Certified Supply Chain Professional (CSCP) Practice Exam

What is the seller's responsibility under CFR terms?

1. Seller delivers goods to the buyer

2. Seller pays for costs and freight of the goods

3. Seller pays for carriage and insurance

4. Seller takes all costs

The correct answer is: Seller pays for costs and freight of the goods

Under CFR (Cost and Freight) terms, the seller has a clear responsibility to pay for the costs and freight associated with transporting goods to a named port of destination. This means that the seller is responsible for covering all expenses related to the shipping process, including loading the goods onto the vessel and paying for the freight to move these goods to the designated port. It's important to note that while the seller bears the cost of freight, the responsibility for insurance does not fall upon them under CFR terms. The buyer is responsible for procuring insurance, which differs from terms like CIF (Cost, Insurance, and Freight), where the seller also covers insurance costs. Thus, the correct understanding hinges on the focus of CFR specifically on the seller's obligation related to costs and freight, confirming that the seller pays for the transportation of goods but not for insurance coverage.