Commissions

The chartering brokers involved in the negotiation of the charter will be rewarded by a commission or brokerage.  Normally this is at the rate of 1.25% to each broker. Remember there may well be more than one or two brokers, in fact quite a ‘chain’ can become involved if the source of the business is very remote from the owner’s base. Commission is payable under a time charter on the total hire paid and under a voyage charter, on the gross freight.  In several voyage charter parties the commission clause will show it to be payable on ‘freight, deadfreight and demurrage’ (commissions are never payable on despatch). In some trades one encounters other deductions, a common one is ‘Address Commission’.  This is payable to the charterers themselves not to a broker and the precise reason for it may be obscure.  In some cases its origins are lost in time but, as mentioned elsewhere, traditions die hard in the chartering world.  Apart from lingering in a trade from tradition, address commission is often a convenient way for a subsidiary company in an exporting group to receive its share of the income from the trade. Another deduction one may encounter is not a commission at all but is an amount, usually 1%, ‘in lieu of weighing’. As the expression implies, the deduction is made because the charterers are willing to pay freight on the Bill of Lading quantity less 1% rather than weigh the cargo at discharging port and pay freight on the outturn weight.  In fact the chances of the charterers ever opting to weigh the cargo out are remote in the extreme and this deduction is really another example of a tradition which continues without logical reason. The ship manager’s Operations Department being a separate concern from those involved in ‘working the ship on the market’.  There will, of course, always need to be close liaison between the chartering personnel and those managing the ship and in the case of in-house management those making the commercial decisions and authorising brokers to negotiate could well be part and parcel of the Operations Department.