Incoterms rule
CFR — Cost and Freight
Under CFR the seller pays the freight to a named destination port and does not insure the journey. The buyer carries the risk from the port of shipment, with no policy behind it unless they buy one.
The gap is the point of the rule
CFR and CIF are the same allocation of cost and risk with one difference: CIF obliges the seller to insure and CFR does not. Everything else — the seller contracting the sea carriage, the buyer carrying transit risk from the port of shipment, the buyer handling arrival — is common to both.
That makes the choice between them a choice about who buys the cover, and about whether anybody does. A buyer who agrees CFR and does not arrange insurance is carrying an uninsured sea voyage, which is the specific outcome the rule leaves open.
Risk passes at the port of shipment, not at the destination
The seller pays freight all the way to a named destination port and stops being responsible for the goods long before they get there. It is the same cost-travels-further-than-delivery structure that catches buyers out under CIF, and it catches them out more often here, because there is no policy to soften it.
A buyer reading CFR as a delivered price is reading it wrongly in two directions at once: it does not cover arrival, and it does not cover loss.
Written for conventional cargo, used for containers anyway
Like the other maritime rules, CFR is built around loading aboard a vessel. Containerised cargo enters the carrier's custody at a terminal well before that, so for a container the delivery point the rule describes and the moment the seller actually loses control of the goods are days apart.
The any-mode counterpart, CPT, has the same cost and risk shape without the maritime assumption. For containers it is the better instrument, and for the same reason CIP is the better instrument than CIF.
What arrival costs, and who pays it
The buyer handles the import entry, duties, taxes, destination terminal charges, collection and inland delivery. Destination charges in particular are where a CFR purchase can turn out to cost more than expected, because the seller chose the carrier and the buyer pays that carrier's charges at the far end.
Where the buyer has no visibility of those charges before agreeing, that is worth resolving in the negotiation rather than in the invoice.
In practice
What this means for a shipment.
- Decide who is insuring the sea leg, because under CFR neither party is obliged to
- Treat a CFR price as an origin-risk price with pre-paid freight, not as a delivered price
- Ask what destination terminal charges the buyer will face, since the seller selects the carrier
- For containerised cargo consider CPT, which has the same shape without the maritime delivery point
- Confirm import requirements with the relevant authority for the specific commodity and country
Original explanation aimed at a commercial audience, not a reproduction of ICC material. The International Chamber of Commerce publishes the authoritative Incoterms wording, holds copyright in it and revises it periodically; use the current edition and record in the contract which version applies.
Use the reference
Apply the definition to the actual contract and shipment.
A reference explains the role of a rule or document. The applicable edition, terms and requirements still need to be confirmed for the case.
Browse freight resources