CFR Incoterms 2020

CFR Incoterms 2020 Verified & Reviewed · Last updated September 2026 CFR (Cost and Freight) is an Incoterms 2020 rule for sea and inland waterway transport. The seller pays export costs and ocean freight to the named destination port, while the buyer assumes risk after the goods are loaded on board the vessel.Learn how CFR works, including seller and buyer responsibilities, risk transfer, shipping costs, and the differences between CFR, CIF, and FOB. CFR Incoterms 2020 Seller vs Buyer Responsibilities CFR vs CIF & FOB Experienced China-based logistics specialists 10,000+ international shipments handled Global sea, air & DDP shipping solutions 24/7 shipment tracking & customer support Table of Contents What Is CFR Incoterms 2020? CFR stands for Cost and Freight. It is an Incoterms 2020 rule where the seller pays the transportation cost to the named destination port, while the buyer assumes the risk after the goods are loaded on board the vessel at the origin port.Under CFR:The seller handles export clearance and ocean freight.The buyer handles import clearance, taxes, and final delivery.Marine insurance is not included.CFR applies only to sea and inland waterway transport. What Does CFR Mean in Shipping? CFR means Cost and Freight and defines how costs and risks are divided between sellers and buyers in international shipping.Under CFR Incoterms 2020, the seller must:Prepare export documentsComplete export customs clearanceDeliver goods to the port of shipmentLoad goods on board the vesselPay ocean freight to the destination portThe buyer must:Arrange cargo insurance if neededHandle import customs clearancePay import duties and taxesArrange delivery after arrivalA key point of CFR is that the seller pays the freight, but the buyer takes the transportation risk after loading. How CFR Incoterms 2020 Works The CFR shipping process includes several important stages. Export Preparation The seller prepares the shipment and completes export procedures.This usually includes:Commercial invoicePacking listExport declarationCargo preparationThe seller is responsible for making sure the goods are ready for international transportation. Loading on Board the Vessel The most important point under CFR is when the goods are loaded on board the vessel.At this stage:Seller responsibility for risk endsBuyer responsibility for risk beginsAlthough the seller continues paying ocean freight, the buyer carries the transportation risk during the sea voyage. Ocean Freight to Destination Port The seller arranges and pays the ocean freight to the named destination port.The seller may work with a freight forwarder to manage:Vessel bookingExport handlingInternational transportation Import and Final Delivery After arrival at the destination port, the buyer manages:Import customs clearanceImport duties and taxesPort handling chargesInland transportationCFR does not include door-to-door delivery. CFR Seller and Buyer Responsibilities The responsibilities under CFR Incoterms 2020 can be summarized as follows: ResponsibilitySellerBuyer Export clearanceYesNo Export documentsYesNo Delivery to origin portYesNo Loading on vesselYesNo Ocean freightYesNo Marine insuranceNoOptional Import clearanceNoYes Import duties and taxesNoYes Final deliveryNoYes The seller manages export transportation, while the buyer takes responsibility after arrival at the destination country. CFR Cost and Freight: Who Pays What? Many buyers misunderstand CFR because the seller pays the freight. However, CFR only covers costs up to the named destination port.The buyer may still need to pay additional charges after arrival. Cost ItemResponsible Party Factory pickupDepends on agreement Export customs clearanceSeller Ocean freightSeller Cargo insuranceBuyer Destination chargesBuyer Import clearanceBuyer Import taxesBuyer Local deliveryBuyer Before agreeing on CFR terms, buyers should confirm all destination costs with their local customs broker or logistics provider. CFR Risk Transfer Point Explained Under CFR Incoterms 2020, the point where risk transfers is different from the point where the seller pays the freight. This is one of the most important concepts buyers need to understand before choosing CFR.The seller is responsible for arranging export procedures, delivering the goods to the port of shipment, loading them on board the vessel, and paying the ocean freight to the named destination port. However, the seller’s risk ends once the goods are loaded on board the vessel at the port of shipment.After loading:The buyer assumes the risk of loss or damage during ocean transportation.The buyer is responsible for arranging cargo insurance if protection is required.The seller is still responsible for paying the agreed ocean freight to the destination port.In simple terms:CFR cost responsibility: Seller pays ocean freight to the destination port.CFR risk responsibility: Buyer takes the risk after the goods are loaded on board the vessel.For example, under CFR Shanghai Port to Los Angeles Port, Incoterms 2020, the seller arranges export clearance and ocean freight from Shanghai. Once the cargo is loaded onto the vessel in Shanghai, the buyer becomes responsible for transportation risks during the sea voyage.Understanding this difference helps importers avoid a common mistake: assuming that the seller is responsible for the goods until they arrive at the destination port. CFR vs CIF vs FOB: Key Differences CFR, CIF, and FOB are commonly used Incoterms for sea freight shipments. IncotermFreight PaymentInsuranceRisk Transfer CFRSeller paysBuyer arrangesWhen goods are loaded on vessel CIFSeller paysSeller provides insuranceWhen goods are loaded on vessel FOBBuyer paysBuyer arrangesWhen goods are loaded on vessel CFR vs CIF The main difference between CFR and CIF is insurance.Under CFR:Seller pays ocean freight.Buyer arranges insurance.Under CIF:Seller pays ocean freight.Seller provides minimum cargo insurance. CFR vs FOB The difference is mainly freight control. Learn more about FOB Incoterms and how FOB works for China imports.Under FOB:Buyer selects the carrier.Buyer pays ocean freight.Under CFR:Seller arranges and pays ocean freight.FOB is often used by experienced buyers with established shipping arrangements, while CFR can be convenient when buyers prefer the seller to manage ocean freight. When Should You Use CFR Incoterms? CFR can be suitable for companies shipping goods by sea when the buyer can manage destination procedures.Common situations include: Sea Freight Shipments For China export shipments, sea freight from China is commonly used for CFR shipments.CFR is commonly used for:Container shipmentsBulk cargoGeneral commercial goods Buyers With Import Experience CFR works better when buyers understand:Local customs requirementsImport documentationDestination charges Buyers Want Seller-Arranged Freight CFR allows the seller to handle international freight arrangements while the buyer manages import operations. Common CFR Incoterms Mistakes Although CFR Incoterms 2020 clearly defines the responsibilities of sellers and buyers, many importers misunderstand how freight costs, risks, and destination charges are divided. These mistakes may lead to unexpected costs or confusion during international shipping. Assuming Seller Is Responsible Until the Cargo Arrives One of the most common misunderstandings is believing that the seller remains responsible for the goods until they reach the destination port.Under CFR, the seller pays the ocean freight, but the risk transfers to the buyer once the goods are loaded on board the vessel at the port of shipment.Buyers should understand that freight payment and risk responsibility are separate concepts. Thinking CFR Includes Marine Insurance CFR does not require the seller to provide cargo insurance.The buyer is responsible for arranging insurance if coverage is needed, especially for:High-value cargoLong-distance ocean shipmentsGoods with higher transportation risksIf the buyer wants the seller to provide insurance, CIF may be a more suitable option. Ignoring Destination Costs Another common mistake is focusing only on the ocean freight cost and overlooking charges at the destination port.Under CFR, the buyer may need to pay:Destination terminal chargesImport customs clearance feesImport duties and taxesLocal transportation costsBefore agreeing to CFR terms, buyers should confirm all potential destination expenses. Using CFR for the Wrong Type of Transportation CFR is designed for:Sea freightInland waterway transportIt is not suitable for:Air freightRoad freightRail freightFor shipments involving multiple transport modes, buyers should consider other Incoterms that match the actual transportation method. Not Specifying the Destination Port Clearly CFR requires a named port of destination in the sales contract.For example: CFR Los Angeles Port, Incoterms 2020 clearly identifies where the seller’s freight responsibility ends.A vague destination description may create disagreements about freight costs and delivery responsibilities. Frequently Asked Questions What does CFR stand for in shipping? CFR stands for Cost and Freight. It means the seller pays ocean freight to the named destination port, while the buyer assumes risk after the goods are loaded on board the vessel. Who pays freight under CFR? The seller pays the ocean freight under CFR. The buyer is responsible for import costs, destination charges, and final delivery. Does CFR include insurance? No. CFR does not include marine insurance. The buyer must arrange insurance if coverage is needed. When does risk transfer under CFR? Risk transfers when the goods are loaded on board the vessel at the port of shipment. What is the difference between CFR and CIF? Both CFR and CIF require the seller to pay ocean freight. CIF includes seller-provided insurance, while CFR does not. Related Guide Incoterms® Shipping From China Guide Incoterms Incoterms® 2020 · Trade Terms Guide Incoterms® 2020: Complete Guide to the 11 International Trade Terms Incot... 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