Posted in Operations and Supply Chain Terms, Total Reads: 349
Definition: Currency Adjustment Factor (CAF)
We don’t have same currency worldwide and therefore having different currencies and that too with different values with respect to each other poses problems for international goods carriers as the value of currencies fluctuate.
To tackle this problem international carriers use Currency adjustment factor which is a fee placed additional to the freight charges. The CAF was developed in order to account for the fluctuating exchange rates between Dollar and other currencies.
The aim of currency adjustment factor is to safeguard carriers from any loss caused due to the fluctuation in the exchange rates and for calculation purposes the methods adopted by different carriers might be different. These rates are designed such that the fluctuations in the exchange rates are equated. Sometimes these rates lead to more money to the carrier than he really needs, sometimes less.
For example- If the basic ocean freight for a particular shipment to US is $10,000 and the currency adjustment factor rate for US is 10 percent, then the currency adjustment factor for the shipment would be $1000.