[C&F] (Cost and Freight) is an international shipping term, as per the International Commercial Terms (Incoterms), which defines the responsibility of the seller for the cost of goods and freight to the port of destination. However, it excludes insurance costs, which must be borne by the buyer.
Definition
Under the [C&F] term:
- The seller is responsible for paying the costs and freight necessary to bring the goods to the named port of destination.
- The risk of loss or damage of goods passes from the seller to the buyer once the goods have passed the ship’s rail at the port of shipment.
Formula and Key Elements
In financial terms, the cost paid by the seller can be broken down as:
Historical Context
The Incoterms were first published by the International Chamber of Commerce (ICC) in 1936 to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. [C&F] was included to simplify and clarify the shipping process by specifying who pays for what during transit.
Applicability and Use
[C&F] term is essential in various trades, notably where transporting goods across international waters. It is commonly used in maritime shipping contracts and is especially relevant to bulk shipping or large volume transportation. For instance, when exporting large quantities of commodities, agreeing on a [C&F] term helps clearly define financial responsibilities.
Examples
- A German machinery manufacturer sells industrial equipment to a buyer in China under [C&F] terms. The manufacturer will cover the transportation costs up to the port of Shanghai but will not provide insurance for the shipment’s risk of loss or damage after it passes over the ship’s rail.
- An Australian wheat seller agrees to a [C&F] contract with a Japanese miller. Here, the seller ensures the wheat is transported to the port of Tokyo, with the buyer taking on the cost of insuring the shipment.
CWE Comparisons
C&F vs. CIF
While C&F covers the cost of goods and freight, CIF (Cost, Insurance, and Freight) additionally requires the seller to assume the cost of insuring the goods during transit.
C&F vs. FOB
FOB (Free On Board) terms indicate that the seller’s responsibility and cost cover only until the goods pass the ship’s rail at the port of shipment, after which the buyer assumes all responsibilities, including freight and insurance.
Related Terms
- CIF (Cost, Insurance, and Freight): A term requiring the seller to cover cost, freight, and insurance against the buyer’s risk of loss or damage of goods during transit.
- FOB (Free On Board): Denotes that the seller fulfills his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment.
FAQs
Q1: What costs are covered under [C&F]?
Q2: Who is responsible for insurance under [C&F]?
Q3: Is [C&F] applicable to all modes of transport?
Summary
[C&F] is a critical term used in international trade, indicating that the seller is responsible for the costs of freight and goods until they reach the destined port. This ensures clear demarcation of financial and risk liabilities between sellers and buyers, facilitating smoother and more predictable trade transactions. Understanding [C&F] alongside terms like CIF and FOB can significantly aid in navigating international shipping logistics and agreements.
References:
- International Chamber of Commerce (ICC). Incoterms 2020.
- Export.gov. International Logistics & Incoterms.
By comprehending [C&F] and associated terms, businesses can better manage and predict shipping costs, reduce disputes, and expedite international trade operations.
