CFR
Cost and Freight
Seller pays freight to destination but risk transfers at origin port. Critical insurance gap - buyer must arrange insurance.
Visual Guide - Cost & Risk Transfer
Obligations & Cost Breakdown
Seller Obligations
- Arrange and pay freight to destination port
- Load goods on board vessel
- Clear goods for export
- Provide Bill of Lading
Cost Responsibility:
Buyer Obligations
- Accept delivery at destination port
- Import clearance and duties
- Arrange insurance (CRITICAL - risk transfers at origin)
Cost Responsibility:
Risk Transfer Point
When goods pass ship's rail at port of shipment
Insurance Requirement
BUYER'S RESPONSIBILITY (Critical gap - seller pays freight but buyer bears risk during voyage)
Real African Trade Examples
Palm Oil: Nigeria → India
CFR LagosCrude 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: Gabon → China
CFR Owendo PortManganese 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
Common African Trade Usage
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.
Common Mistakes with CFR
Buyer Assuming Seller Provides Insurance
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.
Confusing Cost and Risk Transfer Points
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.
When to Use CFR
Best For
- When seller has competitive freight rates
- Established trade routes
- When buyer understands the insurance gap
Avoid When
- When buyer expects seller to insure
- First-time buyers who may not arrange insurance
- High-value shipments without clear insurance agreement