Bunker Adjustment Factor
The Bunker Adjustment Factor (BAF) is an additional charge levied on the shippers to compensate for fluctuations in the price of the ship’s fuel.
Also referred to as bunker surcharge, it is tied to the price of Brent crude oil, a major benchmark for worldwide oil prices.
The surcharge, which varies among trade lanes, is added to the base rate ocean freight cost and accounts for the cost of fuel to be used for the voyage.
To calculate the BAF, one has to take into account a trade factor and the fuel price:
Fuel price x Trade factor = BAF
The fuel price is calculated as the average fuel price in key bunkering ports around the world. The trade factor reflects the average fuel consumption on a given trade as a result of variables such as transit time, fuel efficiency and trade imbalance.
Previously, the BAF was decided on every quarter by the Transpacific Stabilization Agreement (TSA), a system that set prices and coordinated the behavior of shipping lines. But the TSA closed in 2018 following the resignation of its largest member, Maersk Line.
The shipping lines now set their own independent BAF rates, which are closely monitored by the European Commission to ensure that no collusion is taking place.
When operators opt to pass variable fuel costs down the logistics chain, those on the receiving end — the shippers who book space on the container lines’ ships — are not always in agreement, especially if it means paying more.
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