Cost and Freight (CFR) is a business contract term for the purchase and sale of goods. It signifies that the seller is accountable for ensuring the goods are ready for export, arranging water transportation, and covering the shipping expenses to the designated port. Once the goods are securely loaded onto the ship, the seller’s responsibilities end, and the buyer assumes the risk of any potential loss or damage. This term is exclusively applicable when goods are transported via sea or inland waterway.
Cost and Freight (CF) is a contractual term that defines the obligations of the buyer and seller in terms of delivering, paying for, and assuming the risk of loss of goods. Under this term, the seller is responsible for ensuring the goods are ready for export, arranging water transportation, and covering the shipping costs to the designated port. Once the goods are securely loaded onto the receiving vessel, the seller’s delivery is considered complete, and the risk of loss is transferred to the buyer. This term is specifically used for goods transported by sea or inland waterway. For instance, if a Chinese company sells 1000 units of a product to a US company under a Cost and Freight contract, the Chinese company is accountable for clearing the goods for export, arranging sea transportation, and covering the shipping costs to the US port. Once the goods are loaded onto the ship, the Chinese company’s responsibility ends, and the risk of loss is assumed by the US company. In this scenario, the Chinese company bears all the expenses related to shipping the goods to the US, including the cost of loading them onto the ship. The US company is only liable for paying for the goods upon their arrival at the designated port. If any damage or loss occurs during transit, the Chinese company is responsible for compensating for any losses or damages incurred.
CFR is a trade term used in international shipping contracts, where the seller is responsible for the cost of delivering the goods to a named port of destination, and the buyer is responsible for the freight costs.
The seller is responsible for delivering the goods to the named port of destination and paying for the transportation costs to that port.
The buyer is responsible for arranging and paying for the main carriage of the goods from the port of shipment to the port of destination.
Under CFR, the buyer is responsible for obtaining insurance for the goods during the main carriage to the port of destination.
If the goods are damaged during transit, the buyer may have a claim against the carrier for the damage, but it is the buyer’s responsibility to arrange for insurance to cover such risks.
The seller has the freedom to choose the carrier for the transportation of the goods to the named port of destination.
The buyer has the right to choose the port of destination and is responsible for any additional costs associated with delivering the goods to that port.
The seller is required to provide the buyer with the necessary documents, such as the bill of lading, to enable the buyer to take delivery of the goods at the port of destination.
If the goods are lost during transit, the buyer may have a claim against the carrier for the loss, but it is the buyer’s responsibility to arrange for insurance to cover such risks.
Yes, the seller and buyer can negotiate and agree to different terms for the delivery and transportation of the goods, as long as it is clearly stated in the contract.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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