CFR (Cost and Freight)

Definition and Scope

CFR, or Cost and Freight, is one of the eleven Incoterms® 2020 rules published by the International Chamber of Commerce, and it applies exclusively to sea and inland waterway transport[1]. Under this term, the seller is responsible for the cost of moving goods to the named port of destination — covering export clearance, inland transport to the port of origin, loading, and ocean freight — while risk of loss or damage transfers to the buyer at an earlier point: the moment the goods are placed on board the vessel at the port of shipment^[1]. This split between cost and risk is the defining feature of CFR and the source of most confusion around it: the seller keeps paying for transport well after the point at which the buyer has already assumed the risk of anything going wrong.

Cost and Risk Allocation

Under CFR, the seller's obligations end at loading the goods on board the contracted vessel and paying freight through to the named destination port; from that point, the buyer is responsible for import clearance, destination charges, and onward inland transport. Because risk transfers at the port of shipment rather than the port of destination, a buyer bears the risk of the entire ocean voyage — including loss, damage, or delay — even though the seller is the one who arranged and paid for that voyage. Unlike CIF, the seller under CFR has no obligation to purchase insurance on the buyer's behalf[1], which means a buyer who wants coverage for the transit risk they are already carrying needs to arrange marine cargo insurance independently.

When CFR Is — and Isn't — the Right Term

CFR was designed for conventional, non-containerized cargo loaded directly onto a vessel at the port of shipment, such as bulk or breakbulk goods. It becomes a poor fit for containerized cargo, because containers are typically handed to the carrier at a container yard or the seller's premises well before the goods are actually loaded on board the ship — creating ambiguity about exactly when risk transfers, since the named delivery point under CFR is the vessel itself, not an earlier handover point. For containerized shipments, or for any shipment using air, road, or rail transport, the equivalent rule that better matches how the cargo is actually handed over is CPT (Carriage Paid To), which sets the risk-transfer point at the first carrier rather than at loading onto a vessel.

Practical Considerations for Buyers

Because a CFR buyer takes on transit risk without the seller being obligated to insure it, arranging independent marine cargo insurance is a standard precaution, even though CFR itself does not require it. Buyers should also confirm that CFR is being quoted with a named port, not an inland city, since the term only covers cost to the port of destination — anything beyond that, including inland delivery to a warehouse, falls outside its scope and needs to be arranged and costed separately. For buyers weighing CFR against other terms, the practical trade-off is straightforward: CFR generally results in a lower quoted price than CIF because it excludes insurance, but it shifts the responsibility — and the work — of arranging that insurance onto the buyer.

FAQ

What does CFR stand for, and what mode of transport does it apply to?

CFR stands for Cost and Freight. It is an Incoterms® 2020 rule that applies only to sea and inland waterway transport; it should not be used for air, road, or rail shipments.

When does risk transfer from seller to buyer under CFR?

Risk transfers the moment the goods are loaded on board the vessel at the port of shipment — not when the goods arrive at the destination port, and not when the buyer takes physical possession[1].

Does the seller have to buy insurance under CFR?

No. Unlike CIF, CFR places no insurance obligation on the seller. If a buyer wants the seller to arrange marine insurance as part of the quoted price, CIF is the appropriate term instead.

What is the difference between CFR and CIF?

Both terms allocate cost and risk the same way — seller pays freight to the destination port, risk transfers at loading — but CIF additionally requires the seller to purchase minimum insurance cover for the buyer's benefit, while CFR does not.

Can CFR be used for a container shipped by ocean freight?

It's generally discouraged. Since containers are typically delivered to a container yard or the seller's facility before being loaded onto a vessel, using CFR for containerized cargo creates ambiguity about the actual risk-transfer point. CPT (Carriage Paid To) is the more appropriate term for containerized ocean shipments.

If I buy CFR and the shipment is damaged at sea, who is responsible?

The buyer bears that risk, since it transferred to them once the goods were loaded on board at the port of origin — even though the seller was still paying for and arranging the ocean freight. This is why buyers purchasing under CFR terms are generally advised to arrange their own cargo insurance.

Can a buyer name an inland city as the CFR destination?

No. CFR requires a named port of destination, since the term only covers cost to that port — not inland delivery beyond it. If a buyer needs the seller to arrange delivery further inland, a term such as DAP is more appropriate.

Sources & References

1. International Chamber of Commerce (ICC) — Incoterms® 2020, the official rules defining buyer and seller obligations, cost allocation, and risk transfer for each of the eleven Incoterms rules, including CFR: iccwbo.org. Accessed August 17, 2026.