Commission

How ship broker commission works

Published 24 August 2026 · updated 17 October 2026

A ship broker's commission is a percentage of the freight or the hire. Freight is the price paid to carry a cargo. Hire is the daily price paid to use a ship for a period. The shipowner pays the commission. Many people new to the trade miss one fact here: the owner pays every broker on the fixture (the agreed deal), including the charterer's broker.

1.25% per broker

The usual rate for each broker in the chain. It is paid out of freight, deadfreight and demurrage. Two brokers plus 2.5% address commission make a 5% fixture. The worked TCE example takes exactly this total out.

How much is a ship broker's commission

In dry cargo, the usual rate is 1.25 per cent for each broker. The total on a fixture is the sum of every party's share:

One broker: 1.25%
Owner's and charterer's broker: 2.5%
With 2.5% address commission: 5% total
A sub-broker takes part of a broker's share. It does not add a new layer.

No law sets these figures. The fixture sets them. The parties agree the commission clause together with every other term. 1.25 is only the usual starting figure. A long chain of brokers also has a limit. If the deductions reach 6.25 per cent of the freight, the owner starts to ask what each broker did to earn a share.

Who pays the commission

The owner pays every broker on the fixture, out of the freight or the hire. The charterer's broker is appointed by the charterer and works for the charterer, yet the owner still pays that broker. This is because the commission is taken from the money that goes to the ship; it is not a fee the broker invoices to the client who gave the instructions. The short way the trade quotes a rate depends on this. A freight quoted free in and out tells you who pays to load and unload the cargo. The commission written next to it tells you how much of that freight the owner never receives.

Address commission is not the broker's money

Two different deductions are both called commission, and only one of them pays a broker. Brokerage is the broker's payment. Address commission is a deduction that goes to the charterer. It once helped pay the charterer's office costs; today it works as a discount on the freight, written in a form the trade accepts. The recap (the written summary of the deal) shows it as "2.5% address", and it goes to the charterer, not to any broker. What a ship broker does makes the same point from the broker's side. If a broker quotes a rate to an owner and does not mention the address commission, the ship will earn less than the quote suggests.

Address commission vs brokerage, side by side

	Brokerage	Address commission
Who receives it	The ship broker, or each broker in the chain	The charterer
Who bears it	The owner, out of freight or hire	The owner, out of freight or hire
What it is for	The broker's work in fixing the ship	In origin, the charterer's own chartering costs. In effect, a discount
Usual figure	1.25% for each broker	Negotiated. 1.25% to 2.5% is common, and some fixtures have none
How it is paid	By the owner after freight is received, unless the parties agree in writing that the charterer deducts it	Deducted by the charterer from the freight or hire it pays
Named in the charterparty	Yes, with the broker's name	Yes, as a percentage

So the answer to "who pays the ship broker" is the owner, even for the charterer's broker. The Baltic Exchange's guidance to its members says the same thing in two sentences. Unless otherwise agreed in writing, "the owner is responsible for paying all commissions". And if there is no written agreement that the charterer will deduct a broker's commission, "the charterer is required to pay the owner gross values, less any address commission only".

Here is a simple example, on a voyage freight of 1,000,000 dollars with two brokers at 1.25 per cent each and 2.5 per cent address commission:

Gross freight                              1,000,000
Address commission 2.50%, kept by charterer   -25,000
Charterer remits                              975,000
Brokerage 1.25%, owner's broker               -12,500
Brokerage 1.25%, charterer's broker           -12,500
Owner keeps                                   950,000

The charterer's real cost of the freight is 975,000. The owner's real income is 950,000. The figure both sides negotiated, 1,000,000, is paid by nobody and received by nobody. That is why a rate should always be compared net of all three deductions.

The percentages are customs, and sources state them differently. HM Revenue and Customs, in its guidance on shipping for UK tax inspectors, says that for dry cargoes the owner's and the charterer's brokers "might each earn commission of 1.25% of the freight charge", and that a charterer "may demand an 'address commission' of 1.25% from the shipowner to cover its chartering department's costs". The example above uses 2.5 per cent, which dry bulk fixtures often carry. Neither figure is a rule. Read the recap. The number in it is the only one that counts.

Is commission paid on demurrage

Usually, yes. The standard clause makes brokerage due on freight, deadfreight and demurrage. Deadfreight is money paid for cargo space that was booked but not filled, and demurrage is money the charterer pays when loading or unloading takes longer than agreed. The commission therefore follows the money the voyage really earned: if cargo is not shipped but is paid for anyway, commission is due on it. Commission is also due on demurrage once the agreed time for loading and unloading (the laytime) runs out. Despatch is different. Despatch is money the owner pays the charterer for finishing early, so it is paid in the other direction, and no commission is due on it. On a time charter, the same rule applies to hire. It often also applies to a ballast bonus, which is an extra payment for sailing empty to the start of the charter. A fixture can agree something different. That is why the recap says what the commission is due on, and does not leave it to custom.

When commission is earned and paid

A broker earns commission on the money it is tied to, and is paid when that money is paid. In practice, the owner pays the brokerage after receiving the freight or each hire payment. Or, if the fixture says so, the paying side takes it off before paying (this is called deducting at source). One point matters most for business. If a fixture fails before any freight is earned, usually no commission is due. That one line explains how broking makes money. A broker can work on a cargo for three weeks, lose it on subjects (conditions that must be cleared before the deal is final), and be owed nothing. Firm offers and subjects explains this risk.

Where the commission is recorded

The commission is written in the charterparty, which is the contract between owner and charterer. A clause names each broker and their percentage. Before that, it appears in the recap. Being named in the clause protects the broker. The commission becomes a term of the contract between owner and charterer. If an owner pays late or does not pay, the broker can point to that clause. With a chain of parties, check this on every fixture. When a disponent owner (a company that charters a ship in and then charters it out again) sits in the middle, who is who on a fixture decides whose freight the deduction comes from.

References

ITIC, Collecting commission, 2000. itic-insure.com
ITIC, A look at shipbroker commission collection in the United States, 2005. itic-insure.com
UK Parliament, Contracts (Rights of Third Parties) Act 1999, 1999. legislation.gov.uk
Baltic Exchange, Guide to Modern Shipping: Chartering Negotiations, sections on commission and commissions deducted at source, read 12 October 2026. balticexchange.com
HM Revenue and Customs, Tonnage Tax Manual TTM15260: Brokers and agents for shipping companies, updated 24 March 2026. gov.uk
BIMCO, GENCON 1994 (Uniform General Charter), 1994. bimco.org

What a ship broker doesThe job itself: two lists nobody publishes, a market with no price screen, and a commission paid only when a deal is done. Who is who on a fixtureA dozen parties, several called the owner and two called the agent. Who gives instructions to whom, and who you may phone. The fixture recapThe e-mail that says what was agreed. Written in minutes, read by a tribunal years later, and the contract until the charterparty is drawn up. How to calculate laytime and demurrageWhen the clock starts, what stops it, how the demurrage figure is worked out, and why most claims fail on the paperwork, not on whether they were right. Time charter equivalentFreight per tonne cannot be compared with hire per day until you divide it by the voyage. This is the arithmetic that does it.

Neptune Atlas

The Neptune Atlas voyage estimator and the free TCE calculator take commission out of the freight before they work out the daily figure. A TCE that still includes commission makes the voyage look better than it is, by the whole amount the brokers take. On the fixture record, the commission terms sit next to the rate they apply to. So the recap you send says what was really agreed. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

Try 7 days free Ship chartering software for brokers What each plan includes