CFR is one of the most commonly used Incoterms in ocean freight, and also one of the most commonly misunderstood. The confusion almost always comes down to one thing: who pays for the freight and who bears the risk are not the same.
Under CFR, the seller pays for the ocean freight to get the goods to the destination port. But the risk transfers to the buyer much earlier — the moment the goods are loaded onto the vessel at the origin port. That gap between when risk transfers and when cost responsibility ends catches people off guard, especially when cargo is damaged during the ocean voyage.
This guide explains exactly what CFR means, who is responsible for what, and when you should (and shouldn't) use it.
CFR (Cost and Freight) is an Incoterm defined by the International Chamber of Commerce (ICC) under Incoterms 2020. It means the seller is responsible for:
The buyer is responsible for:
The critical distinction: The seller pays for the freight, but the risk is the buyer's from the moment of loading. If the cargo is damaged or lost at sea, it's the buyer's problem — even though the seller arranged and paid for the shipping.
CFR is used with a named port of destination. For example: "CFR Los Angeles" means the seller pays freight to the port of Los Angeles.
CFR is only for ocean and inland waterway transport. For air freight, road, or rail, the equivalent Incoterm is CPT (Carriage Paid To).
| Responsibility | Details |
|---|---|
| Goods and commercial invoice | Provide the goods and invoice per the sales contract |
| Export clearance | Handle all export customs formalities, licenses, and permits |
| Origin transport | Deliver the goods to the port of shipment and load them on the vessel |
| Ocean freight | Pay the freight charges to the named destination port |
| Loading costs | Pay all costs related to loading the goods onto the vessel |
| Delivery | Delivery is complete when the goods are on board the vessel at origin |
| Proof of delivery | Provide the buyer with the transport document (bill of lading) |
| Export documentation | Provide export documentation and information needed for import clearance |
| Responsibility | Details |
|---|---|
| Payment | Pay the price of the goods as per the sales contract |
| Risk from loading | Bear all risk of loss or damage from the moment goods are on board at origin |
| Import clearance | Handle all import customs formalities, duties, taxes, and permits |
| Unloading at destination | Pay for unloading at the destination port (unless included in the freight contract) |
| Destination transport | Arrange and pay for transport from the destination port to the final destination |
| Cargo insurance | Not required by CFR, but strongly recommended since the buyer bears transit risk |
This is the most important concept in CFR:
Risk transfers from seller to buyer when the goods are placed on board the vessel at the port of shipment.
Not when the goods arrive at the destination. Not when the buyer takes physical possession. The moment the last carton is loaded onto the ship at the origin port, the risk shifts to the buyer.
Why this matters:
Imagine you're buying goods CFR Los Angeles. The seller in Shanghai loads the container onto the vessel, pays the ocean freight, and sends you the documents. During the Pacific crossing, the vessel encounters rough weather and your container falls overboard. The goods are a total loss.
Under CFR:
This is why the ICC strongly recommends that CFR buyers arrange marine cargo insurance. CFR doesn't require it (unlike CIF, which does), but operating without it is a significant financial risk.
| CFR | CIF | |
|---|---|---|
| Seller pays freight | Yes | Yes |
| Seller arranges insurance | No | Yes (minimum cover) |
| Risk transfer | On board vessel at origin | On board vessel at origin |
| Buyer needs own insurance | Yes (recommended) | Optional (minimum cover included) |
The only difference: under CIF, the seller must arrange and pay for marine cargo insurance with minimum cover (Institute Cargo Clauses C). Under CFR, insurance is entirely the buyer's responsibility. For this reason, many buyers prefer CIF — it ensures at least basic insurance is in place without relying on the buyer to arrange it.
| CFR | FOB | |
|---|---|---|
| Seller pays freight | Yes | No |
| Risk transfer | On board vessel at origin | On board vessel at origin |
| Who selects the carrier | Seller | Buyer |
| Who controls the shipping | Seller | Buyer |
Under FOB, the buyer arranges and pays for the ocean freight. Under CFR, the seller handles it. The risk transfer point is the same. The key decision between FOB and CFR is about who controls the shipping — some buyers prefer FOB because they want to choose their own carrier and forwarder.
| CFR | DAP | |
|---|---|---|
| Seller's delivery point | On board vessel at origin | Named place at destination |
| Risk transfer | At origin port | At destination |
| Seller arranges destination transport | No | Yes |
| Import clearance | Buyer | Buyer |
DAP places much more responsibility (and risk) on the seller, including arranging destination transport and bearing risk until the goods reach the buyer's location.
CFR works well when:
CFR is less appropriate when:
The most expensive mistake in CFR. Because the seller pays the freight, buyers sometimes assume the seller's coverage extends to the cargo. It doesn't. If the goods are lost or damaged after loading, the uninsured buyer bears the full loss.
Prevention: Always arrange cargo insurance when buying CFR. The cost (typically 0.3–0.5% of the cargo value) is negligible compared to the risk of total loss.
CFR means the seller pays freight to the destination port. But "freight" doesn't always include unloading at the destination. If the liner terms are "free in" (FI) or "free in and out" (FIO), unloading costs fall to the buyer even though the seller paid the freight.
Prevention: Clarify in the sales contract whether unloading costs at the destination port are included or excluded.
CFR is defined exclusively for ocean and inland waterway transport. Using CFR for air freight or trucking creates ambiguity about when risk transfers and what "on board" means.
Prevention: For air freight, use CPT (Carriage Paid To). For multimodal shipments that include a non-ocean leg, also use CPT.
CFR requires a named port of destination (e.g., "CFR Long Beach"). Naming an inland city (e.g., "CFR Dallas") creates confusion because CFR only covers ocean freight to the port, not inland transport.
Prevention: Always name a port as the destination. If you need the seller to arrange delivery to an inland point, use DAP instead.
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CFR (Cost and Freight) is an Incoterm where the seller pays the ocean freight to the named destination port and handles export clearance. However, the risk of loss or damage transfers to the buyer once the goods are loaded on the vessel at the origin port. The buyer is responsible for import clearance, insurance, and destination transport.
The seller pays for the ocean freight to the named destination port. The buyer pays for cargo insurance (if they choose to arrange it), import customs clearance, unloading at the destination (if not included in the freight), and all costs from the destination port to the final destination.
No. Unlike CIF (Cost, Insurance and Freight), CFR does not require the seller to arrange cargo insurance. The buyer bears the risk of loss or damage from the moment the goods are loaded on the vessel and should arrange their own marine cargo insurance.
Risk transfers from the seller to the buyer when the goods are placed on board the vessel at the port of shipment. This is the same risk transfer point as FOB and CIF. Even though the seller pays the freight to the destination, the buyer bears all risk during the ocean transit.
The only difference is insurance. Under CIF, the seller must arrange and pay for minimum marine cargo insurance (Institute Cargo Clauses C). Under CFR, there is no insurance requirement — the buyer must arrange their own coverage. In all other respects (cost responsibility, risk transfer, delivery point), CFR and CIF are identical.
No. CFR is defined only for ocean and inland waterway transport. For air freight, road, or rail transport, use CPT (Carriage Paid To), which has the same cost and risk structure but applies to all modes of transport.