This term is to be used only for sea or inland waterway transport.
"Cost and Freight" ("Cost and freight") means that the seller delivers product by water transport to the port of destination, he is obliged to conclude an agreement and pay all costs necessary for the delivery of the goods, including loading at the warehouse or at the factory, delivery to the port of departure, freight. The seller has the right to deliver cargo to the port of destination and organize work on its unloading. For this it is necessary to agree these conditions in the contract. Further organizational issues such as unloading the goods, customs clearance, delivery to the warehouse, store or end customer importer takes over.
Risk loss or damage to the goods passes when the goods are on board.
When using this term, as well as CPT terms, CIP, CIF the seller fulfills his obligation to deliver when he delivers the goods to the carrier, and not when the goods reach their destination. The transfer of ownership of the goods is carried out at the time of shipment of goods at the port of destination.
Term CFR contains two critical points, because risk and cost pass in two different places. The contract always specifies 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 as clearly as possible in the contract.
Parties are also encouraged by the possibility of more accurately determine the point at the named port of destination, as the costs to this point is the seller. Seller recommended that contracts of carriage, which accurately reflect this choice. If the seller is in his contract of carriage bears the costs of discharge to the agreed point at the port of destination, the seller is not entitled to claim compensation from the purchaser of such costs, unless otherwise agreed by the parties.
The seller must deliver the goods, or on board ship, or cause to be delivered in such a way to provide the goods at destination. In addition, the seller must either enter into a contract of carriage, or to provide such a contract. The reference to the obligation to "provide" at numerous sales for the chain, which are often used in commodity trading.
CFR may not be appropriate when the goods are handed over to the carrier prior to being placed on board the vessel, 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 customs formalities for export, if any. However, the seller is not obliged to carry out customs formalities for import, pay import duties or perform other customs formalities for the import.
Term CFR convenient for the importer, because the exporter assumes the main organizational issues and risks. But the seller will still include all costs in the cost of the goods.
Learn what you need to consider and take when choosing CFRClose the list of actions for CFR
to clarify in detail the parameters and characteristics of the packages (including labeling), this is necessary for the subsequent customs clearance of goods;
clearly coordinate with the seller the port of delivery of the goods;
define a strict delivery date or period in the contract - this is the date by which the goods must be delivered to the port of destination. For example, May 28, 2019, or specify a specific time period: "The goods must be delivered at the named port of destination between June 14 and June 18, 2019". If the seller does not meet the deadline, then the costs for the demurrage of the vessel can be assigned to him.
agree with the insurance company the terms of insurance, if necessary (Insurance for CFR - area of responsibility of the buyer);
This list is not complete and depends on the specific case, under these conditions of delivery, the seller's logisticians may give a lower freight cost compared to, for example, FOB, but usually, as a result, the buyer pays port charges at the port of arrival, which increases the final 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 conditions CFR
A.1.The seller is obliged, in accordance with the contract of sale, to provide the buyer with the goods, the commercial invoiceinvoice, as well as any other proof of conformity of the goods to the terms of the contract of sale, which may be required under the terms of the contract. Any document referred to in A1-A10 may be replaced by an equivalent electronic record or procedure, if agreed by the parties or is common.
V.1. The buyer is obliged to pay the price of the goods, as provided for 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 agreed by the parties or is common.
2.Licenses, permits, security controls and other formalities under the conditions CFR
A.2.If required, the seller must, at his own expense and risk, an export license or other official authorization and carry out all customs formalities necessary for the export of goods.
V.2.If required, the buyer must obtain at his own expense and risk import license or other official authorization and carry out all customs formalities for the import of goods and its transportation through any country.
3. Contracts of carriage and insurance under conditions CFR
A.3.a) Contract of carriage The seller must contract or procure a contract of carriage of goods from a named point of delivery, if it is defined, from the place of delivery to the named port of destination, or, if agreed, to any point in that port. The contract of carriage must be made by the seller, on the usual conditions and provide for carriage by generally accepted direction of the ship of the type normally used for the transport of goods sold. b) Contract of insurance The seller no duty to the buyer under a contract of insurance. However, the seller must provide the buyer, at his request, at his risk and expense (if any costs), the information necessary for the buyer of insurance.
V.3.a) Contract of carriage The buyer has no obligation to the seller to conclude a contract of carriage. b) Contract of insurance The buyer has no obligation to the seller to make a contract of insurance. However, the buyer must provide the seller, upon request, provide the necessary information for insurance.
4. Delivery and acceptance of goods under conditions CFR
A.4.The seller must deliver the goods, either by placing it on the board or by providing goods delivered that way. In this and in another case, the seller must deliver the goods on the date or within the agreed period and in a manner that is typical for this port.
V.4.The buyer must take delivery of the goods as soon as they have been delivered in accordance with paragraph A4, and take the goods from the carrier at the named port of destination.
5. Transfer of risks under conditions CFR
A.5.Seller shall bear all loss or damage to the goods until it is delivered in accordance with paragraph A4, with the exception of the risks of loss or damage in the circumstances referred to in paragraph B5.
V.5.The buyer bears all risks of loss or damage to the goods from the moment of delivery in accordance with paragraph A4. At default by the buyer obligations to provide notification in accordance with paragraph B7, he shall bear all risks of loss or damage to the goods from the agreed date or the date on which expired the agreed delivery period, provided that the goods were explicitly individualized as a commodity, which is the subject agreement.
6 Allocation of costs under conditions CFR
A.6.The seller must pay:
all expenses related to the goods until the time of their delivery in accordance with paragraph А4, with the exception of expenses paid by the buyer, as provided for in paragraph Б6;
freight and other expenses specified in A3 a), including the costs of loading the goods on board the ship and any fees in connection with unloading the goods at the agreed port of discharge, which are charged to the seller under the contract of carriage;
if necessary, the cost of the customs formalities required for the export of goods, as well as duties, taxes and fees paid upon export, as well as the costs of its transportation through any country, if they are charged to the seller under the terms of the contract of carriage.
V.6.The buyer must, subject to the provisions of paragraph A3, pay:
all costs related to the goods from the date of delivery in accordance with paragraph A4, except, if required, the costs of completing customs formalities for the export of goods, as well as taxes, fees and other costs payable upon export, as provided in paragraph A6 c);
all costs and charges relating to the goods during transit prior to their arrival at the agreed destination port, unless such costs and charges are not applicable to the seller under the contract of carriage;
the cost of unloading, including lightering and mooring charges, unless such costs are not borne by the seller under the contract of carriage;
any additional costs incurred due to the seller’s failure to send the notice in accordance with paragraph 7, from the agreed date or from the date of expiration of the agreed period for shipment, provided that the goods were explicitly individualized as goods subject to the contract;
if necessary, the cost of paying taxes, duties and other official charges, as well as the implementation of customs formalities payable when importing goods, and the cost of transporting it through any country, unless such costs and charges are not attributed to the seller.
7.Notification to buyer and seller under conditions CFR
A.7.The seller must provide the buyer proper notice, allowing the buyer to take steps normally required in order that he may carry out acceptance of the goods.
V.7.If the buyer is entitled to determine the time for shipment and / or the point of receipt of the goods at the named port of destination, he must account to the seller due notice thereof.
8.Documentary proof of delivery under conditions CFR
A.8.The seller must at his own expense in a timely manner to provide the buyer with the usual transport document to the agreed port of destination. Such transport document should cover the goods under the contract and be dated within the agreed period of shipment, to provide the buyer the right to claim the goods from the carrier at the port of destination and, unless otherwise agreed, enable the buyer to sell the goods during transit through the transfer of subsequent buyer or by notification to the carrier . If the transport document is negotiable and issued in several originals, a buyer must be a full set of originals.
V.8.The buyer must accept the transport document issued in accordance with paragraph A8 if it corresponds to the contract.
9.Checking, packaging, labeling and inspection of goods under conditions CFR
A.9.The seller must pay all costs associated with checking (checking quality, measuring, weighing, counting) which are necessary for the delivery of goods in accordance with paragraph A4, as well as the costs of inspection of goods before shipment, which is prescribed by the authorities of the exporting country. The seller must, at his own expense, ensure the packing of the goods, unless it is customary in the industry to ship the goods specified in the contract in unpacked packaging. The seller may pack the goods in such a way as is necessary for his transportation, unless the buyer informs the seller about the specific packaging requirements before entering into the contract. Marking packaged goods must be properly implemented.
V.9.The buyer must pay the costs for the mandatory inspection of goods prior to shipment, except when such inspection is carried out by order of the authorities of the exporting country.
10. Assistance in obtaining information and related costs under the conditions CFR
A.10.If need be, the seller is obliged to provide the purchaser or to assist him in obtaining, at the request of the buyer, at his risk and expense, documents and information, including important safety information, which may require the buyer to the goods import and / or transport it to the final destination. The seller is obliged to compensate the buyer for all costs and charges incurred by the buyer in obtaining or assisting in obtaining documents and information as provided for in paragraph B10.
V.10.The buyer must notify the seller in a timely manner the requirements with regard to safety information, so that the seller could act in accordance with paragraph A10. The buyer must reimburse the seller incurred by him costs and charges for providing or rendering assistance in obtaining documents and information as provided for in paragraph A10. If required, the buyer is obliged to provide the seller or facilitate in the seller receiving, at the request of the seller, at his risk and expense, documents and information, including important safety information, which may require the seller to transport, export of goods and for their transport through any country.
The Federal Customs Service and the Federal Tax Service of the Russian Federation have approved an electronic check format for returning VAT to foreign citizens when exporting goods purchased in Russia.