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What is a Cost and Freight (CFR) incoterm?

CFR requires an exporter to load goods onto an agreed-upon vessel and take up the responsibility of transporting them by sea. Learn more about its obligations and meaning in this blog.

After Free on Board (FOB), Cost and Freight (CFR) is one of the most frequently used trade or incoterms. The parties involved in a particular trade transaction usually define the exact meaning and implications of CFR, as per their contract.

What is Cost and Freight (CFR)?

According to previous versions of incoterms, CFR requires an exporter to load goods into an agreed-upon vessel and transport them through sea. The importer is responsible for goods after this point, while the exporter needs to provide necessary documents for shipping. In simple terms, if CFR is mentioned in a trade transaction, it clarifies that the exporter is not responsible for securing insurance for goods or the cargo during shipment¹.

Cost and Freight incoterms 2020 rule

CFR incoterm is a universal trade term used internationally and was recently reviewed under Incoterms 2020 by the ICC. This is specifically used for sea and ocean freight transits. Under this, though the exporter is responsible till goods reach the agreed-upon port, the risk of goods is transferred to the importer once goods are loaded. The importer also has the responsibility for payment charges after the designated port, including insurance coverage of goods².

Exporter’s obligations under a CFR incoterm

Some of the exporter obligations under a CFR incoterm are:
· Delivery of goods and related paperwork
· Transportation within country of origin including packaging
· Costs incurred at the originating country for customs clearance
· Expenses incurred from the point of origin
· Merchandise shipped internationally

Importer’s obligations under a CFR incoterm

Some of the importer obligations under a CFR incoterm are:
· Cash for goods
· Costs are based on the final destination
· Location-specific customs processing costs
· Transportation within the destination country
· Taxes and duties

What is CFR insurance?

It is recommended to obtain insurance for international ocean freight shipments, even if incoterms do not specify cargo insurance to be given under CFR. A single policy issued by either the exporter or importer can help cover all risks associated with the shipment.

Understanding incoterms and detailed requirements for international trade helps businesses be export-ready and avoid any hassles during logistics and customs. With e-commerce exports, the process of exporting from India has become easier than ever with support from programs like Amazon Global Selling - not just with registration, but also with shipping and payments.

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More blogs on incoterms

1. What is Delivered at Terminal (DAT) incoterm?

2. What are incoterms in exports: Here’s everything you need to know

3. All you need to know about Free Alongside Ship (FAS) incoterm 2020

4. Guide to FCL shipping: Everything exporters need to know

5. What is Carriage Insurance Paid (CIP) in incoterms?

6. What is Freight on Board: How does it work in shipping?

7. What is a Container Freight Station (CFS) and its role in shipping?

8. What is Cost, Insurance and Freight (CIF) in shipping?

9. What is a Free Carrier (FCA) incoterm?

10. What is EX Works (EXW) incoterm in international trade?

Frequently Asked Questions

Who controls the CFR?

The International Chamber of Commerce (ICC) governs regulations outlined in CFR incoterm.

Can CFR be used for air freight?

The CFR incoterm is only applicable for oceanic shipments.

How do you calculate CFR price?

Cost of goods, labour, packaging, labelling, insurance, transportation, customs, checks, paperwork, taxes, fees and port fees are usually factored into CFR price.

Does CFR include customs clearance?

An importer is responsible for paying any applicable import customs fees in addition to the CFR price.

What is the legal status of CFR incoterms?

As per incoterms 2020 by ICC, CFR incoterm is a globally recognized commercial term used in international trade.

Who clears import/export customs under CFR shipping terms?

The export clearance process is handled by the exporter, while the import clearance process is handled by the importer.

Can I use CFR shipping terms for domestic shipping?

If an exporting corporation is using containerized shipments, then CFR might not be the suitable phrase to use under Incoterms 2020 guidelines.

Published on November 30, 2022.

Sources:
1. http://rubberboard.org.in/public
2. http://rubberboard.org.in/filereader
3. http://www.rbegp.in/#
4. https://en.wikipedia.org/wiki/Rubber_Board#:~:text=Rubber%20Research%20Institute%20of%20India,-The%20Rubber%20Research&text=There%20are%20nine%20research%20disciplines,Station%20attached%20to%20the%20RRII.

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