Cost and Freight
CFR (named port of destination) Incoterms 2010
- The seller delivers the goods to the buyer by loading them on board alongside the vessel at the agreed port of loading within the agreed period.
- The seller pays the cost and bears the risks of damage to or loss of the goods until he has delivered them.
- The seller contracts for the carriage of goods to the named port of destination and pays the freight.
- The seller takes care of the export formalities.
- The buyer takes the delivery when the seller has loaded the goods on board the vessel at the port of loading.
- The buyer pays the cost of the goods except the freight and bears the risk after the delivery.
- The buyer will take care of the import formalities and possible formalities in the country of transit, if any.
CFR CAN BE USED ONLY IN CASE OF TRANPORT BY SEA OR INLAND WATERWAYS, I.E. FROM PORT TO PORT.
According to CFR the seller delivers the goods to the buyer when he loads the goods on board at the port of loading. The term CFR has got two critical points. They are the point of delivery and the point of destination. The seller contracts for carriage with the carrier chosen by him for the carriage of goods from the port of loading to the agreed port of destination and pays the freight.
The buyer receives the goods from the carrier at the port of destination agreed by the seller and the buyer.
The seller pays the freight. The buyer is responsible for all costs after the delivery except the freight unless those costs are included in the freight. Costs of discharge at the port of destination belong to the buyer, unless they are included in the contract of carriage, in which case they are to be paid by the seller.
The delivery from the seller to the buyer is similar to FOB except that according to CFR the seller contracts for carriage.
From the carrier’s point of view, the contracting partner of the carrier is the seller. The contract should cover the transport from the port of loading to the agreed port of destination.
The risk transfers from the seller to the buyer at the moment of delivery. Because the risk after the delivery is buyer’s, the complaint for possible damages to or loss of goods, delay etc., during the carriage of goods should be made by the buyer or his insurance company, in case the buyer has insured the gods against the risk concerned.
The seller will receive a document from the carrier as a proof of the delivery. If this document is a bill of lading, it should be an “on board” bill of landing.
The seller is responsible for the export formalities and their costs. The import formalities and possible formalities during transit are for the buyer.
The port of destination mentioned in CFR is the port, where the buyer receives the goods from the carrier. It is not the port of delivery.
The seller and the buyer may agree, except about the port of destination, also about the port of delivery, although it is not common.