CFR (Cost and Freight): the seller pays the ocean freight, the buyer carries the sea risk
Under CFR the seller books and pays the voyage, and the buyer owns everything that happens on it. That gap between who pays and who carries the risk is where almost every CFR argument starts.
CFR — Cost and Freight — is an Incoterms® 2020 rule for sea and inland waterway transport only. The seller contracts and pays the freight to the named port of destination, but delivers, and passes risk, when the goods are placed on board the vessel at the port of shipment. Everything that happens to the cargo at sea is the buyer’s risk even though the seller booked and paid for the voyage. Neither party is obliged to insure.
What CFR is not
Three confusions account for most CFR arguments on a file.
- CFR is not CIF. The risk and cost split is identical. The only difference is insurance: under CIF the seller must contract cover for the buyer, and may satisfy that with the restrictive Institute Cargo Clauses (C) rather than the wider (A). Under CFR there is no insurance obligation at all, on either side.
- CFR is not delivery to the destination port. The seller pays to the named port. The seller delivers at the load port. Cost runs to Rotterdam; risk stopped at Ningbo, on board.
- CFR is not for containers, in ICC’s view. The sea rules suit bulk and non-containerised cargo. A container is handed to a terminal days before it is loaded, so between gate-in and loading the seller carries the risk of goods it no longer controls. CPT or CIP fit that hand-over; the same argument is why ICC steers container sellers away from FOB towards FCA.
CFR against its neighbours
| Rule | Modes | Delivery / risk passes | Who pays the main freight | Seller must insure |
|---|---|---|---|---|
| CFR | Sea and inland waterway only | On board at the port of shipment | Seller, to the named port of destination | No |
| CIF | Sea and inland waterway only | On board at the port of shipment | Seller, to the named port of destination | Yes — Institute Cargo Clauses (C) minimum, at least 110% of contract value |
| FOB | Sea and inland waterway only | On board at the port of shipment | Buyer | No |
| CPT | Any | Hand-over to the first carrier | Seller, to the named place of destination | No |
| CIP | Any | Hand-over to the first carrier | Seller, to the named place of destination | Yes — Institute Cargo Clauses (A), minimum 110% of contract value |
| DAP | Any | At the named place of destination | Seller, to the named place of destination | No |
Read it by column. FOB and CFR share a delivery point and differ on who books the ship. CFR and CIF differ by one insurance certificate. CFR and DAP both have the seller paying to destination and are opposites on where the risk sits — the most expensive misunderstanding in the set.
Running a CFR file
- Name the port of destination precisely. “CFR Santos” is a cost boundary. Any leg beyond the port, and its risk, is the buyer’s and belongs in a separate line.
- Get the on-board date right. Delivery is on board, so the on-board notation on the bill of lading records when risk passed. Under a letter of credit it is also the date the bank checks against the latest shipment date.
- Check what the freight already includes. Incoterms 2020 puts every cost into article A9/B9. If the carriage contract the seller signed covers discharge or destination terminal handling, the seller has paid it, and the destination agent should not invoice the consignee for it again.
- Split the clearances. The seller clears export; the buyer clears import and pays duty and import taxes. That division does not move because the seller happens to have an office at destination.
- Say something about insurance. CFR obliges nobody. Either the buyer arranges its own marine cover from the load port, or the sale should have been CIF. Settle it in the contract, not after a general average declaration.
- Watch demurrage and detention. Free time at destination runs against the consignee, so delay is a buyer cost even though the seller chose the carrier and the service. A cheap booking on a slow string can cost the buyer more than it saved the seller.
What goes wrong
- Damage found at destination, claim sent to the seller. Under CFR the buyer has held the risk since the goods went on board. If neither party insured, there is nothing behind the loss but the carrier’s package limitation.
- CFR used for a container. The seller keeps the risk through gate-in, terminal storage and loading — a window it cannot see, and one CPT would have closed at hand-over.
- Destination terminal handling charged twice: once inside the seller’s freight, once by the destination agent to the consignee. That is a cost-allocation failure, not a tariff dispute, and it is settled by reading the carriage contract.
- “CFR door” or “CFR warehouse” on a purchase order. CFR names a port. If the parties mean delivery inland, they mean DAP.
- The vessel is late and the buyer blames the seller. The seller’s obligation is to deliver on board within the agreed period and to contract carriage on usual terms; the voyage is at the buyer’s risk once the goods are aboard.
The other CFR
Searching for “CFR” mixes two unrelated worlds, and forwarders work in both. In the United States, CFR is also the Code of Federal Regulations: Title 19 is Customs Duties, and its Chapter I holds the U.S. Customs and Border Protection regulations brokers work to. A citation such as 19 CFR 111 is a regulation, not a trade term. Everything else here refers to Cost and Freight, one of the eleven Incoterms 2020 rules published by the International Chamber of Commerce.
How software handles it
CFR is a cost-allocation rule, so the place it works or fails is the charge list on the file. What a forwarding system has to do is unremarkable and rarely done well in a spreadsheet: record the term once, hold the named port with it, and keep buy and sell on the same shipment so a destination charge already paid inside the ocean freight cannot be re-billed to the consignee. Linbis carries the term from freight quoting onto the file, prints it on the paperwork produced by document generation, and holds the on-board date and the bill of lading against the same record used for ocean freight software operations.
Questions operators ask
What does CFR stand for in shipping?
Cost and Freight. It is one of the eleven Incoterms 2020 rules, and one of the four that can only be used for sea and inland waterway transport, alongside FAS, FOB and CIF.
When does risk transfer under CFR?
When the goods are placed on board the vessel at the port of shipment. The seller has then delivered, whether or not the goods arrive at the destination port in sound condition, in the right quantity, or at all.
What is the difference between CFR and CIF?
Insurance, and nothing else. Both deliver on board at the load port and both have the seller paying freight to the named destination port. CIF additionally obliges the seller to contract cargo insurance for the buyer, and permits the restrictive Institute Cargo Clauses (C) as the minimum standard.
Is CFR the same as C&F?
C&F and CNF are informal survivals of an older abbreviation for the same idea. They are not Incoterms 2020 rules. Write CFR, name the port of destination and name the edition, or a bank or a court will have to decide what you meant.
Can CFR be used for containers?
It is used for containers constantly, and ICC advises against it. The sea rules assume the seller controls the goods until they are on board; with a container that stops being true at gate-in. CPT or CIP put the delivery point where the hand-over actually happens.
Our terms are always CFR — why would we need a system for that?
Because a single term used everywhere is exactly where allocation errors go unnoticed. The recurring loss is not a mispriced freight rate; it is a destination charge invoiced to a consignee who already paid it inside the seller’s ocean freight. That shows up when buy and sell sit on one record and does not when they sit in two spreadsheets. Linbis starts at $150 per month including one user, with a free trial and no credit card.
Related
- freight forwarding software
- ocean freight software
- air freight software
- warehouse management for forwarders
- freight quoting
- customs filing
CFR sits with the other ten rules on the Incoterms 2020 index.