CNF Shipping Incoterms

CNF shipping Incoterms are a set of rules which describes the delivery of goods from the supplier to buyer.

CNF rules are used to describe the responsibilities of parties connected with customs clearance, freight shipping, and final delivery.

Read this FAQ if you want to learn more about all the nuances about the CNF Incoterms.

What does CNF shipping Incoterms mean?

CNF Incoterms can be transcripted in two ways:
Cost & Freight.

Cost, no Insurance, Freight.

These Incoterms state that the seller completes the delivery when the goods pass through the ship’s rail.

This happens at the port of shipment.

The seller must pay the freight necessary to deliver the goods to the specified port of destination.

There are also other fees and duties for CNF parties, which will be discussed later in this article.

What does CNF shipping Incoterms mean?

CNF Incoterms can be transcripted in two ways:
Cost & Freight.

Cost, no Insurance, Freight.

These Incoterms state that the seller completes the delivery when the goods pass through the ship’s rail.

This happens at the port of shipment.

The seller must pay the freight necessary to deliver the goods to the specified port of destination.

There are also other fees and duties for CNF parties, which will be discussed later in this article.

What are the Sellers’ responsibilities in CNF shipping terms?

As you may already assume from the previous answer, seller’s obligations under CNF are connected with the country of origin.

The seller must pay the freight, insurance and other charges required to deliver the goods to the specified port of destination.

What is the difference between CFR and CNF Incoterms?

CNF and CFR Incoterms are basically the same.

The latter term was introduced with Incoterms 2000, while the CNF rules are known to us from 1936.

What are the Buyers’ responsibilities in CNF shipping terms?

Under the CNF agreement, buyer’s responsibilities arise from the time when goods arrive at the port of destination.

So, the buyer is responsible to pay any costs at the moment of arrival.

This might include the next charges:

  • customs clearance fee;
  • import duty;
  • port charges;
  • VAT (value-added tax);
  • fuel surcharge;
  • docking charge;
  • warehouse storage fee.

Please remember, that the risk of loss or damage to the products passes to the buyer after placing them on board at the port of shipment.

Sea port

What is the difference between FOB and CNF Incoterms?

FOB (Free on Board) rules state that the seller completes the delivery when the goods get to the ship at the nearest port.

After this, the buyer has to organize the transit to the destination country and pay all fees and costs connected with this process.

In the case of CNF Incoterms, the seller has to organize and pay for the delivery to the port of final destination.

CNF pricing scheme

What is the difference between EXW and CNF Incoterms?

Under EXW (Ex-works) Incoterms, the seller doesn’t have to load the goods on the buyer’s designated method of transport.

In such a case, the buyer has to transport products from the point, selected previously with the supplier.

What is the difference between CIF and CNF Incoterms?

CIF Incoterms are similar to CNF, with the main difference lies in the insurance obligations.

Under the rules of CNF, the buyer has to buy additional insurance if he wants such an option to be in charge.

The CIF Incoterms oblige the seller to buy insurance for the transported goods.

Note: all Incoterms with insurance responsibility state that the seller has to provide the minimum coverage.

If the buyer wants stronger insurance, he has to buy it himself or discuss this option with the seller.

What does it mean for CNF Shanghai, CNF Guangzhou, CNF Ningbo, etc?

You can often see such collocations, where the first word is a type of Incoterms, while the second is the name of some city.

For example, you see CNF Shanghai in your agreement with the supplier.

It means that the seller completes the delivery when the goods are placed in some ship at the port of Shanghai and then transferred to your country.

As a buyer, which costs and fees do I have to pay for the CNF Incoterms contract?

As it was said earlier in this FAQ, the buyer has to pay charges which arise at the port of destination.

When the products arrive, you as a buyer have to organize customs clearance and delivery to your office or warehouse.

You can see the full list of possible fees in the question “What are the Buyers’ responsibilities in CNF shipping terms?”.

Freight vessel in ocean

How do I calculate the CNF price in exports?

Unfortunately, there is no stable formula to calculate prices in export.

The prices might vary because of different sellers, shipping agencies, forwarders, and their quotes.

As a buyer, you have to keep in mind that initial CNF price would be smaller than the final price because of additional customs and delivery charges in your home country.

Can I add qualifications or variations to the CNF Incoterms rules?

Yes, it is possible to add extra words to any kind of Incoterms rule.

For example, you can add the “stowed” rule to the agreement, which will make the seller responsible not only for loading the cargo on board but also for stowing it correctly.

Also, you can add the rule of VAT payment and decide that the seller is responsible for paying not only the export costs and duties but VAT as well.

Note: as a buyer, you have to be 100% exact and correct with terms used in your agreement with the supplier.

Use only clear widespread definitions which are common in international trade.

Should I use CNF as a buyer? What benefits can I get?

Each type of Incoterms has clear advantages and disadvantages for the buyer.

CNF is often the cheapest and helpful Incoterms contract since the buyer is obliged to perform only import procedures.

How the CNF Incoterms impact the shipping costs?

Under the CNF rules, all the shipping costs to the destination country are on the seller.

What are the rules for CNF Incoterms insurance?

CNF Incoterms do not have any kind of rules for insurance.

You can add such clauses directly or use another set of rules, like CIF (cost, insurance, and freight).

Are the CNF Incoterms rules applicable to the eCommerce business?

Yes, a lot of eCommerce platforms use CNF Incoterms, as well as other international trading rules.

The most popular Incoterms for B2B trade are EXW, CPT, or CIF.

The B2C model widely uses CPT or CIF Incoterms.

Reminder: eCommerce platforms are websites which buy or sell products via the Internet or other electronic services.

The most popular eCommerce platforms are:

  1. Amazon (both B2B and B2C).
  2. Alibaba (B2B).
  3. AliExpress (B2C).
  4. Shopify (depends on the store, both B2B and B2C).
  5. Magento (B2B and B2C).

Alibaba main page

Does CNF relate to all transportation modes?

No, CNF Incoterms can be used only in the case of maritime transportation.

What is the special paperwork for the CNF Incoterms? Who is obliged to perform it?

Seller is obliged to perform paperwork connected with:

  • export customs clearance;
  • pre-freight delivery;
  • shipping line services.

Buyer, on the other hand, has to be able to:

  • complete documents for import customs;
  • provide papers for the VAT and other taxes;
  • handle any other permits, quotas, special documentation relating to the shipment.

Are there some lacks when using the CNF Incoterms in international trade?

The most obvious flaw of CNF Incoterms lies in the absence of insurance.

Secondly, the transfer of risks connected with loss or damage to goods is also quite confusing: the seller selects the shipping line and organizes the delivery, but he passes his responsibilities when the products are placed on board.

The final lack of these Incoterms arises when the products arrive in your country: from this moment you have to deal with customs and final delivery.

You can prefer to put this work on the forwarding company, but it is connected with extra charges.

Who is responsible for customs clearance in the CNF Incoterms contract?

Export customs clearance is the seller’s obligation, while the buyer has to perform customs duties at the port of destination.

Port services

What does the shipping point mean in the CNF Incoterms?

Shipping point is a place where the seller transfer goods to the shipping company.

For example, it can be a delivery truck, post office, loading dock, etc.

In the case of CNF Incoterms, the shipping point is the port in the country of origin.

This is the place where the seller transfers goods to the shipping company, as well as his responsibilities for loss or damage to such goods.

Can I use CNF Incoterms for domestic transactions?

Even though Incoterms were introduced as rules for international trade, they can be used for domestic agreements as well.

However, please keep in mind that CNF Incoterms regulate only maritime freight.

What is the legal status of CNF Incoterms?

Incoterms is a document which is recommendatory in nature.

This is the reason why all international commercial terms have to be backed up with laws.

The parties can choose between three options:

To keep the law of the exporting country

By default, the seller will use laws of his own country when some issues with shipping arise.

Speaking of Chinese laws and regulations, they similarly protect both buyer and seller.

To keep the law of the importing country

If you don’t want to get confused by unclear regulations of a foreign country, you can decide to use domestic laws.

To keep the law of a third country

This option is also popular because it allows finding the consensus between parties.

If the seller doesn’t want to use your domestic laws, you can decide to pick laws of any country in this world.

Note: as a buyer, you have to find agreement about the laws before the shipping process begins.

Otherwise, it will be considered that you are using the seller’s domestic laws.

Maritime vessel

What is a step-by-step procedure of goods delivery in the case of CNF Incoterms?

Now, when we’ve figured out all the details about the CNF Incoterms, let’s imagine the real situation to have the full picture.

For example, you order some kind of goods from China and decide to use CNF rules with your supplier.

Step 1. The seller packs products, prepare export documentation and other legal papers needed at the port of origin.

Step 2. The supplier delivers your products to the port, using his vehicle capacity or some courier services.

Step 3. The seller has to clear the goods at customs. For this step, the vast majority of companies use the help of customs broker agents.

Step 4. The supplier puts the goods on board the ship. He also pays for the shipping to the destination country and all the above-mentioned services.

Step 5. When the freight gets to the port in your country, you have to start acting.

You must process the customs clearance, pay connected charges and port fees.

Step 6. Finally, you have to deliver goods from the port to the needed destination point.

What is CNF Incoterms connection with the transfer of title to the goods?

Please remember, that none of Incoterms determine transfer title to the products or ownership fact.

Also, they do not contain info about the payment for goods.