Understanding A Bunker Surcharge

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A bunker surcharge, also known as bunker adjustment factor (BAF), is the charge shipper’s incur to compensate for fluctuating fuel prices and is typically in addition to other surcharges and fees added to the freight costs. Some of those surcharges include:

A peak season surcharge (PSS) is the fee that is applied when transporting cargo from Asia, typically anytime between June 1 and October 31. An emergency bunker surcharge (EBS), which is essentially the same as a bunker surcharge, is the adding of a premium for fuel to the cost of the freight. The Alameda Corridor surcharge (ACS) is applied to cargo being transported via the railroad system through Long Beach and Los Angeles gateway.

More surcharges to consider in ocean freight are:

The Panama Canal surcharge (PCS) is cargo moving through the Panama Canal while the Suez Canal surcharge (SCS) is for cargo being transporting through the Suez Canal. A chassis usage surcharge (CUS) is the fee for accommodations at a destination.

There are far too many surcharge definitions but these give you a better example of surcharges and how each relates to different functions of the shipping process.

The bunker surcharge, or bunker adjustment, is specific to ocean carrier’s fuel costs that change on a month-to-month basis. One month fuel rates are down so the surcharge may be less and vice versa, shippers are faced with higher surcharges when fuel costs are on the rise.

The bunker surcharge was once regulated by Carrier Conferences, but in 2008 a European Commission banned them. Shipping lines were then given the authority to set their own bunker surcharge, or BAF rates while still being monitored by the commission to ensure there was no corruption within the process; such as price gauging or setting rates too high to offset other expenses. Basically, charging the customer too much of a bunker surcharge on top of their freight charge.

A bunker surcharge can also be considered the fee a shipper can charge a customer for the use of the bunker but that is an older term used to describe the rate associated with the operation of the bunker or ocean carrier.