CFR (Cost and Freight) is one of the most commonly-used trade terms after FOB but in practice it is used without reference to any version of the Incoterms® rules. In such cases it is then up to the seller and buyer to agree in their contract on what they mean when they use these three letters.
This trade term goes back to the days of sailing ships, and in the Incoterms® 2020 rules, as in previous versions, requires the seller to place the goods on board the vessel contracted by themselves. From that point on risk of loss or damage to the goods transfers to the buyer. “On board” is no longer defined as placing the goods “across the ship’s rail” and in fact is not defined any further as it will be a matter for the contract to specify depending on the nature of the goods. The seller must carry out all export formalities and the buyer must carry out import formalities. Cost of carriage is payable by the seller, the bill of lading usually indicating “freight prepaid.”
It is important to understand that in this rule there are two ports concerned. The seller delivers at the port of loading, but pays freight to the port of destination where the buyer is obligated to receive the goods from the carrier. Given that the word “carrier” does not appear elsewhere in this rule it might have been better-worded as receiving the goods from the vessel. The seller and buyer should agree in their contract who should pay for unloading: the seller in the contract of carriage, or the buyer.
Under the Incoterms® 2020 rules CFR is inappropriate for container shipments because the cargo is given to the carrier at a place some distance from the port, such as a container yard or even the seller’s premises.

The CIF rule is identical to CFR except in one aspect. Even though the risk transfers to the seller upon loading the goods on board the vessel, in CIF the seller is obliged to take out the minimum level of insurance cover for the buyer’s risk.
The seller must give the buyer the insurance policy or a certificate under a policy — this document usually evidences the seller as the party being insured so it must then blank endorse the document on the back to allow the buyer to claim should it so require.

All procedures must be adhered to, no exceptions will be made, this safeguards the prompt and successful execution of the transaction. Each transaction will receive a reference number that must be used on all documentation and communication. No documents will be accepted other than by e-mail to: cameron@vilakazeum.co.za

TRANSACTION WORKING PROCEDURES ON CIF ANY PORT

1. Buyer sends Irrevocable Confirmed Purchase Order (ICPO) on acceptance based on the procedures (as below) and issued by the Seller along with the following:
   1.1 Corporate Profile
   1.2 Buyer’s Passport/ID Copy
   1.3 Company License/Registration Documents
   1.4 Tank Farm Agreement (TFA)
2. Royal Refinery and Buyer sign:
   2.1 Mandate Appointment Letter
   2.2 NCNDA
   2.3 IMFPA
3. Seller issues Draft Contract (open for any amendments) to Buyer. Buyer signs, seals and returns the Draft Contract to Royal Refinery for final endorsement.
4. Seller gives Partial Proof of Product (PPOP):
   4.1 Seller Irrevocable Commitment to 4.2 Supply.
   Statement of availability of product.
   4.3 Certificate of Origin (COO).
   4.4 Commercial Invoice (CI) for the first value shipment.
5. Within 5 (five) banking days, Buyer’s Bank sends Irrevocable Operative SBLC via MT760 according to Seller’s fiduciary bank verbiage, to Sellers nominated, fiduciary offshore bank account, for first month shipment, should Buyer fail to issue payment instrument within 5 (five) banking days, Buyer will make cash deposit of $320,000 USD by TT wire transfer for security guarantee to enable seller charter vessel and commence shipment, and this payment will be deducted from the total cost of product after inspection at discharge port, or legal action will be taken against Buyer for default.
6. Seller’s Bank Issues Full Proof of Product (POP) Documents to the Buyer’s Bank alongside with 2% Performance Bond (PB2%):
   6.1 Copy of license to export.
   6.2 Copy of Approval to Export.
   6.3 Copy of statement of availability of the product.
   6.4 Copy of the Refinery commitment to produce the product.
   6.5 Copy of contract to transport the product to the loading port.
   6.6 Copy of the port storage agreement.
   6.7 Copy of the charter party agreement to transport the product to discharge port.
   6.8 Copy of Vessel Questionnaire 88.
   6.9 Copy of Bill of Lading.
   6.10 SGS Report at loading port.
   6.11 Dip test Authorization (DTA) & ATB
   6.12 NOR /ETA.
   6.13 Certificate of Ownership Transfer.
   6.14 Certificate of Ownership Transfer.
   6.15 Allocation Transaction Passport Code Certificate (ATPCC) by Ministry of Energy.
7. Shipment commences as per signed contract delivery schedule and the shipment should arrive at Buyer’s discharge port within 5-24 days. The SGS inspection will be borne by the Seller at the loading seaport and Buyer at the unloading seaport.
8. Buyer releases payment to Seller by TT/MT103 upon receipt of the shipping documents and confirmation of the Q&Q by SGS/CIQ at destination port.
9. Both parties release payment to all intermediaries on each side Involved in the transaction within 48 (forty-eight) Hours
10. The agreement commences with extensions and roll-overs.
11. Buyer issues SBLC/IRDLC irrevocable, non-transferable, auto revolving for 12 months shipment value, documentary letter of credit for length of contract and for each lift per schedule. Buyer pays after Dip Test by MT103 Wire Transfer on each monthly quantity.
12. The subsequent delivery shall commence according to the terms and conditions of the contract
13. Seller pays commissions to all intermediaries as per IMFPA/NCNDA 48 hours after receiving payment from Buyer.