CFR Incoterm: Cost and Freight (Incoterms 2020)

CFR at a glance

Under CFR the seller contracts and pays for ocean carriage to the named destination port, but delivers — and transfers risk — when the goods are on board at the port of shipment. Insurance is nobody's obligation.

Full term

CFR — Cost and Freight

Transport mode

Sea and inland waterway only

Delivery point

On board the vessel at the port of shipment

Risk transfers

When the goods are on board at the port of shipment — not at the destination port

Export clearance

Seller

Import clearance

Buyer

What CFR means in practice

CFR is the first of the "two-point" rules, and the source of endless confusion. The seller books and pays the sea freight all the way to, say, Antwerp — but the seller's risk ends back in Shanghai the moment the goods are on board. Freight paid to destination does not mean risk carried to destination.

For buyers, the trap is psychological: an invoice that includes freight to your port feels like a delivered service. It is not. If the vessel meets heavy weather mid-ocean, the loss is yours, and under CFR nobody was obliged to insure the cargo. Buyers who want the freight-included convenience with insurance bundled in should look at CIF; buyers on non-sea routes need CPT.

CFR also carries a destination-cost wrinkle: discharge at the arrival port may or may not be included in the seller's freight contract, depending on liner terms. Well-drafted CFR contracts say explicitly who pays discharge, so the buyer isn't surprised by a terminal invoice for a service it assumed the freight covered.

Buyer vs seller responsibilities

CFR's defining feature is the split: the seller pays the main freight, but the buyer bears risk from loading at origin. The cost table and the risk line do not match — by design.

Where costs transfer — and where risk transfers

Cost transfer

The seller pays through loading and the ocean freight to the named destination port. The buyer pays everything the freight contract doesn't cover: typically discharge (unless liner terms include it), import clearance, duties, and onward delivery.

Because the seller chooses the carrier, the buyer inherits the consequences of that choice — transhipment routings, terminal congestion surcharges, demurrage exposure at destination. Buyers on CFR lanes should ask early which liner terms apply and who the destination agent is.

Risk transfer

Risk transfers on board at the port of shipment, exactly as under FOB. The entire ocean voyage happens at the buyer's risk even though the seller paid for it.

This is the clearest illustration in the rulebook that cost transfer and risk transfer are separate events. Reading a CFR quote as "seller's responsibility until my port" is the single most expensive misreading in sea-freight procurement.

When CFR works well

• Bulk and break-bulk sea trades where the seller has strong freight access at the load port and the buyer is comfortable carrying voyage risk.
• Buyers who maintain open marine cargo policies and prefer to insure everything themselves rather than rely on seller-arranged cover.
• Markets where sellers customarily quote freight-inclusive prices (many commodity trades) and both sides understand the on-board risk split.
• Transactions where the buyer wants no involvement in booking sea freight but has good import-side capability.

When to think twice about CFR

• Containerised cargo — as with FOB, the terminal handover pre-dates loading; CPT is the multimodal equivalent with the risk point at first-carrier handover.
• Buyers who assume — or need — the seller to carry risk to destination: that is DAP/DPU territory.
• Buyers without a cargo insurance programme: CFR leaves the voyage uninsured unless someone acts.
• Non-sea routes of any kind — CFR is a sea and inland-waterway rule.

CFR in the real world

Steel coils Shanghai → Antwerp, and an uninsured storm

A Belgian distributor buys steel coils from a Chinese mill at "CFR Antwerp (Incoterms 2020)". The mill books and pays the ocean freight; the price looks pleasantly complete. The distributor, assuming "freight paid to Antwerp" meant "seller's problem until Antwerp", buys no insurance.

Mid-voyage, heavy weather shifts cargo and seawater damages several coils. Risk had passed on board in Shanghai — the loss belongs to the distributor, and there is no policy to claim on. The mill's freight payment obligation was fully performed; its risk ended weeks earlier.

The distributor now runs an open cargo policy attaching at on-board for every C-term purchase, and asks each supplier whether discharge at Antwerp is included in the liner terms — the second surprise on that first shipment was a terminal invoice for unloading.

Common mistakes with CFR

TradeIntel insight

CFR sits in a strange middle seat: the seller controls the freight relationship, the buyer owns the outcome. That works well in commodity lanes where freight is a standardised product. It works badly when the destination side is operationally complex — congested ports, tight delivery windows, demurrage-prone terminals — because the party choosing the carrier isn't the party paying for the consequences. If destination performance matters to you as a buyer, either take freight control (FOB/FCA) or push risk to arrival (DAP) — CFR gives you neither lever.

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Frequently asked questions

Related Incoterms guidance

• Incoterms hub: all 11 rules
• FOB vs CIF
• CIF vs CIP
• Incoterms costs and risks: who pays, who bears, and why they differ
• The best Incoterm for exporters: service, risk and what you can price
• Incoterms Assessment