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ERP ReferenceIncoterms® rules

CFR (Cost and Freight) Incoterms® 2020 rule

The seller clears export, loads and pays sea freight to the destination port, but risk passes to the buyer once on board.

In our own words, checked against public explanatory sources. The official rule text is published by ICC.

Transport mode
Sea and inland waterway only
Risk passes
On board the ship at the port of shipment
Seller must insure?
No

Who pays, at a glance

Seller pays or arranges:
packaging, loading at origin, export clearance, pre-carriage, main carriage.
Buyer pays or arranges:
import clearance, import duties, on-carriage.
Depends on the delivery place or arrangement:
insurance, unloading at destination — see the notes in the cost table.

Where risk passes

Risk passes once the goods are on board the ship at the port of shipment, even though the seller pays the freight to the destination port.

Cost and risk diagram

CFR: who pays for each step, and where risk passesPackaging: Seller; Loading at origin: Seller; Export clearance: Seller; Pre-carriage: Seller; Main carriage: Seller; Insurance: Depends; Unloading at destination: Depends; Import clearance: Buyer; Import duties: Buyer; On-carriage: Buyer. Risk passes: On board the ship at the port of shipment.SellerBuyerPackagingSellerLoading at originSellerExport clearanceSellerPre-carriageSellerMain carriageSellerInsuranceDepends (see notes)Unloading at destinationDepends (see notes)Import clearanceBuyerImport dutiesBuyerOn-carriageBuyerRisk passes from seller to buyerRisk passes: on board the ship at the port of shipment (schematic position).
Rows follow the goods from the seller (top) to the buyer (bottom); the dashed line marks where risk passes. Generated from the table below. Positions are schematic — the named place in your contract decides the exact point.

Who pays for what

Cost itemPaid / arranged byNotes
PackagingSeller
Loading at originSellerIncludes loading the goods onto the ship at the port of shipment.
Export clearanceSeller
Pre-carriageSeller
Main carriageSeller
InsuranceDependsNo party has to insure under this rule. The buyer carries the risk during the sea voyage; each party may cover the part of the journey where it carries the risk.
Unloading at destinationDependsSources differ. One says the seller pays for unloading at the destination when its contract of carriage includes it; another puts unloading on the buyer. Check what the freight contract covers.
Import clearanceBuyer
Import dutiesBuyer
On-carriageBuyerTransport from the port of destination to an inland place is the buyer's.

Insurance

This rule puts no obligation on the seller to insure the goods for the buyer. Either side may still choose to buy cover for its own risk.

Common mistakes

In your ERP and on invoices

Practical consequences of the cost split above for order data, cost bookings and invoice layout. Generic — not specific to any ERP product.

When to look at another rule

Derived from the cost tables: rules for the same kind of route that differ from CFR in one of export clearance, main carriage, import clearance or insurance.

Compare CFR with

Questions about CFR

Where does risk pass from seller to buyer under CFR?
Risk passes once the goods are on board the ship at the port of shipment, even though the seller pays the freight to the destination port.
Which transport modes can CFR be used for?
Sea and inland waterway only.
Who pays for insurance under CFR?
Under CFR the seller has no obligation to insure the goods for the buyer.
Who is responsible for export clearance under CFR?
The seller.
Who is responsible for main carriage under CFR?
The seller.
Who is responsible for import clearance under CFR?
The buyer.
Who is responsible for import duties under CFR?
The buyer.
Who is responsible for unloading at destination under CFR?
Sources differ. One says the seller pays for unloading at the destination when its contract of carriage includes it; another puts unloading on the buyer. Check what the freight contract covers.

Sources

Checked on .