CFR vs. EXW Incoterms: What is the Difference?

CFR vs. EXW Incoterms: What is the Difference?
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CFR vs EXW Incoterms: What is the Difference?

Successfully navigating the intricacies of global trade depends on a deep familiarity with Incoterms, which specify the obligations of buyers and sellers in international commerce. These universal terms, issued by the International Chamber of Commerce (ICC), serve as the foundation for smooth and productive transactions across borders.

In this article, we’ll take an in-depth look at two frequently used Incoterms: CFR (Cost and Freight) and EXW (Ex Works). Our goal is to provide business owners and logistics managers with a clear grasp of the distinctive elements and ramifications of each Incoterm. By understanding these Incoterms, businesses can refine their shipping processes and effectively handle potential risks. We’ll also discuss how digital freight forwarders like Ship4wd can facilitate seamless shipping operations in accordance with Incoterms, offering invaluable support to companies navigating the complexities of global trade.

To begin, let’s take a brief look at the definitions of both Incoterms:

What Is CFR (Cost and Freight)?

CFR (Cost and Freight) is an Incoterm where the seller assumes the costs of transporting goods to the designated port of destination. However, the risk transfers from seller to buyer as soon as the goods have been loaded onto the ship at the port of departure. CFR applies mainly to sea and inland waterway transport. The seller manages export procedures and bears the costs up to the destination port, while the buyer takes on all risks and responsibilities, including cargo insurance and import customs clearance, as soon as the goods are on board.

What Is EXW (Ex Works)?

EXW (Ex Works) signifies that the seller’s responsibility ends once the goods have been made available by the seller at their premises or another specified location. From that point onward, the buyer is responsible for taking care of all costs and risks related to shipping the goods to their final destination, including loading, shipping, cargo insurance, and import duties.

EXW allows buyers to control the entire logistics process, either independently or with the help of their freight forwarders. This Incoterm is suitable for all modes of transport.

CFR vs. EXW: What’s the Difference?

Now that we’ve covered the basic definitions, we can examine the two Incoterms in greater detail.

CFR vs. EXW: Differences in Responsibilities

As with all Incoterms, CFR and EXW outline distinct responsibilities for sellers and buyers. A clear grasp of these obligations is crucial for mitigating risks and ensuring efficient international transactions.

CFR Responsibilities

Under CFR (Cost and Freight), the seller bears all costs until the goods reach the destination port but transfers risk to the buyer once the goods are loaded on the vessel.

Seller Responsibilities Under CFR:
  • Prepare and package goods for transport.
  • Load goods aboard the carrier ship.
  • Handle export customs formalities.
  • Cover costs up to the destination port.
Buyer Responsibilities Under CFR:
  • Pay for goods and transportation from the destination port onward.
  • Obtain cargo insurance.
  • Assume risk once goods are loaded onto the vessel.
  • Manage import customs clearance and associated paperwork.
  • Coordinate the final delivery of goods.

EXW Responsibilities

Under EXW (Ex Works), the majority of the responsibilities fall on the buyer, with the seller only required to have the goods available at their premises.

Seller Responsibilities Under EXW:
  • Make goods available at the seller’s premises or the agreed location.
  • Prepare and package goods for transport.
  • Supply necessary documentation for export.
Buyer Responsibilities Under EXW:
  • Bear all costs and risks from the seller’s premises to the final destination.
  • Arrange loading, transportation, and related compliance procedures in the country of origin.
  • Secure cargo insurance.
  • Handle import customs clearance and the related documentation.
  • Organize and coordinate the final delivery of goods.

CFR vs EXW: Comparison of Risk Transfer

  • CFR (Cost and Freight): While the seller is responsible for paying for the main freight transportation to the destination port, his risk ends once the goods are loaded onboard the ship. From that point, the buyer assumes all risks and costs associated with the goods during transit. 
  • EXW (Ex Works): The buyer takes on all risks as soon as the goods are made available at the seller’s premises or another agreed location. This encompasses all aspects of loading, transportation, and customs clearance from the pickup location to the final destination.

CFR vs EXW: Cost Implications

Understanding the cost implications is essential when choosing between CFR and EXW.

  • CFR (Cost and Freight): The seller covers costs up to the destination port, including packaging, export customs clearance, and freight charges. From the loading point onward, the buyer takes on all costs, including cargo insurance and import customs clearance, managing expenses from the destination port to the final delivery point.
  • EXW (Ex Works): This Incoterm places the least costs on the seller, who is only responsible for making the goods available at their premises and supplying the relevant documentation. The buyer bears all costs from that point forward, including transportation from the seller’s location, loading, export duties, freight charges, cargo insurance, as well as import customs clearance, and arranging for the final delivery.

CFR vs EXW: Comparison of Control Over Freight

To effectively manage your shipping operations, it’s crucial to understand how control over freight differs between CFR and EXW.

  • CFR (Cost and Freight): With CFR, the seller retains control over the goods until they reach the destination port. The seller is responsible for freight and export procedures but transfers risk to the buyer once the goods are loaded on the vessel.
  • EXW (Ex Works): This Incoterm places the least costs on the seller, who is only responsible for making the goods available at their premises and providing the relevant documentation. The buyer bears all costs from that point forward, including transportation from the seller’s location, loading, export duties, freight charges, cargo insurance, import customs clearance, and arranging for the final delivery.

These responsibilities can be managed efficiently with the support of a reliable freight forwarder like Ship4wd, ensuring smooth and effective shipping operations.

Summary Table: Key Differences Between CFR and EXW

This table summarizes the key differences between CFR (Cost and Freight) and EXW (Ex Works), providing a quick reference for understanding the implications of each term on responsibility, cost, and control.

CFR (Cost and Freight) EXW (Ex Works)
Responsibility and Risk Transfer The seller bears responsibility until the goods are loaded on the shipping vessel. Once goods are loaded, the buyer assumes responsibility and risk. The seller is responsible until the goods are made available at their premises or other specified location. From that point forward, the buyer takes over responsibility and risk.
Shipping Costs The seller bears all expenses up to the destination port. The buyer covers costs from the destination port onward. The seller incurs minimal costs (only making goods available). The buyer covers all costs from the seller’s premises to the final destination.
Control Over Freight The seller manages export customs clearance and shipping to the destination port; the buyer handles import clearance and final delivery. The seller makes goods available at their premises or at some other agreed-upon location, handles packaging, and provides documentation. The buyer arranges all logistics from the seller’s location to the final destination.
Cargo Insurance The buyer is responsible for ensuring insurance coverage is in place from the moment the goods are on board the vessel. The buyer is responsible for obtaining cargo insurance to cover the journey from the seller’s premises to the final destination.
Import Customs Clearance The buyer is responsible for import customs clearance and related documentation. The buyer is responsible for import customs clearance and related documentation.
Final Delivery The buyer arranges the final delivery from the port of entry to the final destination. The buyer arranges the final delivery from the port of entry to the final destination.

Ship4wd: Your Trusted Partner for Streamlining Shipping Operations

As soon as you have found a supplier and settled on the Incoterm that best aligns with your business needs, it’s vital to coordinate logistics efficiently. Whether you’re working with EXW, where you manage all logistics from the seller’s premises, or CFR, where you take over once the seller loads the goods onto the vessel, partnering with a trusted freight forwarder can optimize your operations. This is where Ship4wd plays a valuable role. As a business juggling multiple responsibilities, collaborating with a trusted digital freight forwarder like Ship4wd simplifies shipping and enhances efficiency.

Ship4wd provides a comprehensive and efficient solution to help business owners and logistics managers streamline their shipping processes. By signing up on our platform, you’ll gain access to instant quotes and the ability to book international air and ocean freight, including FCL (Full Container Load) and LCL (Less than Container Load) shipments. We also offer cargo insurance to ensure the safety of your goods, as well as pre-shipment inspections to verify that your shipments meet your requirements before they begin their journey to their destination.

Furthermore, Ship4wd handles customs clearance and manages the required documentation and procedures on your behalf. We also coordinate the final delivery of your cargo so that it reaches its destination efficiently.

Our platform features 24/7 customer support to address any questions, assist you with tracking your shipments, and guide you through our user-friendly interface.

Join Ship4wd today and explore how we can help you optimize your shipping operations, allowing you to focus on growing and managing your business effectively.

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