CNF terms define each party’s roles and obligations throughout customs clearance, freight transportation, and final delivery stages. For those interested in CNF Incoterms, this FAQ offers insights into these guidelines, making it easier to grasp the nuances of CNF meaning in shipping. Keep reading to learn more!
What is the CNF Incoterm?
CNF, short for Cost and Freight, is one of the most widely used terms in international trade. In a CNF shipping agreement, the seller is responsible for transporting goods to the port closest to the buyer, covering all freight costs up to that point. Once the goods arrive at the port, the buyer assumes responsibility for additional local expenses, including insurance and transport to the final destination.
A real-world example of CNF Incoterm
An electronics manufacturer in China ships a batch of headphones to a U.S.-based retailer under CNF terms. The Chinese supplier arranges transportation with a freight forwarder to deliver the shipment to the Port of Los Angeles, covering all associated costs and export clearances. Once the shipment reaches Los Angeles port, the U.S. retailer takes over, managing import customs clearance, unloading, and delivery to their warehouse.
Who assumes responsibility in CNF terms and when?
Seller's responsibilities:
Invoices and documentation
The seller provides an invoice detailing all costs and essential information related to the goods. This document serves as a commercial record of the transaction.
Packaging and labeling
In CNF shipping, the seller is in charge of securely packing and marking the goods to ensure their safe transit.
Delivery and pre-shipment handling
Before the goods reach the port, the seller manages inland transportation and any pre-shipment requirements. Under CNF Incoterms, the seller also covers all associated fees.
Export clearance
The seller takes responsibility for export clearance procedures, which include obtaining all necessary licenses, permits, and documents for legal compliance.
Freight costs to destination port
In CNF terms, the seller also covers the cost of freight to the designated port, which can include various charges, such as:
- Customs clearance fees
- Port handling charges
- Value-Added Tax
- Fuel surcharges
- Docking fees
- Warehouse storage fees (if required)
Buyer's responsibilities:
Payment for goods
The buyer should pay for the goods according to the agreed terms and conditions. Payment deadlines are established in advance and must be followed.
Import clearance
All import clearance procedures fall under the buyer’s responsibility. It includes covering import duties, taxes, and other associated charges to bring the goods into the destination country.
Unloading costs
At the arrival port, the buyer bears the costs of unloading the goods from the vessel.
Onward transportation
Once the goods reach the destination port, the buyer is responsible for arranging and paying for transportation from the port to the final delivery point.
Insurance
The buyer is responsible for insuring the goods from the point of delivery onward (i.e., from when they are loaded onto the vessel).
Risk transfer in CNF terms
Under CNF Incoterms, the risk associated with the goods transfers from the seller to the buyer when loading the goods onto the vessel at the port of origin.
It means that, from the moment they are on board, any loss or damage during transit becomes the buyer’s responsibility, even though the seller continues to cover freight costs to the destination port. For this reason, it is often advisable for the buyer to arrange insurance coverage starting from the loading point to mitigate potential transit risks.
CNF vs CIF vs FOB: What’s the difference?
CNF vs CIF (Cost, Insurance, and Freight)
When the supplier arranges insurance for the goods during transit, the term used is CIF terms. In CIF, the seller takes on the risk and is responsible for arranging and paying for insurance coverage. By contrast, under CNF (Cost and Freight), it’s the buyer’s responsibility to secure and cover the cost of insurance for the shipment.
CNF vs FOB (Free on Board)
With FOB shipping, the seller’s responsibility ends once the goods are loaded onto the vessel designated by the buyer. At this point, the risk of damage or loss transfers to the buyer, who then handles the shipment’s transit to the destination country and covers all associated costs and fees. In contrast, under CNF Incoterms, the seller should arrange and pay for the transport of goods to the destination port.
Is CNF applicable to all forms of transport?
No. CNF Incoterms, along with FOB, CIF, and FAS, apply specifically to sea or inland waterway transport. These terms are not suitable for air, rail, or road shipping.
When to use the CNF Incoterm?
Consider using CNF when you have a reliable shipping agent or customs broker at the destination port. These professionals can manage customs clearance and oversee the safe transport of goods from the port to the final delivery point, streamlining the process for you. No matter which Incoterms you choose, our ASLG shipping experts can take the stress out of the process for you!
Why choose ASLG for CNF Shipping?
At ASLG(Airsupply), we go beyond just shipping; we ensure smooth customs clearance, reliable freight forwarding, and timely delivery.
With extensive experience in handling sensitive or dangerous goods such as batteries, vape products, drones, and more, we are well-equipped to manage the complexities of shipping.
Our dedicated team of experts understands the regulations, ensuring compliance and minimizing risks every step of the way. Whether shipping delicate items or bulk cargo, ASLG guarantees secure, reliable, and professional service tailored to your unique needs.
Can I use CNF for air freight?
No, CNF shipping is not typically used for air freight.
Does CNF work with Letters of Credit?
Yes, it does, though it introduces some risk for the seller. Under the CNF arrangement, the seller must wait for the buyer to acknowledge receipt of the goods before receiving payment. However, for buyers, using a Letter of Credit offers protection against potential fraud or disputes.
How can I get cargo insurance when shipping CNF?
As mentioned above, CNF Incoterm does not cover freight insurance. However, if you’re shipping goods under CNF terms, you have options for securing coverage.
One option is to work with a trusted freight forwarder. These professionals have extensive experience and industry connections, allowing them to arrange a suitable insurance policy at competitive rates.
Alternatively, you can contact an experienced insurance broker. They can assist you in obtaining the right policy tailored to your needs.
Can I use CNF for Alibaba Purchases?
Yes. CNF is an option for Alibaba transactions, though FOB and CIF are the platform’s default Incoterms.
Buyers and sellers can mutually agree to conduct the deal under CNF terms, where the buyer is responsible for arranging insurance. Before finalizing the contract, both parties must negotiate and understand the terms to avoid confusion or miscommunication.
