What is the CFR Incoterm?The Incoterm CFR, stands for "Cost and Freight," is one of the international trade terms, also known as Incoterms, defined by the International Chamber of Commerce. This term indicates that the seller bears all costs (except insurance) to bring the goods to the port of destination. In addition to production costs, this includes the transportation costs to get the goods to the port and the freight costs to send the goods to the destination port.
What are the advantages and disadvantages of the CFR Incoterm?CFR Incoterm has several advantages for vendors. It allows vendors to maintain control over the transportation and handling of goods until they are loaded aboard ship. This can be especially helpful when navigating logistical challenges and regulations at the port of departure. On the buyer's side, CFR provides some security, as the seller is responsible for arranging transportation and paying freight charges all the way to the port of destination. However, CFR has some drawbacks. For sellers, this Incoterm carries some financial risks, as sellers must bear the costs but have no control over the product once it is aboard the ship at the port of departure. For buyers, it is a disadvantage that CFR does not include insurance of the goods during sea transportation. In addition, buyers have no control over ship selection or route selection, which can lead to higher risks or unplanned costs.
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Frequently asked questions about the CFR Incoterm:
In what situations is CFR usually used?
CFR is often used for bulk shipping of raw materials and goods where transportation costs are a significant part of the total product cost.
What happens if additional costs are incurred during transportation under CFR?
Under CFR, any additional costs incurred in transit, such as customs, port or storage charges, are basically the responsibility of the buyer.