC Incoterms 2020
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