Incoterms are the official International Chamber of Commerce (ICC) rules for the explanation of trade terms. Incoterms 2010 is adhered to by all major trading nations of the world, and it is the authoritative text for determining how costs and risks are allocated to the parties conducting international transactions. Incoterms facilitate the conduct of international business by defining the responsibilities of the involved participants.
This is the ninth article in our series investigating the basic meaning of all 11 Incoterms. We’ve also covered the following:
- Free Carrier (FCA)
- Delivered At Place (DAP)
- Delivered Duty Paid (DDP)
- Carriage Paid To (CPT)
- Cost, Insurance and Freight (CIF)
- Carriage and Insurance Paid To (CIP)
- Free On Board (FOB)
- Ex Works (EXW)
Today, we’re discussing the Incoterm CFR, also known as Cost and Freight.
To learn more about which trade term is the best for your export,
check out this chart of responsibilities.
What Does the Cost and Freight (CFR) Trade Term Mean?
CFR means “the seller delivers the goods on board the vessel or procures the goods already so delivered.” (The full text of the 2010 edition of the Incoterms rules is available at http://store.iccwbo.org/.)
When Can CFR Be Used?
CFR can be used only for goods transported by sea or inland waterway.
Benefits and Considerations of CFR
- With CFR, the seller enters into a contract of carriage and prepays the freight costs.
- The seller delivers the goods, cleared for export, loaded on board the vessel.
- Risk transfers from seller to buyer once the goods are loaded on board (before the main carriage takes place).
- CFR is best used in situations where the seller has direct access to the vessel for loading, i.e., bulk cargos or non-containerized goods. For containerized goods, consider CPT instead. (Incoterms Explained)
Learn More about Incoterms and CFR
Looking for more information about Incoterms? Check out the archive of Incoterms-related articles on our International Trade Blog.
To get you started, we’ve chosen several of our most popular articles along with other resources:
- The Beginner's Introduction to Incoterms
- An Introduction to Incoterms—Part 2: Why Do Incoterms Matter?
- A Behind the Scenes Look at Incoterms
- Incoterms 2010 Freight and Associated Charges
- From EXW to DDP: Incoterms 2010 Plain and Simple
- Incoterms Lesson: The Danger of Using Ex Works for Your Exports
- Where Does Risk Pass in Your International Shipments?
- Incoterms 2010 and the UCC: A Guide to International and Domestic Terms of Sale reference book
- Incoterms 2010: Terms of Sale seminar
Shipping Solutions export software can help you streamline the process of recording which Incoterms version you’re using and make sure your documentation is correct throughout the transaction. You can try it for free today!