What does CNF Mean? Differences from FOB and CIF

In international trade, there are many trade terms used to describe the responsibilities, costs and risk allocation between buyers and sellers, and CNF (Cost and Freight) is one of them. The CNF trade term stipulates the costs and responsibilities that the seller needs to bear, especially for sea and inland waterway transportation.

What Is The CNF Trade Term?

CNF, which means “cost plus freight” in Chinese, means that the seller needs to bear the transportation costs of the goods to the destination port, but the buyer needs to bear all costs and risks after the goods are unloaded at the destination port. That is to say, under the CNF trade term, the seller is responsible for transporting to the port designated by the buyer and pays all transportation costs, but the risks during transportation are borne by the buyer when the goods cross the ship’s rail.

For example, in a case of shipping from China to the UAE,if the CNF terms are selected, the Chinese seller will be responsible for the freight to transport the goods to the UAE port, but all risks after the goods are loaded on board will be borne by the buyer.

Responsibilities Of CNF Trade Terms

Under CNF terms, the responsibilities and obligations of the seller and the buyer are divided as follows:

Seller’s responsibilities:

Responsible for production, packaging, and export customs clearance.
Responsible for transporting the goods to the port of loading and loading.
Responsible for paying the transportation costs of the goods from the port of loading to the port of destination.
Not responsible for insurance costs during transportation.

Buyer’s responsibilities:

After the goods are loaded, bear the risk of the goods.
Responsible for the unloading fees, import customs clearance and domestic transportation costs of the goods at the port of destination.
You can decide whether to purchase transportation insurance for the goods according to your own needs.

Differences Between CIF, CNF And FOB Trade Terms

FOB – Free On Board

As you can see in the infographics, Incoterms FOB ensure that all obligations relating to costs, risk and insurance of the goods are split between the buyer and the seller in a fair way.

The entire process of importing from China is divided into the most important stages.

Manufacturing and preparing goods for shipping.
Transportation from the factory to the port.
Loading the goods onto the vessel (to the ship’s rail).

CNF VS FOB (Free on Board)

FOB means “free on board”, which means that the seller is responsible for loading the goods onto the ship, and the buyer will bear the costs and risks after the goods cross the ship’s rail. In contrast, CNF requires the seller to pay the freight to reach the destination port.

What Does CIF Mean In Shipping?

CIF, the full name is Cost, Insurance, and Freight, which means cost plus insurance plus freight (specified port of destination). When the buyer and seller use CIF terms to make a deal, the seller is responsible for transporting the goods to the designated port of destination and bears the freight and insurance from the port of shipment to the port of destination. In addition, the seller is required to handle the export customs declaration procedures for the goods and provide relevant documents and certificates.

CNF VS CIF (Cost, Insurance and Freight)

CIF adds the requirement that the seller must purchase insurance for the goods on the basis of CNF. Therefore, the seller not only bears the transportation costs, but also the insurance costs of the goods during transportation, while the insurance under CNF is borne by the buyer.

Learn more : What Is The Difference Between FCA And FOB

Term

Seller’s Responsibilities

Buyer’s Responsibilities

Insurance

Risk Transfer Point

Suitable for Shipping Mode

CNF

Pays for transportation cost to the destination port

Assumes risk once goods are loaded onto the ship

Buyer’s choice

At loading port (when goods are on board)

Primarily sea and inland waterway transport

FOB

Delivers goods to the loading port and pays for loading

Covers costs and risks from loading onward

Buyer’s choice

At loading port (when goods are on board)

Primarily sea and inland waterway transport

CIF

Pays for transportation and insurance to the destination port

Covers unloading and further transportation costs at destination

Seller must purchase minimum insurance coverage

At loading port (when goods are on board)

Primarily sea and inland waterway transport

Advantages And Disadvantages Of CNF Trade Terms

Advantages:
Seller: Control the transportation route of the goods, ensure that they arrive at the destination port on time, and do not need to bear insurance costs.
Buyer: No need to consider the transportation arrangements at the departure port, only the costs after unloading, and the costs are relatively transparent.

Disadvantages:
Seller: Bear all costs before the destination port, and it is difficult to control the costs that may be incurred during transportation.
Buyer: Bear the risk after the goods are loaded on the ship. If there is damage or loss, they need to be responsible for insurance or claims, which increases the risk.

How To Use CNF Trade Terms?

Explicitly use CNF in negotiations
Explicitly indicate the use of CNF terms in the trade contract and specify the port of destination to avoid unclear responsibilities during transportation.
Preparation of customs clearance documents
The seller needs to prepare documents for export customs clearance to ensure that the goods are loaded smoothly. The buyer needs to understand the customs clearance process and requirements of the port of destination.
Insurance arrangements
Although CNF terms do not require the seller to bear insurance, the buyer can purchase insurance according to its own needs to deal with the risks that may arise during the transportation of the goods.
Risk transfer time
The seller should clearly inform the buyer that the risk is transferred to the buyer after the goods are loaded and passed over the ship’s rail, so that the buyer can purchase insurance in time.

Applicable Scenarios Of CNF Trade Terms

CNF is usually applicable to sea and inland waterway transportation, but not to air and land transportation. This trade term is mostly used in situations where the buyer wants the seller to bear the freight, but the buyer is willing to bear the transportation risks and insurance on his own. For example, when the buyer is relatively familiar with the logistics services at the port of destination, it will be more flexible and economical to choose CNF.

Long-distance shipping: CNF is usually applicable to cross-border shipping and is suitable for trade transactions that require clear cost and responsibility sharing before loading.
High-value goods or bulk commodities: It is suitable for higher-priced goods, especially when the buyer has perfect logistics management and risk-bearing capabilities.

How To Avoid Common CNF Mistakes

Clear risk transfer points: Make risk transfer points clear in the contract to ensure that both parties understand and reduce disputes.
Evaluate destination port costs in advance: The buyer should fully understand the unloading, customs clearance and other costs at the destination port in order to accurately calculate the total cost.
Consider additional insurance: The buyer can choose whether to add additional insurance based on the sensitivity and value of the goods to reduce the risk during transportation.

In international trade, choosing the right trade terms is crucial. CNF terms are suitable for buyers who have high cost requirements but strong risk management capabilities. At the same time, ensuring that the terms and risk transfer arrangements are understood before the contract is signed is the key to protecting the interests of both parties.