BAF (Bunker Adjustment Factor) is – first of all – the same as a BUC (Bunker Contribution) or an SBF (Standard Bunker Adjustment Factor). Frachtausschreibungen mit Excel? According to the new rule, the sulphur emissions should be cut from 3.5% to now, 0.5% (outside ECAs). Some have a different name for it, while some are adding it on the top of their ocean charges – further complicating the matters. Bunker Adjustment Factor (BAF) is a floating freight charge or an additional charge which is levied to account for the fluctuation (increase) in the price of the ship's fuel. The American Bureau of Shipping (ABS), first chartered in the State of New York in 1862 to certify ship captains. Privacy Policy Ohne mich! In order to counter the fluctuations in oil prices, the shipping lines charge a surcharge on top of the ocean freight, known as Bunker Adjustment Factor (BAF).. In a commentary published by the Journal of Commerce, Klaus Schnede, manager, North America Marine Category at Eastman, said: “We are not anywhere close to fully understanding the financial impact [of the IMO 2020 rule] to any of the parties. BAF represents the floating price level of fuel in ocean freight shipping and is typically updated on a quarterly basis. The ship operators have to pay for the fuel to the respective local supplier and afterwards try to pass the cost on to the customer – through the BAF. BAF is based on Twenty-foot Equivalent Unit (TEU) and varies according to the trade routes. These are charges which levied along with ocean freight to different locations at different season. The Bunker Adjustment Factor is an additional charge added to the base rate ocean freight cost reflecting the cost of fuel (called bunkers)to be used for the voyage. FCL vs. LCL – What is the meaning of these shipping terms? Managing Freight Tenders During the Crisis. Bunker is simply the name given to the Heavy oil used to fuel ocean vessels. The shippers do gain a surplus, if the fuel price actually decreases during the contract period of the locked-in BAF. Multimodal and Intermodal Transport Mode explained, What if we can predict the future? The term " Bunker " refers to the Fuel that is used to operate ships. The only word appearing in all the terms is ‘bunker’, the ship’s fuel and therefore an important cost factor for all involved parties. shipping freight rate, Hamburg Süd will introduce a simple and predictive Bunker Adjustment Factor (BAF). With the recent implementation of the new emission regulation by the IMO 2020, the shipping industry has gone bonkers, especially regarding the “Bunker” prices what is often called “Bunker adjustment factor” or just BAF. See Bunker Adjustment Factor. This BAF is usually aligned with the movement of the oil prices much like the fuel for our cars.. When the cargo is payable in foreign currency and this currency is subject to major exchange rate fluctuations, the shipping company sometimes levies a currency surcharge or CAF (Currency Adjustment Factor) so as to compensate for those exchange rate risks. Still even quarterly rates might become an administrative challenge and with every shipper having their own formula, it is indeed getting harder and harder to manage the BAF in procurement. Here’s an overview of the pricing (based on sailing from Asia to North Europe): As evident from the table, there is a big disparity in the post-IMO bunker charges, with carriers introducing their bunker programs. The cost of compliance with the new regulation will be significant, so the cost of shipping will increase. According to the reports, the shipping charges have increased from ~ $10 – $290 TEU on most routes from the Mediterranean to the US Gulf. When oil prices go up, BAF goes up and when oil prices come down, BAF also comes down.. This is the kind of BAF that customers would prefer, if they want to be sure about their final prices and therefore want to know their exact cost. These are condition based charges, to tackle unexpected variations, so that they may or may not apply to your cargo. SHIPSTA has become one of the market leaders for eProcurement solutions in Germany. CAF See Currency Adjustment Factor. Drewry has said that freight rates are expected to continue to rise on account of higher bunker surcharges, “but for carriers, the true measure of success will be whether or not they rise sufficiently to cover the additional costs.” The question remains: “Why should the bunker charges be based 100% on low-sulphur fuels, when an increasing number of vessels are equipped with scrubbers (using cheaper fuels), with LNG or dual-fuel engines?” (Source: Drewry). Apply to the flag state for a waiver on behalf of the IMO. Hereby the BAF might be charged separately or might be a part of the freight rate, depending on the agreement and line. These charges are determined by Carrier Conferences and are applicable for a certain period and for certain trade routes. They see their costs increased due to higher insurance premiums because of this risk. The trade factor is average fuel consumption for a given trade varying according to the: Formerly, BAF used to be standardized by the Transpacific Stabilisation Agreement (TSA) using the Brent crude oil as a basis. Get our monthly news about digital freight tendering and logistic procurement: How shippers can carry out freight and transport tenders in a beneficial way, The impact of the crisis on the port of Hamburg. FCL: per-container LCL: per-wm Import/Export Asia BAF… This charge represents the the fluctuating costs to the shipping. International Maritime Organisation (IMO) has standardized and placed regulations for emission control with its mandatory Data Collection System (DCS) – including the Global Sulphur Cap. Low sulphur surcharges originate from an International Maritime Organization (IMO) initiative to reduce the amount of sulfuric fuel emissions burned by ocean vessels. While BAF is designed to recover increases in bunker related costs the compliance costs have not been catered for by any of the shipping lines.. With vessels becoming more efficient and bunker cost therefore being a less dominant cost factor, fixed bunker prices are becoming more of an option in the market. BAF changes every month according to the ups and downs of fuel prices. The rate is similar between carriers, and until recently, they struck the same rate. Once the fixed BAF is agreed on, it is going to be paid for in this exact height. We got used to wearing masks in stores and keeping our distance to people.... 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