Incoterms 2020 · Sea and inland waterway
CFR (Cost and Freight): who pays what
The short answer
Who pays what under CFR
| Step | Under CFR |
|---|---|
| Export clearance | Seller |
| Main freight | Seller |
| Cargo insurance | Buyer (not required) |
| US customs clearance | Buyer |
| US import duty and fees | Buyer |
| Unloading at destination | Buyer (unless the carriage contract includes it) |
| Risk passes to the buyer | When the goods are on board the vessel at the port of loading |
In the contract, CFR is followed by the port of destination the seller pays freight to: for example "CFR Long Beach, Incoterms 2020".
What CFR means for a US importer
CFR is a sea-only rule. The seller books and pays the ocean freight, so the seller picks the carrier and the sailing.
Destination charges are a common surprise under CFR. Terminal handling and delivery order fees at the US port are often charged to the buyer at arrival, even though the freight was "paid".
US customs value under CFR
A CFR price includes the ocean freight. Your broker deducts it from the US customs value when it is shown separately (19 U.S.C. 1401a(b)(4)(A)).
Check the duty for your product in the Gateway tariff calculator.
Watch out for
- The goods travel at your risk while the seller chose the carrier. Insure them yourself.
CFR questions
Does CFR include insurance?
No. CIF is the same rule plus insurance the seller must buy. Under CFR the buyer insures if it wants cover.
When does risk pass under CFR?
When the goods are on board the vessel at the port of loading, although the seller pays the freight to the destination port.
Who pays destination charges under CFR?
Whatever the seller's carriage contract does not cover falls to the buyer. Ask the seller which destination charges are prepaid.
Sources
- International Chamber of Commerce: Incoterms 2020
- International Trade Administration (trade.gov): Know Your Incoterms
- 19 U.S.C. 1401a(b)(4)(A): price actually paid or payable
Incoterms® is a registered trademark of the International Chamber of Commerce. This page explains the rule in our own words; the ICC publication is the authoritative text.