Bunker Adjustment Factor (BAF) is an additional surcharge applied by shipping carriers to account for fluctuations in fuel or bunker prices during ocean transportation.
How It Works:
- Shipping companies monitor global fuel prices.
- When fuel costs rise, a BAF surcharge is added to freight charges.
- The surcharge is adjusted periodically based on market conditions.
- Shippers or importers pay the BAF as part of total shipping costs.
Benefits:
- Helps carriers manage fuel cost volatility
- Ensures pricing transparency in shipping contracts
- Prevents sudden losses for logistics providers
- Enables more stable freight pricing structures
Example:
An exporter shipping goods via sea is quoted a freight charge of ₹1,00,000. Due to rising fuel prices, a BAF of ₹10,000 is added, making the total shipping cost ₹1,10,000.