Broking and Space Charter

 

If you receive a shipping request from a shipper but don't have a ship to carry the cargo, you have three options:

 

1. You turn down the shipping request.

2. You find another shipping company that operates the service and receive a broking commission from them, then they load the cargo on their ship.

3. You find another shipping company that operates the service and rent space on their ship, then you load the cargo on their ship as your own cargo.

 

Option 2 is called broking, and option 3 is called a space charter.

 

In the case of broking, you and the other shipping company make a broking agreement. You act as a broker to introduce the cargo to the other shipping company. After that, the shipper and the other shipping company make a sea transport contract. You are merely a broker and are not responsible for the transport.

 

Generally, a broking commission you receive from the other shipping company is a few percent of the freight. Since the shipper's information will be known to the other shipping company, the shipper will probably quote freight to other shipping companies next time. Also, the other shipping company will be more proactive in making sales to the shipper.

 

In the case of a space charter, you and the other shipping company make a space charter contract, and you rent a part of their ship's hold. After that, the shipper and you make a sea transportation contract. Therefore, you are responsible for the transportation to the shipper.

 

The difference between the freight paid by the shipper and the space charter fee paid by you is your profit. Since you issue a bill of lading to the shipper and the other shipping company issues a bill of lading to you, the shipper's information is kept on your side.