Commission

Address commission also varies in amount. A few charterers do not apply it at all whilst a further few negotiate as much as 5%. Thus the total commission (i.e. address commission plus brokerages) due on dry-cargo business may vary from as little as 1.25% to as much as 7.50% perhaps even more. The norm for deep-sea dry-cargo business is around 3.75/5%, although for certain trades – e.g. sugar business – it is traditionally higher at 6.25%, and other traditionally less – e.g. The World Food Programme, of the United Nations – at 1.25%. Whatever the amount of total commission, however, it is a matter for assessment in the appropriate freight rate, just as for any other factor – e.g. port time. Shipowners must obviously take the total amount into consideration when negotiating freight levels, as it is on net income that returns and profits/losses are calculated. Although in certain cases these brokerages may seem generous, it should be remembered that a broker’s income very much follows the fluctuations of the freight market in which he or she is involved. The lower the freight rates, the harder it is necessary to strive to fix business and the lower the return if successful, based as brokerage is on depressed freight rate levels. Furthermore, a broker receives income only if successful. All those failures and near misses, even though costly in terms of time and expenses, count for nothing unless a confirmed fixture results. Nevertheless, a broker may be able to gain some protection in the case of ‘non-performance’ of confirmed business, as is provided, for example, in the GENCON charterparty, which states – ‘In case of non-execution at least 1/3rd of the brokerage on the estimated amount of freight and dead-freight to be paid by the Owners to the Brokers as indemnity for the latter’s expenses and work. In case of more voyages the amount of indemnity to be mutually agreed’. Few printed charterparties are so generous, however, and it behoves brokers to endeavour to persuade principals to cover them against the financial expenses and time involved in the case of cancellation of a negotiated fixture.