Currency clauses. These have application to both liner shipping and tramp shipping.
In liner shipping, liner conferences may use a “Currency Adjustment Factor” (CAF) to modify the tariff for cargo carried on board the members’ ships because of fluctuations and uncertainties in foreign exchange rates. In chartering, terms are used in charterparties to deal with similar problems, to compensate one or other of the parties if currency exchange rates fluctuate. Currency clauses can also be “with parity” where the clause operates so as to protect both parties if foreign exchange rates alter. For example, a clause in a charterparty can state:
“The freight and the demurrage rate in this Charterparty is based on a rate of ex- “change where USD 1 is equal to (X) (This is the contractual rate of exchange] . If, at the date of actual payment, the bind rate for USD quoted by . . . bank, differs from the contractual rate of exchange by … percent, the U.S. Dollar shall be adjusted to realise the same amount of (X) as if the contractual rate of exchange was used”
(This is similar to the “Parity clause” found in the British Petroleum (BP) charterparty.) BIMCO also recommends a protective “Currency clause” for time charters as follows:
“It is mutually agreed that the monthly hire due under Clause . . . is based upon the mean of the present Bank of England’s selling and buying rate for the U.S. dollar, viz: $ … to the Pound Sterling. Should this mean rate fluctuate it is understood and agreed that the Sterling hire payments shall be adjusted upwards or downwards and the amount actually payable in Sterling shall be the hire calculated at the agreed rate in Sterling of GBP . . . multiplied by $ . . . and divided by the new mean rate in force on the due date of the payment.”
Different currency clauses can be found in other charterparties; for example, in tanker time charters, the INTERTANKO Currency clause or the INTERTANKO “U.S. Dollar Exchange Rate clause” may be used. The former contains two “Attachments”, one dealing with spot exchange rates on a certain date, thus relating the charter hire to a contractual exchange rate related, in turn, to a basket of nine currencies, and the other being a sample calculation. The latter applies to charterparties for medium or long periods, fixing the charter hire in U.S. dollars.