Definition
Cost and Freight (C&F) is an international trade term used to represent a contractual agreement between a buyer and seller. Under this term, the seller is obligated to pay for the costs and freight necessary to bring the goods to the port of destination. However, the buyer assumes responsibility for the insurance and other risks associated with the shipment once the goods have been loaded onto the shipping vessel. C&F, which is often denoted as CFR in modern Incoterms, allows businesses to allocate responsibilities and manage risks effectively in their shipping contracts.
Examples
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Export of Electronics from China to Germany
A Chinese electronics manufacturer agrees to ship a container of smartphones to a German retailer under C&F terms. The manufacturer covers all costs and arrange for freight to the Port of Hamburg. The German retailer, however, is responsible for arranging insurance coverage for the shipment from the moment the goods are loaded onto the ship in China. -
Agricultural Products from Brazil to India
A Brazilian agricultural exporter sells soybeans to an Indian buyer on C&F terms. The exporter pays for all transport until the soybeans arrive at the port in Mumbai. Once the soybeans are loaded onto the export vessel at the Brazilian port, the financial responsibility and risk for insuring the soybeans during the voyage to Mumbai falls on the Indian buyer.
Frequently Asked Questions
What does “Cost and Freight” cover?
C&F covers all transportation costs paid by the seller to bring goods to a specified port, excluding insurance which must be arranged by the buyer once goods are on board.
What are the buyer’s responsibilities in a C&F agreement?
The buyer is responsible for obtaining insurance for the shipment from the moment the goods are loaded onto the vessel and for managing risks associated with the transportation.
How is C&F different from CIF?
C&F requires the seller to pay the cost and freight, whereas CIF (Cost, Insurance, and Freight) requires the seller to additionally cover insurance costs until the goods reach the port of destination.
Does C&F include delivery to the buyer’s door?
No, C&F only covers costs and freight to the port of destination. Further transportation to the buyer’s designated location is not included.
Can a C&F agreement include delivery by air transport?
Typically, C&F is used for sea freight. For air transport, terms like CIF Air or CFR Air may be used, but this is less common.
Related Terms
- Cost, Insurance, and Freight (CIF): A term requiring the seller to cover the costs, insurance, and freight, delivering goods to a specified port.
- Free on Board (FOB): A term that signifies the seller’s responsibility ends once goods pass the ship’s rail at the port of shipment.
- Ex Works (EXW): A term signifying that the seller’s responsibility ends when goods are made available for collection at their premises.
- Incoterms: A set of internationally recognized trade terms established by the International Chamber of Commerce (ICC) to standardize shipping obligations and responsibilities.
Online References
Suggested Books for Further Studies
- “Incoterms® 2020 by the International Chamber of Commerce”
- “Global Supply Chain Management and International Logistics” by Alan E. Branch
- “Mastering Import & Export Management” by Thomas A. Cook
Fundamentals of C&F: International Trade Basics Quiz
By understanding the Cost and Freight (C&F) shipping term, you’re better positioned to navigate the complexities of international trade and secure advantageous shipping agreements. Keep striving for a deeper comprehension and continue acquiring knowledge of international trade terms!
