Currency Adjustment Factor (CAF)
The Currency Adjustment Factor (CAF) is a surcharge applied to ocean freight to offset exchange-rate fluctuations. Ocean freight is usually quoted in US dollars, but a carrier incurs costs in many currencies; the CAF — expressed as a percentage of the freight — compensates for the currency risk between the rate currency and the carrier's actual costs.
CAF is adjusted periodically as exchange rates move and is applied particularly on trades where currency volatility is significant. Together with the Bunker Adjustment Factor (BAF), it forms the pair of classic adjustment surcharges that sit on top of the base freight rate. Like BAF, CAF must be factored into the true cost of a shipment, since the quoted freight alone understates what the shipper will ultimately pay.
A carrier quoting in dollars but paying costs in other currencies carries exchange-rate risk — CAF passes that risk to the shipper as an adjustable percentage. For anyone comparing freight quotes, CAF is another reason the base rate is only part of the story and must be added in to cost a shipment properly.
What does CAF compensate for?
Exchange-rate fluctuations between the currency freight is quoted in (usually USD) and the carrier's actual costs in other currencies.
How is CAF applied?
Usually as a percentage of the base freight, adjusted periodically as exchange rates move.