What is CFR?
CFR · Cost and Freight
The seller pays for carriage to the named destination port, but risk transfers to the buyer when the goods are loaded at origin. The seller does not insure the cargo — that gap between cost and risk is the difference buyers most often miss.
Key points
- The seller pays freight to destination but risk passes at loading.
- No insurance obligation — the buyer covers the voyage or goes uncovered.
- Discharge cost follows the carriage contract, so name it in the sale contract.
At a glance
| Who pays freight | Seller |
|---|---|
| Who insures | Buyer |
| Risk transfers | On board at the load port |
| Export clearance | Seller |
| Import clearance | Buyer |
| Best for | Buyers wanting a known landed cost |
The split that defines CFR
Under CFR — Cost and Freight — the seller contracts and pays for carriage to the named destination port. But risk transfers to the buyer when the goods are loaded on board at origin, exactly as under FOB.
That divergence between where cost ends and where risk ends is the most misunderstood feature of the rule. A cargo lost mid-voyage on CFR terms is the buyer’s loss, even though the seller paid the freight and the vessel is still thousands of miles from the destination named in the contract.
Why buyers still choose it
CFR suits buyers without freight relationships, and any buyer importing from an origin where the seller can secure better tonnage than the buyer could. It also simplifies budgeting: the landed cost to the discharge port is known at contract stage.
Sellers like it because they control the shipping schedule, which matters when a load port has limited berth availability or a production run needs lifting on a particular date.
What to add to a CFR contract
Because the seller has no insurance obligation, a buyer on CFR terms should arrange its own marine cover from the moment of loading. Buyers who assume the seller’s freight arrangement includes insurance discover otherwise after a casualty.
Discharge costs also need stating. CFR does not settle who pays for unloading; that follows the liner terms of the underlying carriage contract, and the sale contract should say so rather than leave it to the bill of lading.
Frequently asked questions
- What is the difference between CFR and CIF?
- Insurance. Both have the seller pay freight to the destination port with risk transferring at loading, but under CIF the seller must also buy marine insurance for the voyage. Under CFR the buyer insures or goes uncovered.
- Does the seller carry risk during the voyage under CFR?
- No. Risk passes to the buyer when the goods are loaded on board at the origin port, even though the seller has paid for carriage to the destination.
- Who pays discharge costs under CFR?
- It depends on the carriage contract the seller concluded. CFR itself does not allocate discharge, so the sale contract should state whether freight is on liner terms or whether the buyer bears discharge.
Related terms
The seller delivers the goods on board the vessel at the named load port and clears them for export. Risk and cost transfer to the buyer once the cargo is loaded, so the buyer arranges and pays for ocean freight and insurance.
As CFR, but the seller also buys marine insurance for the voyage. Risk still transfers on loading at origin; the buyer simply has a policy to claim against. Standard minimum cover is Institute Cargo Clauses (C) unless the contract says otherwise.
The seller bears cost and risk all the way to the named destination, ready for unloading. Import clearance and duties remain the buyer’s responsibility.
The document issued by the carrier that serves as receipt for the cargo, evidence of the contract of carriage, and — critically — a document of title. Whoever holds the original endorsed bill controls the goods.
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