# What Is Cost and Freight (CFR) in Foreign Trade Contracts?

> **Definition**
>
> Cost and freight (CFR) is a contractual term in an export sales agreement that obligates the seller to deliver the goods to the port of destination.

## What Is Cost and Freight (CFR)?

Cost and freight (CFR) is a term in an international trade contract that requires the seller to deliver the goods to a foreign port. The seller assumes responsibility for shipping the goods, along with the documents that the buyer needs to take possession of the goods.

The cost and freight term is used only for cargo transported by sea or inland waterways.

The seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit.

Cost and freight used to be abbreviated in contracts as C&F. In 1990, this was changed to CFR in [Incoterms](https://www.investopedia.com/terms/i/incoterms.asp), a set of commercial trade rules established by the [International Chamber of Commerce (ICC)](https://www.investopedia.com/terms/i/international-chamber-of-commerce-icc.asp).

### Key Takeaways

*   Cost and freight (CFR) is a globally recognized term defined as an International Commercial Term (Incoterm), in the standards for foreign trade published by the International Chamber of Commerce (ICC).
*   A cost and freight provision makes the seller responsible for shipping the goods but not for insuring them against losses.
*   Another term—cost, insurance, and freight (CIF)—indicates that the seller is responsible for marine insurance as well as shipping.

![Cost and Freight (CFR): A legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination.](https://www.investopedia.com/thmb/Kr9iwBV18lyBWhoPOB2NzGLio7g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png)

*If a transaction includes CFR, the seller has to arrange and pay for transporting the cargo to a specified port. — Hilary Allison / Investopedia*

## Understanding Cost and Freight (CFR)

Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery; payment; the conditions under which the risk of loss shifts from the seller to the buyer; and specifying the party responsible for the costs of freight and insurance.

If a buyer and a seller agree to include cost and freight in their transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller must deliver the goods, clear them for export, and load them onto the transport ship. The risk of loss or damage transfers to the buyer once the seller loads the items onto the vessel, but before the main transportation occurs. This provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation.

Cost and freight is an International Commercial Term, also called an Incoterm. To facilitate foreign trade, the ICC publishes and regularly updates this set of globally recognized terms that help to create a standard for the terms of foreign trade contracts. Incoterms are intended to prevent confusion by clarifying the obligations of buyers and sellers, such as transport and export clearance obligations and the physical point where risk transfers from the seller to the buyer.

> **Important**
>
> When an Incoterm such as cost and freight appears in a contract of sale, it creates a legal obligation, meaning that it must be respected.

## Similar Incoterms to Cost and Freight (CFR)

For goods transported internationally by sea or inland waterways, there are three other Incoterms that are closely related to CFR and are frequently used in trade contracts.

*   [Free alongside ship (FAS)](https://www.investopedia.com/terms/f/fas.asp) means that the seller only has to deliver the cargo to the port next to the vessel, and responsibility for the goods shifts to the buyer at that point.
*   [Free on board (FOB)](https://www.investopedia.com/terms/f/fob.asp) requires the seller to also load the goods onto the ship.
*   Like CFR, [cost, insurance, and freight (CIF)](https://www.investopedia.com/terms/c/cif.asp) requires that the seller arranges for the carriage of goods by sea to a port of destination, but the seller has the additional obligation of insuring the goods until they reach the destination port. In CFR, [the seller is not responsible for insuring the goods until they reach the destination port](https://www.investopedia.com/ask/answers/072815/what-difference-between-cost-and-freight-cfr-and-cost-insurance-and-freight-cif.asp).

## What Does Cost and Freight (CFR) Entail?

Cost and freight (CFR) is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller is also responsible for delivering the goods, clearing them for export, and loading them onto the transport ship. However, once the shipment is loaded into the vessel, the risk of loss or damage falls to the buyer. This means that the seller is not responsible for insuring the cargo during transportation.

## What Is an Incoterm?

Incoterm is short for International Commercial Term, a set of terms and definitions published by the International Chamber of Commerce (ICC). These terms are standardized to prevent confusion and clarify the obligations of buyers and sellers, such as transport and export clearance obligations.

## What’s the Difference Between CIF and CFR?

Cost and freight (CFR) and cost, insurance, and freight (CIF) are similar. They both relate to transporting goods by sea and divide the responsibilities of transit between the buyer and the seller. Where they differ is that CIF requires marine insurance to be included, at the expense of the seller. With CFR, the seller is not responsible for insuring the goods until they reach the destination port.  

## The Bottom Line

Cost and freight (CFR), an Incoterms rule that applies only to cargo transported by sea or inland waterways, puts a fair bit of responsibility on the shoulders of both the buyer and the seller. Under these agreements, which are fairly common in [international trade](https://www.investopedia.com/insights/what-is-international-trade/), the seller is responsible for all the planning and costs associated with exporting goods by sea to the destination port specified by the recipient. However, as soon as the goods are loaded on the vessel, the buyer is responsible for providing marine insurance on them—and for [transporting the goods](https://www.investopedia.com/terms/t/transloading.asp) via truck to their final destination, import fees, and so on.  

> **Article Sources**
>
> 1.  Incoterms Explained. “[Cost and Freight (CFR)](https://www.incotermsexplained.com/the-incoterms-rules/the-eleven-rules-in-brief/cost-freight/).”
>     
> 2.  International Chamber of Commerce. “[Incoterms® Rules History](https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-rules-history/).”
>     
> 3.  Trade Finance Global. “[Cost and Freight (CFR): Incoterms® 2020 Rule](https://www.tradefinanceglobal.com/incoterms/cfr-cost-and-freight-shipping-meaning/).”
>     
> 4.  International Chamber of Commerce. “[Incoterms® Rules](https://iccwbo.org/resources-for-business/incoterms-rules/).”
>     
> 5.  UPS. “[Cost and Freight (CFR)](https://www.ups.com/us/en/supplychain/resources/glossary-term/cost-and-freight).”
>     
> 6.  International Chamber of Commerce. “[The Incoterms® Rules 2010](https://iccwbo.org/publication/incoterms-rules-2010/).”
>     
> 7.  IncoDocs. “[Incoterms® Explained—The Complete Guide](https://incodocs.com/blog/incoterms-the-complete-guide/).”
>     
> 8.  Trade Finance Global, via Internet Archive Wayback Machine. “[Incoterms® 2020—7 Key Changes You Need to Know \[Update\]](https://web.archive.org/web/20240526152012/https://www.tradefinanceglobal.com/posts/incoterms-2020-7-key-changes-you-need-to-know/).”
>     
> 9.  Meadows Wye & Co., via Internet Archive Wayback Machine. “[Incoterms—Responsibilities of Seller and/or Buyer Explained.](https://web.archive.org/web/20231001163636/https://www.meadowswye.com/resources/incoterms.htm)”