Key shipping terms deep dive: CFR vs CIF
When it comes to freight forwarding, details are important. Incoterms are no exception. Incoterms are terms of sale recognised across the globe used to define the responsibilities of parties involved with international transactions. In maritime transport, they outline the buyer and seller’s financial and managerial obligations at each stage of a shipment. This includes factors like customs clearance, risks, handling and documentation.
Choosing the right Incoterm can be the difference between smooth sailing or unexpected costs. It’s important for supply chain managers and business owners to familiarise themselves with these terms to fully understand any risks, costs and consequences before signing on the dotted line.
This guide focuses on CFR and CIF, two common maritime shipping Incoterms to be familiar with in 2025. Keep reading to discover what they mean, the key differences between them and when they might be relevant to your business.
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What does CFR mean in shipping?
CFR is a maritime shipping Incoterm that stands for Cost and Freight. It is relevant for the transportation of goods via seas or inland waterways. The term defines a set of responsibilities for both buyers and sellers throughout the entire shipping process.
Responsibilities of sellers under CFR
CFR specifies that the basic responsibilities of the seller include:
- Provide goods and documents specified in contract
- Arrange transportation, including loading and security costs
- Deliver goods on board the vessel
- Pay for the cost of freight to the named destination port
- Give the buyer sufficient notice that goods have been delivered at port of shipment
- Assume any risks or costs up until goods arrive and are delivered at port of shipment
- Manage and pay for export clearance requirements
Responsibilities of buyers under CFR
CFR specifies that the basic responsibilities of the buyer include:
- Receive goods following delivery at named destination port
- Receive specified documents from seller
- Assume any risks or costs in the event of damaged or lost goods from the time goods are delivered at port of shipment
- Handle cargo insurance
- Manage and pay for import clearance requirements
Choosing CFR
CFR can help streamline shipments and reduce costs when:
- The seller has access to the vessel
- Insurance costs for the goods are low
- Shipping bulk goods, raw materials and non-containerised goods
- The buyer has knowledge of local insurance and can secure low premiums
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What does CIF mean in shipping?
CIF is an Incoterm that stands for Cost Insurance and Freight. It is used for similar shipping scenarios as CIF, but has nuances that impact which party is responsible for insurance.
Responsibilities of buyers and sellers under CIF
The responsibilities of buyers and sellers under CIF are nearly the exact same as CFR. However, CIF specifies that the seller is responsible for more of the insurance management and costs. This includes:
- Contract insurance cover for the buyer for when goods are delivered at port of shipment until they arrive at port of destination (covering lost or damaged goods)
- If desired and possible under sales contract, seller can choose limited insurance cover
Under CIF, the seller is not responsible for:
- The success of a claim made by the buyer through the insurance policy
- Promising that goods will be delivered, arrive undamaged or match the specified quantity
Choosing CIF
Similar to CFR, CIF can be applied to maritime transport via sea or inland waterways. It is also ideal for sellers with access to the vessel. CIF may be a consideration when shipping bulk goods, raw materials or non-containerised goods. It can be a safer alternative when the seller is agreeable to paying insurance premiums.
Key differences between CFR and CIF
The most important differences between CFR and CIF lie in insurance obligations and costs. If choosing CFR, both buyer and seller need to understand the seller is not obliged to purchase insurance coverage. CIF, however, means the seller is obligated to purchase insurance coverage for the buyer’s risk of lost or damaged goods.
When it comes to costs, shipments under CFR may be less expensive than those under CIF. However, this comes at the price of a greater risk to buyers in case goods are lost or damaged on their way to the named destination port. CIF can also become more expensive depending on any additional insurance chosen by the buyer.
Seeking guidance on choosing the right Incoterm
Supply chain managers can work with their freight forwarder to ensure they fully understand what each Incoterm means for their business. At Stockwells, we recommend Incoterms based on factors like your business’s risk appetite, budget, timelines and insurance needs.
Our logistics strategies are comprehensive, uncovering hidden costs in CFR agreements or finding pathways to improve efficiencies. We take an educational approach to Incoterms, remaining available to answer any questions you may have and keep you in the know with any changes.
If you’d like to review your current shipping contracts or connect with our freight forwarding experts, please send us an enquiry today. We’ll get back to you as soon as possible.