International shipping relies on standardized terms to govern the exchange of goods between a seller and a buyer. Cost and Freight (C&F) is a trade term used to define the obligations of each party in the transaction. Understanding this designation is necessary for managing the logistics, documentation, and financial exposure of an international shipment. This article defines the C&F term, details the duties and costs assumed by the seller and the buyer, and compares it to related modern shipping standards.
Defining Cost and Freight (C&F)
The term C&F originated as an official rule within the International Commercial Terms (Incoterms), published by the International Chamber of Commerce (ICC). C&F was a standard designation in the 1990 and 2000 versions of the Incoterms rule set. This rule specifies that the seller arranges and pays for the main carriage—the freight—required to bring the goods to the agreed-upon port of destination.
The ICC later replaced the C&F acronym with “CFR” (Cost and Freight) in subsequent revisions, though the underlying rules remained functionally the same. This rule is exclusively intended for use when goods are transported by sea or inland waterway, as it relates specifically to obligations on the vessel. This limits its use in modern multimodal transport.
Seller and Buyer Responsibilities Under C&F
The C&F term mandates a specific division of financial and logistical obligations between the seller and the buyer. The seller is responsible for managing and paying for all costs associated with preparing the goods for export and delivering them to the destination port. This includes expenses related to initial packaging, marking, securing necessary export licenses, and customs clearance in the country of origin.
The seller must also arrange and pay for the pre-carriage, which is the domestic transport from their warehouse to the port of shipment. The seller assumes the cost of the main international carriage, contracting and paying for the ocean freight to the named port of destination. The seller’s obligations conclude only after providing the buyer with the required transport documentation, such as the negotiable Bill of Lading, which allows the buyer to claim the goods.
Once the vessel arrives at the specified destination port, the burden shifts entirely to the buyer. The buyer becomes responsible for all costs incurred from that point forward, including charges associated with unloading the goods from the ship. These expenses include arranging for import customs clearance and paying all applicable duties, tariffs, and taxes in the destination country.
The buyer must also arrange and pay for the onward carriage, which is the final leg of transport from the destination port to their final facility. This division ensures the seller handles outbound logistics and international shipping, while the buyer manages the costs and procedures related to receiving the goods.
The Critical Point of Risk Transfer
While the C&F rule clearly defines the allocation of costs, it establishes a distinct and separate point for the transfer of risk or liability. The seller pays the freight all the way to the named port of destination, ensuring the goods physically arrive at the buyer’s vicinity.
The risk of loss or damage transfers from the seller to the buyer much earlier in the shipping process. This liability shift occurs precisely when the goods are loaded onto the vessel at the port of shipment. If the cargo is damaged or lost during the main ocean transit, the buyer must bear the financial consequences, despite the seller having paid for the voyage.
Because the buyer assumes the risk during the entire main carriage, they hold the financial exposure during transit. Although purchasing marine insurance is not a mandatory requirement under the C&F rule, the buyer is advised to secure adequate coverage. This insurance protects the buyer’s financial interest against potential unforeseen events during international water transport.
C&F Versus Modern Incoterms (CFR)
Although C&F is still widely recognized, the officially recognized term in the modern Incoterms rule set is CFR (Cost and Freight). CFR was introduced by the International Chamber of Commerce to update the older terminology and align it with evolving global trade documentation standards. The rules governing the obligations of the seller and buyer under CFR are functionally identical to those that defined C&F.
The primary differences lie in minor updates to documentation requirements and procedural clarity over the decades. Despite the official replacement, the older C&F acronym persists in global commerce due to habit and legacy systems. Traders must understand that a contract citing C&F generally references the standard obligations defined by the current CFR Incoterm.
How C&F Compares to Other Common Terms
Understanding C&F is easier when comparing it directly to other common Incoterms used for sea freight. A direct comparison highlights where the financial and risk allocation differs significantly.
Cost and Freight Versus CIF
The comparison between C&F and CIF (Cost, Insurance, and Freight) reveals that the two terms are nearly identical in their allocation of cost and risk. Under both rules, the seller pays for the freight to the destination port, and the risk transfers to the buyer once the goods are loaded onto the vessel at the origin port. The singular distinction is the mandatory requirement for insurance coverage. With CIF, the seller is obligated to purchase a minimum level of marine insurance coverage in the buyer’s name for the duration of the transit.
Cost and Freight Versus FOB
C&F differs substantially from the widely used FOB (Free On Board) trade term, particularly regarding payment for the main carriage. Under FOB, the seller’s cost obligation is met when the goods are loaded onto the vessel at the port of shipment. At this moment, the buyer assumes both the risk of loss and the responsibility for paying the subsequent ocean freight. This arrangement is the opposite of C&F, where the seller pays for the main carriage while the buyer assumes the risk at the same point of loading.