Contract of affreightment (COA) explained
A contract of affreightment, or COA, is how regular cargo flows are shipped without fixing every voyage from scratch. The owner agrees to carry a total quantity over a period, in a number of shipments, and chooses which ship performs each one.
What a COA is
Under a COA the shipowner (or operator) undertakes to carry a stated quantity of cargo, for example 300,000 mt of grain in 10 shipments of about 30,000 mt over twelve months, between agreed port ranges, at an agreed freight. Unlike a voyage charter, no single ship is named at the start. The owner nominates a suitable vessel for each shipment within the agreed size range, and each lifting then runs much like a voyage charter.
COA vs voyage charter vs time charter
| COA | Voyage charter | Time charter | |
|---|---|---|---|
| What is agreed | Total quantity over a period | One cargo, one voyage | Use of one ship for a period |
| Ship named | No, nominated per shipment | Yes | Yes |
| Price | Freight per tonne, sometimes indexed | Freight per tonne or lump sum | Hire per day |
| Who runs the voyages | Owner or operator | Owner | Charterer |
| Suits | Regular cargo flows | Single parcels | Operators and traders |
Clauses that decide whether a COA works
- Total quantity and tolerance, and who has the option on it
- Number of shipments, spread through the period and minimum interval
- Shipment size range and the ship sizes the owner may nominate
- Nomination procedure: who declares laycan and cargo size, and by when
- Load and discharge port ranges, and any extra freight for extra ports
- Freight, and any adjustment for bunker prices or a market index
- What happens if a shipment is missed by either side
Why cargo owners use a COA
A COA gives freight cost certainty for a production or sales programme and saves fixing each voyage in the open market. It also secures tonnage in a tight market. The price for that certainty is commitment: if the cargo does not come, the charterer may owe compensation for shipments not declared.
Why shipowners and operators take COAs
For an owner or operator, a COA is a base load of employment that can be covered with its own ships or with chartered tonnage. The flexibility to nominate any suitable ship lets an operator combine COA cargoes with its positions to cut ballast legs. The risk is that the market rises above the agreed freight, so the owner ends up carrying cargo below what the ships could earn elsewhere.
Standard forms
BIMCO publishes standard COA forms, VOLCOA for bulk cargo volume contracts and GENCOA as a general form, and each shipment is usually performed under a voyage charter form referenced in the COA. Many large COAs are drafted on the parties' own terms.
Frequently asked questions
- Is a contract of affreightment a charter party?
- It is a contract of carriage for a series of cargoes. Each shipment under it is usually performed on voyage charter terms, which the COA incorporates.
- Who chooses the ship under a COA?
- Normally the shipowner or operator nominates a vessel for each shipment, within the size and specification limits the COA sets.
- What happens if the charterer cannot provide a cargo?
- It depends on the contract. Many COAs let the owner claim the lost freight margin, or treat the shipment as cancelled with an agreed compensation.
Where this applies on our desk: Vegetable oil shipping and Black Sea to Türkiye grain.