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Difference Between BAF and CAF

Jun 28, 2022Introduction to Trade

BAF and CAF are two charges that shipping carriers use to protect themselves against price fluctuations. These surcharges are levied on the total freight bill and play a significant role in understanding the transport’s final price.

BAF vs. CAF

BAF (Bunker Adjustment Factor)

BAF, or Bunker Adjustment Factor, is a charge that shipping carriers use to protect themselves against price fluctuations. CAF, or Currency Adjustment Factor, is another charge used for the same purpose. BAF is levied on the total freight bill and can play a significant role in understanding the transport’s final price. Shipping lines add this fee to make up for the fluctuation in the oil prices while transporting any given shipment. Fuel prices are a critical component of shipping costs. To avoid constant changes in the prices of transporting services, shipping carriers add a percentage of fuel additive to the total freight charge. This creates a hedge against the risk of rising or falling oil prices.

CAF (Currency Adjustment Factor)

CAF, or Currency Adjustment Factor, is a charge used by shipping carriers to protect themselves against losses due to currency fluctuations. This fee is levied on the total freight bill and can play a significant role in understanding the transport’s final price. Shipping lines add this fee to make up for the fluctuation in currency rates while transporting any given shipment. Currency rates are a critical component of shipping costs. To avoid constant changes in the prices of transporting services, shipping carriers add a percentage of fuel additive to the total freight charge. This creates a hedge against the risk of rising or falling currency rates.

The value of CAF is usually determined once a month. If currency rates drop and the value is negative, freight rates decrease and vice versa. The shipping company chooses a base price, the average exchange rate from last month. The CAF value is calculated based on the difference between current and base rates and other individually selected factors.

For example, if a company in the US buys products from Japan, the shipping cost might be US$ 1800. After adequately evaluating the fluctuation in the currency rates, the shipping company may charge a 12% CAF charge on this shipping cost.

This fee helps to protect the carrier against losses that might be incurred due to changes in currency rates. By adding this surcharge to the total freight bill, it helps to ensure that the final price of transport is not affected by these fluctuations.

The Difference between BAF and CAF?

BAF (Bunker Adjustment Factor) is a charge that shipping carriers use to protect themselves against price fluctuations in oil prices. CAF (Currency Adjustment Factor) is a charge used by shipping carriers to protect themselves against losses due to currency fluctuations. Shipping lines add these fees to make up for the fluctuation in prices while transporting any given shipment.

Can BAF and CAF charges be avoided?

One way to avoid these charges is to negotiate the prices with the carrier. There is always room for negotiation when it comes to ocean freight. However, the scope of bargaining depends on the size of the enterprise and the quantity it ships regularly. It might not be possible for a small company that transports small volumes or products to negotiate CAF and BAF charges with the shipping company. Another option is to get in the shipment before any new CAF and BAF charges apply, but this can be difficult to do timing-wise. Ultimately, there’s no easy way to completely avoid these fees, but being mindful of them can help offset some of the cost.

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