CFR vs CIP – who pays for what?
CFR is Cost and Freight and CIP is Carriage and Insurance Paid To. We compare who pays for transport, customs clearance and duty, and where risk passes to the buyer.
Key differences
Under CIP, the seller also covers insurance. Under CFR, insurance is not compulsory. The two rules also differ in the point at which risk passes to the buyer and in the mode of transport. CFR applies only to sea and inland waterway transport.
- Insurance
- CFRNo obligationCIPSeller
- Risk passes
- CFROn board the vessel at the port of loadingCIPOn handover to the carrier in the country of dispatch
- Mode of transport
- CFRSea onlyCIPAny
Full cost breakdown
| Cost | CFR | CIP |
|---|---|---|
| Export clearance | Seller | Seller |
| Transport to the port or terminal | Seller | Seller |
| Loading for main carriage | Seller | Seller |
| Main carriage (freight) | Seller | Seller |
| Insurance | No obligation | Seller |
| Unloading at destination | Buyer | Buyer |
| Import clearance | Buyer | Buyer |
| Import duty and VAT | Buyer | Buyer |
| Risk passes | At the port of loading, when the goods are on board the vessel – even though the seller pays the freight to the port of destination. | When the seller hands the goods over to the first carrier – even though the seller pays for transport and insurance. |
| Mode of transport | Sea and inland waterway transport only | Any mode of transport (sea, rail, air, road) |
Notes
- CFR and CIF – the main freight ends at the port of destination. Transport from the port to the warehouse is paid by the buyer, while under the D rules (DAP, DPU, DDP) this leg is the seller’s responsibility if the place of delivery is a warehouse.
- Unloading at destination: if unloading costs are included in the contract of carriage concluded by the seller, the seller pays them and cannot charge them to the buyer afterwards.
- Insurance: only the seller is obliged to insure, and only under CIF (at least Institute Cargo Clauses (C), 110% of the value) and CIP (Institute Cargo Clauses (A), 110% of the value). Under the other rules, nobody has to insure the goods – but once risk has passed, any loss is borne by the buyer.
What to watch for when importing from China
CFR Cost and Freight
The supplier pays the freight, but the risk passes to you as early as the port of loading in China. You usually pay the charges at the port of destination (e.g. for container handling at the terminal and the release of documents), and they are set by the forwarder chosen by the supplier – you do not know them in advance. Before you place the order, ask for a list of these charges.
CIP Carriage and Insurance Paid To
In Incoterms 2020, CIP requires broader insurance than CIF: Institute Cargo Clauses (A) – “all risks” – at 110% of the value of the goods. Even so, the risk passes to you in China, when the goods are handed over to the carrier. The policy protects you, but the supplier takes it out – ask for a copy before shipment.
More about CIP →When to use CFR and when to use CIP?
- CFR – for sea freight, when the supplier has a good freight rate to Europe, while you insure the goods yourself and handle customs clearance in Poland.
- CIP – for any mode of transport, when the supplier arranges carriage and broad insurance cover (Clauses (A)), while you handle customs clearance in Poland.
Has your supplier quoted a price including transport?
Compare it with our offer for transport from China – by rail, sea or air – with customs clearance in Poland and cargo insurance. Send us your cargo details and we will prepare a quote tailored to your shipment.
Request a quoteFAQ
What is the main difference between CFR and CIP?
Under CIP, the seller also covers insurance. Under CFR, insurance is not compulsory. The two rules also differ in the point at which risk passes to the buyer and in the mode of transport. CFR applies only to sea and inland waterway transport.
Where does risk pass to the buyer under CFR?
At the port of loading, when the goods are on board the vessel – even though the seller pays the freight to the port of destination.
Where does risk pass to the buyer under CIP?
When the seller hands the goods over to the first carrier – even though the seller pays for transport and insurance.
Can CFR and CIP be used for rail freight from China?
Only CIP. CIP works with any mode of transport, while CFR applies only to sea and inland waterway transport. That is why CFR is not used for rail freight from China.
Compare other pairs
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This page is an independent, simplified summary of how costs and risks are divided – it is not affiliated with or approved by the ICC. When drafting contracts, use the official text of the Incoterms® 2020 rules published by the ICC.