BAF (Bunker Adjustment Factor) Definition:
The Bunker Adjustment Factor, also called bunker surcharge, is an extra or additional fee or charge the shipping company applies to cover for or account for fluctuation in bunker fuel costs used by vessels. The formula for calculating this charge is:
BAF= Fuel Price x Trade Factor
BAF was formerly set by the Transpacific Stabilisation Agreement (TSA) every quarter, utilizing the Brent crude oil benchmark before it was disbanded in 2018. After the disbandment, vessel operators started setting the levy independently. BAF also accounts for the fuel cost that will be utilized for the voyage. It addresses price volatility caused or influenced by varying factors, such as environmental regulations impacting the maritime field, oil price changes in the world market, and geopolitical events.
