The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under CIF shipping terms for the shipper to provide a minimum amount of marine insurance for goods shipped.
The International Chamber of Commerce (ICC) established a system of international commerce terms, also known as Incoterms. Each term refers to an agreement governing the responsibilities of shipping that fall respectively to buyers and sellers in an international trade transaction. Both CFR and CIF are Incoterm agreements. This system of agreements aids in an orderly process of international trade by making contract models available that are easy to identify and understand in all languages.
Cost and Freight
With CFR agreements, the shipping party has a greater amount of responsibility in arranging and paying for transportation than with minimal free on board (FOB) shipping, where the shipper is only responsible for delivering goods to the port of origin for shipping.
With goods shipped under this agreement, the shipper must arrange and pay for transportation to the destination port that the receiver specifies. The receiver, or buyer, assumes responsibility only once the ship has docked in the destination port. All remaining costs, including those for unloading, and any further transportation costs are then the responsibility of the receiver.
Cost, Insurance and Freight
CIF agreements are nearly the same as CFR agreements. The seller is still responsible for all arrangement and transport costs for shipping goods to the agreed-upon destination port. The receiver then assumes all cost responsibilities once the ship has reached port.
The difference between the two agreements lies in one additional responsibility that falls to the shipper. During the process of shipping, the seller must also provide a minimum amount of marine insurance on the goods being shipped, typically an amount agreed upon between the buyer and seller.