Ship Agent’s Fee

Although it may seem strange to introduce the subject of remuneration before considering the agent’s tasks, there is some logic to discussing the question of fees directly after having covered the subject of the methods of appointment. It would be very nice for agents if they, like lawyers, could avoid all mention of anything so mundane as money until after the event and then levy a charge based on the time spent and the expertise involved. Shipowners, however, have more than enough imponderables in their voyage calculations and so expect to agree the fee at the time of nominating the agent for the call in question. In most countries, the agents have formed themselves into some sort of association. In Britain they did this in 1911 when the association which eventually became the Institute of Chartered Shipbrokers was formed. Most such associations produce some sort of tariff of agency fees and at one time such a tariff or Scale of Minimum Agency Charges was mandatory upon all members of the association concerned. This is rarely the case today as the mandatory nature of such scales is now outlawed in many countries. The USA has had its anti-trust laws since the end of the last century. The United Kingdom extended its Restrictive Trade Practices Act to cover services during the latter part of the 1970s and this prohibition of mandatory scales of charges is reinforced by the free competition clauses in the Treaty of Rome which created the European Community. The argument in support of outlawing mandatory scales is that they protect the sub-standard agent and deter the better ones from striving for greater efficiency. Those in favor of tariffs argue that keeping the fees the same but competing in quality of service provides protection enough for the consumer. Be that as it may, owners still seem to welcome some sort of tariff for agency fees (just as much as they do for tugs and pilots) so that they can more quickly calculate their voyage estimates. Most such tariffs even when only advisory rather than mandatory tend to have some form of sliding scale based upon the size of the ship from which the basic fee is calculated with variations (usually additions) for non- standard tasks. There is an argument that says what the agent is selling is his time and that the same amount of time is expended on a 50,000 DWT as on a 150,000 DWT. The converse of this does not work, however, because one could take the same argument down perhaps to a 15,000 DWT, the owner of which would heartily object to paying the sort of fee appropriate to the responsibility involved in attending a ship ten times bigger. The consequence is that most agency fees scales are based on a delicate balance of time, responsibility and size, the last being, in reality, a question of ‘what the market will bear’. Incidentally, under most anti-competition laws it is not an offence to base one’s charges on the scale, the offence would be for two or more agents to agree among themselves to charge the same, or for the institution publishing the scale to attempt to make it obligatory. Whether a tariff is in existence or not, except in those few countries where there is a mandatory scale it is important for the agent to agree the fee before the ship arrives. Almost invariably the fee does not include the agent’s out-of-pocket expenses such as the cost of communicating with the owner (e.g. cables, telex, fax, telephone etc) the cost of travelling to and from the ship (e.g. cab-fares or a car mileage charge) and similar items. These will be charged to the owner but will have to be justified in exactly the same way as any other items in the disbursement account. Naturally some ships require the expenditure of more time and effort than others do but except in the case of truly extraordinary circumstances the same fee is charged for the same size/type of ship. The differences involve the agent taking the ‘rough with the smooth’ in the hope that things average themselves out in the end.