What is Cost and Freight (CFR)?

Alright, so CFR is one of those shipping terms that pop up when you’re dealing with international trade. It’s part of the Incoterms, which are basically a set of rules that dictate the responsibilities of buyers and sellers in international transactions.

In simple terms, when you’re shipping goods under a CFR agreement, the seller foots the bill for the cost of transporting the goods to the port of destination. However, the risk of loss or damage to the goods passes from the seller to the buyer once the goods are loaded onto the ship. So, the seller’s job is to get the goods safely onto the ship, and from there, it’s the buyer’s concern.

Key Responsibilities Under CFR

1. Seller’s Duties: Pay for the transportation to the port of destination. Handle export customs clearance. Provide necessary documentation for the shipment.
2. Buyer’s Duties: Handle import customs clearance. Pay for insurance (if desired) and any costs once the goods are on board. Take on the risk once goods are on the ship.

Why Choose CFR Shipping?

You might wonder why anyone would choose CFR over other shipping terms. Well, CFR can be a great option if you’re looking for a straightforward deal where the seller takes care of most of the shipping process. This can be particularly helpful if you’re new to international shipping or just want to simplify the logistics.

Pros of CFR

• Simplicity: The seller manages the shipping process up to the destination port.
• Cost Control: The buyer can negotiate competitive freight rates.
• Focus on Core Business: Buyers can focus on their core operations without worrying about the shipping process.

Cons of CFR

• Risk Acceptance: Once the goods are loaded onto the ship, the buyer assumes all risks for loss or damage.
• Limited Control: The buyer has limited control over the shipping process since the seller manages it.
• Cost Variability: While the seller may offer a competitive freight rate, the final cost can still vary depending on unforeseen circumstances like route changes, fuel costs, and port charges.
• Insurance Responsibility: The buyer is responsible for insuring the goods once on board.
• Potential for Delays: The seller’s management of the shipping process can sometimes lead to delays if not handled efficiently.