“Cost and Charge”. What does that mean? These were the same questions I asked when I first heard. Well, today I am going to give my explanation as best as I can about this shipping term.

Ok, I have previously reviewed on my blog about Ex Works and FOB, if you have read about them it will definitely help. CFR simply means that you add your ocean freight cost, which is the cost you pay to book a container to the other costs you incur when making a purchase. As I mentioned before, the container is a steel box that is used to contain all the goods that you want to ship. It comes in a 20 footer size, a 40 footer size, and a 40 footer tall cube size. I’ll get to that another time.

This is how CFR works. A buyer from Africa wants to buy 10 container loads of gingerbread dolls from you and asked for a CFR (Port Subject) quote. Then what do you do? Well, first you calculate the quantity you can load in the container and then you calculate the total price of the product per container. This friend is from the factory.

So now let’s proceed to add the shipping charges which include the shipping fee and also the transportation charges. Now with that done you get an FOB price.

We then proceed by adding the ocean freight in addition to the FOB price. This gives you the CFR price.

Summary: CFR = Product Price + Shipping & Freight Charges + Ocean Freight Rate

So what is the benefit of quoting your customer’s CFR? The point is that it will help your client get the most accurate costs available to them in that time period. If you are a serious buyer who needs to confirm your purchase within the next few days or weeks, then this is the most accurate cost you can trust. Of course, he will have to be aware of the import tariffs in your country to obtain a final net price that he will pay for his gingerbread dolls.

Again, always remember to correct the exchange rate of your currency and watch the trend, if the US dollar went up or down in the last few days, what will be the movement tomorrow and beyond, especially the time the products will be shipped.

Remember to put a short validity on your CFR quote because it will protect you from crazy fluctuations in shipping and ocean freight prices. Always double check shipping costs before you deliver. Get a verbal confirmation AFTER you receive a black and white or documented quote from your carrier, freight forwarder, carrier and forwarding agent. In this way, you are freed from the risk of quoting incorrect prices. Your gingerbread men would really blow up your business!

So there you have it, the meaning of CFR is easy for you. If you’re new to shipping, be sure to check with your shipping agents to learn more about these terms. If you do your homework, it will make your job and theirs easier. Ultimately making your customer’s job of buying from you as easy as ABC 123!