CFR (Cost and Freight) and CIF (Cost, Insurance, and Freight) are two commonly used trade terms in international trade, and they have significant differences in many aspects. The following is a detailed explanation of the differences between CFR and CIF:
CFR: The full name is Cost and Freight, which means cost plus freight. It means that the seller is responsible for transporting the goods to the destination port specified by the buyer and bears the freight, but the risks and additional costs after the goods cross the ship's rail at the port of shipment are borne by the buyer. The seller's main responsibilities include loading the goods on board at the port of shipment, paying the freight to the destination port, and providing the buyer with transportation documents.
CIF: The full name is Cost, Insurance, and Freight, which means cost, insurance, and freight. It not only includes the responsibilities that the seller needs to bear under the CFR term but also requires the seller to be responsible for arranging freight insurance for the goods and paying the insurance premium. Therefore, under the CIF term, the seller bears relatively greater responsibilities and risks, providing more protection for the buyer.
CFR: The costs borne by the seller mainly include the cost of the goods, transportation costs, and other costs that may be incurred before the goods are loaded on the ship (such as loading costs). The buyer needs to bear all costs after the goods cross the ship's rail at the port of shipment, including unloading costs, insurance premiums, and other additional costs that may be incurred.
CIF: In addition to the various costs under the CFR terms, the costs borne by the seller also include insurance costs. This means that the seller needs to purchase insurance for the goods and pay the corresponding insurance premiums. After the goods arrive at the port of destination, the buyer usually only needs to pay unloading costs and other small costs that may be incurred.
CFR: Under the CFR terms, the insurance liability is entirely borne by the buyer. The buyer needs to choose an insurance company, purchase insurance for the goods, and pay the insurance premium. If the goods are lost or damaged during transportation, the buyer needs to file a claim with the insurance company.
CIF: Under the CIF terms, the insurance liability is borne by the seller. The seller needs to purchase insurance for the goods and pay the insurance premium. The insurance amount is usually calculated based on the CIF value of the goods plus a premium to ensure that sufficient compensation can be obtained in the event of loss or damage to the goods. If the buyer has special requirements, such as adding war insurance, it should be stipulated in the contract, and the buyer shall bear the additional insurance premium.
Under the CFR and CIF terms, the risk of the goods is transferred from the seller to the buyer when the goods cross the ship's rail at the port of shipment. This means that no matter what kind of loss or damage occurs during transportation, as long as the loss occurs after crossing the ship's rail at the port of shipment, the buyer needs to bear the risk.
In summary, there are significant differences between CFR and CIF in terms of definition, cost bearing, insurance liability, and risk transfer. In actual trade, buyers and sellers should choose appropriate trade terms according to the specific circumstances to clarify their respective rights and obligations and ensure the smooth progress of transactions.
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