CFR (Cost and Freight) is an Incoterms® 2020 rule used only for sea or inland waterway transport. The seller pays the freight to the named destination port, but risk transfers earlier when the goods are delivered on board the vessel at the port of shipment.
The Key CFR Principle: Cost and Risk Separate
The seller contracts and pays for carriage to the destination port. However, the buyer bears the transit risk once the goods are on board the vessel at the shipment port. Paying freight does not mean the seller keeps risk until arrival.
| Activity | Seller | Buyer |
|---|---|---|
| Export clearance | Yes | — |
| Load/deliver on board vessel | Yes | — |
| Pay ocean freight to destination port | Yes | — |
| Transit risk after on-board delivery | — | Yes |
| Cargo insurance | No mandatory obligation | Arrange if desired |
Example
CFR Khalifa Bin Salman Port: the seller loads the goods on board at the origin port and pays ocean freight to Bahrain. Risk transfers at the origin port once the goods are on board. The buyer should therefore consider arranging cargo insurance for the voyage.
CFR vs CPT
CFR is restricted to sea/inland-waterway shipments where delivery occurs on board. For containerized or multimodal cargo handed to a carrier before vessel loading, CPT is often more appropriate.
Reference: ICC Incoterms® 2020, CFR explanatory notes.
