Bunker Adjustment Factor

When looking at your bill of lading for shipping, you may see an assessorial charge called BAF which stands for Bunker Adjustment Factor or a BSC which is Bunker Surcharge. What is bunker? The short answer is that bunker is fuel. It is actually a type of heavier oil that is used for fuel on large ships. Shipping companies add this surcharge when additional costs are incurred for servicing a specific area. As such, not all bunker charges are the same. Companies use the bunker surcharge as a buffer in their rates to make sure they are covering all costs. Unfortunately for the shipper, it completely depends on the trade lane, the additional costs involved for the port to get fuel as well as the costs of fuel itself as to what the bunker fees will be. It is also unfortunate that with rising fuel costs around the world, there will be rising bunker surcharges and more and more companies will be adding on this charge to areas that never had bunker as a charge. Some companies are now using a Bunker Escalation or De-Escalation Clause in their agreements. This is a clause added to cover them in the event that the bunker costs change in the middle of shipping. This way the customer is paying for the actual amount as opposed to an amount made up by the shipping company based on past costs. Although it is good that only actual amounts will be charged, it can also be bad for projections. Many shippers are looking for exact costs that they can use to figure out landed costs and therefore create their list prices. Since this happens well before the merchandise ships, having a flexible bunker can be a burden. Either way, the bunker charges seem to be here to stay since fuel prices are projected to rise again.