What Is Cost and Freight (CFR)?

Cost and Freight (CFR) is an international trade term that requires the seller to cover the costs and freight necessary to bring goods to a specific port, while the buyer assumes responsibility for risks once the goods are on board the shipping vessel.

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CFR is a widely used Incoterm in international shipping that outlines the obligations of both the buyer and seller. Under CFR, the seller pays for the transportation and related costs up to the destination port but is not responsible for insurance. The buyer must handle insurance and any further costs or risks after the goods are loaded onto the ship, making clear communication and documentation essential to avoid disputes.

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CFR plays a vital role in international trade by defining clear responsibilities for both the seller and buyer, ensuring a smoother transaction process. This clarity helps reduce disputes related to cost allocation and risk management during shipping. By agreeing to CFR terms, businesses can better plan their logistics and budget for shipping costs, enabling efficient supply chain management.

For example, a clothing manufacturer in China selling goods to a retailer in Europe might agree to CFR terms. The manufacturer would cover the cost of transporting the goods to a port in Europe, but once the goods are loaded onto the ship, the retailer takes on the risks and handles insurance and delivery to the final destination. This division of responsibilities ensures transparency and efficient handling of the shipment.

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