What Is CFR? Cost and Freight Term

CFR (Cost and Freight) is an Incoterms 2020 sea-transport term under which the seller pays the cost of goods and freight to the named destination port. Risk, however, transfers to the buyer when the goods are loaded on board the vessel at the origin port—not at the destination. CFR is identical to CIF except that the seller is not obligated to provide marine insurance.

This risk-cost split is the defining characteristic of CFR and the source of its most common misunderstanding.

CFR Cost and Risk Allocation

Responsibility	Seller	Buyer
Manufacturing and packaging	Yes	No
Export customs clearance	Yes	No
Inland transport to origin port	Yes	No
Origin port handling and loading	Yes	No
Sea freight to destination port	Yes	No
Risk transfer point	On board vessel (origin)	On board vessel (origin)
Marine insurance	No	Yes (buyer must arrange own insurance)
Destination port unloading	No	Yes
Import customs clearance	No	Yes
Inland transport to site	No	Yes

CFR vs CIF vs FOB

Aspect	FOB	CFR	CIF
Seller pays freight	No	Yes	Yes
Seller pays insurance	No	No	Yes (minimum ICC “C”)
Risk transfer	On board vessel (origin)	On board vessel (origin)	On board vessel (origin)
Buyer arranges insurance	Yes	Yes	No (but should consider additional coverage)
Transport mode	Sea only	Sea only	Sea only
Price includes	Goods + loading	Goods + loading + freight	Goods + loading + freight + insurance

CFR Pricing Example

A shipment of 150 tons of ASTM A234 WPB butt-weld fittings from Mumbai to Jebel Ali:

Cost Element	FOB Mumbai	CFR Jebel Ali	CIF Jebel Ali
Mill price + inland + port	$2,400/ton	$2,400/ton	$2,400/ton
Sea freight	Buyer: $95/ton	Included	Included
Marine insurance	Buyer: $14/ton	Buyer: $14/ton	Included
Quoted price	$2,400/ton	$2,510/ton	$2,530/ton
Total cost to buyer	$2,509/ton	$2,524/ton	$2,530/ton

The $15/ton difference between CFR and CIF reflects the seller’s insurance cost (or markup). The $15/ton gap between FOB and CFR reflects the seller’s freight markup versus the buyer’s own freight rate.

Common Mistake

Assuming CFR includes insurance. It does not. Under CFR, the buyer bears the risk of loss or damage during sea transit but the seller has no obligation to arrange insurance. If the buyer fails to arrange marine insurance and the cargo is lost at sea, the buyer absorbs the full financial loss. Always arrange cargo insurance independently when buying CFR. For high-value piping materials, ICC “A” (all-risks) coverage is recommended.

When to Use CFR

Scenario	Why CFR Works
Buyer has own insurance program	Company-wide cargo insurance policy covers all shipments; separate insurance per shipment is redundant
Buyer wants freight included but controls insurance	Simplifies pricing while maintaining insurance flexibility
Letter of credit transactions	Some L/Cs specify CFR to keep insurance separate from the trade document set

When to Avoid CFR

Scenario	Better Alternative
Buyer forgets to arrange insurance	Use CIF—insurance is built in
Buyer wants full control of logistics	Use FOB—buyer controls both freight and insurance
Buyer wants one delivered price	Use DAP—seller handles everything to destination

Key Documents Under CFR

The seller must provide the following shipping documents:

Document	Required
Bill of lading	Yes—clean, on-board B/L
Commercial invoice	Yes
Packing list	Yes
Certificate of origin	Yes (if required by buyer or customs)
Mill test certificates	Yes (per procurement documents)
Insurance certificate	No (buyer arranges own insurance)

CFR is less common than FOB and CIF in piping material procurement but appears in transactions where the buyer has a blanket cargo insurance policy. For the complete Incoterms 2020 reference, see the detailed guide.

Read the full guide to pipe classes and specifications