Incoterms CFR/CIF

CFR (CNF/C&F) (Cost and Freight) has a long history in the INCOTERMS.

As an INCOTERM, seller passes the risk to the buyer when the cargo crosses the ship's rail at the port of origin. However, the seller passes the responsibilities for the costs of transit to the buyer at the port of destination only. Both of CFR and CIF are Monomial expressions used when the main carriage is by sea as well as suited to the use of Bills of Lading.

Because the ship's rail is seen as triggering these terms, it is often inappropriate to use either in a modern port and reference should be made to the notes on this subject under FOB.

Buyers are disadvantaged which must take risks for a period of carriage during that the buyer has no means of controlling or limiting those risks. Seller controls all the carrier used, the costs incurred for carriage and the schedule of the carriage. The buyer must consider this disparity before accepting these contracts. From the seller's perspective, these terms represent exceptional risk-management opportunities and are actively pursued as a consequence.

CIF (Cost, Insurance and Freight) represents the condition of CFR with the addition of Insurance. This is the first of only two terms that place a compulsory responsibility for insurance on the seller. Under all other terms, the buyer considers insurance as an optional responsibility. (Refer CIP)