Under CFR the exporter has to bear the cost and carry out freight proceedings till the goods reach the designated port. The buyer and seller each have their own set of responsibilities under CFR which they can modify as per their convenience provided both of them agree to it. Officially, the CFR Incoterm is restricted to sea and ocean transit.
It cannot be used for air freight. The seller cannot charge the buyer for shipping costs however he can take it into consideration while arriving at the price for the quote.
Customs clearance is to be carried out by both the parties at their respective ends - the seller looks after the export proceeding and the buyer looks after import. Trade Advice. The CFR incoterm is a universal trade term used internationally, and is one of the recently reviewed publications by the ICC under Incoterms Shipping Terms in CFR The seller is responsible for the delivery of goods till the designated port The risk of goods is transferred at the first port i.
Risk Transfer Although the seller is liable for the delivery of goods till the designated port, he is not responsible for the risk of goods after the first port. Insurance Typically, the seller has no obligation to insurance. Duty and customs clearance The seller will be responsible for export customs proceedings. Risk Transfer The risk of goods is moved to the buyer as soon as the goods are loaded onboard by the seller at the first port. Insurance As discussed above, the buyer pays for insurance in CFR.
Develop and improve products. List of Partners vendors. Cost and freight CFR is a trade term that requires the seller to transport goods by sea to a required port. Cost, insurance, and freight CIF is what a seller pays to cover the cost of shipping, as well as the insurance to protect against the potential damage of loss to a buyer's order.
The two are part of a larger group of international trade rules known as Incoterms. These global guidelines for traders were devised by the International Chamber of Commerce ICC , with the first version published in Each term refers to an agreement governing the responsibilities of shipping that fall respectively to buyers and sellers in an international trade transaction.
This system of agreements aids in an orderly process of international trade by making contract models available that are easy to identify and understand in all languages. Cost and freight is a legal agreement between a buyer and a seller in international trade. The rule applies to goods that are transported by sea.
It requires the seller to transport goods by sea to the buyer's required destination. The cost, therefore, is borne by the seller. Under CFR, the seller is also required to give the buyer the documentation necessary to pick up the goods from the carrier.
With CFR agreements, the shipping party has a greater amount of responsibility in arranging and paying for transportation than with minimal free on board FOB shipping, where the shipper is only responsible for delivering goods to the port of origin for shipping. The agreement does not, however, require the seller to purchase marine insurance against the loss, destruction, or damage to the goods during transit.
The risk to the goods passes once they reach the vessel, so the seller is not liable. The receiver—or buyer—assumes responsibility once the ship has docked in the destination port. All remaining costs including those for unloading and any further transportation costs are then assumed by the receiver or buyer.
The seller is still responsible for all arrangements and transport costs for shipping goods to the agreed-upon destination port. The receiver then assumes all cost responsibilities once the ship has reached port. The difference between the two agreements, though, lies in one additional responsibility that falls on the shipper seller , who must also provide a minimum amount of marine insurance on the goods being shipped.
The amount of insurance is typically agreed upon between the buyer and seller. The seller is also responsible for any additional costs that come with transporting the goods. Free on board FOB requires the seller to also load the goods onto the ship.
Like cost and freight, the terms of cost insurance and freight CIF require that the seller arranges for the carriage of goods by sea to a port of destination, but the seller has the additional obligation of insuring the goods until they reach the destination port. In cost and freight, the seller is not responsible for insuring the goods until they reach the destination port. Cost and freight CFR is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port.
The seller is also responsible for delivering the goods, clearing them for export, and loading them onto the transport ship. However, once the shipment is loaded into the vessel, the risk of loss or damage falls to the buyer. This means the seller is not responsible for insuring the cargo during transportation. These terms are standardized to prevent confusion and clarify the obligations of buyers and sellers, such as transport and export clearance obligations.
There are three other incoterms that are frequently used in trade contracts. International Chamber of Commerce. Business Essentials. Corporate Insurance. Corporate Finance. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile.
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