CFR Incoterm (Cost and Freight): Costs, Risk & Pricing
Ever stared at a quote that reads "CFR Shanghai" and had to pause to work out who is actually on the hook for risk, insurance, and unloading costs? You are not alone. CFR is one of the most widely used sea freight Incoterms, and it is also one of the most misread.
CFR (Cost and Freight) is an Incoterm under which the seller pays the cost of the goods plus ocean freight to the named destination port, but risk transfers to the buyer once the goods are loaded on board the vessel at the port of origin. Under Incoterms 2020, CFR applies to sea and inland waterway transport only.
Key Takeaways
- CFR stands for Cost and Freight. The seller pays freight to the destination port; the buyer takes on risk far earlier.
- Risk transfers when goods are loaded on board the vessel at the origin port, not when they arrive at the destination.
- CFR does not include insurance. If the buyer wants cargo cover, the buyer must arrange and pay for it.
- CFR price = FOB price + main ocean freight charges to the destination port.
- Incoterms 2020 limits CFR to sea and inland waterway freight. For containerized cargo, CPT is the correct term.
- CFR differs from CIF only by insurance, and from FOB only by who pays the main freight.
What is Cost and Freight (CFR)?
Cost and Freight (CFR) is an Incoterm where the seller is responsible for the cost of the goods plus the freight charges to the named destination port. The catch, and the source of most CFR confusion, is the split between cost and risk: although the seller pays for ocean transport all the way to the destination, risk transfers to the buyer the moment the goods are loaded on board the vessel at the port of origin.
That means if the cargo is damaged or lost during the ocean voyage, the buyer carries the loss, even though the seller arranged and paid for the freight. Understanding this gap is the whole point of getting CFR right.
Under Incoterms 2020, CFR is recommended for non-containerized sea freight and inland waterway transport only. The term is always quoted with a named destination port, for example "CFR Los Angeles" or "CFR Rotterdam".
Seller's obligations under CFR
- Provide the goods and the commercial invoice in line with the sales contract
- Handle all export licenses and export customs clearance
- Arrange and pay for ocean freight to the named destination port
- Load the goods on board the vessel at the origin port
- Provide the buyer with the transport document, typically a Bill of Lading
For forwarders managing the export leg, this multi-step handover is exactly the kind of workflow that benefits from Ocean Export Freight Management Software so booking, documents, and freight charges stay tied to a single shipment record.
Buyer's obligations under CFR
- Pay for the goods as agreed in the sales contract
- Obtain import licenses and handle import customs clearance
- Arrange and pay for cargo insurance (optional but strongly recommended)
- Take on risk from the moment the goods are on board the vessel at origin
- Cover all costs after the goods arrive at the destination port, including unloading where not included in the freight contract
CFR cost and risk responsibility at a glance
The table below maps each stage of a CFR shipment to the party that pays for it and the party that carries the risk. The mismatch in the ocean transit row is the defining feature of CFR.
| Stage | Who pays? | Who bears risk? |
|---|---|---|
| Goods and packing | Seller | Seller |
| Export customs and origin handling | Seller | Seller |
| Loading on board the vessel at origin | Seller | Risk transfers here |
| Ocean freight to destination port | Seller | Buyer |
| Cargo insurance | Buyer (optional) | Buyer |
| Import customs and duties | Buyer | Buyer |
| Onward delivery from destination port | Buyer | Buyer |
The core comparison: CFR vs CIF vs FOB
CFR sits between FOB and CIF on the Incoterms scale. The difference comes down to two questions: who pays the main freight, and who pays for insurance.
CFR vs CIF
CFR and CIF are identical in every respect except one: under CIF (Cost, Insurance and Freight), the seller must also purchase cargo insurance for the buyer. In plain terms, CIF = CFR + Insurance. The risk transfer point is the same for both, which is why buyers under CFR should never assume they are covered.
CFR vs FOB
Under FOB (Free On Board), the seller's responsibility ends once the goods are on board the vessel, and the buyer arranges and pays for the main freight. Under CFR, the seller goes one step further and also pays for ocean freight to the destination port. Risk transfers at the same point for both terms.
| Feature | CFR | CIF | FOB |
|---|---|---|---|
| Seller pays main freight? | Yes | Yes | No |
| Seller pays insurance? | No | Yes | No |
| Risk transfer point | On board vessel at origin | On board vessel at origin | On board vessel at origin |
How to calculate a CFR price
CFR pricing is straightforward once you separate it from FOB. The CFR price is simply the FOB price plus the main ocean freight charges to the destination port.
CFR Price = FOB Price + Main Ocean Freight Charges
Worked example: 10 pallets shipped from Shanghai to Los Angeles.
| Cost component | Amount |
|---|---|
| Cost of goods | $20,000 |
| Trucking to Shanghai port | $300 |
| Export customs fees | $150 |
| Origin port handling | $250 |
| FOB Shanghai price (subtotal) | $20,700 |
| Ocean freight to Los Angeles | $3,000 |
| CFR Los Angeles price (total) | $23,700 |
Building accurate CFR quotes by hand gets error-prone fast once contract rates, surcharges, and currency all move. Forwarders typically lean on Rate Management Quoting Software for Forwarders to pull live contract rates into a CFR quote and keep the cost breakdown auditable.
Critical mistakes to avoid with CFR
Under CFR, the buyer carries the risk during the ocean voyage and the buyer is responsible for arranging cargo insurance. If the vessel is damaged or the cargo is lost and the buyer has not secured cover, the loss is entirely theirs. If you want the seller to insure the goods, use CIF instead.
CFR is intended for non-containerized sea freight. For container shipments handed over at a terminal, Incoterms 2020 recommends CPT (Carriage Paid To), where risk transfers when the goods are handed to the first carrier rather than when they are loaded on the vessel.
When to use CFR
CFR works best when the seller has strong, competitive ocean freight rates and is comfortable arranging transport, while the buyer is willing to manage risk and import-side logistics. It is common in bulk and break-bulk trades where containerization is not in play. If the buyer wants a single price that includes cover against transit loss, CIF is the better fit. If the buyer prefers to control the carrier and the freight contract directly, FOB is the better fit. For a full picture of how CFR sits alongside the other ten trade terms, see the related guides at the end of this article.
CFR shipments mix freight costs, documents, and risk handovers across multiple parties. See how GoFreight keeps every Incoterm, charge, and Bill of Lading on one cloud platform.
Request a GoFreight Demo →Frequently Asked Questions
What does CFR mean in shipping?
CFR stands for Cost and Freight. It is an Incoterm where the seller pays the cost of the goods plus ocean freight to the named destination port, while the buyer takes on risk once the goods are loaded on board the vessel at the origin port.
When does risk transfer under CFR?
Risk transfers from seller to buyer when the goods are loaded on board the vessel at the port of origin. From that point, any loss or damage during the ocean voyage is the buyer's responsibility, even though the seller still pays for the freight.
Does CFR include insurance?
No. CFR does not include cargo insurance. The buyer carries the risk during the ocean voyage and is responsible for arranging and paying for insurance. If you want the seller to provide insurance, use CIF (Cost, Insurance and Freight) instead.
How do you calculate a CFR price?
CFR Price = FOB Price + Main Ocean Freight Charges. You take the FOB value, which covers the goods plus all origin-side costs up to loading, and add the ocean freight to the named destination port. For example, an FOB Shanghai price of $20,700 plus $3,000 ocean freight gives a CFR Los Angeles price of $23,700.
What is the difference between CFR and CIF?
CFR and CIF are identical except for insurance. Under CIF, the seller must also buy cargo insurance for the buyer, so CIF equals CFR plus insurance. The risk transfer point is the same under both terms: when the goods are loaded on board the vessel at origin.
What is the difference between CFR and FOB?
Under FOB, the seller's responsibility ends when the goods are on board the vessel, and the buyer arranges and pays for the main freight. Under CFR, the seller also pays the ocean freight to the destination port. Risk transfers at the same point under both terms.
Is CFR suitable for all transport modes?
No. Under Incoterms 2020, CFR applies to sea and inland waterway transport only, and it is intended for non-containerized cargo. For air, road, or rail, or for containerized sea freight handed over at a terminal, use CPT (Carriage Paid To) instead.
What documents must the seller provide under CFR?
The seller must provide the commercial invoice and a clean, negotiable transport document, typically a Bill of Lading, which lets the buyer claim the goods at the destination port. The seller is also responsible for export customs clearance documentation.
