CAF - Currency Adjustment Factor
CAF is an extra charge on your freight bill that protects shipping lines from currency exchange rate fluctuations. Because ocean freight rates are usually quoted in US Dollars (USD), but carriers operate in many local currencies worldwide, CAF adjusts the amount you pay to account for the difference - so exchange rate swings don't create losses for either side.
Why does currency even matter in shipping?
Ocean freight is a global business. A shipping line might be headquartered in Denmark, operate ships registered in Panama, pay port fees in Singapore Dollars, and collect freight charges in US Dollars — all for the same voyage.
Most international freight rates are priced in USD. But when a carrier collects payment in another currency (say, Indian Rupees or Euros), the value they actually receive depends on the exchange rate at that moment. If the USD strengthens or weakens sharply, the carrier could end up earning far less — or more — than expected.
CAF is their way of keeping things balanced. It adjusts the freight charge up or down based on how far the exchange rate has moved from a fixed baseline.
Think of it this way: Imagine you agreed to sell a product to a buyer in the US for $1,000. But by the time payment arrives, the dollar has weakened and you only receive the equivalent of ₹79,000 instead of ₹83,000. You've lost ₹4,000 due to currency movement — through no fault of either party. CAF is the shipping industry's built-in fix for exactly this problem.
How is CAF calculated?
CAF is expressed as a percentage of the base ocean freight rate. It can be positive (you pay more) or negative (you pay less), depending on which direction the exchange rate has moved.
Example — 1 x 20ft container (TEU), China to India:
Base ocean freight rate: $800
BAF (Bunker Adjustment Factor): +$150
CAF (Currency Adjustment Factor) at +5%: +$40
THC (Terminal Handling Charge): +$110
Total freight cost: $1,100
Important: CAF is calculated on the base freight rate only, not on the total invoice including other surcharges. So a 5% CAF on an $800 base rate = $40 — not 5% of the full $1,100 total.
Each carrier sets their own CAF based on a reference exchange rate (called a peg rate) agreed upon at the start of a contract or review period. They then compare the current live exchange rate to that peg. If the USD has strengthened versus the local currency, CAF goes up — meaning you pay more. If the USD has weakened, CAF may drop to zero or even turn negative. Carriers typically review and update CAF monthly or quarterly.
What drives CAF up or down?
USD strength — When the US Dollar rises vs local currencies, carriers need more local money to cover costs, so CAF goes up.
Trade lane — CAF varies by route. Asia–Europe CAF differs from Asia–US because different currencies are involved.
Central bank policy — Interest rate decisions by the US Fed or other central banks can shift exchange rates rapidly.
Global events — Political instability, trade wars, or economic crises can cause sudden currency swings that trigger CAF adjustments.
CAF vs. BAF — what's the difference?
BAF (Bunker Adjustment Factor) — Covers fuel price fluctuations. Goes up when oil prices rise, down when they fall. Based on commodity markets.
CAF (Currency Adjustment Factor) — Covers exchange rate fluctuations. Goes up when USD strengthens vs the local currency, down when it weakens. Based on forex markets.
Note: It's entirely possible to get hit with both a high BAF and a high CAF at the same time — for example, during periods of high oil prices and a strong US Dollar. Always check both line items when comparing freight quotes.
Why does CAF matter to you as a shipper?
It affects your true landed cost. If you budget based on a quoted freight rate and CAF jumps by the time your shipment sails, your actual cost will be higher than expected.
It often isn't in the headline rate. Many freight quotes show the base ocean rate plus BAF, but leave CAF as a separate line item. Always ask for a fully inclusive all-in rate before committing.
Long-term contracts can lock it in. If you ship regularly, you may be able to negotiate a fixed CAF rate or a cap within a service contract, giving you cost predictability.
CAF can also work in your favour. When the USD weakens against your local currency, CAF can drop to zero or apply a small credit — effectively reducing your freight cost. It's a two-way mechanism.
Conclusion
CAF is charged as a percentage of the base freight rate
Most ocean freight rates are priced in US Dollars (USD)
CAF is typically reviewed and updated monthly
CAF can be positive or negative depending on exchange rate movement
Frequently asked questions (FAQs)
1. Is CAF charged on every shipment?
Not always. CAF is more commonly applied on trade lanes where a significant portion of costs are incurred in a currency other than USD — such as Asia–Europe or intra-Asia routes. On some routes, carriers may waive it or include it in the base rate. Always check your quote.
2. Can CAF be zero?
Yes. If the current exchange rate is at or near the peg rate the carrier uses as their baseline, CAF may be 0%. This is common during stable forex periods. It does not mean the charge has been removed permanently — it will reactivate if rates shift.
3. Is CAF the same for all shipping lines?
No. Every carrier sets their own CAF based on their peg rate, operational currency exposure, and review schedule. This is why CAF can differ between two quotes for the exact same route and same cargo — always compare all-in rates, not just base rates.
4. Does CAF apply to air freight too?
CAF is primarily an ocean freight surcharge. Air freight has its own currency-related adjustments, but they are typically handled differently — often through rate revision cycles rather than a separate named CAF surcharge.
5. How do I protect myself from CAF surprises?
Three practical ways: (1) Always request an all-in freight quote that explicitly lists CAF. (2) Ship earlier in a rate review cycle when CAF is already known. (3) For high-volume regular shipments, negotiate a fixed or capped CAF in your contract with the carrier or freight forwarder.