Freight Surcharges and Rebates

The following surcharges and rebates are generally applicable in ocean freight charges.

• Bunker Adjustment Factor (BAF): “Bunkers” is the generic name given to fuels and lubricants that provide energy to power ships. The cost of bunker oil keeps fluctuating continuously without any prior indication:
• Currency Adjustment Factor (CAF): The currency adjustment factor is a mechanism for taking into account fluctuations in exchange rates, these fluctuations occur when expenses are paid in one currency and monies earned in another by a shipping company.

The currency adjustment factor is a mechanism for taking into account these exchange rate fluctuations. It is always expressed as a percentage of the basic freight and is subject to regular review.

• War Surcharge: The outbreak of war or hostilities between countries can have significant effect upon carriers servicing international trade even though they may sail under a neutral flag. Carriers sailing within the vicinity of a war zone may impose a war surcharge on freight to compensate for the higher risks involved and the higher levels of insurance premium, which they may have to pay.

Example

Freight rate: Mumbai to Singapore

Freight rate: US Dollar: 4000.00 per 20-M container+ WAR 6%

US Dollar 4000.00 X 5% = US Dollar 200.00

Adding the two amounts together Freight rate: US Dollar 4200.00

All of the above surcharges may be applied to a single freight rate.

Example

Freight rate: Mumbai to Singapore

Freight rate: US Dollar: 4000.00 per 20-M container+ BAF 5%+ CAF 6%+ WAR  6%

Total amount of surcharge 16.0%

US Dollar 4000.00 X 16% = US Dollar 640.00

Adding the two amounts together Freight rate: US Dollar 4640.00

• Port Congestion Surcharge: Congestion in a port for a period of time can involve considerable idle time for vessels serving that port resulting in loss to the ship owner. Shipping lines therefore have the right to impose a surcharge on the freight to recover revenue lost. Another factor which influences port congestion surcharge would be labour disputes. Port congestion surcharges are calculated as a percentage of the freight rate as expressed in the previous examples.