CFR, or Cost and Freight, is a shipping method used for transporting cargo overseas, under which the seller is responsible for loading the goods and paying the freight charges, but once the cargo is loaded on the ship, responsibility passes to the buyer.
The exporter is supported to arrange export clearance and pays for the freight charges under CFR, whereas the buyer should get import clearance and pay duty on the goods when they reach the port. Also, the buyer arranges for insurance as well under CFR, not the seller.
How It Works:
- The seller prepares and packages the goods for export.
- The seller arranges and pays for transportation to the destination port.
- Once the goods are loaded onto the vessel, the risk transfers to the buyer.
- The buyer is responsible for insurance, unloading, and further transportation.
- The buyer completes customs clearance and final delivery.
Benefits:
- Simplifies logistics for buyers as the seller arranges shipping.
- Provides clear division of cost and risk between buyer and seller.
- Commonly used in sea freight transactions.
- Helps buyers estimate import costs more easily.
Example:
Under CFR Hamburg, the seller pays freight to Hamburg, but the buyer takes the risk once the goods are loaded onto the ship.