How to Write a CFR Clause in Your Sales Contract (Template Included)

A CFR price can look like a delivered price, and that is where the trouble starts. The seller pays for the sea voyage to the named destination port, yet the buyer already carries the risk of loss or damage from the moment the goods go on board at the port of shipment. The freight invoice and the risk point travel to different ports, and a clause that does not say so in plain words leaves both sides arguing about the same voyage from opposite ends.

This article gives drafting guidance only and is not legal advice. Ask a lawyer or freight broker to review the signed wording before the goods move.

What the document is for

The CFR clause is the delivery section inside a sales contract. CFR means Cost and Freight. Under Incoterms 2020, CFR is a rule for sea and inland waterway transport only, and the seller contracts and pays freight to the named port of destination, while risk transfers when the goods are loaded on board the vessel at the port of shipment, not on arrival.¹ The seller handles export formalities, inland transport to the port, and ocean freight payment up to the destination port, while the buyer takes over from the moment the cargo is on board, managing import customs, unloading, and onward delivery.¹

The clause must therefore name the destination port in full, state the on-board delivery and risk point, and state the insurance position in writing, because CFR imposes no insurance obligation on either party.² Under CIF, by contrast, the seller must obtain cargo insurance for the buyer.²

Required fields explained

Work through each field in order, and leave no row blank.

• Named port of destination, in full. Write the destination port, not a country or a region, in the same sentence as the rule and the version.

• Port of shipment and on-board delivery point. Write the port of shipment in full, plus the loading point inside it. Risk passes when the goods go on board there.¹

• Incoterms version. Write "Incoterms 2020" in full, beside the rule and the named destination port, as "CFR (named port of destination) Incoterms 2020". Without the edition, the governing rules are not fixed.

• Seller carriage contract and freight scope. State that the seller will contract and pay for carriage to the named destination port, and list what that freight price covers. It includes goods cost plus ocean freight, excluding insurance, import duties, and destination handling unless stated otherwise.¹

• Delivery and risk sentence. State in one sentence that delivery occurs, and risk passes to the buyer, when the goods are on board. Use one risk point only.

• Loading and export clearance. State that the seller will load the goods and complete export clearance, listing documents supplied, such as the commercial invoice.¹

• Insurance position. State the insurance position in writing, even though CFR imposes no insurance duty.² If the buyer arranges its own cover, name on board as its start point.

• Import clearance, destination charges, and unloading. State that the buyer will handle import clearance, duty, and taxes, plus unloading and onward transport.¹

• Delivery window, vessel, and notice. State the loading date or window, and how the seller will notify the buyer once the goods are on board, including vessel name and sailing details.

• Transport document and proof of delivery. State which transport document the seller will provide for carriage to the destination port.

• Goods covered. Name the goods, quantity, and marks, with the order number.

The Incoterms rules define the delivery point and the transfer of risk for loss or damage from seller to buyer, and the sea and inland waterway rules, including CFR, are defined by the vessel, alongside it or on board it.³

Template (table or downloadable)

Copy the table into the contract and fill in every row, replacing bracketed text.

If any destination port, freight charge, insurer, or destination payer is still unstated, the clause is not finished.

Filled example

All names, figures, and dates below are examples only, with fictitious parties. Adapt every entry, and have a lawyer or broker review the final clause.

Example clause. Delivery is CFR Hamburg, Germany, Incoterms 2020. Example Home Textiles Ltd, the seller, will load 600 cartons of cotton bed linen, order number EX-5290, export cleared, on board the seller-contracted vessel MV North Sea Trader at Mongla, Bangladesh, on or between 18 and 20 February. The seller will contract and pay for carriage to Hamburg, and will notify the buyer by email on the day the goods are on board, with the vessel name and sailing details. Delivery occurs, and risk passes to the buyer, when the goods are on board at Mongla. No insurance is required under CFR, and the buyer, Example Retail GmbH, will arrange its own cover from on board. Import clearance, import duty, destination handling, unloading at Hamburg, and onward transport are for the buyer's account, except for any destination charge expressly included in the seller's freight contract, which is listed in the contract schedule. The seller will provide the usual transport document covering carriage to Hamburg.

The example turns on the split, not the arrival: the seller pays to Hamburg, but the buyer carries the sea risk from Mongla.

Common errors

Using CFR for air, road, or rail shipments. CFR applies only to sea or inland waterway transport.¹ Use a carrier-handover rule for other modes.

Naming a country instead of a destination port. A country holds many ports. Write the destination port in full, and the port of shipment beside it.

Reading freight-paid as risk to destination. The seller pays freight to destination, but risk passes on board.²

Assuming the seller insures the voyage. Neither party is obliged to insure under CFR.² Under CIF the seller must insure.

Assuming freight includes destination charges. A CFR price covers goods and freight to destination, not duty, destination handling, or onward transport unless stated.¹

Using CFR for container cargo handed to a terminal. Containers are often handed to a carrier at a terminal before loading, and the sea rules describe delivery on board, not a terminal handover.³

Leaving the buyer uninsured from on board. The buyer bears the risk from loading, so insurance must start at loading, not at arrival.

Omitting the Incoterms version. Without "Incoterms 2020", the governing edition is not fixed.

Copying the example without adapting it. An unadapted example port, vessel, order number, or date points at the wrong shipment.

FAQs

Who issues this document?

No authority issues a CFR clause. The buyer and seller agree it together as part of their sales contract, and it takes effect when that contract is signed. Incoterms 2020 supplies the meaning of CFR.

Which fields are mandatory?

The named destination port, port of shipment, Incoterms 2020 version, on-board delivery and risk wording, freight scope, and clearance split are the minimum.

Can it be digital?

A clause can sit inside a contract in electronic form, provided it meets the form, signature, and record requirements of its governing law. Confirm that check first, and keep the transport document with the contract record.

What errors cause delays?

A wrong mode, a vague destination port, a missing version, freight-risk confusion, an uninsured voyage, and unnamed destination charges cause most delays.

Next steps on Exportain

Compare CFR with the other sea and any-mode rules in Incoterms for Shipments From Bangladesh, see how insurance changes the sea bargain in the CIF rule, and follow the buying steps around the contract in How to Source and Buy from Bangladesh.

Post a free RFQ on Exportain.