FOB vs CFR (Incoterms 2020)
In both, the seller delivers the goods on board the ship at the port of shipment and the risk passes to the buyer there. The difference is the sea freight: under FOB the buyer books and pays it; under CFR the seller books and pays the freight to the named port of destination, while the risk still passes at loading.
Side by side
| FOB · Free On Board | CFR · Cost and Freight | |
|---|---|---|
| Transport | Sea and inland waterway | Sea and inland waterway |
| Delivery and risk pass to the buyer | On board the ship at the port of shipment | On board the ship at the port of shipment |
| Main freight paid by Different | Buyer | Seller |
| Insurance | Not required | Not required |
| Export clearance | Seller | Seller |
| Import clearance and duties | Buyer | Buyer |
| Unloading at destination | Buyer | Buyer |
Where risk and costs pass from the seller to the buyer
SellerBuyer
Origin → Main carriage → Destination. Simplified diagram: the exact point is the named place written after the rule. The costs line shows who pays the main carriage and, under DDP, the import duties and taxes.
Seller's obligations compared (A1–A10)
| FOB | CFR | |
|---|---|---|
| A1/B1 General obligations | Provide the goods and the commercial invoice as the contract requires, plus any other proof of conformity it asks for. Documents may be paper or electronic if agreed or customary. | Provide the goods and the commercial invoice as the contract requires, plus any other proof of conformity it asks for. Documents may be paper or electronic if agreed or customary. |
| A2/B2 Delivery and taking delivery | Deliver by placing the goods on board the ship nominated by the buyer, at the loading point indicated by the buyer at the named port of shipment, or procure goods so delivered; if no point is given, the seller may choose one. | Deliver by placing the goods on board the ship at the port of shipment, or procure goods so delivered. |
| A3/B3 Transfer of risks | Bears all risk until the goods are on board the ship. | Bears all risk until the goods are on board, even though it pays freight to the destination port. |
| A4/B4 Carriage | No obligation to contract carriage; if agreed, the seller contracts it on usual terms at the buyer's risk and cost. Meets transport-related security requirements up to delivery. | Contract or procure carriage on usual terms, by the usual route, in a ship of the type normally used, from the port of shipment to the named port of destination; meet transport-related security requirements. |
| A6/B6 Delivery or transport document | Provide, at its cost, the usual proof that the goods are on board, and help the buyer obtain a transport document. | Provide, at its cost, the usual transport document to the agreed port of destination. It must cover the goods, be dated within the shipment period, let the buyer claim the goods at destination and, unless agreed otherwise, sell them in transit; a negotiable bill of lading goes to the buyer as a full set of originals. |
| A9/B9 Allocation of costs | Pay all costs until the goods are on board, including loading, the proof of delivery and export clearance. | Pay all costs until the goods are on board, the loading and sea freight, any unloading at the port of discharge and transit costs that the carriage contract puts on the seller, the transport document and export clearance. |
| A10/B10 Notices | Give the buyer sufficient notice that the goods have been delivered, or that the ship did not take them in time. | Notify the buyer that the goods have been delivered, and give any notice the buyer needs to receive them. |
When to use each rule
FOB
FOB is meant for sea and inland waterway transport where goods are loaded directly on board, such as bulk and break-bulk cargo. It is widely used for containers too, but the ICC recommends FCA for container shipments.
CFR
CFR suits sea shipments of bulk commodities and general cargo when the seller can get better freight rates than the buyer. For containers, CPT is the any-mode equivalent the ICC recommends.
Compare other rules
A plain-language summary of Incoterms® 2020 for everyday use. The full rules are published by the International Chamber of Commerce (ICC), and your contract wording decides. Incoterms® is a registered trademark of the ICC.
Guides on this topic
Common questions
Does FOB include freight?
No. Under FOB the buyer books and pays the sea freight. The seller's price covers the goods delivered on board at the port of shipment.
Who insures the goods under CFR?
No one is obliged to. Because the buyer carries the risk from loading, the buyer usually arranges cargo insurance.
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