Shipbroker commission and address commission explained
Every voyage charter recap carries a commission line, often written as '3.75% total' or '1.25% brokerage plus 2.5% address'. It looks like a small detail, but on a large freight it is real money, so it helps to know who receives what.
Two kinds of commission
- Brokerage: paid by the owner to each broker involved in the fixture
- Address commission: an allowance the owner grants back to the charterer
- Both are usually deducted from freight, hire, deadfreight and demurrage
- Both are written into the charter party so there is no argument later
Typical levels
Market practice varies by trade, but in dry cargo a brokerage of 1.25% per broker is common, and address commission is often 2.5% or 3.75%. A fixture with one broker on each side and 2.5% address commission would show a total commission of 5%. These are common practice, not fixed rules: the charter party decides.
A worked example
Illustrative figures: 30,000 mt at USD 30.00 per mt, 2.5% address commission and 1.25% brokerage.
| Line | USD |
|---|---|
| Gross freight (30,000 × 30.00) | 900,000 |
| Address commission to charterer (2.5%) | 22,500 |
| Brokerage (1.25%) | 11,250 |
| Owner's freight after commissions | 866,250 |
Why address commission exists
Address commission is effectively a discount on freight that is returned to the charterer. It is common in trades where charterers expect it as standard, and it is part of the commercial terms rather than a fee for a service. Comparing two offers means comparing freight net of all commissions.
What to check in the recap
- Each commission, its percentage and who receives it
- What it applies to: freight only, or also deadfreight and demurrage
- When it is payable
- That the total matches what was agreed in the negotiation
Frequently asked questions
- What is address commission in shipping?
- A percentage of freight or hire that the owner allows back to the charterer, written into the charter party. It is commonly 2.5% or 3.75% in dry cargo.
- What is a typical shipbroker commission?
- In dry cargo, 1.25% per broker on freight or hire is a common level, although it varies by trade and by agreement.