Shipping Exchange Rate – Implications of the District Court Settlement

The judgment rendered by the Central District Court (Lod) in Civil Case 35587-02-20 (Hon. Judge Avi Porat, October 29, 2025) addresses a recurring issue in the shipping sector and in international trade more broadly: where service charges are denominated in U.S. dollars but paid in Israeli shekels, which exchange rate governs the conversion. The importer sought certification of a class action against the shipping company, alleging that it applied a “shipping exchange rate” – namely, an internal or contractually determined rate – that exceeded publicly available exchange rates and was therefore misleading and unfair. The shipping company, for its part, argued that this is a well-established industry practice and that no legal rule requires the use of the Bank of Israel representative exchange rate.

To understand the dispute, it is useful to clarify what is meant by a “shipping exchange rate.” In the shipping industry, many charges are quoted in U.S. dollars (or euros) due to foreign-denominated pricing, international tariffs, overseas costs, and frequent market fluctuations. Many customers in Israel, however, request invoices in shekels and seek advance certainty as to the amount ultimately payable. This creates the need for a currency-conversion mechanism. Some companies peg charges to the representative exchange rate, some rely on a specific bank rate, and others apply their own “shipping exchange rate.” When the dollar fluctuates sharply, even a modest gap in the exchange rate may translate into significant sums, particularly for high-volume importers.

The importer’s principal argument was straightforward: if the Bank of Israel publishes a representative exchange rate, and the market generally regards it as the default benchmark, a shipping company should not unilaterally apply a different rate – particularly where that rate is higher and increases the effective price of the services. In the importer’s view, this was not merely a pricing issue but also a disclosure issue: a customer may receive a quotation that appears reasonable in dollar terms, only to discover that the shekel amount is higher because the exchange-rate mechanism was not clearly disclosed in advance. The importer also relied on various legal provisions and advanced arguments rooted in disclosure, transparency, and commercial fairness.

The shipping company responded that the shipping exchange rate forms part of the overall contractual price. Just as the parties negotiate freight rates, handling charges, surcharges, and credit terms, they may also agree on the currency-conversion mechanism. The company emphasized that this practice is longstanding in the shipping industry and is justified on both operational and economic grounds. Timing gaps often arise between the date of service, the invoice date, the payment date, and the dates on which the shipping company pays its overseas counterparties. Currency volatility, together with credit and financing costs and the need for commercial predictability, may therefore justify a contractual conversion rate as a risk-allocation and pricing mechanism. The company further argued that, absent a clear statutory prohibition, parties remain free to agree on commercial terms, including a contractual exchange rate.

The court did not determine the merits of whether charging on the basis of a shipping exchange rate is lawful, nor did it decide what the “correct” exchange rate should be. The proceeding concluded by way of a withdrawal settlement, and therefore no binding judicial determination was issued regarding the legality of the practice itself. The court’s analysis focused instead on whether the motion disclosed an arguable cause of action and whether the settlement conferred a tangible public benefit.

First, the court held that the motion was not frivolous. At the time of filing, the court considered that the certification motion disclosed a prima facie cause of action. This indicates that, even if the shipping exchange rate is common industry practice, it is not insulated from judicial scrutiny at the preliminary stage.

Second, the court identified a concrete public benefit in the form of enhanced transparency. The shipping company undertook to publish on its website the method used to determine the shipping exchange rate and to refer to that mechanism in its customer agreements. The court regarded these undertakings as forward-looking measures that would enable customers to understand the applicable rate, the manner in which it is set, and where it may be verified. Although the court did not invalidate the practice, it underscored the importance of clear and accessible disclosure.

The court therefore approved the withdrawal. It dismissed the certification motion and rejected the importer’s personal claim, while giving effect to the shipping company’s transparency undertakings, together with the agreed compensation and attorneys’ fees. The outcome was thus not a substantive ruling on the validity of the shipping exchange rate, but rather an approved resolution that establishes clearer expectations going forward.

The judgment does not provide a definitive answer as to whether a shipping exchange rate is “permitted” or “prohibited.” Its principal takeaway is that where an exchange-rate mechanism affects the price charged, it must be disclosed clearly and in advance. Customers should be able to understand the applicable rules beforehand, and shipping companies should present those rules in a straightforward and accessible manner.

Practical recommendations for importers: (1) Address the exchange-rate mechanism expressly during the commercial negotiation. Ask what the shipping exchange rate is, which benchmark it is based on, what spread or margin is added, and on what date the rate is fixed for billing purposes. (2) Require the mechanism to be set out in writing in the quotation or agreement. A generic reference to a “shipping exchange rate” is insufficient for verification or meaningful comparison. (3) Compare competing offers on the basis of the total shekel cost, rather than by reference to the dollar-denominated tariff alone, since two identical dollar quotations may yield materially different shekel totals depending on the conversion methodology.

Practical recommendations for shipping companies: (1) Treat the shipping exchange rate as a pricing component requiring disclosure and explanation, not as an internal technical detail. Publishing the exchange-rate mechanism on the website and referring to it in contractual documents are sound commercial practices. (2) Disclose the mechanism in plain language, including the benchmark source, any margin or spread, and the timing of updates, ideally accompanied by a brief numerical example (for example, “invoice-date representative rate plus X agorot”). (3) Apply the mechanism consistently, since inconsistency or ad hoc changes are common triggers for disputes. (4) Make both the daily rate and the mechanism readily accessible, whether through the website, the invoice, or a contractual reference. (5) Address the exchange-rate issue at the contracting stage rather than leaving it to the invoicing stage, thereby reducing the risk of subsequent claims of surprise, inadequate disclosure, or lack of transparency.

A shipping exchange rate may serve as a legitimate pricing mechanism, but it is commercially and legally sensitive because it directly affects price comparability and perceptions of fairness. Even in the absence of a merits ruling, the judgment signals that courts may regard clear and accessible disclosure of the exchange-rate mechanism as the principal safeguard, and as a meaningful public benefit in this context. Importers and shipping companies that adopt transparent practices at the outset are likely to face fewer disputes and to build stronger commercial relationships founded on trust and mutual understanding.