What Is CFR (C&F)? Meaning, Freight, the Insurance Gap, and CFR vs CIF vs FOB

CFR looks convenient because the seller pays freight to the destination port, but it hides an insurance gap that no one fills. Risk has already passed to the buyer, yet the contract carries no insurance obligation.

This article goes deep on CFR alone. For a comparison of all 11 rules, see the Incoterms 2020 complete guide.

What Is CFR?

CFR (Cost and Freight) is an Incoterms rule under which the seller pays freight to the destination port but does not take out insurance. It is for sea and inland-waterway transport only, and it sits in Group C, where the seller pays main freight. In practice it is also written as C&F or CNF, all the same rule. In a contract you write the rule and destination port together, like "CFR Busan."

CFR is CIF with the insurance obligation removed. Everything is the same as CIF except that the seller does not insure the cargo.

Who Bears What Under CFR

The key is that the insurance row is empty. Neither seller nor buyer has a contractual duty to insure.

Cost Runs to Destination, Risk Transfers at Origin

Because CFR is a Group C rule, the cost divide and the risk divide are different points.

• Cost: the seller pays freight to the destination port
• Risk: transfers to the buyer once the goods are loaded on board at the port of shipment

So if cargo is damaged mid-voyage, the seller may have paid the freight, but the risk of damage already sat with the buyer. And because CFR carries no insurance, a buyer who did not arrange their own cover absorbs the loss.

CFR vs CIF: The Only Difference Is Insurance

These are the two most-compared rules. The freight burden and the risk-transfer point are identical; only the insurance obligation differs.

If you want the seller to at least provide minimum insurance, use CIF; if you want to design the cover yourself, use CFR. But under CFR, the buyer must always arrange insurance.

CFR vs FOB: Who Pays the Freight

Under FOB the buyer pays freight to the destination port; under CFR the seller pays it. The risk-transfer point (on board at the port of shipment) is the same for both.

If you want to control transport yourself, use FOB; if you want the seller to arrange freight but prefer to insure the cargo yourself, use CFR.

The CFR Trap: The Insurance Gap

This is the part to watch most under CFR. Risk transfers to you at origin, yet the contract carries no insurance. If a container accident, water damage, or breakage happens mid-voyage, the CFR buyer bears the loss regardless of who paid the freight.

So if you import under CFR, take out cargo insurance separately before shipment. If you want the seller to handle insurance too, then CIF, not CFR, is the right rule. We break down the scope of cargo insurance by policy in the marine cargo insurance guide.

Import Duties and CFR

Korea assesses import duties on a CIF-based customs value (freight and insurance included). Since CFR already includes freight and only leaves out the insurance premium, adding just the premium to the CFR amount gives the customs value. To see how much duty a CFR amount produces, add the premium in the CFR import duty calculator and get the figure right away.

This guide is for general information. Actual contracts depend on the detailed rules and each deal, so confirm against the ICC rules and with a specialist.