TTM15260 - Background material: Brokers and agents for shipping companies

Commission

For dry cargoes, owner’s and charterer’s brokers might each earn commission of 1.25% of the freight charge.  A tanker broker may receive 2.5% on cargoes of less than 15,000 tons, but only 1.25 per cent on larger cargoes.  Although only one broker may be acting in the ‘wet’ trade, a charterer may demand an ‘address commission’ of 1.25% from the shipowner to cover its chartering department’s costs.  A longer-term time charter may result in a discounted commission of 1 per cent.

It is estimated that only one in six trades results in a fixture and ‘no sale, no fee’ applies.  Fees with sub-agents are usually split 50:50.  For most voyage charters commission falls due on discharge of the cargo, although for molasses it is due on sailing from the port of loading.  For time charters the broker will invoice the shipowner monthly.

For sales of ships the standard commission is 1% of the sale price.  This is payable by the seller to both the seller’s and the purchaser’s broker, that is, 1% each.

For ship’s supplies the commission may be between 2.5% and 5% of contract price.

For tugs more complex operations apply.  Some tug companies offer 5% on gross but also give a rebate to the shipowner of up to 25% for prompt payment.  Others may offer a 5% ‘contract discount’ to the shipowner, but pay a further 25% ‘private rebate’ and a 5% commission on the net contract price to the agent.  Yet another version is a payment by the shipowner of 90% of contract price, with the agent receiving 7.5% commission and then returning all but 0.5% of this back to the shipowner, although rebating of commissions may involve other parties.

The General Agent’s remuneration will depend on which services he offers.  He may receive an annual lump sum retainer plus broker’s commission for cargoes fixed plus a fee and expenses for each ship supervised.

References

Types of brokers and agents	TTM15240
Appointment of brokers and agents	TTM15250