CFR Incoterms 2026: Cost and Freight Explained for Freight Forwarders

Introduction

Here is the quick answer:

• CFR meaning: Cost and Freight (named port of destination)
• Cost: Seller pays cost of goods plus ocean freight to the destination port
• Risk: Transfers to buyer when goods are on board the vessel at the origin port
• Modes: Sea freight and inland waterway only
• Freight: Prepaid by the seller
• Insurance: Buyer's responsibility (not required by CFR)
• Import clearance: Buyer's responsibility

This guide covers CFR meaning, how the CFR price is built on a quotation, who pays what under CFR, how CFR compares to CIF and FOB, when risk transfers, the mode restriction, common quoting mistakes forwarders resolve every week, and a worked CFR Shenzhen to Los Angeles cost breakdown.

What is Cost and Freight (CFR) Incoterm?

CFR (Cost and Freight) is one of the 11 Incoterms 2020 rules published by the International Chamber of Commerce (ICC). Under CFR, the seller pays for the cost of goods and the ocean freight all the way to the named port of destination, but risk transfers to the buyer the moment the goods are on board the vessel at the origin port.

Written in full on a contract: CFR [Named Port of Destination]. Example: "CFR Los Angeles, Incoterms 2020" means the seller delivers goods on board a vessel at the origin port (say, Shenzhen), pays the ocean freight to Los Angeles, and hands the shipment over at the Los Angeles port with risk having transferred to the buyer back at Shenzhen when the container was loaded.

The three defining features of CFR:

• Risk transfer point: On board the vessel at the origin port. The buyer bears the risk for the entire ocean transit.
• Freight cost: Prepaid by the seller all the way to the named destination port.
• Insurance: Not part of CFR. The buyer chooses whether to buy marine insurance separately.
• Export formalities: Seller handles export clearance, duties, and origin port charges.

Is CFR an Incoterm?

Yes. CFR is one of the 11 rules published by the International Chamber of Commerce as Incoterms 2020. It is a sea only rule alongside FAS, FOB, and CIF. CFR is the seller-heavier version of FOB: the seller not only delivers on board the vessel, but also pays the ocean freight to the destination port. The buyer takes the risk from the moment the cargo is on board, exactly as under FOB.

What does CFR mean on a quotation?

When "CFR" appears next to a price on a seller's quotation, the price includes:

• The cost of goods themselves
• Export packaging and export clearance
• Inland transport from the seller's factory to the origin port
• Terminal handling charges at the origin port
• Loading on board the vessel
• Ocean freight from the origin port to the named destination port

The CFR price does NOT include marine insurance, unloading at the destination port beyond ship's rail, import duty and tax, destination customs clearance, destination terminal handling if not included in the ocean rate, or drayage from the destination port to the buyer's warehouse. Every one of those items is the buyer's cost on top of the CFR price.

The Roles and Responsibilities of Sellers and Buyers

The CFR Incoterm splits cost and risk in a specific way that is easy to get wrong on a contract. The seller pays freight to destination, but risk transfers at origin. The clearest way to see it is a side by side cost split table.

Who pays for shipping under CFR?

Under CFR Incoterms, the seller pays for ocean freight from the origin port to the named destination port. Freight is prepaid on the Bill of Lading. The buyer does not receive an ocean freight invoice from the steamship line, because the seller already settled it.

Everything else on the buyer side of the port is the buyer's cost: marine insurance, ISF filing for US imports, destination terminal handling if not included in the ocean rate, customs entry, import duty and tax, delivery order and pier pass, and drayage from the port to the warehouse.

Does CFR include insurance?

No. CFR does not include insurance. The seller has no obligation to arrange marine insurance under CFR, and the buyer is not required to insure either. Because risk transfers on board the vessel at the origin port, the buyer carries the ocean transit risk uninsured unless the buyer buys marine cover separately. If the buyer wants the seller's price to include insurance, use CIF (Cost, Insurance and Freight) rather than CFR.

CFR Pricing and the CFR Price on a Quotation

The CFR price on a seller's quotation is a composite number. Every operator quoting CFR to an overseas buyer builds it from the same six line items.

Worked example: CFR Los Angeles, Incoterms 2020

A Chinese electronics supplier quotes a US importer CFR Los Angeles for a 40ft container of goods. The seller builds the CFR price like this:

The seller quotes $21,420 CFR Los Angeles. This is the full seller side of the shipment. The buyer knows that any additional cost from unloading at Los Angeles onward is theirs to absorb: marine insurance, ISF filing, US customs entry, import duty, destination THC if unbilled by the carrier, delivery order, and drayage to the warehouse. A well built CFR quote line items every buyer side cost separately so the buyer sees the true landed cost before signing.

Prepaid freight and the seller's margin

Under CFR, ocean freight is marked "prepaid" on the Bill of Lading. The seller pays the steamship line before the container is loaded, then embeds that cost in the CFR price they invoice to the buyer. This gives the seller full control over the carrier selection and the routing, which can be a lever on margin. Sellers with high volume can negotiate contract ocean rates and quote CFR at a rate the buyer could not get on the spot market. Sellers without volume simply pass the spot rate through to the buyer.

Software that models the seller side landed cost per shipment, like our Rate Management Quoting Software for Forwarders, pulls contract ocean rates, origin THC, and standard export fees into a single CFR quote automatically. Forwarders acting on behalf of the seller can generate the CFR price in one click rather than compiling six invoices by hand.

Transportation and Delivery Nuances

CFR is defined for sea and inland waterway shipping only. Under CFR, cargo moves through three phases: origin port loading, ocean voyage, and destination port arrival. Each phase has its own operational risk and its own documentation.

Containerized vs non-containerized cargo

Cargo under CFR splits into two families:

• Containerized cargo: Goods packed into standard 20ft or 40ft ISO containers. Standardised handling makes them cheap to move, but CFR is not the ideal Incoterm for containers loaded at the seller's factory. Risk under CFR does not transfer until the container is on board at the origin port, yet the buyer's nominated forwarder often collects the container from the factory. If the container is damaged during drayage from the factory to the port, the parties fight over whose insurance responds. The ICC recommends CPT (Carriage Paid To) instead of CFR for containerized cargo.
• Non-containerized cargo (bulk, breakbulk): Goods too large, heavy, or specialised to fit standard containers, such as bulk grain, oversized machinery, or project cargo. These move on specialised vessels and each piece is handled individually. CFR is a natural fit here, because the seller physically supervises loading on the vessel at the origin port.

At the destination port

When the CFR shipment arrives at the named destination port, the seller's obligation is done. The buyer takes over immediately:

• Customs entry: The buyer files the import entry with the destination country's customs authority. For US imports, this includes the CBP entry and the ISF that should already have been filed 24 hours before vessel loading at origin.
• Import duties and tax: Buyer pays.
• Destination terminal handling: Buyer pays if not already covered by the ocean rate.
• Drayage: Buyer arranges the container move from the port to the warehouse or the next inland leg.

Modern Customs Management Software for Forwarders automates the destination entry filing and the ISF confirmation on the shipment file, so the buyer's forwarder can pull the ISF number, the entry summary, and the duty payment record into a single view.

Risks in CFR: When and How Risk Transfers

Risk transfers from seller to buyer under CFR the moment the goods are on board the vessel at the origin port. This is the exact phrasing Incoterms 2020 uses, and it is the single most searched fact about CFR. Before the container is on board, the seller carries the risk. After the container is on board, the buyer carries the risk, and the buyer carries it for the entire ocean transit even though the seller pays the freight.

Worked example: typhoon damage mid ocean

A US importer buys electronics from a Shenzhen supplier under CFR Los Angeles terms. The container is loaded on board the vessel at Shenzhen. A typhoon damages the container mid ocean between Shenzhen and Los Angeles.

• The seller's obligation ended the moment the container was on board at Shenzhen.
• The buyer files the marine insurance claim, because risk had already transferred at Shenzhen.
• If the buyer chose not to purchase marine insurance, the buyer absorbs the loss.
• The buyer cannot claim from the seller. The Incoterm is clear on where the risk boundary lies.

Managing CFR risk in practice

The two levers a buyer has to manage CFR risk:

• Buy marine insurance. Standard practice for any CFR ocean shipment. Marine cover is inexpensive relative to cargo value (typically 0.3 to 0.5 percent of insured value) and protects against damage, theft, and delay.
• Confirm the loading date. The moment of risk transfer is the moment of loading, not the moment of sailing. Buyers should confirm on the Bill of Lading exactly when the container was on board, because that is the point their insurance policy needs to start covering.

CFR Incoterms 2020 vs 2026: What Changed?

Nothing changed to the CFR rule in 2026. Here is why searchers keep asking:

• Incoterms 2020 is still the current version published by the International Chamber of Commerce. It took effect on 1 January 2020 and remains in force through 2029.
• Incoterms 2030 is expected to be the next revision. The ICC has publicly signalled the review process, but no new rules or wording have been released as of 2026. Any advisor referring to "Incoterms 2026" as an official version is mistaken.
• The CFR rule text has not been amended since September 2019 publication. Cost split, risk transfer point, mode restriction (sea and inland waterway only), and documentation obligations are unchanged.

Practical implication for a 2026 contract: writing "CFR Los Angeles, Incoterms 2020" on a purchase order is correct and enforceable. Writing "CFR Los Angeles, Incoterms 2026" is not, because no such Incoterms version exists.

CFR vs CIF vs FOB

CFR vs CIF

CFR and CIF share the same risk transfer point (on board vessel at origin) and the same mode restriction (sea only). The only real difference is who arranges marine insurance.

Practical read: quote CFR when the buyer will arrange their own marine cover. Quote CIF when the buyer wants the seller to include a minimum insurance policy in the price.

CFR vs FOB

CFR and FOB share the same risk transfer point (on board vessel at origin) and the same mode restriction (sea only). The difference is who pays the ocean freight.

Practical read: use CFR when the seller has better ocean rates than the buyer and wants to lock margin into the freight. Use FOB when the buyer has contract rates with a nominated carrier and wants to route the shipment themselves.

CFR in the full 11 Incoterms 2020 comparison

How Freight Forwarders Quote CFR Shipments

When a forwarder quotes CFR on behalf of the seller, the quote is built from the origin factory all the way to the named destination port. The buyer side quote (unloading and beyond) sits separately, and the forwarder is expected to walk the buyer through it before the sale is signed. Here is the standard breakdown for a 40ft container Shenzhen to Los Angeles under CFR Los Angeles, Incoterms 2020:

The seller side of the quote (rows 1 to 6) is the CFR price on the commercial invoice. Everything from row 7 onward is what the buyer still pays after the CFR price, and the buyer's forwarder assembles it as the destination side quote.

Common CFR quoting mistakes we see every week

1. Destination THC billed twice. Some ocean rates include destination THC. Some do not. The buyer sees a destination THC line on their forwarder's invoice and pays for the same handling twice if the seller's CFR rate already included it. Always confirm destination THC scope in writing before the booking.
2. No named port of destination on the contract. "CFR" without a named port is unenforceable. Always write "CFR [Named Port of Destination], Incoterms 2020". Example: "CFR Los Angeles, Incoterms 2020".
3. Marine insurance omitted from the buyer side quote. Buyers routinely assume CFR includes insurance. It does not. If the forwarder does not raise it, the shipment sails uninsured and the buyer carries the full ocean transit exposure.
4. Wrong Incoterm for containerized cargo. CFR was written for cargo the seller physically loads on the vessel. If the container is loaded at the seller's factory and the ocean carrier takes it from there, use CPT (Carriage Paid To) instead. CFR risk under container drayage from the factory to the port is legally muddy.
5. Missing ISF filing on US imports. Under CFR into the US, the ISF filing is still the buyer's responsibility, exactly as under FOB. If the buyer's forwarder does not file the ISF at least 24 hours before vessel loading at origin, US Customs fines up to $5,000 per shipment.

Common CFR Mistakes

1. Writing "CFR" without a named port of destination. The contract is ambiguous if the destination port is missing. Always write "CFR [Named Port of Destination], Incoterms 2020". Example: "CFR Los Angeles, Incoterms 2020".
2. Using CFR for containerized cargo. Under CFR the seller carries risk until the container is on board at the origin port, but the buyer's forwarder often controls the container from the factory gate. Use CPT (Carriage Paid To) instead for FCL containers loaded at the seller's factory.
3. Assuming CFR includes insurance. It does not. Neither the seller nor the buyer is required to insure the cargo under CFR. Buyers regularly lose claims because they assumed the seller's freight prepayment also bought marine cover. If the buyer wants insurance included in the seller's price, use CIF instead.
4. Using CFR for air freight. CFR is defined for sea and inland waterway shipping only. For air, use CPT (Carriage Paid To). Sellers who quote "CFR" on an air waybill create an unenforceable contract.
5. Confusing risk transfer with cost transfer. Under CFR, cost transfers at the destination port (seller pays freight all the way) but risk transfers at the origin port (buyer carries risk the moment cargo is on board). New forwarders and first time importers often assume the two transfer at the same point. They do not.

Frequently Asked Questions

What does CFR mean in shipping?

CFR stands for Cost and Freight. It is an Incoterms 2020 rule for sea and inland waterway shipping. Under CFR, the seller pays for the cost of goods plus the ocean freight to the named port of destination, but risk transfers to the buyer the moment the goods are on board the vessel at the origin port. The buyer arranges marine insurance separately if they want it.

What is the CFR price?

The CFR price is the seller's total price to deliver the goods to the named port of destination with freight prepaid. It includes the cost of goods, export packaging, inland transport to the origin port, export clearance, origin terminal handling, loading on board the vessel, and ocean freight to the destination port. It does NOT include marine insurance, import duty, destination customs clearance, destination unloading beyond ship's rail, or drayage to the buyer's warehouse. All of those are the buyer's cost on top of the CFR price.

What does CFR mean on a quotation?

When a seller quotes "CFR [port]" next to a price, the price includes the goods and all cost to get them to the named destination port with freight prepaid. Everything after ship's rail at the destination port is the buyer's cost: marine insurance if desired, unloading, import duty, customs entry, destination THC if not covered by the ocean rate, and drayage. A well built CFR quote line items every buyer side cost separately so the buyer sees the true landed cost.

What does CFR stand for in shipping?

CFR stands for Cost and Freight. It is one of the 11 Incoterms 2020 rules published by the International Chamber of Commerce (ICC). CFR applies to sea and inland waterway transport only. CFR was previously abbreviated "C&F" or "CNF" in older commercial usage; both refer to the same rule.

When does risk transfer under CFR?

Risk transfers from seller to buyer under Incoterms 2020 CFR the moment the goods are on board the vessel at the origin port. The seller pays the ocean freight to the destination port, but the buyer bears the risk during the entire ocean transit. This is the same risk transfer point as FOB and CIF. Any damage, loss, or delay after loading on board is the buyer's exposure.

Does CFR include insurance?

No. CFR does not include marine insurance. The seller has no insurance obligation under CFR, and the buyer is not required to insure either. Because risk transfers on board the vessel at the origin port, the buyer carries the ocean transit risk uninsured unless they buy marine cover separately. Buyers who want the seller to include insurance in the quoted price should use CIF (Cost, Insurance and Freight) instead of CFR.

What is the difference between CFR and CIF?

CFR and CIF share the same risk transfer point (on board vessel at origin) and the same mode restriction (sea only). The only difference is marine insurance. Under CFR the buyer buys insurance if they want it. Under CIF the seller must buy a minimum insurance policy and pass the cost through in the price. CIF is CFR plus a mandatory insurance line on the seller side.

What is the difference between CFR and FOB?

CFR and FOB share the same risk transfer point (on board vessel at origin) and the same mode restriction (sea only). The difference is who pays ocean freight. Under CFR the seller prepays ocean freight to the destination port. Under FOB the buyer pays ocean freight from origin port onward. Buyers with strong ocean contract rates usually prefer FOB. Sellers with strong ocean contract rates usually quote CFR.

Is CFR an Incoterm?

Yes. CFR is one of the 11 rules published by the International Chamber of Commerce as Incoterms 2020. It is a sea only rule alongside FAS, FOB, and CIF. CFR is a maritime term written into ocean sale contracts; it does not apply to air, road, rail, or multimodal cargo.

Can CFR be used for air freight?

No. CFR is defined for sea and inland waterway transport only. For air freight, use CPT (Carriage Paid To), which is the multimodal equivalent of CFR. For air freight with insurance included in the seller's price, use CIP (Carriage and Insurance Paid To). Using CFR on an air waybill creates an unenforceable Incoterm because there is no vessel loading point.

What is CFR value in shipping?

The CFR value is the value of the goods delivered on the CFR terms: cost of goods plus all cost to reach the named destination port with freight prepaid. Customs authorities in some countries use the CFR value as the basis for import duty calculation (adding local factors on top). Buyers should distinguish the CFR value from the CIF value (which additionally includes insurance) when submitting a customs entry.

What is CFR in export?

In an export sale, CFR means the seller ships goods to the buyer's named destination port with ocean freight prepaid. The full form of CFR in export documentation is "Cost and Freight". Export invoices should always state the Incoterm plus the port ("CFR Los Angeles, Incoterms 2020") to avoid ambiguity with the buyer's customs broker at destination.

How do freight forwarders quote CFR shipments?

A forwarder quoting CFR on behalf of the seller builds the CFR price from six seller side line items: cost of goods, export packaging, factory to origin port trucking, export clearance, origin THC, and ocean freight to the named destination port. The forwarder then walks the buyer through the destination side line items the buyer will pay on top of the CFR price: marine insurance, ISF filing for US imports, US customs entry, import duty, destination THC if unbilled, and drayage. Modern forwarding software pulls contract ocean rates and standard export fees into a single CFR quote automatically.

What documents are needed for a CFR shipment?

Standard CFR seller side documentation includes the commercial invoice, packing list, Bill of Lading marked "freight prepaid" once cargo is on board, export clearance paperwork, and Certificate of Origin if the destination country requires one. Buyer side documentation includes marine insurance certificate (if insurance is purchased), ISF filing for US imports, import customs entry, and duty payment record. The Bill of Lading is the central document on a CFR shipment because it evidences both the loading date (risk transfer point) and the freight prepayment.

Embracing the Cost and Freight Incoterm for Success

CFR (Cost and Freight) is one of the most useful Incoterms 2020 rules for ocean sales, because it lets the seller lock ocean freight into the price and the buyer receive a single delivered to port quotation. Incoterms 2020 remains the current version through 2029, and the CFR rule wording has not changed since September 2019.

To trade under CFR successfully, the seller and the buyer both need to understand where the paradox sits. The seller pays freight all the way to destination, but risk transfers to the buyer at origin the moment the goods are on board. The buyer should buy marine insurance as standard practice, confirm the destination port on the contract, and expect to pay marine insurance, ISF, customs entry, import duty, destination THC (if unbilled by the carrier), and drayage on top of the CFR price. The seller should quote a CFR price that only covers what CFR actually covers, and quote CIF instead if the buyer wants insurance included.

For freight forwarders managing CFR shipments, modern TMS platforms tag the Incoterm on the shipment file, validate that the mode matches the rule, quote the full seller side CFR price plus the destination side buyer cost line by line, and handle ISF and customs entry inside the same workflow. Ready to see Incoterm tagging and CFR quoting inside a freight forwarding platform? Request a GoFreight Demo.

To manage ocean shipments end to end, from CFR quote to Bill of Lading to destination clearance, our Ocean Freight Management Software tags the Incoterm on every shipment record and validates that the mode matches the rule before the booking is confirmed.

Keep Reading

• Incoterms 2026 Explained: Complete Guide to All 11 Trade Terms
• CIF: Cost, Insurance, and Freight
• FOB Incoterms Explained: A Complete Guide for Importers and Freight Forwarders 2026