Cost and Freight Incoterm (CFR) — Cost Split Estimator
Answer: Under CFR Cost and Freight, the seller pays cost and freight to the named destination port, while the buyer handles insurance, import customs, duties, destination charges, and on-carriage after the port.
Under CFR Cost and Freight, the seller pays the cost of goods, export handling, and freight to the named destination port, while the buyer handles insurance, import customs, duties, destination charges, and on-carriage after the port.
How the CFR estimate works
CFR is a sea and inland waterway Incoterms rule. This estimator separates the seller’s CFR invoice from the buyer’s after-port budget:
- Seller side — goods value, origin local charges, export clearance, and main freight to the named destination port.
- Buyer side — insurance, import duty and tax, destination port or CFS charges, customs-related costs, and inland delivery after the destination port.
- Risk transfer — risk transfers to the buyer when the goods are loaded on board the vessel at the origin port, even though the seller pays freight to the named destination port.
This page is a planning tool and plain-English explanation, not legal advice. Confirm contract wording, cargo insurance, customs obligations, and Incoterms interpretation with qualified advisors before signing.
FAQ
What does CFR stand for in shipping? CFR stands for Cost and Freight. The seller pays the cost of goods and freight to the named destination port, but the buyer takes risk once the goods are loaded on board at origin.
Who pays insurance under CFR? The buyer pays for cargo insurance under CFR. If the seller is required to provide insurance, the transaction is usually CIF rather than CFR.
Who handles import customs under CFR? The buyer handles import customs clearance, duties, taxes, destination port charges, and inland delivery after the named destination port.
Is CFR only for ocean freight? Yes, CFR is intended for sea and inland waterway transport. For air freight or multimodal shipments, CPT is usually the more appropriate Incoterms 2020 rule.
What named place should be used with CFR? Use the named destination port, such as CFR Los Angeles Port or CFR Hamburg Port. CFR should not be written as a final warehouse address.
Is CFR better than FOB for buyers? FOB gives buyers more control over the main freight booking. CFR can be simpler when the seller has strong ocean freight rates, but buyers must still budget insurance, destination charges, import customs, and on-carriage.
Does CFR mean the seller is responsible until arrival? No. The seller pays freight to the destination port, but risk transfers when cargo is loaded on board at the origin port. This cost-versus-risk split is the most common CFR misunderstanding.
CFR responsibility comparison
| Stage | Seller under CFR | Buyer under CFR | Practical note |
|---|---|---|---|
| Goods and packing | Pays | Reviews compliance | Commercial invoice should match purchase contract |
| Origin trucking and export | Pays | Usually not responsible | Seller clears export unless contract says otherwise |
| Main ocean freight | Pays to named port | Receives freight benefit | Freight cost is embedded in CFR price |
| Cargo insurance | Not required | Arranges and pays | Buyer should insure because risk transfers at origin |
| Import customs and duty | Not responsible | Pays and files | HS code and declared value drive duty exposure |
| Destination port and delivery | Not responsible | Pays | Terminal, CFS, drayage, rail, and warehouse costs can be material |
Incoterm comparison
| Term | Seller pays main freight? | Seller provides insurance? | Buyer import responsibility |
|---|---|---|---|
| FOB | No | No | Buyer handles import and freight onward |
| CFR | Yes, to named destination port | No | Buyer handles insurance, import, destination, on-carriage |
| CIF | Yes, to named destination port | Yes, minimum cover | Buyer handles import, destination, on-carriage |
| DAP | Yes, to named place before import | Usually not separate | Buyer handles import clearance and duties |
| DDP | Yes, to named place | Contract-specific | Seller handles import clearance and duties |
Dated facts
- As of May 2026, Incoterms 2020 remains the current ICC Incoterms rule set used in most international sales contracts.
- As of May 2026, CFR and CIF remain sea and inland waterway rules; CPT and CIP are the closer rules for air freight or multimodal shipments.
- As of May 2026, many China-to-US supplier quotes still use CFR or CIF port pricing for ocean shipments, but Amazon and Shopify sellers usually need to add destination port, customs, and inland delivery costs to estimate true landed cost.
- As of May 2026, US importers should budget MPF, possible HMF for ocean imports, duty, Section 301 tariffs when applicable, customs brokerage, and final delivery separately from a CFR supplier price.
Frequently asked questions
- What does Cost and Freight mean?
- Cost and Freight, abbreviated CFR, means the seller pays the cost of goods and main freight to the named destination port. The buyer handles insurance, import clearance, duties, destination charges, and inland delivery.
- Who pays insurance under CFR?
- The buyer arranges and pays insurance under CFR. If the seller must provide insurance, the term is usually CIF, not CFR.
- When does risk transfer under CFR?
- Risk transfers from seller to buyer when the goods are loaded on board the vessel at the port of shipment, even though the seller pays freight to the destination port.
- Is CFR the same as CIF?
- No. CFR and CIF both require the seller to pay freight to the named destination port, but CIF also requires the seller to provide minimum cargo insurance.
- Can CFR be used for air freight?
- CFR is designed for sea and inland waterway transport. For air or multimodal shipments, CPT is usually the closer Incoterms 2020 rule.
- Does this estimator provide legal advice?
- No. It is a planning tool and plain-English explanation. Confirm contract wording, insurance, customs obligations, and local legal interpretation with qualified advisors.