CFR - Cost & Freight

The Incoterm CFR stands for “Cost and Freight.” Under CFR, the seller is responsible for paying the costs associated with transporting the goods to the port of destination. This includes the freight charges necessary to ship the goods to the named port. However, the seller does not cover the cost of insurance for the goods during transit—this is the responsibility of the buyer.

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Significance of CFR:

1. Cost Management: CFR helps in clarifying the cost responsibilities between buyer and seller. The seller takes on the cost of shipping, which can simplify the buyer’s financial planning since they are only responsible for insurance and import duties upon arrival.
2. Risk Transfer: Although the seller covers the shipping cost, the risk of loss or damage to the goods transfers from the seller to the buyer as soon as the goods are loaded onto the shipping vessel. This means the buyer assumes the risk during transit.
3. Predictable Expenses: CFR provides a predictable framework for calculating shipping costs, which can aid in budgeting and financial planning for both parties.
4. Simplicity in Negotiations: Using CFR can streamline negotiations since it clearly delineates the costs covered by the seller and those that remain the buyer’s responsibility, thus avoiding potential disputes.

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Overall, CFR helps in defining the financial and risk responsibilities associated with shipping, making international trade transactions more transparent and manageable.