Why cost and freight (CFR) matters to a first-time founder
CFR separates who pays freight from who bears transport risk, which affects pricing, insurance and claims. The seller arranges and pays carriage to the named destination port, but the buyer bears risk once goods are aboard at shipment. Missing that distinction can leave a founder with an uninsured loss.
Examples of cost and freight (CFR)
A seller quotes CFR Rotterdam for goods worth ¥4 million and pays ¥300,000 ocean freight. The goods are damaged after loading at the departure port. Although the seller still pays carriage to Rotterdam, risk has already transferred to the buyer, who needs suitable cargo insurance to cover the loss.
Common misunderstanding
CFR does not mean the seller insures the shipment until arrival, and payment of freight does not determine risk transfer. It is intended for sea or inland waterway transport. Writing only “CFR” without the named port and applicable Incoterms edition creates avoidable ambiguity about cost and delivery obligations.
When to use it
Use CFR for suitable port-to-port goods shipments when the parties understand the transport chain. State the named destination port and edition, such as Incoterms 2020, in the contract. For container shipments handed to a carrier before loading, seek advice on whether another Incoterms rule fits better.