CFR Incoterms: What Cost and Freight Means
for E-Commerce Sellers (2026)

What Is CFR (Cost and Freight)?

CFR is one of 11 Incoterms published by the International Chamber of Commerce (ICC). It applies only to ocean freight and inland waterway transport.

Under CFR, the seller handles:

1. Cost: The product price
2. Freight: Ocean freight to the named destination port

The seller does NOT provide cargo insurance. The seller does NOT handle import customs. The seller does NOT pay duties or destination charges.

CFR has the same risk structure as CIF: risk transfers when goods are loaded on board the vessel at the origin port. The seller pays for the voyage but is not responsible for what happens during it. If your cargo is damaged in transit, that is your loss, unless you arranged separate insurance.

Think of CFR as CIF without the insurance, or as the ocean freight-only version of CPT.

Key Takeaway: CFR = seller pays freight to port. No insurance. You handle everything at destination. Arrange your own cargo insurance.

Where CFR Sits Among the "C" Terms

Term	Transport Mode	Seller Pays Freight	Seller Pays Insurance	Risk Transfers
CFR	Ocean freight only	Yes	No	On board vessel
CIF	Ocean freight only	Yes	Yes (Clauses C, minimum)	On board vessel
CPT	Any mode	Yes	No	At first carrier
CIP	Any mode	Yes	Yes (Clauses A, all-risks)	At first carrier

CFR vs CIF: Add minimum insurance and you get CIF. If your supplier quotes CFR and you want insurance included, ask for CIF. Or better, arrange your own Clauses (A) policy for broader coverage. See CIF Incoterms.

CFR vs CPT: Same concept, different transport scope. CFR is ocean freight only. CPT works for any mode. For air freight or multimodal shipments, CPT is the correct term. See CPT Incoterms.

CFR vs FOB: Under FOB, YOU arrange and pay for freight. Under CFR, the SELLER arranges and pays. Neither includes insurance. The practical question: do you want to book ocean freight yourself (FOB) or let your supplier book it (CFR)? See FOB Incoterms.

CFR in Practice: What Your Supplier Is Offering

When a supplier quotes "CFR Los Angeles," they are telling you:

Included in the CFR Price	NOT Included (You Pay Separately)
Product manufacturing and packaging	Cargo insurance (approx. 0.3-0.5% of cargo value for Clauses A)
Inland transport from factory to Chinese port	Destination port terminal handling charges
Export customs clearance in China	Customs broker fee ($150-350)
Ocean freight to the named destination port	Import duties (0-25%+ depending on HS code)
	Customs bond (single entry or annual)
	ISF filing ($25-75)
	Trucking from port to warehouse ($200-1,500 depending on distance)

The CFR quote covers more than FOB (freight is included) but less than CIF (no insurance) and significantly less than DDP (no insurance, customs, duties, or delivery).

CFR Responsibilities Breakdown

Seller's Obligations Under CFR

Obligation	What It Means
A1: General	Provide goods and commercial invoice
A2: Delivery	Deliver goods on board the vessel at origin port
A3: Risk transfer	Risk passes when goods are loaded on board at origin
A4: Transport	Arrange and pay for ocean freight to destination port
A5: Insurance	No obligation
A6: Transport document	Provide bill of lading covering carriage to destination
A7: Export clearance	Handle export formalities
A8: Checking/packaging	Package goods for ocean freight transport
A9: Cost allocation	Pay all costs to destination port, except insurance and import costs
A10: Notices	Notify buyer of dispatch details

Buyer's Obligations Under CFR

Obligation	What It Means
B1: General	Pay the agreed price
B2: Taking delivery	Accept delivery at destination port
B3: Risk transfer	Bear all risk from origin port loading onward
B4: Transport	No obligation (seller pays freight)
B5: Insurance	No obligation, but strongly recommended
B6: Transport document	Accept the bill of lading
B7: Import clearance	Handle ALL import customs, duties, and taxes
B8: Inspection	Pay for inspection if required
B9: Cost allocation	Pay insurance, destination port charges, customs, duties, unloading, trucking
B10: Notices	Notify seller of receiving requirements

When CFR Makes Sense

CFR is not common for e-commerce imports. It appears in specific situations:

• Your supplier has favorable ocean freight contracts and can book cheaper rates than you can arrange independently. Some large Chinese manufacturers ship enough volume that their freight rates are significantly below market.
• You want to arrange your own insurance with a specific provider or under an annual policy.
• Commodity imports where CFR is the industry standard pricing term.
• Your supplier insists on CFR because they want to control the freight booking. Note: sometimes suppliers pad the freight cost, so compare against market rates.

For most e-commerce sellers: FOB or DDP is a better fit. FOB gives you full control over freight. DDP gives you zero logistics work. CFR sits in an awkward middle where you get some cost coverage but still manage insurance, customs, duties, and delivery yourself.

Common Mistakes with CFR

Mistake 1: Shipping CFR without cargo insurance.
CFR does not include insurance. Risk transfers at origin. If your $50,000 shipment is damaged in transit and you have no insurance, you absorb the full loss. Always buy cargo insurance under CFR. Cost is typically 0.3-0.5% of cargo value for Clauses (A) coverage.

Mistake 2: Not verifying the freight component in the CFR quote.
Some suppliers inflate the freight portion of CFR quotes. Ask for a breakdown: product cost vs. freight cost. Compare the freight number against current market rates. If your supplier quotes $2,500 for freight on a route that costs $1,800 at market rates, you are overpaying by $700.

Mistake 3: Assuming CFR includes destination port handling.
CFR covers freight TO the port. It does not cover port charges AT the port (terminal handling, unloading, documentation). Those are your costs.

Mistake 4: Using CFR for containerized cargo when CPT is technically correct.
Like FOB and CIF, CFR is designed for cargo that can be inspected at the ship's rail. For containers, CPT (which works for any transport mode) is the ICC's preferred term. In practice, CFR is still used for container shipments, but know the distinction.

Frequently Asked Questions

Related Incoterms and Resources