CFR DELIVERY TERM - COST AND FREIGHT

COST AND FREIGHT, incoterms

CFR Delivery Term

CFR / Cost and Freight Delivery

CFR Delivery term is using when seller organize the main shipment to any destination port without insurance, only difference between CIF & CFR is insurance obligation . As a note, incoterms including 11 different delivery methods, and CFR is the one of this.

Cost and Freight

In the form of CFR delivery, the exporter company completes all steps in such a way as to deliver the cargo to an agreed port in buyer's country without an insurance. So, seller (exporter) company respomsible to carry the goods from his factory to the destination port, on the otherhand, buyer (importer) company have to make the insurance. This process include an expense; inland transportation, customs clearence, port charges, shipment costs.

For example, if the delivery term in the contract or in the proforma invoice is given as CFR Antwerp Port, and the exporter company based in Istanbul city; the exporter company is responsible for loading the container, inland transportation, customs clearence and the rest shipment processes until the cargo ship reach to the port of Antwerp, Belgium without an insurance.

CFR Delivery Term Insurance Obligation 

In the form of CFR transport, insurance is the buyer's obligation. Seller's insurance only covering the inland transportation till the container reach to loading port. So the buyer company should make an insurance covering the goods till the goods reach to destination point any warehouse or buyer2s facility.

CFR, "Cost Insurance Freight" How to Calculate Price

When calculating the CFR price, the seller, ie the exporter company, adds the profit share on the cost of the product, the packaging cost, the factory loading, the internal transportation to the port, the port costs, the customs clearence costs and also the freight cost. In this way CFR price is determined.


CFR Price Account: Product cost + profit share + packaging costs + loading in factory + inland transportation + port charges + customs expenses + freight cost

CFR Delivery Term: How it works

According to the CFR delivery method, the seller makes the shipment plan including all process and steps in CFR delivery term. ETA (estimated date of arrival) to be taken from the carrier before shipment and then give an information to the buyer (importer) company about this. If the buyer company has any deadline, shipment alternatives and delivery time checked when both parties negotiate the order, the seller company should give an info about the best possible production and delivery time to importer company and its better to sign any contract or proforma invoice including the ETA. The buyer should know and agreed about the delivery time to to prevent future problems. 

As an advise, if the seller (exporter) company check the "free time periods" and negotiate with the carrier companies for getting the maximum free time for destination port, its avoid the future problems such a longer customs clearance or any documentation problem caused to an extra demurrage charges

CFR Delivery In the form of Buyer and Seller's Responsibilities

Seller (Exporter) responsibilities CFR delivery Term
  • The seller load the container in his own facility, 
  • The seller should arrange the international shipment
  • Organizes the inland transportation to reach container to harbour, 
  • Ensures that the cargo is loaded to the ship on time 
  • Complete the customs clearence
  • International shipment costs belong to the seller.

Buyer (Importer)
  • The buyer company should prepare the insurance covering all risks
  • The buyer company should handle the port of destination (in buyer's contry)
  • Customs clearance at destination point (in buyer's contry)
  • Inland transportation from destination port to buyer's facilities
CFR DELIVERY TERM

CFR delivery is the most commonly used incoterms in "group C".

CFR "Cost and Freight" Delivery and Distribution of Responsibility

The seller (exporter) company  should prepare the documents including: invoce, packing list, certificate or origin. Exporter company also should finish the customs clearence process

The seller (exporter) company handle the shipment process so they also managed the shipment with the carrier company. As an advice, its better to send the Bill of lading draft to the buyer (importer) company and get their confirmation. In this way, the original  Bill of lading could be prepare without any mistake. The buyer company need to prepare the insurance document so its better to prepare the insurance when the bill of lading done.

The carrier company agent, contact with the buyer (importer) company before the ship reach to destination port and check the main informations including; buyer company name, address, imported product name and hscode.... 

As an advise, always check the shipment period till the ship reach to detination port and also the buyer company start customs clearence. Otherwise, you are responsible for all port costs and demuraggae costs at destination port, till the buyer accept the goods, start unloading and port process.

The seller (Exporter) company should send their export documents including; "invoice, packing list, certificate of origin, bill of lading and any other agreed  document" to the buyer by courier. 

When both parties agree on CFR delivery term, The port city should be clear on contract or proforma invoice and its better both parties check that; which port is the best option for the buyer company. Doublecheck if the destination port didnt mentioned on proforma invoice or contract and get the confirmation from buyer company when the freight company give an freight offer about it.

CFR Delivery Term:  Seller & Buyer Responsibilities


details CFRCostsRisks
PackagingSeller ie exporterSeller ie exporter
Internal shipment (to the harbour)Seller ie exporterSeller ie exporter
Customs clearenceSeller ie exporterSeller ie exporter
Port Loading (handling charges)Seller ie exporterSeller ie exporter
Shipment (main shipment charges)Seller ie exporterBuyer ie importer
InsuranceBuyer ie importerBuyer ie importer
Port Unloading at destination (handling)Buyer ie importerBuyer ie importer
Customs clearence at destinationBuyer ie importerBuyer ie importer
Internal shipment at destinationBuyer ie importerBuyer ie importer

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usatradevisa: CFR DELIVERY TERM - COST AND FREIGHT
CFR DELIVERY TERM - COST AND FREIGHT
CFR is one of the incoterms created to determine the authorities and responsibilities of exporters and importers. CFR incoterm is described in incoterms 2010 with all the details.
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