EXPECT a five per cent currency charge on freight costs for imported goods.
The TT Shipping Association gave this warning in a statement yesterday titled: Currency Adjustment Factor is introduced to TT.
The notice is aimed at importers, exporters and manufacturers plus anyone importing goods for which foreign exchange is needed for payment of freight.
Several shipping lines, either directly or through their local agents, have introduced a currency adjustment factor (CAF).
This would provide an increase in the freight rate if paid in local currency.
“A CAF is a mechanism used in international shipping to offset or mitigate against losses where cargo and/or freight is payable in foreign currency and this currency is subject to major exchange rate fluctuations or shortages,” the statement said. It is often charged as a percentage of the basic sea freight.
Forex shortage persistent
“Given what is now a persistent shortage of foreign exchange, carriers, shipping lines and shipping agents have been forced to engage in a number of sophisticated financial options, including cross-currency swaps to acquire the foreign exchange needed for repatriation.”
Even then, chronic delays in sourcing the foreign exchange create a backlog of outstanding foreign currency payments, it said.
“Shipping lines are no longer prepared to absorb the associated costs and risks, hence the introduction of the CAF.”
The CAF will not be applied when payment is being made in the required foreign currency, the association said.
“Affected parties can expect to see charges starting at five per cent of basic freight rates. The charge will of course be dependent on the cost structure faced by the line or shipping agent.
“Importers/ exporters /manufacturers/consignees are encouraged to demand an explanation from their agent where they experience a charge way in excess of his baseline, five per cent."
The association said the CAF ought not to be charged on the Local Administration Charge.