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Cost and Freight (CFR)

Candlefocus Editor
Cost and Freight (CFR) is an important Incoterm that is used in international contracts and transactions involving the transportation of goods by sea. CFR is the responsibility of the seller, who is required to arrange the goods to be shipped to the buyer’s designated port of destination and provide the buyer with the necessary documents to pick up the goods. It is the seller’s responsibility to provide the cargo’s bills of lading, invoices and other documentation.

Under the CFR Incoterm, the seller is not responsible for arranging marine insurance to cover damages to the goods during transportation. Thus, if the seller agrees to sell on CFR terms, the buyer needs to be aware that he or she needs to secure his own insurance for the goods to protect against unexpected loss or damage.

In essence, CFR contract terms require that the seller bear the freight cost for the goods shipment, but the seller does not have to assume the risk of potential loss or damage to the goods during the transportation process. This makes CFR a popular term for sellers, particularly of large shipments, as it reduces their costs and risk involved in shipping.

CFR contracts are useful for buyers as they provide assurance that they will receive the goods they requested and can monitor the shipment progress with their shipping documents. In addition, CFR provides legal protection in case of adverse cargo claims that may occur during transportation, such as wrongful delivery or non-delivery of the cargo.

It is important to note that the CFR term only relates to the costs and risks associated with the shipment of the goods and does not apply to any other obligations or liabilities between the buyer and seller. Thus, the buyer and seller must ensure that all of their obligations, such as payment terms and delivery dates, are included in the contract of sale.

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