This article https://danil-hristich.com/en/cif-and-cfr-c-f-obligations-of-the-parties-and-transfer-of-risks/ seeks to provide a basic understanding of the CIF and CFR terms, as well as their variants, CIFFO and C&FFO. These terms are frequently used in conjunction with Incoterms.

Incoterms, or International Commercial Terms, are standardized rules established by the International Chamber of Commerce (ICC) to facilitate international trade. These rules define the responsibilities, costs, and risks for the parties involved in international transactions. When parties reference Incoterms, they adopt the latest edition of these rules. The current version, Incoterms 2020, has been in effect since January 1, 2020.

CIF stands for "Cost, Insurance, and Freight." Under CIF, the seller is responsible for arranging and covering the costs of the goods, transportation, and insurance up to the destination port. The seller assumes most costs until the goods arrive at the destination port.

CFR (or C&F) stands for "Cost and Freight" and is often used interchangeably with C&F. With CFR, the seller arranges and pays for the transportation of the goods to the destination port, similar to CIF. However, CFR does not include insurance coverage; the buyer is not obligated to insure the goods but may do so at their own expense.

Additionally, there are terms like CIFFO and C&FFO, which extend CIF and CFR, respectively, by adding a "Free Out" component. CIFFO means CIF with the additional responsibility of unloading the goods at the destination port, while C&FFO means C&F with the same added responsibility. The "Free Out" component allocates the costs of unloading to either the seller or the buyer, depending on the contract terms. Since "Free Out" is not included in Incoterms, it is important to clearly define its meaning in the contract to prevent any confusion.

Common Responsibilities for CIF and CFR (C&F): Under all these terms, the seller is responsible for the following obligations:

  1. Shipping the goods:

    • The seller can either load the goods onto a vessel or purchase cargo that is already afloat. The latter is a common practice in international trade involving multiple sales down a chain. The goods must be shipped within the agreed shipment period, typically indicated by the date on the bill of lading.
    • The goods must meet the description, quality, and quantity specified in the contract.
    • The seller must notify the buyer upon completing this duty, providing details such as the ship's name, bill of lading dates, and quantity shipped (e.g., Clause 7 of FOSFA 54 (Declaration of shipment) or Clause 11 of Gafta 48 (Appropriation)).

  2. Contracting or securing a contract of carriage to the destination:

    • This usually involves chartering a vessel and paying the freight. In sales down the supply chain, the seller may purchase bills of lading marked "freight prepaid."

  3. Providing the buyer with shipping documents:

    • This includes the bill of lading, commercial invoice, and other contractual documents such as certificates of weight and quantity, certificates of origin, phytosanitary certificates, and fumigation certificates