A currency adjustment factor (CAF) is a fee placed on top of freighting charges for carrier companies developed to account for constantly changing

exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

s between the

dollar Dollar is the name of more than 25 currencies. The United States dollar, named after the international currency known as the Spanish dollar, was established in 1792 and is the first so named that still survives. Others include the Australian d ...

and other currencies. Its goal is to offset any losses from fluctuating exchange rates for carriers. Calculation basis and

methodology In its most common sense, methodology is the study of research methods. However, the term can also refer to the methods themselves or to the philosophical discussion of associated background assumptions. A method is a structured procedure for bri ...

may vary from carrier to carrier.

Overview

The CAF increases as the US dollar decreases. It is applied as a percentage on top of the base exchange rate, which is calculated as the average exchange rate for the previous three months. Due to this added charge, shippers tend to enter into "all inclusive" contracts at one price that accounts for all applicable charges, to limit the effect of the CAF. In 2005, the CAF charged on shipments to Japan was 51%. On 21 July 2005, the People’s Bank of China announced that it would no longer peg the Chinese currency (

renminbi The renminbi ( ; currency symbol, symbol: Yen and yuan sign, ¥; ISO 4217, ISO code: CNY; abbreviation: RMB), also known as the Chinese yuan, is the official currency of the China, People's Republic of China. The renminbi is issued by the Peop ...

or RMB) to the United States dollar (USD). In response a number of international freight forwarders decided to convert all their contracts with their customers into renminbi and to introduce a CAF surcharge. The freight businesses agreed to set the CAF amount; the

European Commission The European Commission (EC) is the primary Executive (government), executive arm of the European Union (EU). It operates as a cabinet government, with a number of European Commissioner, members of the Commission (directorial system, informall ...

held that this agreement between competing companies amounted to a

cartel A cartel is a group of independent market participants who collaborate with each other as well as agreeing not to compete with each other in order to improve their profits and dominate the market. A cartel is an organization formed by producers ...

and fined the businesses in 2012; this decision and decisions regarding a number of other freight cartels were upheld by the

Court of Justice of the European Union The Court of Justice of the European Union (CJEU) ( or "''CJUE''"; Latin: Curia) is the Judiciary, judicial branch of the European Union (EU). Seated in the Kirchberg, Luxembourg, Kirchberg quarter of Luxembourg City, Luxembourg, this EU ins ...

on 1 February 2018.Court of Justice of the European Union,
The Court of Justice upholds the fines imposed by the Commission on a number of companies for their participation in cartels in the international air freight forwarding services sector
, Press Release 09/18, published 1 February 2018, accessed 19 January 2022.

References

{{Reflist Freight transport Foreign exchange market adjustment factor Foreign trade of the United States