Bunker Adjustment Factor (BAF): Formula, Clauses and Law

Bunker adjustment factor (BAF) is the freight surcharge or contract term that moves the freight payable with the price of marine fuel between the day a rate is agreed and the day the cargo is carried. Container lines publish it per container as a reference fuel price multiplied by a trade factor for the lane, and usually revise it quarterly. In voyage charter parties and contracts of affreightment a bunker escalation clause does the same work, and the standard wording is the BIMCO Bunker Price Adjustment Clause 2004. BAF prices fuel only: EU ETS allowances, FuelEU Maritime penalties and the extra distance of a route diversion are billed separately unless the contract says otherwise.

Fuel is why the charge exists. UNCTAD’s Review of Maritime Transport 2023 states that, depending on vessel size, efficiency and distance, fuel “can account for up to two thirds of overall expenses”, the largest part of a carrier’s variable cost. A price that moves that much of the cost base within a single contract year has to be allocated to someone.

What the bunker adjustment factor covers

BAF allocates one risk, the price of fuel, and leaves the quantity of fuel with the carrier or owner. The freight rate is quoted ex-fuel or at a base fuel price, and BAF moves the difference to the cargo interest. Whether the mechanism is a published liner surcharge or a clause in a fixture, it needs the same four inputs: a price source, a price date or averaging window, a consumption figure, and a unit to bill against.

One mechanism, three names

The same economics carry three labels. Liner tariffs say BAF or bunker surcharge. Tramp fixtures say bunker escalation or bunker price adjustment. Individual carriers add their own brand names, so a shipper may see a carrier-branded recovery charge or, at Maersk from 2024, a Fossil Fuel Fee on documents that all mean fuel cost passed through.

What BAF does not cover matters as much. It does not recover carbon allowances, it does not recover a longer route, and in the current liner formulas it does not recover the premium for 0.10% sulphur fuel where a separate low sulphur surcharge still exists. Each of those is a separate line on the invoice.

Where BAF sits in the liner freight build-up

A container booking prices the sea leg as a base ocean freight plus surcharges that move with an external variable. BAF moves with fuel; the currency adjustment factor moves with the exchange rate; peak season surcharges and general rate increases move with demand. Terminal handling charges sit outside the sea freight and pay for the quay. The full stack, and how a forwarder quotes it, is in ocean freight cost and surcharges .

The distinction between freight components and terminal charges decides who pays under the Incoterms rule and whether the charge enters the customs value, both covered in their own sections below.

How liner BAF is calculated

Maersk’s and CMA CGM’s published formulas multiply the full reference fuel price by a trade factor. There is no base price deduction: the base ocean freight excludes fuel, so the surcharge carries all of it. CMA CGM’s notice of 3 December 2018 states the formula as “Fuel Price per ton x trade coefficient”. Maersk’s Fossil Fuel Fee terms of October 2024 write “FFF = Trade factor x Fuel price”.

The trade factor

The trade factor converts a price per tonne of fuel into a price per container. CMA CGM defines it as the round-voyage fuel consumption in tonnes on the trade divided by the number of full TEU carried. Maersk defines its factor as “a function of bunker consumption per loaded container and volume imbalance between Headhaul and Backhaul in a specific trade”, in tonnes per FFE, “reviewed annually and … valid for a calendar year”.

Imbalance is why the headhaul factor is higher than the backhaul. A string running full westbound and half-empty eastbound burns the same fuel both ways, so the loaded westbound boxes carry more of it per unit. The factor also absorbs the service string design : transit speed, ship size and port rotation. A shipper cannot see those inputs, only the resulting factor.

Units differ between carriers. Maersk quotes tonnes per FFE, CMA CGM per full TEU, so a direct comparison needs a factor of two applied first.

Reference index, hub ports and review window

The price input is a published fuel assessment averaged over a fixed window. Maersk’s Fossil Fuel Fee terms name Platts as the source, VLSFO (0.5% sulphur) and LSMGO (0.1% sulphur) as the fuels, delivered prices as the basis, and Rotterdam, Singapore and Balboa as the reference ports, with Singapore alone for intra-Asia and Rotterdam alone for intra-Europe. The FFF price is the weighted sum of each fuel’s price times its share of consumption.

CMA CGM’s 2019 formula used one IFO 380 reference price for all trades, weighted 50% Singapore, 40% Rotterdam and 10% Houston, reviewed quarterly with one month’s notice. Bunker price indices and benchmarks and the price reporting agencies that publish them decide the number every one of these formulas starts from.

The window closes weeks before the new rate applies. Maersk’s BAF effective 1 January 2026 averaged prices from 26 August to 25 November 2025; its FFF for a 1 January update uses 11 August to 10 November. The FFF baseline moves each quarter and there is no trigger band, so the fee is revised every quarter whatever the size of the move.

Container size, reefer and contract length

Carriers set the 40-foot rate and derive the rest by ratio. Maersk’s FFF terms fix a 20-foot at 0.5 times the 40-foot, a 45-foot equal to the 40-foot, and a reefer container at 1.5 times the dry rate.

Contract length decides which charge applies. Maersk’s BAF applied to contracts valid longer than 3 months. CMA CGM’s 2019 formula applied only to contracts and quotations of at least 3 months, and spot and shorter business carried no BAF but was “subject to EBS”, its Emergency Bunker Surcharge. A shipper moving from a contract to spot on the same lane can therefore change surcharge regime as well as rate.

Worked example: per-container liner BAF

Maersk’s announcement of 1 December 2025 published an average Platts VLSFO price of USD 461.54 per tonne and a Far East to North Europe BAF of USD 554 per 40-foot dry box from 1 January 2026. Dividing the two gives the implied trade factor. Maersk did not publish the factor itself.

The 20-foot rate is half, USD 277, and the 40-foot reefer is 1.5 times, USD 831, both matching the published tariff. Now assume a later quarter in which the reference price averages USD 600 per tonne and the trade factor is unchanged. The BAF becomes 600 x 1.20 = USD 720 per FEU, or USD 360 per TEU, a 30% rise in the surcharge from a 30% rise in fuel.

Maersk’s own FFF terms carry a blended example: with a trade factor of 1, and fuel consumed 20% LSMGO at USD 900 and 80% VLSFO at USD 600, the fee is 1 x (0.2 x 900 + 0.8 x 600) = USD 660. The blend is how a single fee replaced separate BAF and low sulphur lines.

Bunker escalation in charter parties

In tramp shipping BAF exists only where the owner pays for fuel and the parties write a clause for it. Who pays depends on the charter form, and the standard clause is a BIMCO wording added to the printed form, since neither GENCON 1994 nor NYPE 2015 prints one.

Who pays for bunkers under each charter form

Under a voyage charter the owner buys the fuel and prices it into a lump sum or per-tonne freight, so an escalation clause is the only way to share a price move after fixture. Under a time charter party the charterer buys the fuel and carries the price risk directly, so no BAF arises. A bareboat charter party puts the charterer in the owner’s position for all running costs, fuel included.

NYPE 2015 clause 9 settles the fuel on board at delivery and redelivery by one of three alternatives: the charterer takes over and pays for bunkers on delivery and the owner pays for those on redelivery; the charterer pays for estimated consumption at an agreed daily rate and price, trued up at redelivery; or the ship is redelivered with about the same quantities and grades, with the difference paid at the net contract price. The second alternative is the nearest a time charter comes to a price allocation. The detail sits in bunkers on delivery and redelivery .

Escalation matters most in a contract of affreightment. A COA fixes freight for many voyages over months or years, and the owner cannot price fuel for a voyage two years away.

BIMCO Bunker Price Adjustment Clause 2004

The BIMCO Bunker Price Adjustment Clause 2004 is tagged by BIMCO for voyage charters and contracts of affreightment. Its operative text reads:

“This Contract is concluded on the basis of a bunker price of USD _____ per metric ton for _____ oil of _____ grade. If the bunker price per metric ton at _____ on the first day of loading is higher than USD _____ or lower than USD _____, any amount in excess of such increase or decrease shall be payable to Owners or Charterers as the case may be. The agreed bunker consumption for each voyage is as follows: _____”

BIMCO, Bunker Price Adjustment Clause 2004.

The footnotes require the parties to name the fuel (gas oil, diesel or fuel oil) and the “port or place (supplier or published index)”. Seven blanks carry five terms: the base price, the fuel and grade, the price source, an upper and lower band, and the agreed consumption for each voyage. The price is taken on one day, the first day of loading.

The clause produces a lump sum per voyage, not a rate per day or per tonne of cargo, and it does not state that the adjustment forms part of freight. Its text says only that the amount is “payable to Owners or Charterers as the case may be”. A party that wants the adjustment treated as freight, for lien or for set-off purposes, has to say so.

The card applies the band as a deductible. That is one of two readings, set out in the disputes section below; the linked calculator on ShipCalculators.com runs both readings side by side, and the one-way Bunker Rise Clause, from the clause’s own inputs.

BIMCO Bunker Rise Clause for Voyage Chartering

The BIMCO Bunker Rise Clause works one way. The charter is concluded on a stated price “in force on the date of this Charter”, and if “the price actually paid by the Owners during the period of this Charter for the quantity consumed on the contracted voyage(s) should be higher, the difference shall be paid by the Charterers”. BIMCO’s note says it “is particularly intended for contracts for several voyages”.

Two features separate it from the 2004 clause. It pays on the owner’s actual purchase price, proved by the owner’s account, not on an index. And it only moves upward, so a falling market leaves the owner with the gain.

GENCON 1994, NYPE 2015 and where the clause goes

The printed GENCON 1994 form contains no bunker clause; the word does not appear anywhere in it. Clause 17 is the war risks clause, Voywar 1993. An escalator goes in as an additional clause under Box 26, which is where a fixture incorporates the BIMCO 2004 wording.

GENCON 1994 clause 7 is sometimes misread as tying demurrage to freight. It does not. Demurrage is payable “at the rate stated in Box 20 … per day or pro rata for any part of a day”, falls due day by day on the owners’ invoice, and a failure to pay gives the owners a right to terminate after 96 running hours’ written notice while the ship is at the loading port. An escalation adjustment therefore leaves the demurrage rate untouched, and demurrage and laytime run on their own terms.

NYPE 2015 separates fuel into clause 9 (bunkers), clause 12 (speed and consumption) and clause 38 (slow steaming). Clause 12 governs how much fuel the ship should burn; the speed and consumption warranties article covers the claims that follow when it burns more.

Price, not quantity

An escalation clause adjusts for price against an agreed consumption. The BIMCO 2004 clause fixes “the agreed bunker consumption for each voyage”, so if the ship burns 10% more than that figure, the owner bears the extra tonnes at whatever they cost. Over-consumption is a performance matter, pursued under the speed and consumption terms or as an off-hire and performance claim on a time charter, never through the escalator.

Worked example: voyage escalation on a Capesize

The inputs below are hypothetical except the consumption figures. Assume a Capesize round voyage from Western Australia to Qingdao of 12.5 days laden and 12.5 days in ballast at 12 knots, with port consumption ignored and a cargo of 170,000 tonnes. At 12 knots the Baltic Exchange C5TC(182) standard ship description prescribes 36 tonnes a day laden and 29 tonnes a day in ballast.

The parties fix under the BIMCO 2004 clause with a base price of USD 600 per tonne and a band of USD 575 to USD 625. On the first day of loading the agreed index shows USD 660.

Worked example constructed by Shipping-Wiki.com, 25 September 2026, on hypothetical prices, voyage days and cargo, and the C5TC(182) consumption at 12 knots.

Spread over the cargo, reading B is USD 48,750 / 170,000 = about USD 0.29 per tonne of cargo. That is the order of magnitude a Capesize escalator works at. A fuel intensity of 812.5 / 170,000 = 0.0048 tonnes of fuel per tonne of cargo means a USD 10 move in fuel shifts freight by about USD 0.05 per tonne, and a clause drafted per tonne of cargo should be calibrated to that figure.

The consumption card prices the tonnes a voyage burns at a given speed, which is the quantity the escalation clause multiplies.

Tanker voyage charters and Worldscale

Tanker voyage freight is usually fixed in Worldscale points, and the flat rates behind those points are fixed for the calendar year. The Worldscale Association recalculates its flat rates every twelve months, effective 1 January, reflecting bunker prices, port costs and currencies assessed up to 30 September. A fuel move after that date reaches the freight only through the points negotiated for the next fixture, or through the next annual reset. The flat rate and its differentials carry the method.

Sulphur rules and the low sulphur surcharge

The 0.50% global sulphur limit forced every carrier to rebuild its BAF on a new fuel. MARPOL Annex VI regulation 14.1 set the limit from 1 January 2020, a date written into the Annex by MEPC.176(58) and confirmed by the committee decision MEPC.280(70) in October 2016. MEPC.305(73), adopted 26 October 2018, added a ban on carrying non-compliant fuel for use from 1 March 2020 unless the ship has an approved exhaust gas cleaning system . The regulation itself is covered in MARPOL Annex VI regulation 14 and the IMO 2020 sulphur cap .

The 2019 rebenchmark

Carriers rebuilt their formulas for contracts starting 1 January 2019. CMA CGM’s notice of 3 December 2018 set a quarterly fuel price and trade coefficient formula for contracts from that date, and Maersk’s notice of 11 September 2019 refers to its revised BAF as already communicated. The new formulas had to survive a change of fuel: Maersk’s notice of 11 September 2019 explained that its 2019 BAF used the price of 3.5% sulphur fuel, and that from 1 January 2020 it would use 0.1% sulphur gasoil “with a fixed deduction of 50 USD/ton” as a proxy for the new blends.

Fuel prices then moved again with the war in Ukraine. UNCTAD’s Review of Maritime Transport 2022 records very low sulphur fuel oil at USD 730 per ton in February 2022 and more than USD 1,000 in June, with high sulphur fuel oil rising from USD 571 to USD 712, and states that container lines “increased fuel surcharges by around 50 per cent”.

ECA fuel and the 0.10% limit

Inside an emission control area regulation 14.4 limits fuel sulphur to 0.10%, which in practice means marine gas oil or a 0.10% blend. The Baltic, North Sea, North American and US Caribbean areas have applied the limit since 1 January 2015. The Mediterranean area, designated by MEPC.361(79) and in force 1 May 2024, has applied the 0.10% limit since 1 May 2025. The Canadian Arctic and Norwegian Sea areas apply it from 1 March 2027. A North-East Atlantic area was adopted by MEPC.407(84) on 1 May 2026 and is not yet in force.

Each new area raises the share of 0.10% fuel on the strings that cross it. Maersk’s structure shows how carriers bill that share: its BAF recovered 0.5% sulphur fuel and its low sulphur surcharge recovered the 0.1% sulphur fuel burned in ECAs.

LSS, EFF and the Fossil Fuel Fee

Carrier names changed faster than the mechanism. Maersk’s Environmental Fuel Fee took effect on 1 December 2019 for spot and contracts up to 3 months, calculated as the price difference between high and low sulphur fuel multiplied by a trade factor, and reviewed only on moves above USD 50 per tonne. It was an IMO 2020 transition charge and had nothing to do with carbon.

On 31 May 2024 Maersk announced that its Fossil Fuel Fee would replace “in a phased manner” both the BAF and the LSS for contracts over 3 months. The FFF weights VLSFO and LSMGO prices by the share of each fuel consumed, so the ECA premium sits inside one fee rather than two. During the phase-in both structures are live for different contract populations, with different review windows.

Carbon costs and the BAF boundary

Carbon costs sit outside BAF in Maersk’s surcharge structure and in BIMCO’s charter clauses. The EU Emissions Trading System has covered shipping since 1 January 2024 and FuelEU Maritime since 1 January 2025. Both create a cost per voyage that does not move with fuel price, and a BAF indexed to VLSFO will not recover it.

EU ETS: who owes and who pays

Directive (EU) 2023/959 brought maritime transport into Directive 2003/87/EC from 1 January 2024. Article 3ga(1) covers 100% of emissions on voyages between two EEA ports and while at berth in an EEA port, and 50% of emissions on voyages into or out of the EEA. Article 3gb phases in the surrender obligation: 40% of verified emissions for 2024, 70% for 2025 and 100% from 2026. Only carbon dioxide counted for 2024 and 2025; methane and nitrous oxide are covered from 1 January 2026.

Scope follows the MRV Regulation (EU) 2015/757 as amended by Regulation (EU) 2023/957: ships of 5,000 GT and above carrying cargo or passengers commercially, with offshore ships of that size joining on 1 January 2027. Allowances for a calendar year are surrendered by 30 September of the next. The article on the EU ETS for shipping and the ETS phase-in and scope carry the full regime.

The legal debtor is the shipping company, meaning the ISM company. Article 3gc requires Member States to give it a right to reimbursement where “the ultimate responsibility for the purchase of the fuel, or the operation of the ship, or both, is assumed by an entity other than the shipping company pursuant to a contractual arrangement”, with operation defined as “determining the cargo carried or the route and the speed of the ship”. That right runs to a time charterer or commercial operator. It gives a liner carrier no statutory claim on a shipper, so a liner ETS surcharge rests on the carrier’s tariff or contract.

The Commission’s Carbon Market Report COM(2025) 735 of 3 December 2025 put auction clearing prices for allowances at EUR 49.50 to EUR 75.35 during 2024, averaging EUR 64.74; the previous report, COM(2024) 538 of 19 November 2024, gave EUR 66.49 to EUR 96.33 for 2023, averaging EUR 83.60. A carbon price that moves independently of fuel is the reason a fuel-only BAF under-recovers or over-recovers allowance cost.

Carrier emissions surcharges

Maersk announced on 1 December 2023 “a standalone surcharge known as ‘Emissions Surcharge’” for all bookings with a price calculation date of 1 January 2024 or later where the load or discharge port is in EU ETS scope. It is a separate line from BAF and from the FFF. Other carriers bill comparable charges under their own names, collected in carrier emissions surcharges .

The Article 3ga(2) rule on neighbouring container transhipment ports bears on these charges. A call at a listed port outside the Union, within 300 nautical miles of an EU port and handling more than 65% transhipment, does not count as a port of call, so routing a string through one does not cut the 50% leg short.

BIMCO ETS and FuelEU clauses in charters

BIMCO has published carbon clauses for both main charter types. The ETS Allowances Clause for Time Charter Parties 2022 moves allowance cost to the time charterer. Three ETS clauses for voyage charter parties followed in 2023: the Freight clause makes the ETS cost part of freight, the Surcharge clause adds a pre-agreed emission scheme surcharge paid in cash, and the Transfer of Allowances clause has the charterer transfer allowances. The FuelEU Maritime Clause for Time Charter Parties 2024 handles the compliance balance.

A fixture that uses the BIMCO 2004 escalator and none of these clauses has priced fuel and left carbon unallocated. The escalator’s text refers to “bunker price per metric ton” and nothing else.

FuelEU Maritime compliance cost

Regulation (EU) 2023/1805 entered into force on 12 October 2023 and has applied since 1 January 2025 to ships above 5,000 GT carrying cargo or passengers commercially. Article 4(2) caps the greenhouse gas intensity of energy used on board, measured well-to-wake, at the reference value of 91.16 gCO2e/MJ reduced by 2% from 2025 (89.34), 6% from 2030 (85.69), then 14.5%, 31%, 62% and 80% at five-year steps to 2050. Coverage is 100% of energy on voyages between EU ports and at berth, and 50% on voyages to or from a third country.

A ship over the limit pays EUR 2,400 per tonne of VLSFO-equivalent energy of deficit, a tonne being 41,000 MJ, under Annex IV Part B, by 30 June, with the amount multiplied by 1 + (n - 1)/10 after consecutive deficit years. Surplus can be banked or pooled across ships and companies under Articles 20 and 21, which is why the cost of compliance differs by fleet. FuelEU Maritime explained and the article on FuelEU penalties, pooling and multipliers carry the calculation. The penalty is set in energy terms, so a fuel-price BAF does not track it.

The two EU regimes also draw their size lines differently. The ETS takes ships of 5,000 GT “and above”; FuelEU takes ships “above” 5,000 GT. A ship of exactly 5,000 GT is inside the ETS and outside FuelEU on the text.

IMO Net-Zero Framework status

There is no global carbon price for a BAF or a surcharge to track. The IMO Net-Zero Framework was approved at MEPC 83 in April 2025 but not adopted; the extraordinary session convened to adopt it adjourned in October 2025, and the IMO has scheduled its resumption for 4 December 2026, subject to confirmation by MEPC 85. Until adoption, the operational carbon rules in force globally are the Carbon Intensity Indicator and EEXI , neither of which carries a charge.

CII is rated per ship, for ships of 5,000 GT and above in 12 ship types. A ship rated D for three consecutive years or E once needs a plan of corrective actions in its SEEMP. The rating carries no fine, but the speed an owner runs to protect it changes consumption, which is the quantity a trade factor or an agreed consumption figure assumes.

Emergency bunker surcharges and route diversions

An emergency bunker surcharge is a short-notice fuel charge outside the scheduled BAF cycle. CMA CGM’s 2018 notice applied its Emergency Bunker Surcharge to spot and short contracts that carried no BAF.

A route diversion is a different problem: it raises consumption, not price. The Red Sea diversions around the Cape of Good Hope from late 2023 lengthened Asia to Europe strings that had passed through the Suez Canal , so each loaded box burned more fuel. A trade factor fixed for the calendar year does not see that, so the cost of a diversion needs its own surcharge or a revised factor.

Notice rules apply to both. In US trades the Federal Maritime Commission’s advisory of 12 January 2024 on Red Sea surcharges restated that a new or increased charge needs 30 days’ notice unless the Commission grants special permission. Commissioner Laura DiBella’s statement of 23 March 2026 on special permission requests for war risk surcharges tied to the Strait of Hormuz recorded her vote to disapprove them, on the ground that a carrier asking to shorten the notice period should link its cost increase to the amount of the surcharge.

BAF in customs valuation and trade terms

BAF is part of international freight, so it follows freight in both the customs value and the Incoterms split. The same surcharge is dutiable in one jurisdiction and not in another.

CIF-basis and FOB-basis valuation

The European Union values imports on a CIF basis. Article 71(1)(e) of the Union Customs Code adds the cost of transport, insurance, loading and handling to the place where goods enter the Union, and BAF and CAF are components of that freight. The United States values on an FOB basis: 19 U.S.C. 1401a excludes international freight and its surcharges from transaction value. The consequence for an importer who cannot apportion a bundled freight invoice is worked through in landed cost and import duty , and the six-method hierarchy is in the WTO Customs Valuation Agreement .

Destination charges are treated differently. Terminal handling at the port of discharge is incurred after entry, so on a CIF-basis value it stays out, while BAF stays in. Cargo insured value follows a similar line: a fuel surcharge billed to the buyer counts, and one the carrier absorbs does not.

Allocation under Incoterms 2020

Whoever buys the main carriage pays the BAF. Under FOB and FCA the buyer contracts for the sea freight; under CFR, CIF, CPT and CIP the seller does and prices it into the goods. Incoterms 2020 allocates the cost; it says nothing about how the carrier calculates it. The practical interaction with forwarders and house bills is in freight forwarding and Incoterms .

Regulation of BAF in liner trades

No regulator sets a BAF level or prescribes its formula. What is regulated is how carriers agree, publish and change it: EU competition law bars carriers from fixing it together, US law requires it to be published and sets the notice period, and China requires rates to be filed.

European Union: liner conferences and Article 101

For two decades a liner conference could set a common BAF lawfully in EU trades. Council Regulation (EEC) 4056/86, in force from 1 July 1987, exempted conference agreements whose objective was “the fixing of rates and conditions of carriage”. Council Regulation (EC) 1419/2006 repealed it with effect from 18 October 2006, keeping the exemption for conferences already in existence for a two-year transitional period to 18 October 2008. Recital 5 of the repealing regulation names the harm: horizontal price fixing where “charges and surcharges are jointly fixed”.

Since then every carrier sets its own BAF, and agreeing it with a competitor falls under Article 101 TFEU. The Consortia Block Exemption Regulation , Regulation (EC) 906/2009, never changed that: Article 4(1) excluded consortia whose object was “the fixing of prices when selling liner shipping services to third parties”. Its application was extended to 25 April 2020 and then, by Regulation (EU) 2020/436, to 25 April 2024. The Commission decided on 10 October 2023 not to extend it again, and it expired on 25 April 2024.

Enforcement against surcharge coordination predates the repeal. In the FETTCSA decision , Commission Decision 2000/627/EC of 16 May 2000, the Commission listed BAF first among the principal charges and surcharges and found that an agreement among carriers not to discount from published tariffs for charges and surcharges infringed Article 81(1) EC, now Article 101, for a period in 1992.

Container shipping commitments, case AT.39850

The 2016 case against container carriers was about price signalling, and it wrote bunker charges into the remedy. In case AT.39850 the Commission made binding, on 7 July 2016 under Article 9 of Regulation 1/2003, the commitments of 14 carriers to stop publishing General Rate Increase announcements. For three years from 7 December 2016, any price announcement had to include “at least the five main elements of the total price (base rate, bunker charges, security charges, terminal handling charges and peak season charges if applicable)”, bind as a maximum price and come no more than 31 days before it took effect. The decision made no infringement finding and imposed no fine.

United States: Shipping Act tariffs and the FMC

In US trades BAF is a tariff charge. The Shipping Act of 1984 , Public Law 98-237 of 20 March 1984, requires each ocean common carrier to publish a tariff “showing all its rates, charges, classifications, rules, and practices” (46 U.S.C. 40501(a)(1)). Under 40501(e) and 46 CFR 520.8(a)(1) an increase takes effect no earlier than 30 days after publication; a decrease may take effect on publication. The 30-day rule is statutory and predates the 2022 reform; the current regulation text dates from 1999 (64 FR 11225).

The Federal Maritime Commission does not approve or cap BAF. The only cost limit in 520.8 is paragraph (b)(4), which forbids marking up pass-through charges outside the carrier’s control above cost. BAF is under the carrier’s control, so it is not a pass-through charge in that sense. The FMC’s Fact Finding 29 Final Report of 31 May 2022 recommended, as Recommendation 7, that the Commission investigate tariff surcharges, noting that “there are currently only limited Commission regulations to evaluate charges”.

The Ocean Shipping Reform Act of 2022 , Public Law 117-146 of 16 June 2022, did not add a surcharge rule. It made it unlawful to assess a charge that does not comply with applicable provisions and regulations, gave the FMC power to order refunds, and created charge complaints with a reasonableness burden on the carrier for demurrage and detention only. Its rulemakings covered demurrage and detention billing (46 CFR Part 541, effective 28 May 2024) and unreasonable refusal to deal (Part 542, effective 23 September 2024).

A shipper that considers a BAF unlawful files a sworn complaint with the FMC within 3 years of the claim accruing (46 U.S.C. 41301). Reparations cover actual injury, with up to twice the injury for specified violations and attorney fees (41305). A breach of a service contract is for the courts, not the Commission. The BAF terms inside a liner service contract are therefore a contract question first.

China: rate filing

China regulates the filing of liner rates, not their content. Article 14 of the PRC Regulations on International Ocean Shipping , as amended by State Council Order No. 817 of 28 September 2025, requires international liner operators and NVOCCs to file their freight rates. Published rates take effect 30 days after filing is accepted and agreed rates 24 hours after, and operators must apply the filed rates. Failure to file or to apply them carries a fine of CNY 20,000 to 100,000 under Article 38. Nothing in the text singles out BAF.

Hedging fuel price risk alongside BAF

A party that dislikes carrying fuel price risk under a BAF can hedge it with exchange-traded or over-the-counter fuel derivatives. ICE Futures Europe lists a Marine Fuel 0.5% FOB Singapore (Platts) future of 1,000 metric tonnes, cash settled monthly on the average of the Platts 0.5% FOB Singapore cargo assessment, alongside a Rotterdam barges contract. Swaps on the same assessments trade over the counter, and bunker hedging and bunker swaps covers their structure.

A hedge offsets a contractual BAF; it does not cancel it. A shipper that buys a fuel swap still owes the surcharge and nets the swap’s payout against it. Basis risk remains, because the carrier’s reference is a delivered multi-port average and the swap settles on one assessment at one hub. An owner hedging a freight position with a forward freight agreement should note that a short C5TC position already nets bunker cost, so a bunker swap on top of it partly repeats the same trade.

Disputes over bunker escalation clauses

An escalation clause is only as certain as the blanks filled in at fixture. The BIMCO 2004 clause leaves the price source, the grade, the band and the consumption to the parties, and a gap in any one of them leaves a tribunal to construe the fixture.

The band: two readings

The 2004 clause pays “any amount in excess of such increase or decrease” once the price leaves the band. Reading A pays only the part of the move beyond the band edge, so the band works as a deductible. Reading B pays the full move from the base once the band is breached. On the Capesize example above the two readings differ by USD 20,312.50 on a single voyage. The words favour reading A, and the clause does not expressly multiply the amount by the agreed consumption, although the consumption line has no other purpose. A fixture that states the arithmetic removes the question.

Index failure, grade mismatch and price date

A clause that names an index that stops publishing, or a grade the ship no longer burns, leaves the parties arguing construction. The post-2020 grade change is the common case: a COA written against 380 cSt high sulphur fuel oil and performed on VLSFO references a price that no longer describes the cargo of the bunker barge. A fixture drafted to avoid that argument names the grade against its ISO 8217 category, the publisher, the port, the price date and a fallback source.

The 2004 clause prices on a single day, the first day of loading. On a multi-voyage COA the parties decide whether that date is taken per voyage or once. Charter disputes of this kind go to arbitration under the fixture’s law and seat clause, for example London under LMAA terms, where awards are private.

History of the bunker surcharge

Bunker surcharges began as conference emergency measures in the 1973 oil crisis. UNCTAD’s Review of Maritime Transport 1972-1973 records that “out of a total of 155 bunker surcharges imposed during the year, only 13 had been introduced up to the end of October”, as supply and price moved in the last quarter of 1973. The same review counted 166 currency adjustment surcharges announced in 1973, up from 47 in 1972. Its tables label the fuel charge “bunker surcharge”, not BAF.

The UN Liner Code , the Convention on a Code of Conduct for Liner Conferences adopted at Geneva on 6 April 1974 and in force from 6 October 1983, set the rule for them. Article 16(1) treats surcharges “to cover sudden or extraordinary increases in costs or losses of revenue” as temporary, to be reduced as the situation improves and cancelled when it ends. Article 16(3) requires notice and consultation on request before imposition, and Article 17 deals with currency changes. Several European states, including Belgium, Denmark, Germany and the United Kingdom, later denounced it.

In EU trades, conference surcharges ran until the repeal in 2006 and the end of the transitional period in October 2008. The formula era that followed is carrier-specific: separate BAFs from 2008, a fuel price and trade factor structure from 1 January 2019, and single blended fuel fees from 2024. The UNCTAD Review of Maritime Transport has recorded shipper concern throughout; its 2023 edition states that formulas for “freight rates and surcharges, including fuel surcharges” are “generally an issue of concern for shippers”.

Comparison: liner BAF and charter-party escalation

Liner BAF and charter-party bunker escalation answer the same fuel price risk with different machinery.

Comparison constructed by Shipping-Wiki.com from the carrier notices and BIMCO clause texts cited, 25 September 2026.

Limitations

This article describes the published formulas of Maersk and CMA CGM. Other carriers publish their own methods, change them without a common schedule, and in some cases block automated access to their notices, so a named carrier’s current BAF must be taken from its own tariff on the booking date. The Maersk trade factor quoted is derived by dividing two published figures and is not a figure Maersk published.

The worked examples use hypothetical prices, voyage days and cargo quantities. Only the C5TC(182) consumption figures and the Maersk tariff figures are sourced. Real voyages add port consumption, weather and speed changes that alter the agreed or actual consumption.

The BIMCO 2004 clause is quoted from BIMCO’s current clause page; the construction of its band has not been decided in a published judgment, and the readings given are textual. EU ETS, FuelEU and US FMC rules are stated as at 25 September 2026. The IMO Net-Zero Framework is unadopted at that date and any adoption would change the carbon section. Customs valuation outcomes depend on the invoice, the Incoterms rule and the importing jurisdiction, and are not advice on a specific entry.

Related Articles

• Ocean Freight Cost and Surcharges
• Voyage Charter Party
• Time Charter Party
• NYPE 2015 Time Charter Form
• Worldscale
• Bunker Hedging and Bunker Swaps
• EU ETS for Shipping
• FuelEU Maritime Explained
• IMO 2020 Sulphur Cap
• Landed Cost and Import Duty
• Charter Party Speed and Consumption Warranties
• Slow Steaming