Cost and Freight (CFR)
What Is CFR (Cost and Freight)?
CFR (cost and freight) is a legal term used in international trade agreements. The seller is expected to arrange for the transport of goods by sea to a port of destination and supply the buyer with the paperwork required to receive them from the carrier in a contract indicating that a sale is cost and freight. The seller is not liable for obtaining marine insurance against the risk of loss or damage to the cargo during transportation when a cost and freight transaction is made. The term "cost and freight" refers solely to cargo delivered by sea or inland waterways.
TAKEAWAYS IMPORTANT
Cost and freight is a legal phrase used in international commerce contracts that states that the seller of the products must arrange for the shipment of the goods by sea to a port of destination and give the buyer with the relevant documentation to acquire the items from the carrier.
If a buyer and seller agree to include cost and freight in their transaction, the seller is relieved of the responsibility of insuring the goods against loss or damage during shipment.
Cost and freight are two often used International Commercial Phrases, which are a collection of internationally recognised terms that assist to establish a standard for international trade contracts and are published and updated on a regular basis by the International Chamber of Commerce.
Cost and Freight Management (CFR)
International transportation contracts sometimes include condensed trade terms that specify the time and place of delivery, payment, the conditions under which the risk of loss switches from the seller to the buyer, and the party liable for freight and insurance charges.
If a buyer and seller agree to include cost and freight in their deal, the seller is responsible for arranging and paying for the cargo's transportation to a defined port. The products must be delivered, cleared for export, and loaded aboard the transport ship by the seller. Once the seller places the things aboard the vessel but before the primary conveyance, the risk of loss or damage passes to the buyer.
This clause states that the seller is not liable for insuring the goods against loss or damage during shipment.
An Incoterm is an International Commercial Term, commonly known as a cost and freight term. The International Chamber of Commerce (ICC) produces and maintains this database of globally recognised phrases to assist develop a standard for the terms of foreign trade contracts in order to promote international trade. 1 International Commercial Terms are meant to define the duties of buyers and sellers, such as transportation and export clearance obligations, as well as the physical point at which risk shifts from the seller to the buyer, in order to avoid misunderstanding.
There are three more Incoterms that are closely connected to cost and freight and are regularly used in trade contracts for commodities carried globally by sea or inland waterways. Free alongside ship (FAS) indicates that the seller just has to bring the cargo to the port adjacent to the vessel, after which the buyer has responsibility for the items. The vendor must additionally load the products aboard the ship if the commodities are sold "free on board." The conditions of cost insurance and freight (CIF) require the seller to arrange for the transportation of goods by sea to a port of destination, but the seller also has the extra responsibility of insuring the items until they arrive at the destination port, similar to the terms of cost and freight. In terms of price
The seller is not responsible for insuring the products until they arrive at the target port, including freight.
What Does CFR (Cost and Freight) Mean?
The cost and freight (CFR) of merchandise moved by sea or inland waterways is an expense. If CFR is used in a transaction, the seller is responsible for arranging and paying for freight transportation to a designated port. The seller is also in charge of delivering the items, obtaining export clearance, and loading them aboard the transport ship. The risk of loss or damage passes to the buyer once the consignment is placed onto the vessel. This implies that the seller is not responsible for cargo insurance while it is being transported.
What Is an Incoterm, Exactly?
The International Chamber of Commerce publishes a collection of terminology and meanings known as the "International Commercial Term" (ICC). These words are standardised to avoid misunderstandings and to define the duties of buyers and sellers, such as transportation and export clearance.
What Are Some Other Incoterms That Are Like Cost and Freight?
Three more incoterms are regularly used in trade contracts. The term "free alongside ship" (FAS) refers to when the seller simply needs to bring the goods to the port next to the vessel, but the buyer is responsible for loading it. "No charge on board" (FOB)
necessitates the seller loading the items aboard the ship. The seller must arrange for the carriage of goods by sea to a port of destination under the "cost insurance and freight" (CIF) clause, but the seller must also insure the items until they arrive at the destination port. The seller is not responsible for insuring the products until they arrive at the target port in terms of cost and freight.
