Cost and Freight - Explained
What is Cost and Freight?
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Table of ContentsWhat is Cost and Freight (CFR)?What are the buyer's obligations in a CFR sales agreement?What are the seller's obligations in a CFR sales agreement?
What is Cost and Freight (CFR)?
Cost and freight (CFR) is a term associated with international trade or international shipping that puts the responsibility of transporting purchased goods on the seller. The seller pays all costs associated with the carriage of goods and other unplanned expenses. Cost and freight is a legal term. It is a common provision in international shipping agreements.
What are the buyer's obligations in a CFR sales agreement?
Both the buyer and the seller in a clause and freight (CFR) contract have obligations they must perform. The major obligations of a buyer are:
- Payment of the price of goods purchased.
- Obtaining documents, licenses, and authorizations to receive goods at the port.
- Acceptance of goods when delivered.
- Physical assessment of delivered goods to ensure whether they are in good condition.
- Payment of taxes, tariffs and other charges imposed on the goods after they have been successfully delivered by the courier.
- Depending on the agreement reached by the seller and buyer, the buyer might need to reimburse the seller for carriage expenses.
What are the seller's obligations in a CFR sales agreement?
In a cost and freight (CFR), the obligations of a seller are the following;
- Supply and transportation of goods paid for by a buyer.
- Ensuring the delivery of goods by sea or inland waterway.
- Carriage and payment of carriage bills for goods to be delivered to the buyer at designated ports.
- Issuance of license and documents needed to claim the goods when delivered at the port.
- Payment of all costs associated with transporting the goods until they are delivered to the buyer.
- Payment for expenses associated with licensing and verification of the merchandise.