All Airlines and Shipping Lines adopt a policy of adding various surcharges as a supplementary and separate charge to the overall cost of freight. In many cases the surcharges are in excess of 50% over and above the actual freight charge and often greater than the freight cost.
This is similar to the current wave of passenger air ticket prices increasing dramatically where for example a ticket to say Australia may cost $600 of which the fuel surcharges and air passenger taxes are in the region of over 30% (and rising) of the cost.
We caution any prospective customer to be aware that some of our competitors do not always include surcharges in their quotations and it can come as a nasty shock where for example air freight logistics from Johannesburg to Nairobi may well be $0.50 per kg, but add the prevailing fuel surcharge and this currently represents an additional 20%
In order to bring some clarity to all of this we offer the following explanatory notes.
Fuel surcharges are reviewed against a fuel index based on an average price of aviation fuel in four key spot markets; N.W.Europe, Singapore, Los Angeles and US Gulf. These averages are monitored against a fixed base of US $0.513 per US gallon, equal to index 100 and from this a weekly fuel price index is arrived at. Fuel surcharges are determined when the index reaches specific trigger points for two consecutive weeks.
How do we monitor this ourselves and are we any the wiser? Well since these surcharges appear to be with us for the long term and are non-negotiable, this means they are unlikely to go away, then we have to accept them because to challenge the airlines would be an impossibility. We simply offer the information as a general reference point. All airlines follow the same principle although it varies within geographical regions.
BAF and CAF charges
The Bunker Adjustment Factor (BAF) is a surcharge raised by shipping lines to take account of fluctuations in the price of marine fuel. A similar surcharge, commonly referred to as "fuel surcharge" is applied where goods are transported by air to compensate for fluctuations in the price of aviation fuel.
The Currency Adjustment Factor (CAF) is an adjustment to the shipping line's freight tariff which takes into account variances between the currency in which freight is normally billed and those under which expenses are incurred.
It is normally calculated as a percentage surcharge on the basic freight rate. So there are 2 principle surcharges and to make matters even more complicated they vary greatly between trade routes.
- CAF is usually calculated as a % of freight.
- BAF is usually calculated in the same way, a % of freight, but in some regions as a charge per weight measure (w/m)
Confused? Don't be. You can rely on us to calculate the surcharges correctly and to include them in our fair price quotations. Contact London Logistics today for more information.