Incoterms CFR: Cost and Freight

Named Place Requirement: Port of Destination

Applies to: Sea and inland waterway only

Risk and cost transfer from seller to buyer at different points.

CFR Shipping | Incoterms Obligations

Seller’s Obligations

• Goods, commercial invoice and documentation
• Export packaging and marking
• Export licenses and customs formalities
• Pre-carriage and delivery
• Loading charges
• Delivery at named port of destination
• Proof of delivery
• Cost of pre-shipment inspection

Buyer’s Obligations

• Payment for goods as specified in sales contract
• Risk starting with onboard delivery
• Discharge and onward carriage
• Import formalities and duties
• Cost of pre-shipment inspection (for import clearance)

CFR (Cost and Freight) is one of the most commonly-used trade terms after FOB but in
practice it is used without reference to any version of the Incoterms® rules. In such cases it
is then up to the seller and buyer to agree in their contract on what they mean when they
use these three letters.
This trade term goes back to the days of sailing ships, and in the Incoterms® 2020 rules, as
in previous versions, requires the seller to place the goods on board the vessel contracted
by themselves. From that point on risk of loss or damage to the goods transfers to the
buyer. “On board” is no longer defined as placing the goods “across the ship’s rail” and in
fact is not defined any further as it will be a matter for the contract to specify depending
on the nature of the goods. The seller must carry out all export formalities and the buyer
must carry out import formalities. Cost of carriage is payable by the seller, the bill of lading
usually indicating “freight prepaid.”
It is important to understand that in this rule there are two ports concerned. The seller
delivers at the port of loading, but pays freight to the port of destination where the buyer
is obligated to receive the goods from the carrier. Given that the word “carrier” does not
appear elsewhere in this rule it might have been better-worded as receiving the goods
from the vessel. The seller and buyer should agree in their contract who should pay for
unloading: the seller in the contract of carriage, or the buyer.
Under the Incoterms® 2020 rules CFR is inappropriate for container shipments because
the cargo is given to the carrier at a place some distance from the port, such as a container
yard or even the seller’s premises.

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Any excerpts quoted from the Incoterms® 2020 rules are the copyright of the International Chamber of
Commerce. Source: ICC website. The full text of the 2020 edition of the Incoterms rules is available at
https://2go. iccwbo.org/. The word “Incoterms” is a registered trademark of the International Chamber of Commerce.