Currency Adjustment Factor - CAF

AAA

DEFINITION of 'Currency Adjustment Factor - CAF'

A type of charge applied on top of freight costs by carriers servicing trade between the United States and Pacific Rim countries. The charge was developed due to costs that carriers incur from constantly changing exchange rates between the U.S. dollar and other foreign currencies.

INVESTOPEDIA EXPLAINS 'Currency Adjustment Factor - CAF'

The currency adjustment factor rises as the value of the U.S. dollar falls. 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 are now looking to enter into "all inclusive" contracts at one price, that accounts for all applicable charges, to limit the effect of the CAF.

In the third quarter of 2005, the CAF charged on shipments to Japan was approximately 51%.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
  3. Free On Board - FOB

    A trade term requiring the seller to deliver goods on board a ...
  4. Incoterms

    Trade terms published by the International Chamber of Commerce ...
  5. Translation Exposure

    The risk that a company's equities, assets, liabilities or income ...
  6. Cost and Freight - CFR

    A trade term requiring the seller to arrange for the carriage ...
RELATED FAQS
  1. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  2. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  3. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  4. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  5. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  3. Economics

    A Comparison Between a Default and a Collapse

    Is the Greek default similar to the Lehman Brothers collapse?
  4. Savings

    Inflation for Dummies

    Inflation may seem like a straightforward concept, but it is more complex than it appears. We examine its varieties and causes.
  5. Economics

    How Does China Manage Its Money Supply?

    Here's how the Central Bank of China manages its currency rates and the money supply.
  6. Forex Strategies

    Three Currencies Benefiting From Low Oil Prices

    The Indian rupee is clearly the biggest beneficiary of the slide in oil prices, followed by the Indonesian rupiah and British pound.
  7. Economics

    Global Impact of China's Geopolitical Strategy

    China's geopolitical strategy is shifting the status quo from the Pacific to the Pentagon. Can the U.S. keep pace with Chinese military innovation?
  8. Economics

    What Happens to the Economy If China Deleverages

    Attempts to deleverage and institute reforms that will foster more sustainable growth could exacerbate an already slowing Chinese economy.
  9. Economics

    Do Transport Stocks Signal a U.S. Selloff?

    The Dow Jones Transportation Average index has underperformed the broader DJ Industrials Average, leading some market watchers to speculate a selloff.
  10. Economics

    Why U.S. Consumers Aren’t Spending

    Despite continued improvement in the labor market and lower gasoline prices, consumers' activity remains soft: retail sales growth is close to its lowest.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!