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Cost and Freight (CFR): Key Insights into Shipping Contracts
Definition & Meaning
Cost and Freight (CFR) is a shipping arrangement where the seller is responsible for the transportation of goods to a specified port of destination. In this arrangement, the seller must pay for the costs and freight necessary to bring the goods to the buyer's chosen location. However, unlike Cost, Insurance, and Freight (CIF) contracts, the seller does not need to obtain insurance for the goods during transit. The seller also handles all export formalities, ensuring that the goods are ready for shipment.
Table of content
Legal Use & context
CFR is commonly used in international trade and shipping contracts. It is relevant in legal contexts involving commercial transactions, logistics, and trade law. Businesses and individuals engaging in international shipping may encounter CFR terms in contracts. Users can often manage CFR agreements using legal templates provided by services like US Legal Forms, which offer resources drafted by experienced attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company in the United States sells machinery to a buyer in Germany under a CFR agreement. The seller arranges for the shipment of the machinery to Hamburg, covering all freight costs, while the buyer is responsible for insurance once the goods are on board.
Example 2: A farmer in Brazil sells coffee beans to a distributor in Canada using CFR terms. The farmer pays for shipping to the port in Canada but does not insure the beans during transit (hypothetical example).
State-by-state differences
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
State
CFR Variations
California
Standard CFR terms apply, with no significant variations.
New York
Commonly used in international trade, similar to federal standards.
Texas
Generally follows CFR definitions, but local regulations may apply.
Comparison with related terms
Term
Description
Key Differences
CFR
Seller pays for shipping costs to the destination port.
No insurance requirement.
CIF
Seller pays for shipping and insurance to the destination port.
Includes insurance coverage.
FOB (Free on Board)
Seller is responsible for costs until goods are loaded on the vessel.
Transfer of risk occurs at the loading point, not the destination.
Common misunderstandings
What to do if this term applies to you
If you are entering into a CFR agreement, ensure you understand your responsibilities regarding shipping costs and export formalities. If you're the buyer, consider obtaining insurance separately to protect your goods during transit. For assistance, explore US Legal Forms for templates that can help you draft or manage your CFR agreements. If your situation is complex, consulting a legal professional may be necessary.
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Export formalities are the seller's responsibility.
Key takeaways
Frequently asked questions
CFR stands for Cost and Freight, which means the seller pays for shipping costs to a destination port but does not insure the goods.
No, insurance is not included in CFR agreements. Buyers should arrange for their own insurance if needed.
The seller is responsible for all export formalities in a CFR contract.
In CFR, the seller pays for shipping to the destination port, while in FOB, the seller's responsibility ends once the goods are loaded onto the vessel.
Yes, legal templates can help you draft and manage CFR agreements effectively.