What Does the Shipping Term "BAF" Mean?

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The shipping term "BAF" means "bunker adjustment factor." This is an adjustment to shipping companies' freight rates to take into account fluctuations in the cost of fuel for their ships or freighters.

The bunker adjustment factor can also be called the bunker surcharge, and it is determined only by carrier conferences. These set rates are then applicable for a certain period of time for certain trade routes. As of 2014, the European Commission and the Japan Fair Trade Commission are studying the process used to determine the bunker adjustment factor and are discussing the possibility of eliminating the ability of the carriers to set fixed prices.