Cost and Freight
Seller pays freight to destination but risk transfers at origin port. Critical insurance gap - buyer must arrange insurance.
When goods pass ship's rail at port of shipment
BUYER'S RESPONSIBILITY (Critical gap - seller pays freight but buyer bears risk during voyage)
Crude palm oil in bulk
Nigerian palm oil exporters often have volume contracts with shipping lines, getting competitive freight rates on the West Africa–India route.
CIF Mumbai to include minimum insurance
Manganese ore shipments
Mining companies negotiate bulk carrier charters and pass cost savings to the CFR price. Chinese buyers know to arrange their own insurance.
FOB Owendo if buyer prefers to control shipping
Used when African exporters have negotiated favorable freight rates on high-volume routes (West Africa to Asia, East Africa to Middle East). Common for bulk mineral and agricultural commodity exports. Less popular than FOB or CIF but used by established exporters.
The Mistake: Buyer assumes that since seller pays freight, seller also insures the cargo.
The Problem: This is the most dangerous misunderstanding in Incoterms. In CFR, risk transfers at origin port. Goods damaged during voyage are buyer's loss.
The Solution: Buyer MUST arrange marine insurance from port of shipment. If insurance is needed, use CIF instead.
The Mistake: Thinking risk transfers at destination because seller pays freight to destination.
The Problem: Cost and risk have different transfer points in CFR. Cost transfers at destination, risk at origin.
The Solution: Clearly communicate to buyer that they need insurance from origin port, not destination.
