CFR vs DDP – who pays for what?
CFR is Cost and Freight and DDP is Delivered Duty Paid. We compare who pays for transport, customs clearance and duty, and where risk passes to the buyer.
Key differences
Under DDP, the seller also covers import clearance as well as import duty and VAT. Under CFR, the buyer pays for this instead. 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. Under CFR, the main freight ends at the port of destination; under DDP, it ends at the agreed place, e.g. your warehouse.
- Import clearance
- CFRBuyerDDPSeller
- Import duty and VAT
- CFRBuyerDDPSeller
- Risk passes
- CFROn board the vessel at the port of loadingDDPAt the place of destination, before unloading
- Mode of transport
- CFRSea onlyDDPAny
Full cost breakdown
| Cost | CFR | DDP |
|---|---|---|
| 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 | No obligation |
| Unloading at destination | Buyer | Buyer |
| Import clearance | Buyer | Seller |
| Import duty and VAT | Buyer | Seller |
| 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. | At the place of destination, after import clearance, when the goods are ready for unloading. |
| 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.
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.
DDP Delivered Duty Paid
The supplier has to act as the importer in Poland: declare the goods for customs clearance and pay duty and VAT. A Chinese supplier is rarely able to do this on its own, so it uses intermediaries. Goods shipped under DDP sometimes do not go through proper import clearance – and it is then the consignee who has a problem with goods that were not legally released for free circulation. With a new supplier, DAP is the safer choice.
More about DDP →When to use CFR and when to use DDP?
- 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.
- DDP – when the supplier is reliable and can legally clear the goods in Poland as the importer, and you want the goods delivered with duty and VAT paid.
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.
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What is the main difference between CFR and DDP?
Under DDP, the seller also covers import clearance as well as import duty and VAT. Under CFR, the buyer pays for this instead. 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. Under CFR, the main freight ends at the port of destination; under DDP, it ends at the agreed place, e.g. your warehouse.
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 DDP?
At the place of destination, after import clearance, when the goods are ready for unloading.
Can CFR and DDP be used for rail freight from China?
Only DDP. DDP 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.
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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.