If you're involved in finance, international business, marketing, logistics, or supply chain, you've probably heard about Cost and Freight (CFR). But what is it exactly? In this post, we'll dive into the details about CFR and answer the 6 most popular questions about it.
Cost and Freight (CFR) is a trade term used in international commerce. It refers to a contract between a buyer and a seller where the seller is responsible for delivering the goods to a specific destination port. The seller covers the cost of transportation and insurance up to the port of destination, while the buyer is responsible for any additional costs after that.
CFR includes all costs associated with getting the goods from the seller's location to the port of destination. This includes transportation costs, loading fees, and insurance costs. However, it does not include any costs associated with unloading or clearing customs at the port of destination.
CFR is similar to Cost, Insurance and Freight (CIF), but with CIF the seller is also responsible for insuring the goods up to the port of destination. CFR is also different from Free On Board (FOB) where the buyer takes responsibility for transportation costs from the port of origin.
In CFR, the seller pays for all transportation costs up to the port of destination. However, upon arrival at that port, any additional expenses for unloading or clearing customs are paid by the buyer.
Using CFR can benefit both buyers and sellers. For sellers, it eliminates any ambiguity around who is responsible for transporting goods to their destination. For buyers, it simplifies their purchasing process as they only need to worry about additional costs after arrival at the port of destination.
One potential drawback of using CFR is that the buyer has no control over the transportation process. This can lead to delays or damage to goods in transit. Additionally, any unexpected costs associated with unloading or clearing customs must be paid by the buyer, which can add up quickly.
In conclusion, Cost and Freight (CFR) is a trade term used in international commerce that refers to a contract between a buyer and a seller where the seller is responsible for delivering the goods to a specific destination port. It has its benefits and drawbacks, so it's important to understand it fully before using it.
