The currency adjustment factor (CAF) is a fee placed on top of freighting charges for carrier companies. The charge was developed to account for constantly changing exchange rates between the dollar and other currencies. Thus its goal is to offset any losses from constantly fluctuating exchange rates for carriers. Calculation basis & methodology might 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 recent years, the CAF charged on shipments to Japan was 51%.
Video Currency adjustment factor
References
Source of the article : Wikipedia
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