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  • CFR - Cost and Freight

CFR INCOTERMS - Cost and freight

This term should be used only for sea or inland waterway transport.
CFR-Incoterms-2010-VINCULUM-Customs clearance Vladivostok-GC-IMPORT40 Factory or warehouse of the manufacturer or seller Delivery from the factory or warehouse to the departure terminal Placement of goods at the cargo terminal Placement of goods on board the vessel State border Sea transportation to the port of discharge Placement in a temporary storage warehouse at the port of arrival (unloading) Delivery of goods ready for unloading from the vehicle Cargo recipient's warehouse Seller's area of expenses and responsibility Buyer's area of expenses and responsibility The moment of transition of risks !

"Cost and

With the development of the world transport system, the concept of freight has spread to air (English air freight) and land (English land freight) transport.

" >Freight" ("Cost and freight") means that the seller deliversproductby water transport to the port of destination, he is obliged to conclude a contract and pay all the costs necessary for the delivery of the goods, including loading in a warehouse or factory, delivery to the port of departure, freight. The seller has the right to delivercargoto the destination port and organize work on its unloading. To do this, it is necessary to agree on these terms in the contract. Further organizational issues such as unloading of goods, customs clearance, delivery to a warehouse, store or final buyer, the importer undertakes.

 Riskthe loss or damage of the goods passes when the goods are on board the ship. 

When using this term, the term, as well as the CPT terms,CIP,CIFthe seller fulfills his delivery obligation when he hands over the goods to the carrier, and not when the goods have reached their destination. The transfer of ownership of the goods is carried out at the time of shipment of the goods at the port of destination.

TermCFRit contains two critical points, because the risk and costs are transferred in two different places. The contract always defines the port of destination, but may not specify the port of shipment when the risk passes to the buyer. If the port of shipment is of particular interest to the buyer, the parties are advised to define it most clearly in the contract. 

The parties are also advised to determine the point at the agreed port of destination as accurately as possible, since the costs up to this point are borne by the seller. It is recommended that the seller provide contracts of carriage that accurately reflect this choice. If the seller under his contract of carriage bears the costs of unloading at an agreed point in the port of destination, the seller has no right to demand from the buyer compensation for such costs, unless otherwise agreed by the parties.

The seller is obliged either to deliver the goods on board the vessel, or to ensure that the goods delivered in this way are provided at the destination. In addition, the seller is obliged either to conclude a contract of carriage or to provide such a contract. The indication of the obligation to "provide" takes into account the numerous sales along the chain, which are often used in commodity trading.

CFR may be inappropriate when the goods are transferred to the carrier before they are placed on board the ship, for example, goods in containers, which is typical for delivery to" >terminal. In such situations, it is more correct to use the term CPT.

CFR requires the seller to perform customs formalities for export, if applicable. However, the seller is not obliged to perform customs formalities for importation, pay import duties or perform other customs formalities upon importation.

The term CFR is convenient for the importer, because the main organizational aspects and risks are assumed by the exporter. But all expenses, the seller will still include in the price of the goods.

 

Find out what needs to be considered and taken into account when choosing CFR Close the list of actions with CFR
  • to clarify in detail the parameters and characteristics of cargo packages (including labeling), this is necessary for subsequent customs clearance of goods;
  • clearly coordinate with the seller the port of delivery of the goods;
  • to define a strict delivery date or period in the contract is the date by which the goods must be delivered to the destination port. For example, on May 28, 2019, or specify a certain time interval: "The goods must be provided at the named port of destination in the period from June 14 to June 18, 2019." If the seller does not meet the deadline, then the costs for the downtime of the vessel can be assigned to him.
  • agree with the insurance company on the terms of insurance, if necessary (CFR insurance is the buyer's area of responsibility);
  • obtain permits if necessary;
  • pay customs fees for the import of goods;
  • to carry out customs clearance of goods;

This list is not complete and depends on the specific case, under these conditions of delivery, the seller's logistics may give a lower freight cost compared to, for example,FOB, but usually in the end the buyer pays port fees at the port of arrival, which increases the total cost, it is also not recommended to use this term if the cargo is planned to be sent further across Russia in container trains.

 

  

1.General obligations of the seller and the buyer under the terms of CFR

A.1.The seller is obliged, in accordance with the contract of sale, to provide the buyer with the goods, a commercial invoice-invoice, as well as any other proof of compliance of the goods with the terms of the contract of sale, which may be required under the terms of the contract.Any document referred to in paragraphs A1-A10 may be replaced by an equivalent electronic record or procedure, if this is agreed by the parties or is customary.
V.1.The buyer is obliged to pay the price of the goods, as stipulated in the contract of sale.Any document referred to in paragraphs B1-B10 may be in the form of an equivalent electronic record or other procedure, if this is agreed by the parties or is customary.

2. Licenses, permits, security controls and other formalities under CFR conditions

A.2.If necessary, the seller is obliged, at his own expense and at his own risk, to obtain an export license or other official permit and to perform all customs formalities necessary for the export of goods.
B.2.If necessary, the buyer is obliged to obtain, at his own expense and at his own risk, an import license or other official permit and perform all customs formalities necessary for the import of goods and their transportation through any country.

3.Contracts of carriage and insurance under CFR conditions

A.3.a) Contract of carriage
The seller is obliged to conclude or ensure the conclusion of a contract for the carriage of goods from the named point of delivery, if it is determined, from the place of delivery to the named port of destination or, if agreed, to any point in such port. The contract of carriage must be concluded at the expense of the seller, under normal conditions and provide for transportation in the usually accepted direction on a vessel of the type that is usually used to transport the goods sold.
b) Insurance contract
The seller has no obligation to the buyer to conclude an insurance contract. However, the seller is obliged to provide the buyer, at his request, at his risk and at his expense (if there are expenses), with the information necessary for the buyer to obtain insurance.
B.3.a) Contract of carriage
The buyer has no obligation to the seller to conclude a contract of carriage.
b) Insurance contract
The buyer has no obligation to the seller to conclude an insurance contract. However, the buyer is obliged to provide the seller, at his request, with the necessary information to ensure insurance.

4.Delivery and acceptance of goods under CFR conditions

A.4.The seller is obliged to deliver the goods either by placing them on board the vessel or by providing the goods delivered in this way. In either case, the seller is obliged to deliver the goods on an agreed date or in an agreed period and in a manner that is usual for this port.
V.4.The buyer is obliged to accept delivery of the goods as soon as they are delivered in accordance with paragraph A4, and to accept the goods from the carrier at the named port of destination.

5. Transfer of risks under CFR conditions

A.5.The seller bears all risks of loss or damage to the goods until the moment of its delivery in accordance with paragraph A4, except for the risks of loss or damage in the circumstances specified in paragraph B5.
V.5.The buyer bears all risks of loss or damage to the goods from the moment of its delivery in accordance with paragraph A4.
If the buyer fails to fulfill the obligation to provide notice in accordance with paragraph B7, he bears all risks of loss or damage to the goods, starting from the agreed date or from the date when the agreed delivery period expired, provided that the goods were explicitly individualized as goods that are the subject of the contract.

6.Allocation of expenses under CFR conditions

A.6.The seller is obliged to pay:
  • all expenses related to the goods until the moment of its delivery in accordance with paragraph A4, except for expenses paid by the buyer, as provided for in paragraph B6;
  • freight and other expenses specified in paragraph A3 (a), including the costs of loading the goods on board the vessel and any charges in connection with unloading the goods at the agreed port of unloading, which are assigned to the seller under the contract of carriage;
  • if necessary, the costs of performing customs formalities necessary for the export of goods, as well as duties,taxesand the fees paid upon export, as well as the costs of its transportation through any country, if they are imposed on the seller under the terms of the contract of carriage.
V.6.The buyer is obliged, subject to the provisions of paragraph A3, to pay:
  • all expenses related to the goods from the moment of their delivery in accordance with paragraph A4, except, if required, the costs of customs formalities for the export of the goods, as well as taxes, fees and other expenses payable upon export, as provided in paragraph A6 (c);
  • all costs and charges related to the goods during transit prior to their arrival at the agreed port of destination, unless such costs and charges are attributed under the contract of carriage to the seller;
  • unloading costs, including lightening and berthing fees, unless such costs are borne by the seller under the contract of carriage;
  • any additional costs incurred as a result of the seller's failure to send a notice in accordance with paragraph B7, from the agreed date or from the date of expiry of the agreed period for shipment, provided that the goods have been explicitly individualized as goods that are the subject of the contract;
  • if necessary, the costs of paying taxes, duties and other official fees, as well as customs formalities to be paid upon importation of the goods, and the costs of transporting it through any country, unless such costs and fees are attributed to the seller under the contract of carriage.

7.Notification to the buyer and seller under CFR conditions

A.7.The seller is obliged to give the buyer a proper notice allowing the buyer to take the measures normally necessary to enable him to accept the goods.
V.7.If the buyer has the right to determine the time for the shipment of the goods and /or the point of receipt of the goods at the named port of destination, he is obliged to give the seller proper notice of this.

8.Documentary proof of delivery under CFR conditions

A.8.The seller is obliged, at his own expense, to provide the buyer with a regular transport document in a timely manner to the agreed destination port.
Such a transport document must cover the goods under the contract and be dated within the agreed shipping period, grant the buyer the right to claim the goods from the carrier at the port of destination and, unless otherwise agreed, allow the buyer to sell the goods during transit by transferring the document to a subsequent buyer or by notifying the carrier.
If the transport document is negotiable and issued in several originals, the buyer must be given a complete set of originals.
V.8.The buyer is obliged to accept the transport document issued in accordance with paragraph A8, if it complies with the contract.

9.Inspection, packaging, labeling and inspection of goods under CFR conditions

A.9.The seller is obliged to bear all the costs associated with the inspection of the goods (quality control, measurement, weighing, counting) necessary for the delivery of the goods in accordance with paragraph A4, as well as the costs of inspecting the goods before shipment, which is prescribed by the authorities of the country of export.
The seller is obliged to ensure the packaging of the goods at his own expense, except in cases when it is usually customary in this branch of trade to ship the goods specified in the contract without packaging. The seller may pack the goods in such a way as is necessary for their transportation, unless the buyer notifies the seller of the specific packaging requirements prior to the conclusion of the contract.Markingthe packaged goods must be carried out properly.
V.9.The buyer is obliged to bear the costs of mandatory inspection of the goods before shipment, except in cases when such inspection is carried out by the order of the authorities of the country of export.

10.Assistance in obtaining information and related costs under CFR conditions

A.10.If necessary, the seller is obliged to provide the buyer in a timely manner or assist him in obtaining, at the buyer's request, at his risk and at his expense, documents and information, including security information, which the buyer may need to import the goods and/or transport them to the final destination.
The seller is obliged to reimburse the buyer for all costs and fees incurred by the buyer when receiving or assisting in obtaining documents and information, as provided in paragraph B10.
Q.10.The buyer is obliged to inform the seller in a timely manner about the requirements for security information so that the seller can act in accordance with paragraph A10.
The buyer is obliged to reimburse the seller for the costs and fees incurred by him for providing or assisting in obtaining documents and information, as provided for in paragraph A10.
If necessary, the buyer is obliged to provide the seller in a timely manner or assist the seller in obtaining, at the seller's request, at his risk and at his expense, documents and information, including security information, which the seller may need for transportation, export of goods and for its transportation through any country.
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