Shipbrokers’ Duties

Shipbrokers’ Duties

Despite their integral role in negotiating, shipbrokers are often unjustly labeled as parasites by certain principals. Their expertise encompasses far more than just having the necessary connections.

It is crucial that the trading and legal professions refrain from either mistreating or neglecting the vast majority of shipbrokers. However, it is also prudent to exercise caution and steer clear of the few bad actors among them.

Conversely, it would behoove many shipbrokers to critically evaluate their principals.

Shipbrokers are the Shipowners’ and Charterers’ link with the market, so it is up to the shipbroker to keep their principals, Shipowners and Charterers, informed about developments in the market, even though the principal may not be planning any market operations at the moment.

It is this information that makes it possible for both parties, Shipowners and Charterers, to plan ahead. To assist with this, most of the large shipbrokers maintain a computer database giving the current position and status of all ships in which they specialise.

The charterers are therefore able to check on the tonnage that is available before they enter the market. This helps them to ensure that they can get a good rate, since there may be several owners interested in their business.

It is the job of the Shipowners’ Shipbroker to ensure that all charterers who may have a cargo from an area where his ship could load know the position and the details of his ship. This entails contacting not only the charterer’s agents but the competitive shipbrokers as well.

The function of the Charterer’s Shipbroker is to ensure that all possible owners are aware of his need for a ship in order to enable him to obtain the best possible rate.

Shipbrokers Duties towards their Principals

Shipbrokers must be aware of the necessary application of basic agency law. Shipbrokers must always work within their ‘warranty of authority’ as defined by their principal shipowner or charterer. Even if shipbrokers take on the mantle of an ‘agent of necessity’, they should always ensure that their principal ratifies their actions within time, otherwise the shipbrokers might find that they have become a principal, which will have several potentially devastating effects:

  1. Shipbrokers will almost certainly not be able to afford to become that principal by providing a ship or a cargo
  2. Shipbrokers might be accused of misrepresentation
  3. Shipbrokers might not be able to defend their error
  4. Shipbrokers action might invite an expensive law suit
  5. the result of such action could ruin the shipbrokers financially
  6.  irrespective of any legal action, the shipbrokers’ reputation would probably never recover.

Shipbroker’s Role In Negotiating And Fixing Charterparties

Chartering forms the most important method of employing a ship and there is a world-wide network of shipbrokers involved in chartering ships.

Traditionally, these Shipbrokers may work as

  • Shipowners’ Shipbrokers
  • Charterers’ Shipbrokers
  • Competitive Shipbrokers

In London, this distinction is not so clear, as most charterers put their business out through several brokers, so a large charterer may employ a number of brokers.

Shipowners frequently have the brokering function in-house, hence the term House Broker.

Shipbrokers Ethics

The motto of both the Baltic Exchange and the Institute of Chartered Shipbrokers (ICS) is ‘Our Word Our Bond’, which embodies a very strong Code of Ethics. The need for a code of ethics comes from the fact that much of the business is based on word of mouth and is only followed up later by written confirmation.

The spoken word legally binds both principals, Shipowners and Charterers, to each other via the Shipbroker or Shipbrokers. This is a very powerful negotiating tool and is only useable by approximately 5,500 brokers world-wide, comprising 2,000 members of the Baltic Exchange and 3,500 Members and Fellow of the Institute of Chartered Shipbrokers (ICS).

The value of the Code of Ethics is that it makes it possible to transact business from a position of trust, without which it would be very difficult to fix ships. BIMCO (Baltic and International Maritime Council) also recommend to their members various principles of chartering.

Shipbrokers in Three Geographic Areas

International shipbroking markets are in Three Geographic Areas:

  1. America – represented by New York, with assistance from branch offices in San Francisco and Vancouver;
  2. Asia  – Tokyo, Seoul, Shanghai, Hong Kong, Singapore, Sydney and Melbourne; and
  3. Europe – Piraeus, Oslo, Hamburg and Copenhagen for owners, Paris for charterers (especially traders of soft commodities) and London, which is still the main centre of international shipbroking, covering approximately 45%  of all world shipping trades. Whilst this is a  reduction  from  the domination of handling 75% of world shipping until 1992, London still covers more than most minor chartering broking centres combined.

 

What does a Shipbroker Job Description include?

A shipbroker is a professional who acts as an intermediary between shipowners and charterers, providing a range of services related to the chartering and sale of ships. A shipbroker’s job description may include the following responsibilities:

  1. Shipbrokers and Marketing: Shipbrokers market ships for charter or sale to potential clients, including shipowners, charterers, and traders. This involves developing and maintaining relationships with clients, tracking market trends and opportunities, and utilizing advertising and promotional materials to attract business.
  2. Shipbrokers and Negotiation: Shipbrokers negotiate the terms of charter parties and sale agreements on behalf of their clients. This may include negotiating the freight rate, duration of the charter, and other terms and conditions of the agreement.
  3. Shipbrokers and Documentation: Shipbrokers prepare and review legal documentation related to charter parties and sale agreements, such as bills of lading, charter party agreements, and contracts of sale. They may also assist with customs and immigration procedures and other administrative tasks related to ship operations.
  4. Shipbrokers and Market Analysis: Shipbrokers conduct market research and analysis to assess the supply and demand for ships and other market conditions that may impact ship charter or sale rates. This analysis may involve tracking freight rates, ship availability, and other industry data to inform their clients’ decisions.
  5. Shipbrokers and Relationship Management: Shipbrokers maintain relationships with shipowners, charterers, and other industry professionals to stay informed of market conditions and opportunities. They may also attend industry events and conferences to network and build relationships with potential clients.
  6. Shipbrokers and Risk Management: Shipbrokers may provide risk management services to their clients, such as insurance advice or assistance with regulatory compliance. They may also advise clients on potential risks associated with particular ships or charter routes.
  1. Shipbrokers and Problem-Solving: Shipbrokers must be able to identify and solve problems that may arise during the charter or sale process. This may involve negotiating with conflicting parties, managing delays or disputes, and finding creative solutions to complex issues.
  2. Shipbrokers and Financial Management: Shipbrokers are responsible for managing the financial aspects of ship charters and sales. This may include negotiating payment terms and ensuring timely payment of charter fees, commissions, and other expenses.
  3. Shipbrokers and Ship Inspections: Shipbrokers may perform ship inspections to assess the condition and suitability of ships for charter or sale. This may involve coordinating with surveyors, port authorities, and other stakeholders to ensure compliance with safety and regulatory standards.
  4. Shipbrokers and Client Communication: Shipbrokers must maintain clear and effective communication with their clients throughout the charter or sale process. This includes providing regular updates on market conditions, negotiating terms and conditions of agreements, and managing client expectations.

Shipbroker’s job description involves providing a range of services to clients in the maritime industry, with a focus on facilitating the chartering or sale of ships. The role requires strong communication, negotiation, and analytical skills, as well as a deep understanding of the shipping industry and market conditions. Shipbrokers play a critical role in facilitating the chartering and sale of ships by providing a range of services related to marketing, negotiation, documentation, market analysis, relationship management, risk management, problem-solving, financial management, ship inspections, and client communication. Successful shipbrokers must have a deep understanding of the shipping industry and possess strong communication, negotiation, analytical, and problem-solving skills to meet the needs of their clients and navigate complex market conditions.

 

What services are provided by shipbrokers?

Shipbrokers provide a wide range of services to various parties in the shipping industry, such as ship owners, charterers, and cargo owners. Their primary role is to act as intermediaries, facilitating transactions and negotiations related to the movement of goods by sea. Some of the key services provided by shipbrokers include:

  1. Ship Chartering: Shipbrokers assist in finding suitable vessels for transporting cargo, either on a voyage or time charter basis. They negotiate the terms and conditions of the charter party agreement, such as freight rates, laytime, demurrage, and other clauses, ensuring a fair deal for both the charterer and the ship owner.
  2. Ship Sale and Purchase (S&P): Shipbrokers facilitate the buying and selling of vessels, newbuildings, and second-hand ships. They advise clients on market trends, vessel valuations, and suitable opportunities, while also assisting in negotiations, contract drafting, and coordinating the necessary inspections and documentation.
  3. Shipping Market Analysis and Research: Shipbrokers provide clients with valuable market insights, such as freight rate forecasts, market trends, and supply and demand analysis. They also track global trade patterns, political developments, and economic factors that may impact the shipping industry.
  4. Ship Valuation: Shipbrokers assess the value of vessels for sale or purchase, taking into account factors such as age, condition, specifications, and market trends. This service is essential for clients looking to buy, sell, or finance ships.
  5. Ship Finance and Investment Advice: Shipbrokers may offer advice on financing options for ship owners and investors, such as bank loans, lease agreements, or equity investments. They can also assist in identifying investment opportunities in the shipping industry, such as joint ventures, mergers, or acquisitions.
  6. Ship Demolition Brokerage: Shipbrokers help coordinate the sale of end-of-life vessels for scrapping, ensuring compliance with international regulations and environmental standards. They also negotiate the best terms for their clients and assist in the logistics and documentation involved in the scrapping process.
  7. Ship Management and Ship Operations: Some shipbrokers provide ship management services, overseeing the day-to-day operations, maintenance, and crewing of vessels. They ensure that ships are in compliance with international regulations and safety standards.
  8. Bunker (Fuel) Brokerage: Shipbrokers may also facilitate the procurement of fuel (bunkers) for vessels, negotiating the best prices and delivery terms on behalf of their clients.
  9. Cargo Brokerage: Shipbrokers can help cargo owners find suitable transportation options for their goods, whether it be by sea, air, or land. They can also assist in securing competitive freight rates and ensuring the safe and efficient handling of cargo.
  10. Risk Management and Ship Insurance: Shipbrokers may advise clients on risk management strategies and assist in securing appropriate insurance coverage for vessels, cargo, and operations.

These services, among others, demonstrate the diverse range of expertise and knowledge that shipbrokers bring to the shipping industry, helping to facilitate smooth transactions and efficient operations for their clients.

 

 

Key skills and qualifications of Shipbroker

A shipbroker is a specialized professional who serves as an intermediary between ship owners, charterers, and other parties involved in the shipping industry. They are responsible for negotiating and arranging the transportation of goods by sea, as well as the buying and selling of ships. To excel in this profession, a shipbroker should possess the following key skills and qualifications:

  1. Education: A bachelor’s degree in maritime studies, international trade, business administration, or a related field is often required. Some shipbrokers may also have a background in law, economics, or finance.
  2. Industry knowledge: A thorough understanding of the shipping industry, including its regulations, market trends, and vessel types is essential. Familiarity with various shipping routes, ports, and trade patterns is also necessary.
  3. Negotiation skills: Shipbrokers must be skilled negotiators, as they are responsible for securing the best terms and conditions for their clients. This includes negotiating freight rates, chartering agreements, and ship sale and purchase contracts.
  4. Communication skills: Excellent verbal and written communication skills are crucial for maintaining clear and effective communication with clients, ship owners, charterers, and other stakeholders.
  5. Analytical skills: Shipbrokers need to analyze market data and trends to provide informed advice to clients on shipping matters, such as freight rates, vessel valuations, and market forecasts.
  6. Networking and relationship-building: Establishing and maintaining strong professional relationships within the maritime community is vital for a successful shipbroker. Networking can help identify potential clients and business opportunities.
  7. Multilingualism: The ability to speak multiple languages is highly advantageous in this global industry. Proficiency in languages like English, Mandarin, Greek, Japanese, or Russian can improve communication with international clients and stakeholders.
  8. Attention to detail: Shipbrokers must be thorough and precise when drafting contracts, preparing documentation, and managing transactions to ensure the smooth completion of deals.
  9. Time management and multitasking: Shipbrokers often work on multiple deals simultaneously and must be able to prioritize tasks and manage their time efficiently.
  10. Problem-solving skills: The ability to think on your feet and find creative solutions to challenges that may arise during negotiations or transactions is crucial for a shipbroker.
  11. Computer literacy: Proficiency in Microsoft Office applications and other relevant software, such as shipbroking and market analysis tools, is essential.
  12. Certifications: Obtaining professional certifications, such as the Institute of Chartered Shipbrokers (ICS) qualification or the Baltic Exchange courses, can enhance a shipbroker’s credibility and expertise in the industry.
  1. Adaptability: The shipping industry is dynamic and ever-changing, so shipbrokers must be adaptable and willing to learn new skills to stay ahead of the curve. This includes staying updated on industry news, regulations, and technological advancements.
  2. Teamwork: Shipbrokers often work as part of a team, collaborating with colleagues and professionals from different sectors, such as insurers, surveyors, and lawyers. The ability to work well with others and contribute to a positive team environment is crucial.
  3. Customer service skills: Shipbrokers should prioritize client satisfaction by understanding their needs and providing prompt, reliable, and professional service. This includes being responsive, attentive, and proactive in addressing concerns or issues that may arise during a transaction.
  4. Resilience and stress management: The fast-paced nature of the shipping industry, combined with the high-stakes nature of negotiations and transactions, can be stressful. Shipbrokers should be able to remain calm under pressure and demonstrate resilience in the face of challenges.
  5. Ethical conduct: Shipbrokers must act with integrity, honesty, and transparency in their dealings with clients and other stakeholders. Familiarity with industry codes of conduct and ethics is important to ensure compliance and maintain a strong professional reputation.
  6. Cultural sensitivity: Shipbrokers interact with clients and colleagues from diverse cultural backgrounds. Being sensitive to cultural differences and demonstrating respect for others can help foster positive relationships and facilitate effective communication.
  7. Decision-making skills: Shipbrokers should be able to make informed decisions quickly and efficiently, taking into account various factors, such as market conditions, client needs, and potential risks.
  8. Sales and marketing skills: Shipbrokers must be able to promote their services effectively and secure new clients. This requires strong sales and marketing skills, such as persuasive communication, networking, and developing marketing strategies.

A successful shipbroker should have a solid educational background, strong industry knowledge, and a range of interpersonal, analytical, and technical skills. Continual professional development and staying informed about industry trends are essential for staying competitive and achieving long-term success in this challenging and rewarding field. Please check Institute of Chartered Shipbrokers (ICS) we page www.ics.org.uk

 

Who pays the shipbroker?

A shipbroker’s fees, commonly known as brokerage or commission, are usually paid by the party who hires them or benefits from their services. In most cases, shipbrokers are paid by one or more of the following parties:

  1. Ship owners: When a shipbroker is hired to find a suitable charterer for a vessel, the ship owner typically pays the commission. The shipbroker negotiates the terms of the charter party agreement and secures a cargo or charterer for the vessel, thus earning their fee.
  2. Charterers: If a shipbroker is engaged to find a suitable vessel for a charterer’s cargo, the charterer will pay the brokerage fee. The shipbroker assists in negotiating the charter party agreement and ensures that the vessel meets the charterer’s requirements.
  3. Ship Buyers and Sellers: In the case of ship sale and purchase transactions, both the buyer and the seller can pay the shipbroker’s commission. The fees are often split between the buyer’s broker and the seller’s broker, with each party paying their respective broker.
  4. Cargo owners: If a shipbroker is involved in cargo brokerage, the cargo owner may pay the commission. The shipbroker helps the cargo owner find suitable transportation options for their goods and negotiates freight rates on their behalf.

The exact percentage or amount of the commission paid to a shipbroker depends on the specific services provided and the terms agreed upon between the shipbroker and the client. Brokerage fees typically range from 1% to 2.5% of the total value of the transaction, such as the freight rate for a charter or the sale price of a vessel. In some cases, fees may be negotiated on a flat rate or lump sum basis.

It is important to note that shipbrokers are expected to act ethically and transparently in their dealings and must disclose any potential conflicts of interest, such as receiving fees from multiple parties involved in a transaction.

 

Why use a shipbroker? What is the advantage of using a shipbroker?

Using a shipbroker can provide numerous advantages for parties involved in the shipping industry, such as ship owners, charterers, cargo owners, and investors. Some of the key reasons to use a shipbroker include:

  1. Expertise and experience: Shipbrokers possess in-depth knowledge of the shipping industry, vessel types, market trends, and regulations. Their expertise allows them to provide informed advice, making it easier for clients to make well-informed decisions.
  2. Negotiation skills: Shipbrokers are skilled negotiators, enabling them to secure the best terms and conditions for their clients. They can help negotiate freight rates, charter party agreements, and ship sale and purchase contracts, ensuring a fair deal for all parties involved.
  3. Time and resource savings: Engaging a shipbroker can save clients time and effort, as the broker handles the complex process of searching for suitable vessels, cargo, or counterparties. Shipbrokers also manage negotiations, documentation, and other logistical aspects, allowing clients to focus on their core business.
  4. Access to market information: Shipbrokers have access to up-to-date market data, trends, and analysis. This information is invaluable for clients, as it allows them to make informed decisions based on current market conditions and future forecasts.
  5. Extensive network: Shipbrokers have a broad network of contacts within the maritime industry, including ship owners, charterers, and other professionals. This network enables them to identify potential clients, business opportunities, and suitable vessels or cargo more efficiently.
  6. Customized solutions: Shipbrokers can tailor their services to meet the unique needs of each client, offering customized solutions that align with specific requirements, budget, and preferences.
  7. Risk mitigation: Shipbrokers can help clients manage risks associated with shipping transactions by conducting thorough due diligence, ensuring that all parties involved are reputable and reliable. They can also advise on risk management strategies and insurance coverage.
  8. Compliance: Shipbrokers are familiar with international shipping regulations and standards, ensuring that all transactions are compliant with relevant laws and guidelines. This reduces the risk of non-compliance penalties and legal issues.
  9. Dispute resolution: In the event of disputes or conflicts between parties, shipbrokers can act as intermediaries to facilitate communication and resolve issues. Their knowledge of industry practices and contract terms can be instrumental in finding amicable solutions.
  10. Cost-effectiveness: By leveraging their expertise and network, shipbrokers can help clients secure competitive freight rates, vessel prices, and other shipping costs. This can result in significant cost savings for clients over time.

In summary, using a shipbroker can provide valuable expertise, time savings, and access to industry networks, leading to more efficient and cost-effective shipping transactions. Their services can help clients navigate the complexities of the maritime industry, minimize risks, and ensure compliance with regulations.

What skills do you need to be a shipbroker?

To be a successful shipbroker, one should possess a variety of skills and qualifications that are relevant to the shipping industry. Here are some of the key skills needed to excel in this profession:

  1. Education: A bachelor’s degree in maritime studies, international trade, business administration, or a related field is often required. Some shipbrokers may also have a background in law, economics, or finance.
  2. Industry knowledge: A comprehensive understanding of the shipping industry, including its regulations, market trends, and vessel types is essential. Familiarity with various shipping routes, ports, and trade patterns is also necessary.
  3. Negotiation skills: Shipbrokers must be skilled negotiators, as they are responsible for securing the best terms and conditions for their clients. This includes negotiating freight rates, chartering agreements, and ship sale and purchase contracts.
  4. Communication skills: Excellent verbal and written communication skills are crucial for maintaining clear and effective communication with clients, ship owners, charterers, and other stakeholders.
  5. Analytical skills: Shipbrokers need to analyze market data and trends to provide informed advice to clients on shipping matters, such as freight rates, vessel valuations, and market forecasts.
  6. Networking and relationship-building: Establishing and maintaining strong professional relationships within the maritime community is vital for a successful shipbroker. Networking can help identify potential clients and business opportunities.
  7. Multilingualism: The ability to speak multiple languages is highly advantageous in this global industry. Proficiency in languages like English, Mandarin, Greek, Japanese, or Russian can improve communication with international clients and stakeholders.
  8. Attention to detail: Shipbrokers must be thorough and precise when drafting contracts, preparing documentation, and managing transactions to ensure the smooth completion of deals.
  9. Time management and multitasking: Shipbrokers often work on multiple deals simultaneously and must be able to prioritize tasks and manage their time efficiently.
  10. Problem-solving skills: The ability to think on your feet and find creative solutions to challenges that may arise during negotiations or transactions is crucial for a shipbroker.
  11. Computer literacy: Proficiency in Microsoft Office applications and other relevant software, such as shipbroking and market analysis tools, is essential.
  12. Certifications: Obtaining professional certifications, such as the Institute of Chartered Shipbrokers (ICS) qualification or the Baltic Exchange courses, can enhance a shipbroker’s credibility and expertise in the industry.

In addition to these core skills, qualities such as adaptability, teamwork, customer service, resilience, ethical conduct, cultural sensitivity, decision-making, sales and marketing, and an understanding of risk management and insurance will further contribute to a successful career in shipbroking.

 

Shipowners’ Shipbroker Vs Charterer’s Shipbroker

In the shipping industry, shipbrokers play a crucial role in facilitating transactions between shipowners and charterers. A shipbroker is an intermediary who helps negotiate and arrange contracts for the transportation of goods by sea. They can represent either the shipowner or the charterer, depending on their expertise and the specific needs of their clients. This leads to the distinction between a shipowners’ shipbroker and a charterer’s shipbroker.

  1. Shipowners’ Shipbroker: A shipowners’ shipbroker primarily represents the interests of the shipowner. Their main responsibility is to find suitable cargo for their client’s vessel(s) and negotiate the terms of the contract, known as a charter party, with the charterer or their broker. The shipowners’ shipbroker also helps in arranging necessary documentation, coordinating with port agents, and ensuring that the vessel meets the requirements set by the charterer. Their main goal is to secure the best possible charter rates and conditions for the shipowner.

Key tasks of a shipowners’ shipbroker:

  • Find suitable cargo for the shipowner’s vessels
  • Negotiate charter rates and contract terms
  • Arrange documentation and coordinate with port agents
  • Ensure vessel complies with charterer’s requirements
  • Provide market analysis and advice to shipowners
  1. Charterer’s Shipbroker: A charterer’s shipbroker represents the interests of the cargo owner or charterer. Their primary role is to find suitable vessels to transport the cargo, negotiate the terms of the charter party with the shipowner or their broker, and ensure that the vessel meets the charterer’s requirements. They must also closely monitor the market for the best available vessels and charter rates, taking into account the charterer’s preferences, such as the size and type of vessel, the route, and the desired delivery schedule.

Key tasks of a charterer’s shipbroker:

  • Find suitable vessels for the charterer’s cargo
  • Negotiate charter rates and contract terms
  • Ensure vessel complies with the charterer’s requirements
  • Monitor market trends and provide advice to charterers
  • Coordinate with port agents and other parties involved in the shipment

Both shipowners’ and charterers’ shipbrokers play vital roles in the shipping industry by representing the interests of their respective clients. While their responsibilities may overlap in some areas, such as negotiating charter rates and ensuring vessel compliance, they each have a unique focus. Shipowners’ shipbrokers work to secure the best possible charter rates and conditions for shipowners, while charterers’ shipbrokers aim to find the most suitable vessels for transporting their clients’ cargo at competitive rates.