What is CFR?
CFR (Cost and Freight) is an Incoterm where the seller pays freight to a named port of destination, but risk transfers to the buyer when goods cross the ship’s rail at the port of shipment, before the goods have even left the origin country. CFR applies to sea and inland waterway transport only. The seller does not arrange insurance. Also written C&F or C+F in older contracts.
If a supplier has just sent you a quote showing “CFR Felixstowe” and you are not sure what it means, this article explains it in plain English.
CFR is one of the most commonly used Incoterms in sea freight, particularly for bulk goods and commodity trades. At first glance it looks simple: the seller pays freight to your named port, and you take over from there. But there is a catch that catches out a lot of new buyers. The seller pays the freight bill all the way to the destination port, but the risk of the goods being lost or damaged transfers to you at the port of shipment, before the ship has even set off.
That gap between where you carry the risk and where the seller stops paying freight is the single most important thing to understand about CFR. Read the risk section carefully.
Here is the full sequence of events in a CFR shipment, from factory to your door.
1. Contract agreed. The seller and buyer agree on CFR terms and name a specific port of destination: for example, “CFR Felixstowe” or “CFR Southampton.” The named port matters because it determines how far the seller’s cost obligation extends.
2. Seller prepares and packs the goods. The seller packs the goods for export. All costs at the seller’s end, packing, origin handling, and haulage to the port of loading, are the seller’s responsibility.
3. Seller handles export customs clearance. The seller clears the goods through customs in the country of export. The seller pays any export duties and taxes. The seller needs an EORI (Economic Operators Registration and Identification) number in the country of export to do this.
4. Goods are loaded on board the vessel. The seller delivers the goods on board the ship at the port of loading. This is the critical moment, risk transfers to the buyer when the goods are on board the vessel at the port of shipment. From this point, the buyer bears the risk of loss or damage, even though the seller has paid for the freight to carry them to the destination port.
5. Seller pays the freight. The seller contracts with the shipping line and pays the ocean freight charge from the port of loading to the named port of destination. The seller does not arrange insurance, that is the buyer’s responsibility.
6. Transit. The goods travel by sea. The buyer carries the risk; the seller has paid the freight bill. If goods are damaged during the voyage, it is the buyer’s financial loss.
7. Goods arrive at the named port. The seller’s cost obligation ends at the named port. Unloading costs at the destination port may or may not be included in the freight contract, check whether they fall to the seller or the buyer (see the costs section below).
8. Buyer handles import customs clearance. Import clearance is the buyer’s responsibility. In the UK, you need a UK EORI number, a customs broker, and a customs declaration filed through the UK Customs Declaration Service (CDS). You also pay import duty and UK import VAT.
9. Delivery to buyer’s premises. The buyer arranges collection from the port and delivery to their warehouse. This last-mile cost is entirely the buyer’s.
| Responsibility | Seller | Buyer |
|---|---|---|
| Packing and origin handling | Yes | No |
| Export customs clearance | Yes | No |
| Export duties and taxes | Yes | No |
| Origin haulage to port of loading | Yes | No |
| Loading goods on board vessel | Yes | No |
| Ocean freight to named port | Yes | No |
| Cargo insurance | No — not required | Yes — buyer must arrange own |
| Risk of loss or damage in transit | Ends when goods on board at origin | From when goods on board at origin |
| Unloading at destination port | Check contract | Check contract |
| Import customs clearance | No | Yes |
| Import duties and import VAT | No | Yes |
| Delivery from port to destination | No | Yes |
The most important line in this table is insurance. Under CFR, the seller has no obligation to arrange cargo insurance. The buyer bears the risk from the moment goods are on board the vessel and must arrange their own insurance if they want cover.
When a supplier quotes you a price on CFR terms, here is what that price covers and what it does not.
What the seller’s CFR price includes:
What the buyer must arrange and pay for separately:
A cost example in practice:
A UK tools distributor imports power tools from a manufacturer in China on CFR Southampton terms. The goods are invoiced at £40,000. The CFR price covers ocean freight from the Chinese port all the way to Southampton. On top of that, the UK buyer pays separately: cargo insurance (typically 0.2–0.5% of goods value, around £80–£200 for standard open cover), customs clearance (around £200–£350 via a broker), UK import duty (check your commodity code on the UK Global Tariff), and UK import VAT at 20% on the goods value plus duty. None of these costs are included in the CFR price.
This is the section that matters most. Get this wrong and a shipment loss can cost you far more than you expected.
Under CFR, risk passes from seller to buyer when the goods are placed on board the vessel at the port of shipment in the country of export.
That means risk transfers at the origin port, not the destination port. The goods are still on the ship. They have not arrived. They have not been unloaded. But from the moment they are loaded onto the vessel, you, the buyer, bear the risk of loss or damage.
The seller has contracted and paid for the freight. The seller is still financially committed to the freight cost all the way to your named port. But the seller does not bear the commercial risk of the goods being lost at sea or damaged during the voyage. That risk is yours.
Why does this matter?
A UK importer buys 500 pallets of ceramic tiles from a supplier in Spain on CFR Southampton terms, for a total value of £60,000. The goods are loaded at Valencia. Three days into the voyage, the vessel encounters a severe storm and 100 pallets of tiles are damaged. The goods were on board, risk had transferred to the UK buyer. The seller is not responsible. If the UK buyer had not arranged cargo insurance, the £12,000 loss is theirs to absorb entirely.
Under CFR, the buyer pays the freight indirectly (it is included in the seller’s price) but absorbs the risk directly. This split, who pays for transport versus who bears the risk of transport, is what makes CFR, and the other C-group Incoterms, potentially dangerous for buyers who do not understand it.
Under CFR, the seller has no obligation to arrange cargo insurance. Zero. This distinguishes CFR from CIF (Cost, Insurance and Freight), where the seller must arrange minimum insurance.
As the buyer under CFR, you are responsible for arranging your own cover, and you need to arrange it before the goods are loaded at origin, because that is when your risk begins.
What type of insurance should you get?
For most commercial cargo, the standard options are Institute Cargo Clauses (ICC) A, B, or C.
For a CFR shipment where you carry all the risk during the sea voyage, Clauses A is the sensible default for most buyers. The cost is typically 0.1–0.5% of the goods value depending on cargo type and trade route, for a £40,000 shipment, that is around £40–£200.
When to arrange it:
Arrange insurance before the goods are loaded at the origin port. Once risk has transferred, you cannot retrospectively insure a shipment that is already at sea.
Tip for regular importers:
If you import regularly, consider an open cover marine cargo policy. This is an ongoing policy with your insurer that automatically covers all your shipments within agreed parameters. You declare each shipment as it happens, usually via your freight forwarder. It is cheaper per shipment than arranging individual policies and removes the risk of a gap in cover.
Control over the freight arrangement. The seller books the vessel, negotiates freight rates, and chooses the carrier. Sellers who export regularly can use volume freight agreements to achieve rates that individual buyers could not access. This gives the seller a commercial edge, they can build a margin into the freight cost.
A complete, landed cost quote. A CFR price tells the buyer exactly what it costs to get the goods to their named port. For buyers who want a simple comparison between suppliers, a CFR quote is easier to evaluate than an FOB quote where the buyer has to add their own freight costs on top.
No insurance obligation. Unlike CIF, CFR does not require the seller to arrange or pay for cargo insurance. The seller’s cost obligation is freight only. This simplifies the seller’s responsibilities and removes the insurance arrangement from their plate entirely.
Risk transfers at loading. Once goods are on board the vessel, the seller’s risk obligation is fulfilled. Any damage that occurs at sea is the buyer’s problem commercially, even though the seller arranged the freight. This protects the seller from claims related to ocean transit.
Widely understood in export markets. CFR is one of the most established Incoterms in commodity and bulk trade. Sellers in China, India, and Southeast Asia regularly quote on CFR terms. It is a familiar framework for both parties in high-volume sea freight trade.
Freight handled by the seller. You do not need to arrange or manage ocean freight. The seller deals with the shipping line, the booking, and the freight documentation. For buyers without established freight relationships, this removes a logistical burden.
Predictable landed cost to port. The CFR price gives you the cost of the goods plus freight to your named port. Add your insurance, import duty, and customs clearance costs on top and you have a clear picture of your total landed cost. No freight surprises after the deal is done.
Seller uses established freight relationships. Experienced exporters, particularly in China and other high-volume origin countries, often have preferential freight rates with major shipping lines. As a buyer, you benefit from those rates indirectly through the CFR price.
Simpler documentation. Under CFR, the seller handles the bill of lading and freight booking. You receive the shipping documents and use them to clear the goods at the UK port.
Choice over your own insurance. Unlike CIF, where the seller picks the insurer and cover level, CFR lets you choose your own insurance provider. If you have a preferred broker or an open cover policy that already covers your imports, CFR gives you full control of that relationship.
Freight cost risk. The seller commits to paying the freight when the contract is agreed. If freight rates rise sharply between contract date and shipping date, as they did majorly between 2020 and 2022, the seller absorbs the increase. For long-lead-time contracts, this can seriously affect margin.
Limited control once goods are on board. Once the goods are loaded and risk has transferred to the buyer, the seller has paid for the freight but has no commercial say in what happens to the goods. If the buyer refuses delivery or goes insolvent during transit, the seller faces a complex situation.
Named port must be specific. “CFR UK” is not a valid CFR contract. The seller must name a specific port of destination. Vague destination terms create disputes about where the freight obligation ends, disputes that can end up in court.
Upfront costs. The seller pays export clearance and ocean freight before receiving payment in many cases. This creates a cash-flow burden, particularly when the seller is also extending credit terms.
Container shipments create risk point complications. For FCL or LCL shipments, the “on board the vessel” risk transfer point can be technically ambiguous. Container freight stations and port operations mean goods may sit at the terminal for days before being lifted on board. See the transport mode section below.
Risk transfers at origin, not at your port. This is the trap. The seller pays freight to Felixstowe or Southampton, but your risk begins when the goods are loaded onto the vessel in China or wherever they originated. If the ship sinks halfway across the Indian Ocean, you have lost your goods and the seller owes you nothing, unless you have insurance.
No insurance obligation on the seller. The seller does not have to arrange cover. If you forget to arrange your own, or arrange it after loading, you have no protection. This is a far more common mistake than you would expect, especially when buyers are new to sea freight.
Import duties and customs clearance are entirely your responsibility. You need a UK EORI number, a customs broker, and a CDS customs declaration filed on your behalf. If your documentation is not ready when the vessel arrives, you face storage or demurrage charges at the port. At Felixstowe and Southampton, port storage charges of £50–£200 per container per day accumulate quickly after the free period expires.
Goods over £135 attract UK import VAT. Any commercial shipment with a customs value above £135 is subject to UK import VAT at 20% at the border. Under CFR, this cost is entirely yours. If your unit economics did not account for it, it erodes your margin.
Limited visibility of freight arrangements. The seller books the freight. As the buyer, you may not know which shipping line, which vessel, or which routing the seller has chosen until you receive the bill of lading. This can complicate your UK customs preparations and warehouse scheduling.
Unloading costs at the destination port may fall to you. In some CFR contracts, destination terminal handling charges (DTHC) are included in the freight rate; in others they are not. If they are not included, you pay them separately. Always clarify before signing the contract.
CFR works well in these situations.
When you are buying commodities or bulk goods by sea, raw materials, bulk foodstuffs, steel, or timber. CFR is a well-established choice. These trades often use break-bulk or bulk vessel shipping where CFR’s “on board the vessel” risk point works cleanly.
When the seller has better freight access than you do. If you are a small UK importer buying from an established Chinese exporter with volume freight agreements, CFR means you benefit from those rates indirectly.
When you already have a marine cargo insurance policy in place. If you have an open cover policy that automatically covers your imports, CFR lets you keep your insurance relationship and avoid paying for CIF insurance you do not need.
When the trade is on a simple, single-mode sea route. CFR works cleanly for point-to-point sea freight, one port of loading, one named UK port of destination.
CFR is most commonly used in commodity trades, metals, grains, minerals, bulk chemicals, and in traditional exporting relationships from Asia, Africa, and South America to the UK.
Avoid CFR for containerised (FCL or LCL) shipments. CFR’s “on board the vessel” risk transfer point does not align cleanly with how containerised freight works. Goods are typically handed to a freight forwarder or container freight station days before being lifted on board the ship. FOB or FCA are better-aligned options for containerised trade.
Avoid CFR if you cannot arrange your own insurance. If you do not have an insurance broker or an open cover policy, you are exposed to the full risk of the sea voyage. In that case, CIF is safer, the seller arranges minimum insurance, giving you some protection.
Avoid CFR for air, road, or rail shipments. CFR is restricted to sea and inland waterway transport only. If your goods are moving by air from Hong Kong, by road from Germany, or by rail via the China–Europe corridor, CFR does not apply. Use CPT (Carriage Paid To) instead.
Avoid CFR when you want to control the freight. If you have a preferred freight forwarder with competitive rates and a track record you trust, CFR hands control to the wrong party. Use FOB instead, the seller handles export clearance, and you arrange the main freight.
Avoid CFR when the destination port is ambiguous. CFR requires a named port of destination. “CFR UK” is not enough.
If CFR is not the right fit, consider FOB (Free on Board) if you want to control your own freight, or CIF (Cost, Insurance and Freight) if you want the seller to include basic insurance in the price.
Mistake 1: Assuming the seller’s freight payment means the seller bears the risk.
This is the most expensive misunderstanding in CFR. The seller pays for the freight. The buyer bears the risk. If goods are lost or damaged at sea, it is the buyer’s financial problem, not the seller’s. New shipping coordinators often assume that because the seller “sorted the shipping,” they would be covered if something went wrong. They would not.
Mistake 2: Not arranging cargo insurance before the goods are loaded.
Under CFR, you need to arrange insurance before loading, because that is when your risk starts. Arranging insurance after the goods have already left port is either impossible or very expensive. Set up a marine cargo open cover policy before you start importing regularly on CFR terms.
Mistake 3: Using CFR for containerised shipments.
CFR’s “on board the vessel” risk transfer point does not align cleanly with how containerised freight actually works. For FCL and LCL shipments, the ICC recommends FOB or FCA rather than CFR.
Mistake 4: Forgetting to check whether destination terminal handling charges are included.
Some freight rates include DTHC; others show them separately. If your CFR contract is silent on this, ask the seller explicitly. Unexpected DTHC charges of £200–£500 per container are a common surprise.
Mistake 5: Not having a UK EORI number before goods ship.
As the importer under CFR, you are responsible for UK import customs clearance. You cannot clear goods through UK customs without a UK EORI number. If you do not have one, apply through HMRC, it typically takes 3–5 working days. Goods sitting at Felixstowe or Southampton waiting for EORI registration incur daily storage charges.
Mistake 6: Ignoring UK import VAT on goods above £135.
The £135 de minimis threshold means that individual consignments valued at £135 or less have import VAT collected at the point of sale. Above £135, which covers virtually all commercial sea freight shipments. UK import VAT at 20% is due at the border. HMRC’s customs valuation guidance, including how Incoterms like CFR affect the taxable value of your goods, is at gov.uk/guidance/customs-valuation/incoterms.
Mistake 7: Writing CFR as C&F or C+F on a modern contract.
C&F and C+F are older notations for the same term. They are not formally recognised under Incoterms 2020. Always write CFR in contracts and specify the Incoterms edition: for example, “CFR Felixstowe, Incoterms 2020.”
CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) look almost identical. The difference is one word, insurance. But that one word changes the buyer’s exposure majorly.
| Key Difference | CFR | CIF |
|---|---|---|
| Transport mode | Sea and inland waterway only | Sea and inland waterway only |
| Seller pays freight to named port | Yes | Yes |
| Seller arranges cargo insurance | No — buyer’s responsibility | Yes — minimum Clauses C required |
| Minimum insurance level | None — buyer decides | Institute Cargo Clauses C (named perils) |
| Risk transfer point | On board vessel at port of shipment | On board vessel at port of shipment |
| Named place | Port of destination | Port of destination |
| Suitable for containerised cargo | Technically no — use FOB/FCA | Technically no — use CPT/CIP |
Both CFR and CIF have the same risk transfer point, on board the vessel at the origin port. Both are sea-only terms. The only structural difference is that CIF requires the seller to arrange minimum insurance (Clauses C, named perils), while CFR leaves insurance entirely to the buyer.
Which should you choose?
Choose CFR if you already have a marine cargo insurance policy that covers your imports and you want control over your insurer and cover level. You are not saving much, the CIF insurance cost is typically a small fraction of the goods value, but CFR gives you the freedom to choose your own terms.
Choose CIF if you do not have your own insurance in place and want the seller to arrange a baseline level of cover. Be aware that CIF’s minimum is Clauses C, named perils only, not all risks. For high-value or fragile goods, consider supplementing CIF’s minimum with your own top-up policy, or use CIP (which requires Clauses A cover and is the ICC’s recommended option for container shipments).
CFR and FOB (Free on Board) are the two most common Incoterms in traditional sea freight. The difference is who pays and arranges the freight.
| Key Difference | CFR | FOB |
|---|---|---|
| Transport mode | Sea and inland waterway only | Sea and inland waterway only |
| Who pays ocean freight | Seller | Buyer |
| Who arranges ocean freight | Seller | Buyer |
| Risk transfer point | On board vessel at port of shipment | On board vessel at port of shipment |
| Insurance obligation on seller | None | None |
| Buyer controls freight choice | No | Yes |
| Named place in contract | Port of destination | Port of shipment |
Under FOB, risk also transfers when goods are on board the vessel at the origin port, exactly the same as CFR. The only difference is that under FOB, the buyer books and pays the freight from the port of loading to the UK. Under CFR, the seller books and pays the freight.
Which should you choose?
Choose CFR if the seller has better freight rates than you and you are comfortable for them to manage the shipping booking. You pay for it indirectly in the price, but you benefit from the seller’s volume relationships.
Choose FOB if you want to use your own freight forwarder, if you want control over the carrier and routing, or if you can negotiate competitive freight rates yourself. FOB is often preferred by experienced UK importers who have established freight forwarder relationships and want full visibility over their supply chain.
The risk profile is identical, both terms transfer risk at loading. The choice is entirely about who manages and pays the freight.
CFR applies to sea and inland waterway transport only. This is a hard limit. CFR does not apply to air freight, road freight, or rail freight.
If your goods are travelling by any other mode, or by a combination of modes, you need a different Incoterm. CPT (Carriage Paid To) is the all-mode equivalent to CFR: the seller pays freight to a named destination, but it works for road, air, rail, and sea.
The containerised cargo problem:
CFR was designed for traditional sea freight, bulk cargo and break-bulk shipments, where goods are physically loaded onto the vessel item by item. The “on board the vessel” risk transfer point made sense in that context.
For containerised freight (FCL or LCL), the logistics work differently. A container is packed at a warehouse, delivered to a port terminal, and then lifted onto the ship, sometimes days later. The goods are not “on board” until they are hoisted by crane onto the vessel, but they are out of the seller’s direct control much earlier.
This is why the ICC advises against using CFR for containerised shipments. The risk transfer point does not align with how containers actually move, which can create disputes and gaps in insurance cover. The ICC’s recommended alternatives are:
What goods is CFR actually used for?
CFR remains common in bulk commodity trades: metals, ores, grains, coal, timber, chemicals shipped in bulk tankers or bulk carriers. In these trades, individual items are genuinely loaded on board the vessel, so the “on board” risk point is clean and unambiguous. If you are importing these types of goods by bulk sea freight from Africa, South America, or Asia, CFR is appropriate and well understood.
No. CFR was not changed in Incoterms 2020. The rules are identical to Incoterms 2010.
The risk transfer point, cost obligations, and responsibilities of seller and buyer are unchanged between the 2010 and 2020 editions. CFR remains a sea-only term with risk transferring when goods are on board the vessel at the port of shipment.
What did change in Incoterms 2020, but not in CFR?
The major change in the 2020 revision affected CIP, not CFR. The minimum insurance level under CIP was upgraded from Clauses C to Clauses A. This makes CIP majorly more protective for buyers, but it has no effect on CFR, which has never included an insurance obligation.
The 2020 edition also updated FCA to allow the buyer’s bank to instruct the carrier to issue an on-board bill of lading under FCA terms, a practical fix for FCA use in documentary credit transactions. Again, no effect on CFR.
Does this mean your old CFR contracts are fine?
If your existing contracts reference “CFR, Incoterms 2010,” the rules that applied then are functionally identical to Incoterms 2020 for CFR specifically. That said, it is good practice to update contract templates to reference “Incoterms 2020” for clarity.
What about C&F or C+F in old contracts?
C&F and C+F were used as shorthands for Cost and Freight in older documents, particularly in commodity trades. They are not formally defined in Incoterms 2020 or 2010. If you have an old contract that uses C&F or C+F, both parties typically interpret it as CFR, but if there is ever a dispute, the lack of a formal ICC definition creates ambiguity. Modern contracts should use CFR with a specific Incoterms edition reference.
CFR is widely used in UK trade, particularly for sea freight imports from China, India, and Southeast Asia. There are several UK-specific points every shipping coordinator should know.
You are the importer of record. Under CFR, you, the UK buyer, handle all UK import customs clearance. This means you need a UK EORI number. Without one, you cannot import goods commercially into the UK. If you do not have an EORI number yet, register through HMRC, it typically takes 3–5 working days. HMRC’s guidance on customs valuation and how Incoterms affect the taxable value of your imports is at gov.uk/guidance/customs-valuation/incoterms.
Import customs declarations go through CDS. The UK’s Customs Declaration Service (CDS) replaced the legacy CHIEF system in November 2023. All UK import declarations must now be filed through CDS. Your customs broker should be using CDS, if they mention CHIEF, check whether they have migrated.
UK import duty applies. Once your goods arrive at Felixstowe, Southampton, or another UK port, you owe UK import duty at the rate set for your commodity code under the UK Global Tariff. This is separate from the CFR price.
UK import VAT applies above £135. Goods with a customs value above £135 are subject to UK import VAT at 20% at the border. For most commercial sea freight shipments under CFR, the value will be well above this threshold. Most VAT-registered UK businesses use postponed VAT accounting, this lets you defer the VAT payment and account for it on your quarterly VAT return rather than paying it upfront at the port.
Arrange your own insurance. As the buyer under CFR, you carry the risk from when goods are loaded at the origin port. Arrange cargo insurance before loading, not after. Speak to a marine insurance broker or your freight forwarder about an open cover policy.
Port storage charges accumulate fast. At Felixstowe and Southampton, containers have a free period, typically 5–7 days, before storage charges kick in. After that, charges of £50–£200 per container per day are common. Have your customs documentation ready before the vessel arrives.
You handle UK export customs clearance. Under CFR, you are responsible for clearing goods through UK customs as the exporter. You need a UK EORI number and must file an export declaration. This is usually handled by a freight forwarder or customs agent on your behalf.
Post-Brexit customs. Since the end of 2020, goods moving between the UK and EU require full customs formalities on both sides of the border. As a UK exporter selling on CFR terms to an EU buyer, you handle UK export clearance. The EU buyer handles EU import clearance and pays any EU import duties on their side.
You book and pay ocean freight. Under CFR, you contract the shipping line from the UK port of loading to the buyer’s named port. Get competitive quotes from multiple freight forwarders, especially for regular trade routes, to protect your margins.
You do not arrange insurance. Unlike CIF, CFR does not require you to arrange cargo insurance. Once the goods are on board the vessel, risk has transferred to the buyer. Your freight obligation continues, you have paid for the vessel transit, but the commercial risk of the goods sits entirely with the buyer.
Here is a realistic worked example showing how CFR plays out from start to finish.
The scenario: A UK garden furniture retailer. Greenway Outdoors, buys 200 sets of teak garden furniture from a manufacturer in Java, Indonesia. The contract is agreed on CFR Felixstowe, Incoterms 2020.
Goods value: £50,000
What the seller does:
The Indonesian manufacturer packs the furniture, clears the goods through Indonesian export customs, and delivers the goods to the container freight station (CFS) in Surabaya port. The seller books a full container (FCL) on a shipping line and pays the ocean freight from Surabaya to Felixstowe. The freight cost is around £2,500.
When risk transfers:
When the container is lifted on board the vessel at Surabaya port, risk transfers to Greenway Outdoors. The goods are still in Indonesia. They have not left Asia. But Greenway Outdoors now bears the commercial risk of the shipment.
What Greenway Outdoors does before the goods ship:
Greenway Outdoors has an open cover marine cargo policy with their freight forwarder’s preferred insurer. They declare the shipment, £50,000 goods value, Clauses A cover, before loading. The premium is around £125 (0.25% of goods value).
In transit:
The container voyage takes around 28 days via the Suez Canal. No major incidents occur, but one pallet of outdoor cushions arrives with water damage, around £800 of goods.
Arrival at Felixstowe:
The vessel arrives at Felixstowe. Greenway Outdoors’ customs broker files the UK import declaration through CDS. The commodity code for teak garden furniture is checked against the UK Global Tariff for the applicable duty rate. Greenway Outdoors pays UK import VAT at 20% on £50,000 = £10,000, handled via postponed VAT accounting on their next VAT return.
The insurance claim:
Greenway Outdoors discovers the water-damaged cushions on inspection. They contact their insurer, submit a claim with photographic evidence and a survey report, and receive a settlement of around £800. Total insurance cost for the shipment: £125 premium. Claim received: £800. The insurance paid for itself more than six times over on this single shipment.
What would have happened without insurance:
If Greenway Outdoors had not arranged cargo insurance, the £800 damage loss would have been absorbed in full. The seller would have had no liability, risk transferred at loading. For a larger loss, say, a container falling overboard, the uninsured loss would have been the full £50,000 goods value. This is the risk CFR buyers take when they skip the insurance step.
CFR stands for Cost and Freight. It is one of the 11 Incoterms 2020 rules published by the International Chamber of Commerce (ICC). Under CFR, the seller pays the ocean freight from the port of loading to the buyer’s named port of destination. Risk transfers to the buyer when the goods are placed on board the vessel at the port of shipment. The seller does not arrange cargo insurance, that is the buyer’s responsibility.
CFR and CIF are almost identical, both are sea-only terms where the seller pays freight to the named port of destination, and both transfer risk when goods are on board the vessel at the port of shipment. The single difference is insurance. Under CFR, the seller has no insurance obligation, the buyer must arrange their own cover. Under CIF (Cost, Insurance and Freight), the seller must arrange cargo insurance at a minimum of Institute Cargo Clauses C (named perils). For buyers who want the seller to provide insurance, CIF is the safer option. For buyers who have their own insurance policy, CFR gives them full control.
Both CFR and FOB are sea-only terms and both transfer risk when goods are on board the vessel at the port of shipment. The difference is who pays and arranges the freight. Under FOB (Free on Board), the buyer books and pays the ocean freight from the port of loading to the destination. Under CFR, the seller books and pays it. If you want to use your own freight forwarder, FOB gives you that control. If you prefer the seller to handle the freight arrangement, CFR does that for you.
The buyer. CFR places no insurance obligation on the seller whatsoever. As the buyer, you carry the risk of the goods from when they are loaded on board the vessel at the origin port, all the way through the sea voyage. If you do not arrange cargo insurance before loading, you have no protection against loss or damage during transit. Arrange marine cargo insurance, ideally an open cover policy, before your first CFR shipment.
No. CFR is restricted to sea and inland waterway transport only. If your goods are moving by air, road, or rail, or by a combination of modes. CFR does not apply. Use CPT (Carriage Paid To) instead, which is the all-mode equivalent. The seller still pays freight to the named destination under CPT, but it works for any transport mode.
The ICC advises against it. CFR’s “on board the vessel” risk transfer point was designed for bulk and break-bulk sea freight. For containerised cargo (FCL or LCL), goods are typically handed to a freight station or terminal before being lifted on board, creating ambiguity about exactly when “on board” occurs. The ICC recommends FOB or FCA instead of CFR for containerised shipments, and CPT or CIP if the seller is paying freight.
Yes. As the importer of record under CFR, you are responsible for UK import customs clearance. You cannot import goods commercially into the UK without a UK EORI number. Register through HMRC, it typically takes 3–5 working days. You will also need to file a customs declaration through the UK Customs Declaration Service (CDS) and pay any applicable UK import duty and import VAT.
Yes, in practice. C&F and C+F are older notations for Cost and Freight and are commonly seen in commodity contracts and older documentation. They are not formally defined in Incoterms 2020 (or 2010), so they carry some legal ambiguity. Modern contracts should use “CFR” and specify the Incoterms edition: for example, “CFR Felixstowe, Incoterms 2020.”
Article: cfr-incoterm | ShippingEducation.co.uk | Published June 2026 | Incoterms 2020
Internal links: FOB Incoterm | CIF CIF IncotermPT Incoterm | CIP Incoterm | FCA Incoterm | Incoterms Explained
External: HMRC Customs Valuation. Incoterms
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What is FAS? Free Alongside Ship (FAS) is an Incoterm where the seller delivers goods by placing them alongside the named vessel at the port
What is an EUR1 certificate? An EUR1 movement certificate is an official document that proves goods originate in the UK to claiming preferential tariff treatment
What is DDP? Delivered Duty Paid (DDP) is an Incoterms 2020 rule where the seller takes on every obligation in the shipment, export clearance, international
What is FCL? FCL stands for Full Container Load. It means you book an entire shipping container, 20ft, 40ft, or 40ft High Cube, and no
What is FCA? FCA, Free Carrier, is an Incoterm where the seller delivers goods to a carrier nominated by the buyer, at a named place.
What is import customs clearance? Import customs clearance is the process of declaring goods to HMRC when they arrive in the UK, paying any applicable