Surcharges are required to help carriers and forwarders adjust to increasing fuel costs and fluctuating currencies. By instituting fuel and currency surcharges, carriers have eliminated the need to renegotiate freight contracts every time fuel prices increase or decrease.
The applicable surcharges are those published and in effect on the date when a shipment is received by the carrier or its agent. A shipment is not considered to be “received” until the full B/L quantity has been received.
The following is an explanation of commonly-used surcharges.
Fuel Recovery Surcharge (FRS):
This surcharge is imposed by carriers when fuel prices exceed certain levels, and is typically based upon the fuel prices published monthly by the U.S. Department of Energy. Fuel refining shutdowns and costs result in higher fuel costs that typically occur before freight rates are re-negotiated and this surcharge helps carriers cope with current fuel prices. The FRS is adjusted periodically to reflect market conditions.
Bunker Adjustment Factor (BAF):
This is a fuel recovery surcharge that applies specifically to residual fuel oil for ships and distillate and jet fuel oils for aircraft. Currency Adjustment Factor (CAF) / Currency Adjustment Surcharge (CAS) This is a freight surcharge to offset foreign currency fluctuations, particularly where freight rates have remained stable for extended periods of time while related currencies have not. The CAF or CAS surcharge is charged as a percentage of the freight before the FRS or BAF charge. While fuel and currency surcharges are generally set by international organizations such as the CTSA and FCA, Omnilogistics monitors fuel prices set by other regulating bodies to ensure fair application of surcharges.
The following websites help to monitor fluctuating fuel prices:
Freight Carriers Association of Canada (CFA), North American Transportation Council
Ontario Ministry of Energy
Energy Information Administration
Please contact your Client Representative for additional information concerning surcharges.