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| Corporate Practice bd |
CFR (Cost and Freight) and FOB (Free on Board) are both international trade terms used in sales agreements, specifying the obligations and responsibilities of the buyer and seller regarding the delivery of goods. These terms determine when the risk and responsibility for the goods transfer from the seller to the buyer, as well as who is responsible for arranging and paying for transportation and insurance.
CFR (Cost and Freight):
In a CFR agreement, the seller is responsible for delivering the goods to a named port of destination and paying for the cost of transportation to that port. The seller also arranges and pays for freight charges.
Once the goods are delivered to the port of destination and loaded onto the vessel, the risk and responsibility transfer from the seller to the buyer. From that point onwards, the buyer is responsible for any further transportation, insurance, and customs clearance.
The CFR term is typically followed by the name of the port of destination, such as CFR New York or CFR Shanghai.
FOB (Free on Board):
In an FOB agreement, the seller is responsible for delivering the goods to a named port of shipment and loading them onto the vessel nominated by the buyer. The seller covers the cost of transportation to the port of shipment and loading charges.
Once the goods are loaded onto the vessel at the port of shipment, the risk and responsibility transfer from the seller to the buyer. From that point onwards, the buyer is responsible for arranging and paying for transportation, insurance, and any other costs associated with the delivery of the goods to the final destination.
The FOB term is typically followed by the name of the port of shipment, such as FOB Shanghai or FOB New York.
In summary, the main difference between CFR and FOB sales agreements lies in the point at which the risk and responsibility for the goods transfer from the seller to the buyer. In CFR agreements, the transfer occurs at the port of destination, while in FOB agreements, it occurs at the port of shipment. These terms are crucial in international trade as they determine who bears the risk of loss or damage to the goods during transportation and who is responsible for arranging and paying for transportation and insurance.