CFR (Cost and Freight) - Incoterm 2020 - Obligations, Risk, Customs Value
C - Main carriage paid
Transport mode
Maritime only
Valuation group
cpt
Risk transfer
On board the vessel at the port of shipment
CFR (Cost and Freight) is an Incoterms® 2020 rule restricted to sea and inland waterway transport only. The seller delivers the goods by placing them on board the vessel at the port of shipment, or by procuring goods already so delivered. The seller must then contract and pay the freight to the named port of destination.
The fundamental characteristic of CFR is the separation between the point of risk transfer and the point to which the seller bears costs. Risk transfers to the buyer once the goods are on board the vessel at the port of shipment, but the seller pays freight to the named port of destination. Between these two points, the goods travel at the buyer's risk but at the seller's expense.
CFR is the maritime equivalent of CPT (Carriage Paid To). For multimodal or containerised transport, CPT should be used instead. CFR remains appropriate for bulk cargo loaded directly on board a vessel.
The seller is responsible for export clearance but has no obligation regarding import clearance. The seller has no obligation to arrange insurance - the buyer is well-advised to do so, as they bear risks from the moment of shipment.
Two ports are critical under CFR: the port of delivery (shipment, where risk transfers) and the port of destination (to which the seller pays freight). The contract may not name the port of shipment; the buyer is well-advised to require its specification.
Who pays freight but bears no risk during transport under CFR?
The seller pays ocean freight to the destination port but bears no risk once the goods are on board the vessel at the port of shipment. This cost-risk split is the defining feature of CFR: the seller's financial obligation extends to destination, while risk transfers at shipment. The buyer therefore bears all transit risks despite not paying for freight.
When does risk transfer under CFR - at loading or at destination?
Risk transfers at the port of shipment, not at destination. The moment the goods are placed on board the vessel at the loading port, all risks of loss or damage pass to the buyer. This is true even though the seller pays freight to the destination. This split between risk and cost is the most misunderstood aspect of CFR.
What is the difference between CFR and CIF?
The only significant difference is insurance. Under CIF, the seller must take out marine cargo insurance covering the buyer's risks (minimum Institute Cargo Clauses C). Under CFR, the seller has no insurance obligation whatsoever. The risk transfer point, freight obligations, and all other responsibilities are identical between the two terms.
Why is CFR not recommended for containerized goods?
Under CFR, risk transfers when goods are loaded on board the vessel. For containers, goods are handed over to a terminal well before actual on-board loading, creating a gap where neither party clearly bears risk. The seller has no control over what happens between terminal delivery and vessel loading. CPT is more appropriate for containers, as risk transfers upon handover to the carrier at the terminal.
What is the difference between CFR and CPT?
CFR is restricted to sea and inland waterway transport, while CPT works for any transport mode including multimodal. Under CFR, risk transfers on board the vessel; under CPT, it transfers upon handover to the first carrier. For containerized or multimodal shipments, CPT is the recommended alternative to CFR because the risk transfer point is clearer.
Does CFR include insurance?
No. The seller has absolutely no obligation to arrange or pay for insurance under CFR. This is a critical distinction from CIF, where the seller must provide minimum insurance coverage. Under CFR, the buyer bears all transit risks without any insurance safety net unless they arrange their own. Marine cargo insurance is strongly recommended for the buyer.
Who is responsible for export clearance under CFR?
The seller is responsible for all export customs formalities, including export licences, security clearances, and pre-shipment inspections. Import clearance at the destination country is the buyer's exclusive responsibility. This allocation is consistent across all "C" group Incoterms (CFR, CIF, CPT, CIP).
How does CFR affect customs valuation?
The CFR price includes goods cost plus ocean freight to the destination port. In the EU, customs value is assessed on a CIF basis, so the importer must add insurance cost to the CFR price. If the CFR destination port is the first EU port of entry, the freight component is already correctly included. If not, adjustments may be needed for the leg to the EU border.
Can CFR be used for air transport?
No. CFR is exclusively reserved for sea and inland waterway transport. The concept of risk transfer "on board the vessel" has no application in air freight. For air transport or multimodal shipments, the equivalent Incoterm is CPT (Carriage Paid To), which functions similarly but works with any transport mode.
Who pays unloading costs at the destination port under CFR?
It depends on the freight contract terms. If unloading is included in the seller's freight contract (liner terms), the seller bears these costs and cannot recover them separately from the buyer. If unloading is excluded (FIO terms), costs fall on the buyer. The parties should clarify this in the contract to avoid disputes, which are very common with CFR.
What are the seller's obligations under CFR?
The seller must deliver goods on board the vessel, arrange and pay for ocean freight to the destination port, clear goods for export, provide a transport document (bill of lading), and bear all costs up to the destination port. However, the seller's risk ends at the port of shipment once goods are on board. The seller does not arrange insurance.
When should CFR be used instead of CIF?
CFR is preferred when the buyer wants to arrange their own marine cargo insurance, typically because they have a global policy with better terms or lower premiums. It is also used when the buyer has specific insurance requirements that exceed the minimum CIF coverage (Clauses C). If neither party has a preference, CIF is generally safer for the buyer.
How should the CFR destination port be specified?
The correct wording is "CFR [named port of destination] Incoterms 2020", for example "CFR Shanghai, China Incoterms 2020". It is strongly recommended to also specify the port of shipment in the contract, as this is where risk transfers: "CFR Shanghai (shipment Le Havre) Incoterms 2020". Omitting the shipment port leaves the risk transfer point ambiguous.
What are the most common CFR mistakes?
The most frequent errors are using CFR for containerized transport (use CPT instead), the buyer failing to arrange marine insurance despite bearing all transit risks, confusing CFR with CIF by assuming the seller provides insurance, not specifying the port of shipment in the contract, and failing to clarify unloading cost allocation (liner terms vs FIO) at the destination port.
Common mistakes
1Using CFR for containerised transport when CPT is more appropriate, as the risk transfer on board the vessel is meaningless when the container is delivered to a terminal.
2Failing to take out marine transport insurance when the buyer bears all risks from shipment - an omission with potentially catastrophic consequences.
3Confusing CFR and CIF, believing the seller arranges insurance under CFR - the seller has no insurance obligation whatsoever.
Seller vs buyer obligations
Obligation
Seller
Buyer
Export formalities
Loading
Main transport
Transport insurance
Unloading
Import formalities
Risk transfer diagram
ICC Explanatory notes
Delivery, risks, and on-board transfer
Under CFR, "Cost and Freight" means that the seller delivers the goods - and transfers risk - to the buyer by placing them on board the vessel at the port of shipment, or by procuring goods already so delivered. The "or procure" wording caters for string sales, which are common in commodity trading.
Once the goods are on board the vessel, the seller does not guarantee that the goods will arrive at the port of destination in good condition, in the stated quantity, or even that they will arrive at all. Risk transfers from the seller to the buyer once the goods are on board the vessel at the port of shipment. However, the seller must contract and pay the freight to the named port of destination.
Example: bulk goods are loaded on board a vessel at the port of Le Havre for shipment to the port of Shanghai. Delivery (risk transfer) takes place at Le Havre as soon as the goods are on board; the seller must, however, conclude a contract of maritime carriage and pay the freight to Shanghai.
Critical point: under CFR, there are two important ports:
The port of delivery (shipment): where risk transfers to the buyer (goods on board the vessel).
The port of destination: to which the seller pays freight.
Mode of transport: sea only
CFR is restricted exclusively to sea and inland waterway transport. It must not be used for air, road, rail, or multimodal transport.
For multimodal transport or containerised shipments (where the goods are handed over to a container terminal before being loaded on board), CPT (Carriage Paid To) should be used instead - it is the "any mode" equivalent of CFR.
The reason is that the point of risk transfer under CFR - placement on board the vessel - only makes sense for cargo loaded directly onto a ship. For a container delivered to a terminal, risk transfers well before the actual loading on board.
Port of shipment and port of destination
The parties are strongly encouraged to identify both ports as precisely as possible in the contract of sale.
Port of shipment (delivery): the CFR contract of sale is only required to name the port of destination. The port of shipment may not be specified. The buyer is well-advised to require the port of shipment to be stated in the contract, as this is where risk transfers. Without this specification, the seller selects the port of shipment according to its own interests.
Port of destination: this is the named port in the CFR rule, to which the seller must pay the freight. The parties should identify as precise a point as possible at the port of destination (berth, terminal, etc.).
Unloading costs at destination: if the seller incurs unloading costs at the port of destination under its contract of carriage, the seller is not entitled to recover those costs separately from the buyer, unless otherwise agreed between the parties.
Multiple carriers and the point of risk transfer
When carriage involves multiple successive carriers, risk transfers when the goods are delivered to the first carrier (i.e. placed on board the first vessel), unless the parties have agreed otherwise.
Example: goods are loaded on board a feeder vessel at Le Havre for transhipment at Rotterdam onto an ocean-going vessel bound for Shanghai. Unless otherwise agreed, risk transfers to the buyer upon loading on board the feeder vessel at Le Havre.
The parties may agree that risk transfers at a later point (e.g. at transhipment), but this must be expressly stipulated in the contract of sale.
The "or procure" wording also enables string sales, where an intermediate seller does not load the goods itself but procures goods already on board.
Critical points
Risk and cost split at different points
Risk transfers on board the vessel at the port of shipment, but the seller pays freight to the port of destination - a major source of confusion.
The most important and most confusing feature of CFR is the separation between the point of risk transfer and the point of cost transfer:
Risk: transfers to the buyer once the goods are on board the vessel at the port of shipment.
Costs: borne by the seller up to the named port of destination (maritime freight included).
This means that between the port of shipment and the port of destination, the goods travel at the buyer's risk but at the seller's expense. If the goods are damaged or lost during the sea voyage, it is the buyer who bears the loss - even though the seller paid the freight.
Direct consequence: the buyer should take out transport insurance covering the sea voyage from the port of shipment to the port of destination. Since the seller has no insurance obligation under CFR, it is up to the buyer to protect itself. If the buyer wants the seller to arrange insurance, use CIF instead.
No insurance obligation
The seller has no obligation to arrange insurance - the buyer bears risk without any contractual cover.
Under CFR, the seller has no obligation to the buyer to make a contract of insurance. The buyer has no obligation to the seller either.
Since risk transfers to the buyer once the goods are on board the vessel at the port of shipment, the buyer bears the risk of loss or damage throughout the entire sea voyage, without any contractual insurance cover.
This is why the Incoterms® 2020 rules state that the buyer would be "well-advised" to arrange insurance.
Recommendation: the buyer should systematically take out marine transport insurance covering at least the voyage from the port of shipment to the port of destination. For the seller to be contractually obliged to arrange insurance, use CIF instead of CFR.
Important: the fact that the seller pays freight does not in any way mean the seller bears the risks during carriage. Financial responsibilities (costs) and risks are two distinct concepts under Incoterms.
Unloading costs at the port of destination
Frequent ambiguity about who bears unloading costs at destination - a common source of disputes.
The allocation of unloading costs at the port of destination is a frequent source of disputes under CFR.
Default rule: if unloading costs at the port of destination are included in the contract of carriage concluded by the seller (as is common under "liner terms"), the seller bears them and may not recover them separately from the buyer, unless otherwise agreed.
If unloading costs are not included in the contract of carriage, they are for the buyer's account.
Recommendation: the parties should clarify in the contract of sale who bears unloading costs (handling, stevedoring, wharfage) at the port of destination. They should also specify whether lighterage and wharfage charges are included or excluded.
Freight terms ("liner terms", "FIO", "FIOST") have a direct impact on this allocation and should be examined carefully.
Detailed seller obligations (A1-A10)
Article A1General obligations
The seller must provide the goods and the commercial invoice in conformity with the contract of sale, together with any other evidence of conformity that may be required by the contract.
Any document to be provided by the seller may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
Article A2Delivery
The seller must deliver the goods by placing them on board the vessel at the port of shipment, or by procuring goods so delivered. In either case, the seller must deliver the goods on the agreed date or within the agreed period, in a manner customary at the port.
Article A3Transfer of risks
The seller bears all risks of loss of or damage to the goods until they have been delivered in accordance with A2 (i.e. placed on board the vessel at the port of shipment), with the exception of loss or damage in the circumstances described in B3.
Article A4Carriage
The seller must contract or procure a contract of carriage for the goods from the agreed point of delivery at the port of shipment to the named port of destination, or if agreed, any point at that port.
The contract of carriage must be made on usual terms at the seller's expense and provide for carriage by the usual route on a vessel of the type normally used for the transport of the type of goods sold.
The seller must comply with any transport-related security requirements applicable to the destination.
Article A5Insurance
The seller has no obligation to the buyer to make a contract of insurance. However, the seller must provide the buyer, at the buyer's request, risk, and expense, with information in the seller's possession that the buyer needs for obtaining insurance.
Article A6Delivery/transport document
The seller must provide the buyer, at the seller's own expense, with the usual transport document for the agreed port of destination.
This transport document must cover the contract goods, be dated within the agreed period for shipment, enable the buyer to claim the goods from the carrier at the port of destination and, unless otherwise agreed, enable the buyer to sell the goods in transit by transfer of the document to a subsequent buyer or by notification to the carrier.
When such a transport document is issued in negotiable form and in several originals, a full set of originals must be presented to the buyer.
Article A7Export/import clearance
a) Export clearance: where applicable, the seller must carry out and pay for all export clearance formalities required by the country of export, such as:
export licence;
security clearance for export;
pre-shipment inspection;
any other official authorisation.
b) Import clearance assistance: where applicable, the seller must assist the buyer, at the buyer's request, risk, and expense, in obtaining any document and/or information relating to transit/import clearance formalities, including security requirements and pre-shipment inspection, needed in any country of transit or in the country of import.
Article A8Checking/packaging/marking
The seller must pay the costs of those checking operations (such as checking quality, measuring, weighing, counting) that are necessary for the purpose of delivering the goods in accordance with A2.
The seller must, at its own expense, package the goods, unless it is usual for the particular trade to transport the type of goods sold unpackaged. The seller must package and mark the goods in the manner appropriate for their transport, unless the parties have agreed on specific packaging or marking requirements.
Article A9Allocation of costs
The seller must pay:
a) All costs relating to the goods until they have been delivered in accordance with A2, other than those payable by the buyer (B9).
b) Freight and all other costs resulting from A4, including loading charges and any transport-related security costs.
c) Unloading costs at the port of destination, but only if such costs are for the seller's account under the contract of carriage.
d) Transit costs that are for the seller's account under the contract of carriage.
e) The cost of providing the usual proof to the buyer (A6) that the goods have been delivered.
f) Where applicable, duties, taxes, and any other costs related to export clearance (A7a).
g) Reimbursement to the buyer of all costs and charges incurred in providing assistance in obtaining documents and information in accordance with B7(a).
Article A10Notices
The seller must notify the buyer that the goods have been delivered in accordance with A2 (i.e. placed on board the vessel).
The seller must give the buyer any notice needed to allow the buyer to receive the goods at the port of destination.
Detailed buyer obligations (B1-B10)
Article B1General obligations
The buyer must pay the price of the goods as provided in the contract of sale.
Any document to be provided by the buyer may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
Article B2Taking delivery
The buyer must take delivery of the goods when they have been delivered in accordance with A2 (on board the vessel at the port of shipment) AND receive them from the carrier at the named port of destination.
Article B3Transfer of risks
The buyer bears all risks of loss of or damage to the goods from the time they have been delivered in accordance with A2 (placed on board the vessel at the port of shipment).
If the buyer fails to give notice in accordance with B10, the buyer bears all risks of loss of or damage to the goods from the agreed date or the expiry date of the agreed period for shipment, provided that the goods have been clearly identified as the contract goods.
Article B4Carriage
The buyer has no obligation to the seller to make a contract of carriage.
Article B5Insurance
The buyer has no obligation to the seller to make a contract of insurance.
Article B6Delivery/transport document
The buyer must accept the transport document provided in accordance with A6 if it is in conformity with the contract.
Article B7Export/import clearance
a) Export clearance assistance: where applicable, the buyer must assist the seller, at the seller's request, risk, and expense, in obtaining any document and/or information relating to export clearance formalities, including security requirements and pre-shipment inspection, needed in the country of export.
b) Import clearance: where applicable, the buyer must carry out and pay for all formalities required by any country of transit and the country of import, such as:
import licence and any licence required for transit;
security clearance for import and any transit;
pre-shipment inspection;
any other official authorisation.
Article B8Checking/packaging/marking
The buyer has no obligation to the seller.
Article B9Allocation of costs
The buyer must pay:
a) All costs relating to the goods from the time they have been delivered in accordance with A2, other than those payable by the seller (A9).
b) Transit costs, unless such costs were for the seller's account under the contract of carriage.
c) Unloading, lighterage, and wharfage costs, unless such costs were for the seller's account under the contract of carriage.
d) Reimbursement to the seller of all costs and charges incurred in providing assistance in obtaining documents and information in accordance with A5 and A7(b).
e) Where applicable, duties, taxes, and any other costs related to transit or import clearance (B7b).
f) Any additional costs incurred if the buyer fails to give notice in accordance with B10, from the agreed date or the expiry date of the agreed period for shipment, provided that the goods have been clearly identified as the contract goods.
Article B10Notices
The buyer must, whenever it is agreed that the buyer is entitled to determine the time of shipment and/or the point of receiving the goods at the named port of destination, give the seller sufficient notice.
CFR vs FOB comparison
Critère
CFR
FOB
Maritime freight
Seller contracts and pays freight
Buyer contracts and pays freight
Transfer of risks
On board the vessel (port of shipment)
On board the vessel (port of shipment)
Contract of carriage
By the seller
By the buyer
Insurance
No obligation (neither seller nor buyer)
No obligation (neither seller nor buyer)
Logistics control
Seller controls maritime transport
Buyer controls maritime transport
Critère
CFR
CIF
Insurance
No obligation
Seller arranges (Institute Cargo Clauses C - minimum cover)
Maritime freight
Seller contracts and pays
Seller contracts and pays
Transfer of risks
On board the vessel (port of shipment)
On board the vessel (port of shipment)
Cost to the seller
Freight + export
Freight + export + insurance
Buyer protection
Must arrange own insurance
Covered by seller's insurance (minimum Clauses C)
Impact on customs value
Incoterm CFR belongs to group CPT. This group determines which adjustments (AK/BA) are applied to the invoiced price to calculate customs value.
Bulk maritime transport: ideal for commodities (oil, grain, ores) loaded directly on board a vessel.
When the seller has better freight rates: the seller may obtain more competitive maritime freight rates thanks to its shipping volume.
String sales: the "or procure" wording enables successive resales of goods already in transit, common in commodity trading.
When the buyer does not need insurance from the seller: if the buyer has its own insurance policy or wishes to arrange it independently.
When to avoid CFR
Containerised transport: use CPT instead, because the goods are handed over to a container terminal before being loaded on board the vessel, making the CFR risk transfer point inappropriate.
If the buyer wants insurance from the seller: use CIF.
Multimodal transport: use CPT (any mode).
If the buyer wants to control transport: use FOB and arrange freight independently.
If the port of shipment is unknown: under CFR, only the port of destination must be named; the buyer bears risks from shipment without necessarily knowing which port.
Recommended contractual clauses
Name the port of shipment: although CFR only requires the port of destination, the buyer should insist that the port of shipment (risk transfer point) be specified in the contract.
Insurance: the buyer should systematically take out marine transport insurance covering the voyage from the port of shipment to the port of destination.
Unloading costs: clarify whether unloading, lighterage, and wharfage costs at the port of destination are included or excluded, and specify the freight terms (liner terms, FIO, FIOST).
Vessel type: define the vessel criteria (age, class, flag) particularly for dangerous or high-value goods.
Shipment period: specify the shipment window so the buyer can arrange insurance and reception at destination.
Analysis by profile
Advantages
Obligations limitées, l'acheteur n'est pas en charge du pré-acheminement et transport principal.
Disadvantages
L'acheteur ne choisit pas le transporteur mais en supporte les risques.
Recommendations
Recourir à cet Incoterm pour les transports maritimes.
Attention, il convient de distinguer précisément le lieu de livraison (= transfert des risques) du lieu de destination (= répartition des coûts).
Bien mentionner le port d'expédition désigné dans le contrat et sur les documents de transport.
Si transporteurs multiples, bien préciser où intervient le transfert du risque du vendeur à l'acheteur.
Assurance transport principal conseillée.
Important : Transport insurance is recommended for this Incoterm.
Comparative analysis (radar)
CFR
Compare with
Common mistakes
1
Using CFR for containerised transport when CPT is more appropriate, as the risk transfer on board the vessel is meaningless when the container is delivered to a terminal.
2
Failing to take out marine transport insurance when the buyer bears all risks from shipment - an omission with potentially catastrophic consequences.
3
Confusing CFR and CIF, believing the seller arranges insurance under CFR - the seller has no insurance obligation whatsoever.
4
Not requiring the port of shipment to be stated in the contract, leaving the buyer unaware of the exact point of risk transfer.
5
Neglecting to clarify unloading costs at the port of destination (liner terms vs FIO), a frequent source of disputes between seller and buyer.
CFR 2020: Seller Pays Freight, Risk at Loading - The Trade Hub