CFR (Cost and Freight) Incoterm: Meaning and Pricing 2024 - HUAQI

What is CFR (Cost and Freight)?

CFR, or Cost and Freight, is an Incoterm established by the International Chamber of Commerce (ICC). It defines the responsibilities of buyers and sellers in international shipping. Under CFR, the seller is responsible for the costs and freight necessary to transport goods to a designated port of destination. However, the risk transfers to the buyer once the goods are loaded onto the vessel at the port of departure.

Key Features of CFR

1. Delivery Responsibility: The seller arranges and pays for the transportation of goods to the specified port of destination.
2. Risk Transfer: Risk transfers from the seller to the buyer once the goods are loaded onto the vessel at the port of origin.
3. Shipping Method: CFR is primarily used for sea freight and inland waterway transport.

Seller’s Responsibilities

• Transport Costs: The seller covers all costs related to transporting the goods to the destination port, including freight charges.
• Loading Charges: The seller is responsible for loading the goods onto the ship.
• Export Customs Clearance: The seller must handle all export documentation and customs clearance at the origin.

Buyer’s Responsibilities

• Insurance: The buyer is responsible for insuring the goods during transit, as the risk transfers when the goods are loaded.
• Import Customs Clearance: The buyer handles customs clearance upon arrival at the destination port and pays any applicable duties and taxes.
• Further Transportation: After clearing customs, the buyer is responsible for transporting the goods to their final destination.

Pricing Under CFR

When calculating shipping prices under CFR, consider the following components:

1. Freight Charges: The cost of transporting goods by sea to the destination port.
2. Loading Costs: Fees for loading the goods onto the vessel at the port of departure.
3. Terminal Handling Charges: Costs incurred at the loading port for handling the goods.
4. Export Customs Fees: Any charges related to export clearance processes at the origin.

Example Scenario

Scenario: A company in China sells machinery to a buyer in the United States using CFR.

• Seller’s Responsibilities:
  • Arrange for the shipment of machinery from their facility to the designated U.S. port.
  • Cover all costs associated with freight, loading, and export customs clearance.
• Buyer’s Responsibilities:
  • Once the machinery is loaded onto the vessel, the buyer assumes the risk.
  • Upon arrival at the U.S. port, the buyer is responsible for customs clearance and arranging further transport.

Conclusion

CFR is an essential Incoterm that clarifies the roles and responsibilities of sellers and buyers in international trade. Understanding CFR helps businesses manage their logistics effectively and ensures compliance with shipping regulations. At HUAQI International Logistics, we are committed to providing expert guidance and solutions to facilitate smooth and efficient shipping operations.