A currency adjustment factor (CAF) is a fee placed on top of

freighting Cargo consists of bulk goods conveyed by water, air, or land. In economics, freight is cargo that is transported at a freight rate for commercial gain. ''Cargo'' was originally a shipload but now covers all types of freight, including transp ...

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 and other currencies. Its goal is to offset any losses from fluctuating exchange rates for carriers. Calculation basis and methodology may vary from carrier to carrier. 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%. People's Bank of China Headquarter, Beijing

People's Bank of China Headquarter, Beijing

On 21 July 2005, the

People’s Bank of China The People's Bank of China (officially PBC or informally PBOC; ) is the central bank of the People's Republic of China, responsible for carrying out monetary policy and regulation of financial institutions in mainland China, as determined by ...

announced that it would no longer peg the Chinese currency (

renminbi The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...

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 executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...

held that this agreement between competing companies amounted to a cartel 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 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 Currency Foreign exchange market Foreign trade of the United States Freight transport