CNF-Shipping-Term

Do you know what is CNF meaning and how it can help you save costs in shipping?

Are you aware of shipping incoterms and how it can impact your business?

CNF stands for Cost and Freight; It is a legal term that is commonly used in international shipping and transportation.

CNF refers to a shipping agreement between a buyer and a seller in which the seller pays to send the item to a destination port to the customer, and the buyer is responsible for the rest of the shipping charges from the port to the buyer’s destination or warehouse.

Having a thorough understanding of CNF and other incoterms can help you to get a clear idea about shipping expenses.

In this blog, we have provided all the important aspects of CNF meaning that you need to know as a buyer or seller.

Table of Content

Chapter 1: What is CNF meaning?

Chapter 2: Which Costs are Included and not Included in CNF Shipping Term?

Chapter 3: Responsibilities of Buyer and Seller in CNF Incoterm

Chapter 4: How Freight Forwarding Agent can Help with your Shipments from China?

Chapter 5: Difference between CNF and other Shipping Terms?

Chapter 6: FAQs about CNF Shipping Term

Chapter 1: What is CNF meaning?

what-is-CNF

1. What is CNF? Is CNF, C&F and CFR the same?

CNF is the short form for cost and freight and it is also known as CFR and C&F. It refers to a contract between a shipper (mostly a seller) and a consignee (commonly a buyer) regarding shipment charges.

This terminology is only used for sea freight. Seller pays to deliver the goods to the port that is nearest to the buyer and buyer bears all the shipment expense from that point onward.

Please note that the 3 terms CNF, C&F and CRF means the same and there is no difference between them while operating. C&F and CFR are usually used in terms of delivery in a domestic or international trade. Some also use CNF.

2. What is the importance of CNF?

what-is-the-importance-of-CNF

With the increase of international trading, the need of standardizing international shipping has also emerged. Understanding the available shipping options helps the business owner and seller to make their supply chain more efficient and flexible.

CNF and other global shipping terms help the shipper and buyer to figure out and efficiently manage their freight cost.

3. Relevance of CNF and incoterms

Incoterms is a short form of International Commercial Terms. Incoterms are commercial universal terms that are standardized to help and aid the trade.

They include 11 predefined sets of rules and regulations for buyers and sellers to facilitate international trade. CNF is one of the eleven pre-defined and globally recognized incoterm.

relevance-of-CNF-and-incoterms

The main purpose of defining these terminologies is to specify centralized, authentic, and constant standards for international trading.

With the help of CNF, buyers and sellers can get a better understanding of risks, tasks, costs, and tax-related information that can be involved in transferring the goods.

These terminologies are usually used by people who are involved in the overseas delivery of goods including buyers, sellers, producers, banks, and traders use these terminologies.

4. Is CNF applicable to all modes of transportation?

No, CNF is only applicable when goods are delivered via Sea freight.  Some other incoterms including CIF, FAS, and FOB shipping incoterms are also applicable for sea freight and cargo that is delivered through sea or air.

There are other shipping incoterms that refer to other modes of transportation as well.

5. What is the difference between CNF and CIF?

CNF-applicable-to-all-modes-transportation

CIF stands for Cost Insurance and Freight; CNF and CIF have a lot of similarities and are often confused with each other.

In both CNF and CIF seller is responsible to unload the goods to a port that is nearest to the buyer. Then buyer is responsible for the customs clearance and delivery of the cargo from the port to the buyer’s destination.

However, in CIF suppliers or sellers also provide the insurance for the goods. That’s means if any damage occurs during the shipment it’s the responsibility of the supplier/seller.

Chapter 2: Which Costs are Included and not Included in CNF Shipping Term?

CNF specifies the cost of cargo transportation for the seller and buyer and any other member that is involved in the supply chain. Here are the details of all the costs that are included or not included in the CNF (Cost and freight) shipping term.

1. Costs that are included in CNF Price

Following is the list of the costs that are included in the CNF price. Seller and buyer need to pay this fee if they are using CNF shipping term for their cargo transportation.

costs-that-are-included-in-CNF

  • Shipping of the goods

CNF includes the cost of delivering the goods to the destination. Seller or supplier pays for the shipping of the goods to the nearest port. Buyers are responsible for the cost of shipping the goods from destination port to the buyer’s warehouse or destination.

  • Freight charges

The freight charges of transportation of the goods via sea are included in the cost of the CNF shipping term.

2. Costs that are not included in CNF Price and has to be paid separately

CNF seems like a good option because of the less cost and shipping charges however there are a lot of costs that are not referred to in the CNF and have to be paid separately.

Following is the list of all the shipping related costs that are not included in the CNF (cost and freight).

3. Customs clearance charges

Customs-clearance

Custom clearance charges are required for the customs clearance of the shipment. The buyer might need a customs broker to clear the cargo. In CNF, the cost of custom clearance charges is not covered and the buyer has to pay it separately.

  • Import duty

Import duties are the number of charges that custom authorities collect for the goods that are being imported. Import duty fee is not included in CNF and it needs to be paid separately.

  • Port security fees

Port operators charge for the Port security fees to provide security services to the customers. The buyer needs to pay this amount separately as this cost is not included in the CNF cost.

  • Docking fee

A docking fee is a fixed fee that is charged by the port for using the docking services. They are charged for the loading and unloading of the cargo. CNF cost does not include the docking fee and the buyer has to pay the docking fee.

  • Warehouse storage charges

The buyer might need a warehouse storage service to keep the goods for a short or long period. CNF shipping term does no facilitate the warehouse storage charges and the buyer needs to pay the warehouse charges.

  • Fuel surcharge

Fuel surcharge refers to the fuel charges that ocean vessels use during transportation. The buyer may have to bear the fuel surcharges as CNF incoterm does not provide Fuel surcharge coverage.

Chapter 3: Responsibilities of Buyer and Seller in CNF Incoterm

As mentioned in the previous chapter, CNF aids the seller and buyer in determining the costs and shipping fees associated with cargo transportation. In this chapter, we will demonstrate in detail that what are the responsibilities of the buyer and what are seller’s responsibilities.

1. In CNF (Cost and freight) shipping, what are the major Seller’s responsibilities?

Following is the list of common responsibilities of seller in a CNG agreement.

  • Goods invoice and documentation

An invoice is a commercial document and it includes all the charges and details on the account of the goods that are being shipped.

It can have information regarding terms and methods of payment. According to CNF term, preparing the invoices of the goods and all other necessary documentation is the seller’s responsibility

  • Packaging and marking

Goods are packed and marked before shipment to keep them safe and protected. In CNF (cost and freight) seller is responsible for the packaging and marking of products before shipment.

  • Fulfilling Customs formalities

In CNF Seller is also responsible to take care of all the customs formalities before shipping the cargo. Clearing all the customs formalities is necessary for the international shipments.

  • Delivery and Pre carriage

Pre carriage is an inland movement of the cargo before the container is being loaded or moved to the port or terminal. In CNF, the seller is responsible for the delivery and pre-carriage activates and the seller is also responsible for all the delivery and pre-carriage fees or charges.

  • Loading fees

 The loading fees refer to the fee of loading the containers to the ocean vessel for the delivery of the goods. In CNF, the seller is responsible for the payment of the loading fee.

  • Delivery at the port

delivery-at-the-port

The final activity of the seller is the delivery of the goods to the port that is nearest to the buyer. Seller responsibility ends here and the buyer is responsible for the activities that take place afterward like delivery of the goods from port to the buyer’s place.

2. In CNF(Cost and freight) shipping, what are the major Buyer’s responsibilities?

Following are the buyer’s responsibilities in the CNF shipping term.

  • Payment for goods

The buyer needs to make the payment of the received goods. All the payments should be cleared and payment should be made according to the pre-decided terms and conditions.

payment-for-goods

  • Discharge and forward carriage

According to CNF, Once the seller ship the goods to the nearest port, the buyer needs to discharge and forward the carriage from that point onward.

  • Is there a formula to estimate the CNF final price for Buyer or Seller?

There is no formula available to estimate the final CNF price. Buyers and sellers can calculate the price roughly by considering all their expenses.

However, it is important to keep in mind the final CNF price will be always greater than the estimated price because of the extra additional charges of delivery and customs clearance.

Chapter 4: How Freight Forwarding Agent can Help with your Shipments from China?

In the CNF shipping term, sellers and buyers have to pay a lot of additional costs that increase the final CNF fee. A freight forwarding agent can help you to get your shipment from China smoothly without going through the hassle of organizing all the activities yourself.

It is not only cost-effective it also helps you save time and energy. These agents take care of all the aforementioned costs including customs clearance fees, docking charges, warehouse storage fees, port security, etc.

1. Cost overhead in the CNF(Cost and Freight) price can be minimized

cost-overhead-in-the-CNF

In the CNF agreement, there are a lot of additional costs that are not included in the CNF cost, and the buyer or seller needs to bear that costs. Using a freight forwarding agent can help in minimizing the cost overhead in the CNF.

2. Freight Forwarding Agent provide cost-effective services

Freight forwarding companies usually deal with the goods in bulk volume. It is easier for them to negotiate a better price with carriers due to bulk volume.

There are a lot of freight forwarding agents in China that offer competitive prices for managing all the services whose costs are not included in the CNF such as warehouse service and customs clearance etc.

freight-forwarding-agent

3. Freight forwarder simplifies the Shipping process

If you are a beginner in trading then managing all these trading-related responsibilities can be overwhelming for you. A freight forwarding agent simplifies the whole shipping process.

Taking the service of a trustworthy freight forwarding agent, you won’t have to invest your time and energy in comparing the prices, researching, and negotiating.

4. Freight Forwarding Agents are trustworthy and reliable

Freight Forwarding Agents are trustworthy and reliable. All the processes that are included in the shipping from the seller’s side to the buyer’s end are documented properly to maintain the quality and control check. Chinese companies & Agents provide reliable and competitive services.

Chapter 5: Difference between CNF and other Shipping Terms?

Some other incoterms have some similarities with the CNF but they are different. In this chapter, we have provided a brief comparison between CNF and some other well-known incoterms.

difference-between-CNF-other-incoterms

1. CNF vs FOB

FOB stands for Freight on Board. In FOB if the agreement is of FOB Destination, it means the seller is responsible to deliver the goods at the destination port of the supplier.

If any losses or damage happens during this process then the shipper is responsible for that. However, if the agreement is FOB shipping point.

That means the shipper is responsible to bring the goods to the shipping port from where the goods will be loaded on the ship and go to the destination port. So it all depends on what kind of agreement is there between both parties.

In the case of CNF, the shipper is responsible for any damage or losses that may occur until the unloading of the cargo. These shipping terms are decided between the shipper and consignee before the cargo is moved.

CNF is a better option for the small shipment and for the traders that are new to trading. FOB is a better option for experienced traders who have experienced in international trade and have their logistic and forwarding agents.

2. CNF vs EXW

CNF-vs-EXW

EXW stands for Ex Works. This incoterm refers to an agreement between the buyer and seller that all the shipping and freight responsibilities will refer to the buyer. It is an advantage on the end of the seller as the seller doesn’t have to bear the price of the shipping.

For example, if the seller is in China and the buyer is in the UK and they agree upon the EXW agreement then the seller will keep the shipment ready and the buyer will pick the cargo within China.

The buyer will be solely responsible for all the shipment and if any losses or damage happen during the shipment then it will be the buyer’s responsibility and the seller will not be liable for any losses.

However, In the case of the CNF trade agreement both seller and buyer share the shipment responsibilities.

3. CNF vs DDP

DDP stands for Delivered Duty Paid. In this agreement, the seller is responsible for all the shipping responsibilities unless the cargo is delivered to the buyer.

Seller is responsible for all the shipping tasks, any losses or damage that may occur, and all the costs of the transportation. It includes the cost of the insurance, customs clearance, and other costs associated with the import/export.

Shipper or sellers have to deliver the cargo to the buyer’s destination that they agree upon in the contract. DDP is beneficial for the buyer because the seller is responsible for most of the shipping errands and costs involved in the shipping.

The seller will bring the goods after clearing the customs to the buyer’s warehouse in his country. In CNF, both shipper and consignee share the shipping responsibilities and cost.

3. CNF vs CIF

CIF stands for Cost Insurance and Freight. CNF and CIF are closely related however they are not the same. They both work in the same way except that CIF also provides insurance on the cargo.

For example, if you are a seller located in China and you want to ship to a buyer that is located in the USA. You as a seller have to pay for the freight charges and insurance charges to ship the cargo to the buyer’s nearest port.

Seller bears all the charges until the unloading and then buyer receives the cargo, pays the custom-related expense and taxes.

The buyer will also be responsible for the shipment from the port to his/her location. CNF is the same as CNF except that CNF does not include insurance coverage.

Chapter 6: FAQs about CNF Shipping Term

faqs

1. Can CNF shipment be used for Airfreight?

No CNF incoterm cannot be used for the airfreight. CNF shipment term is only valid for the ocean freight, shipments that are made through the waterway.

2. Does CNF involve risk?

CNF does not include the insurance cost. In the CNF agreement seller is not responsible for the insurance of the cargo so if the seller or buyer is not taking separate insurance services then it can be risky if any losses or damage occurs during the shipment or loading and unloading of the cargo.

3. Which Incoterms are best for a seller?

FOB (Freight on Board) is most commonly used in international trade. In FOB seller is responsible for the loading of the cargo on the vessel.

EXW incoterm is most benefitical for the supplier as he just need to make the products and then the buyer will have to collect it from the supplier’s factory or warehouse and handle everything from there.

4. Which Incoterms are best for a buyer?

DDP (Delivered Duty Paid) incoterm is also widely used,  this is fully beneficial for the buyer because the seller is responsible to not only ship the goods to the buyer’s country, but also clear the goods from the customs and deliver it to the buyer’s warehouse in his own country.

5. Does CNF include the cost of insurance?

No, CNF does not include the cost of insurance. Seller is not liable to take insurance services for the cargo.

Conclusion

Incoterm is international commercial terms that are defined by the International Chamber of Commerce to facilitate international trade.

CNF (cost and freight) is an incoterm that is used for international trade. It refers to a standardized trade agreement between the seller and buyer.

We hope that this blog would have helped you to better understand about CNF. Its advantages and what costs it includes.