CFR (Cost and Freight) Incoterms Explained

CFR incoterm (Cost and Freight) is one of the commonly used incoterms in international trade. As a business owner involved in international trade, it is essential to understand the terms of trade to avoid potential misunderstandings and disputes that may arise.

In this article, we will explain the CFR incoterm and provide a better understanding of its usage and implications.

What is CFR Incoterm?

CFR (Cost and Freight) is an incoterm used in international trade, and it means that the seller is responsible for delivering the goods to the port of destination, including loading the goods onto the shipping vessel. The seller bears the cost of freight to the port of destination, but the buyer assumes the risk of loss or damage to the goods from the port of loading to the final destination.

The seller is responsible for obtaining all the necessary export documents and clearing the goods for export. However, the buyer is responsible for obtaining import licenses, paying customs duties and taxes, and arranging for the transportation of the goods from the port of destination to their final destination.

Key Points of CFR Incoterm

• The seller bears the cost of freight to the port of destination
• The seller is responsible for obtaining all necessary export documents and clearing the goods for export
• The buyer assumes the risk of loss or damage to the goods from the port of loading to the final destination
• The buyer is responsible for obtaining import licenses, paying customs duties and taxes, and arranging for the transportation of the goods from the port of destination to their final destination.

Advantages of CFR Incoterm for the Seller

• The seller only needs to deliver the goods to the port of destination, which is relatively easy compared to other incoterms such as FOB, where the seller bears the cost of loading the goods onto the shipping vessel
• The seller can negotiate a better shipping rate due to the volume of goods they transport.

Advantages of CFR Incoterm for the Buyer

• The buyer has control over the transportation of the goods from the port of destination to their final destination.
• The buyer can negotiate a better price for the goods due to their control over transportation.

Disadvantages of CFR Incoterm for the Seller

• The seller has limited control over the transportation of the goods and may face unforeseen issues such as delays, theft, or damage to the goods.
• The seller is responsible for the goods until they are loaded onto the shipping vessel.

Disadvantages of CFR Incoterm for the Buyer

• The buyer assumes the risk of loss or damage to the goods from the port of loading to the final destination, which can be costly.
• The buyer is responsible for arranging the transportation of the goods from the port of destination to their final destination, which can be complicated and time-consuming.

Conclusion

In conclusion, CFR incoterm is an essential aspect of international trade. As a business owner, it is important to understand the terms and conditions of CFR to avoid misunderstandings and potential disputes. The key takeaway is that the seller is responsible for delivering the goods to the port of destination, and the buyer is responsible for obtaining import licenses, paying customs duties and taxes, and arranging for the transportation of the goods from the port of destination to their final destination.