Incoterms 2020 · Seller pays freight, risk moves on board
CFR — Cost and Freight
The seller pays freight to the destination port, but risk passes when the goods are on board at origin.
Key facts
| Risk passes | When the goods are on board the vessel at the origin port |
|---|---|
| Export clearance | Seller |
| Import clearance and duty | Buyer |
| Main carriage | Seller pays to the named destination port |
| Insurance | Neither party is obliged; buyer should insure from the origin port |
| Unloading at destination | Buyer, unless the contract includes it |
| Best for | Sea freight where the seller has better freight rates |
| Source | ICC Incoterms 2020, CFR |
Freight paid, risk not carried
The seller pays the ocean freight, but the buyer owns the risk from the moment the goods are on board. If the cargo is damaged in transit, the buyer claims on its insurance. The seller's freight contract does not transfer that risk back.
Because the buyer bears risk, it should insure from the origin port. The seller should provide the shipment details needed to place cover, including the vessel, the loading date and the port of discharge.
CFR versus CIF
CIF is CFR plus a seller-paid minimum insurance obligation. Under Incoterms 2020, CIF requires Institute Cargo Clauses (C), the minimum cover, at 110% of the contract value. CFR leaves insurance to the buyer.
If the buyer has its own cargo policy, CFR avoids duplicate cover. If the buyer wants the seller to arrange at least minimum cover, CIF is the simpler rule.
Frequently asked questions
Who insures under CFR?
Neither party is obliged by the rule. The buyer should insure from the origin port because risk passes there.
Does CFR include unloading at destination?
No. The buyer unloads unless the contract includes unloading in the seller's scope.
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