What is the difference between cost and freight (CFR) and free on Board (FOB)?

Answer:

The difference between cost and freight (CFR) and free on Board (FOB) is who is responsible for different transport or freight costs – the buyer or the seller. The terms refer to the point at which the transfer of responsibility for shipped goods arises from the seller/sender to the buyer/recipient.

General Terms Of Delivery

The international chamber of Commerce (ICC) was created by the compilation of international trade terms known as “Incoterms”, which define the shipping charges for international trade. The purpose of the Incoterms, such as FOB and CFR, to facilitate trading, providing standard contract terms, which can easily be recognized in a variety of languages.

Free on Board

FOB refers to the shipping arrangement, the seller or consignor is responsible only for providing for transportation of the goods to the designated primary point of dispatch. This point is usually a port, as the Incoterms are the most widely used in international trade when goods are transported by sea.

Delivery is completed, and responsibility for the goods transferred from the consignor to the purchaser or recipient at the time when the goods are loaded on Board a vessel in the designated port of origin.

The recipient is responsible for arranging and paying for actual shipping cost from port of departure to port of destination, as well as for the organisation and payment of transport for further destination. The shipper, therefore, is relieved of liability when the goods are on Board the vessel.

Cost and freight

In the framework of the agreement on SMO in the sellerr has greater responsibility for the organization and payment of transportation. For goods transported by the Railways, the shipper is responsible for arranging and paying for transportation all the way to the port of destination specified by the recipient.

Responsibility for the goods only passes to the buyer or recipient when the ship reaches the port of destination. The buyer is responsible for unloading, expenses and any other costs, transportation to final destination.

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