CFR – Cost and Freight (named port of destination) - Incoterms 2020

Explained

In CFR the seller delivers when the goods are on board and cleared for export. The seller pays for freight to transport the goods until the final port of destination. However, the risk transfer occurs when goods are on board.

This term is used in ocean and inland waterway transportation. The contract must specify the exact port of discharge, whereas the port of loading is optional. The risk and delivery happens at the port of loading. The seller covers the cost of freight until port of discharge. The buyer covers discharge and import clearance cost.

Doing Business

Deliver happens in the port of loading, the risk for seller ends at the port of origin. In addition to this, the seller must arrange international freight transportation and provide all documentation to the buyer. The seller must also clear export customs. In summary, the seller arranges transportation under buyers’ risk, therefore it is recommended that the buyer gets additional insurance coverage.

This term is exclusively used on waterway transportation. This term is commonly used for agricultural or chemical products where seller has expertise and buying power on loading and transportation until port of discharge.
If shipment is containerized, it is preferred to use CPT. This term is usually applied when goods are in bulk cargo like grains and oil, oversized cargo or cargo that exceeds the normal dimensions to fit inside a container.

The usual transport document is a Bill of Lading showing the onboard date. The Bill of Lading allows the buyer to transfer the property of goods while in transit. It is common practice to have the Bill of Lading as proof for shipment to letters of credit or payments from buyer to seller.

Unloading costs (i.e. Destination Terminal Handling Charges) are under buyers responsibility unless agreed in the contract of sale.

When carriers have multiple legs and transshipment points, it is common practice that delivery happens at the first port of loading. For instance, transporting the first leg from Jakarta to Singapore and second leg from Singapore to Long Beach, California.

Examples

Buying chemicals from China: CFR Port of Rotterdam - Incoterms® 2020

Seller and Buyer obligations

THE SELLER’S OBLIGATIONS	THE BUYER’S OBLIGATIONS
1. General The seller must deliver the goods, commercial invoice, and any evidence of conformity.	1. General The buyer must pay the price of goods as agreed.
2. Delivery Deliver the goods by placing on board the vessel in the agreed date or period. In the customary manner at the port	2. Taking Delivery The buyer takes the goods from the carrier at the port of destination
3. Risks All risk of loss/damage until goods have been delivered	3. Risks All risk of loss/damage from the time or end of the period agreed for delivery. If the buyer fails to give note of the port of destination, the risk is under the buyer.
4. Carriage Contract carriage of goods until port of destination.	4. Carriage No obligation to contract a carrier.
5. Insurance No obligation. Provide at buyers risk and cost, any required information.	5. Insurance No obligation to insure the goods.
6. Delivery/transport document Provide the usual transport document.	6. Delivery/transport document Accepts the proof of delivery
7. Export/Import clearance All export clearance expenses (license, security, inspection, etc). Assist with import clearance	7. Export/Import clearance Assist with export clearance. Pay for import clearance and formalities (licenses, security, official documentation).
8. Checking The seller must check, count, weight, mark, and package goods	8. Checking No obligation.
9. Allocation of cost Pay all the cost until delivery, freight cost, and loading cost. Unloading cost if agreed in the contract. Transit costs. Cost of proof of delivery. Duties and taxes for export. All costs related to providing assistance in obtaining documents to the buyer	9. Allocation of cost Pay from the time goods delivered. All costs for assistance on getting carriage, insurance, delivery, and customs documentation. Pay duties and taxes for import or transit. Any additional cost if the carrier is not nominated or carrier fails to collect goods.
10. Notices Give notice that goods have been delivered on board.	10. Notices Time or period for receiving the goods and name the port of destination.

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