CFR Incoterms: Cost and Freight, and When to Use It

CFR, Cost and Freight, is a sea rule under which the seller contracts and pays for carriage to a named destination port. Risk passes to the buyer much earlier, when the goods are loaded on board at origin.

You may still see it written as C and F or CNF in older documents. Those are informal abbreviations of the same rule.

The cost and risk split

The seller pays the ocean freight to the destination port. The buyer carries the risk from the moment the goods are on board at the load port.

So for the entire sea voyage the seller is paying for transport of goods that travel at the buyer's risk. If the vessel is lost, the buyer bears the loss and the buyer must claim, even though the seller booked and paid for the passage.

No insurance is required from either party under CFR. If the buyer does not arrange cover, the goods cross an ocean uninsured at the buyer's risk. That is the main practical hazard with this rule.

CFR compared with CIF

CIF is CFR with insurance added. The seller must buy cargo cover, though only at the minimum level under Incoterms 2020.

If the buyer has no marine policy of its own, CIF is the safer choice. If the buyer holds open cover, CFR avoids paying the seller to insure something already insured.

CFR compared with CPT

CPT is the any mode equivalent. Two differences matter. CPT works for air, road, rail and multimodal movements as well as sea, and under CPT risk passes at the first carrier rather than at vessel loading.

For containers, CPT is the appropriate rule. CFR shares the same defect as FOB when applied to boxes: risk stays with the seller until loading even though the container left the seller's control at the terminal days earlier.

When to use CFR

Bulk commodity trades where the seller has better freight rates than the buyer, and where the buyer holds its own marine cover. This is the traditional home of CFR and it still works well there.

Avoid it for containers, and avoid it where the buyer has no cargo insurance in place.

Common mistakes

Assuming the seller is responsible until arrival. It is not. The seller pays the freight, but the risk is the buyer's from loading.

Assuming insurance is included. It is not. That is CIF.

Naming the load port instead of the destination. Under CFR and CIF the named port is the destination port. Getting that wrong reverses who pays the ocean freight.

Where this rule sits

CFR is the third of the four sea rules, sitting between FOB and CIF. It adds the freight to the seller obligation but leaves insurance to the buyer.

For the full set, see our guide to all 11 Incoterms 2020 rules, or work through how to choose the right rule for a given shipment. Our Mastering Incoterms 2020 course covers every rule with worked examples from Gulf trade lanes.

Frequently asked questions

What does CFR mean in Incoterms?

Cost and Freight. The seller pays for carriage to the named destination port, but risk passes to the buyer when the goods are loaded on board at origin.

Does CFR include insurance?

No. Neither party is obliged to insure under CFR. If you want the seller to provide cover, use CIF.

What is the difference between CFR and CPT?

CPT works for any transport mode and risk passes at the first carrier. CFR is for sea and inland waterway only and risk passes at vessel loading.

Which port is named in a CFR term?

The destination port. Naming the load port by mistake reverses the intended freight obligation, so it is worth checking on every contract.