Advertisement. These are particularly useful where it is difficult to nominate suitable indices (not least where one is dealing with different blends of fuels stemmed on board with broad pricing variances) and where pricing movements are uncertain/volatile. General Counsel & Company Secretary e: michele.white@intertanko.com t: +44 20 7977 7038 The BAF rate is a non-negotiable pass-through charge. There will be no negative Currency Adjustment Factor. The shipping lines now set their own independent BAF rates. Update on Bunker Adjustment Factor (BAF) As previously communicated, our revised Bunker Adjustment Factor (BAF) is designed to adjust contract rates within the duration of a contract, based on fluctuations in fuel-related costs. Related Content. Bunker adjustment factor clauses. Contact Michele White. for example, including Bunker Adjustment Factor clauses. Also, no provision is made for the burning of high sulphur fuel where owners are at liberty to use scrubbers at their own discretion. ABAF clause addresses this uncertainty by importing a type of cost/bunker surcharge on the base rate freight price, reflecting the increased cost of the voyage(s) to be performed. Charterers and shipowners can use bunker adjustment factor (BAF) clauses to manage rising fuel cost and the possible volatility in prices due to the 2020 sulphur limit. BAF clauses help carriers hedge against the risk of bunker price volatility. New Bunker Adjustment Factor . The customer could be Avoyage Charterer and a Cost, Insurance & Freight (CIF) seller of cargo carried on board the vessel. Whilst parties’ relative bargaining powers will determine the extent to which carriers may pass on these additional costs to their customers, BAF clauses are malleable and can be drafted to suit the wants and needs of the parties involved and are therefore a viable device. Parties’ respective bargaining positions determines the exact drafting of BAF clauses, which will determine the indices to be utilised, degree of any adjustment to be applied and how and when the adjustment computation is to be carried out. It is agreed that the Freight Rate shall be increased or decreased by US$0.125 for every US$1.00 and/or prorated for the difference between US$300 [this figure is adjustable and usually based on geography and previous pricing realities] and the price per metric ton of spot IFO 380 CST in Singapore as per advice from “Platts Oilgram Bunkerwire” on the Bill of Lading Date”2. The current Bunker Clause will be renewed on the 1st January 2020, same date as the IMO world sulphur cap is introduced. Other potential drafting issues or anomalies stand out: no provision is made for an index more closely aligning with ultra low sulphur fuel oil (i.e., with a maximum sulphur content of 0.1%) as would be required to be burned in Emission Control Areas (ECA). Clauses 3.2-3.4 - mirror the provisions of the INTERTANKO Bunker Compliance Clause (1.2.-1.4.) What are bunker adjustment factor (BAF) or surcharge clauses? Conversely, if the Singapore spot price was US$290/mt, then the agreed charter freight rate would decrease by US$1.25. 509977). Bunker fuel started to be used in the shipping industry increasingly in the 1950’s as it is the primary power source for the vessel engine. There is an increasing demand for so-called bunker adjustment factor clauses in contracts now, says law firm Rajah & Tann More contracts factoring in bunker adjustments :: Lloyd's List We use cookies to improve your website experience. According to this new amendment, c urrent standard medium of consumption will change and sulphur content will decreased Bunker Adjustment Factor Tips: Smaller charges like this can add confusion, so smaller customers usually receive or should ask for, an all-inclusive port to port charge. (c) If it is established that loss or damage occurred during the port-to-port leg for reasons stipu - lated in Clause 5 (1) (c) above, Clause 5 (1) (c) applies. The major bunker price reporting agencies only recently started to publish assessments for 0.5% low sulphur grades. BAF (Bunker adjustment factor) - A clause which stipulates that the freight rate is predicated upon bunkers being at a particular market price and if the cost of bunkers goes up (down), there is an associated increase (decrease) in freight. Some shipping companies are finding it a struggle to explain to their customers that they need to review existing bunker adjustment factor (BAF) clauses, or add other forms of surcharges, because of tightening sulphur limits. European Commission banned Carrier Conferences as of October 17, 2008 clauses are found. 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