Brokerage activity as a professional class formed by the end of the last century. By this time, the development of international trade has reached a level where the owners of cargo and carriers was not under force themselves to follow the continuous market fluctuations in the global freight market and organize the delivery of cargo to the destination. Therefore, in the existing system of relations, “the cargo-ship owner,” there is a need in the connecting link – brokers – intermediaries specialized in possession of information on the availability and nature of the goods, the size of freight rates, freight proposals for vessels and ensure the interests of both sides of the dock. In addition, the freight market are tens of thousands of entities as shipowners and cargo owners (charterers) are separated from each other, and sometimes very significantly, that is, are not able to regularly communicate, thoroughly not know each other. Everything else, the geographic diversity of cargo freight transactions, their numbers, speed of execution and conclusion – make it impossible to look at the parties, to explore each other even during the execution of the transaction. Hence, such a specificity opens opportunities for all kinds of fraud, which is costly for the victim. In these circumstances, the shipowner and the charterer, and may not independently find each other for a deal. Therefore, everyone turns to his broker, having a widely established business relationship, which helps to find Principal (ship owner or the cargo owner) suitable contractor, partner. At the same time, and it is fundamentally important that brokers act towards each other and, consequently, to its partners in the transaction, as the guarantors of the integrity of business partners and their financial solvency. Failure to comply with these safeguards undermines the business reputation of the brokerage firm. Therefore, the checking of principals is an important element of the brokerage business and is the key to its success in a climate of constant risk.
The main types of brokerage activities in merchant shipping are chartering and sale and purchase of ships. Brokerage firms engaged in chartering vessels normally specialized on tramp and liner shipping in certain areas or types of goods (ships types). However, such a division is conditional and reflects the basic specialization of the company and, accordingly, the broker.
In the sphere of activity are distinguished:
- freight broker (CharteringBroker), acting as an intermediary between the shipowner and the charterer in the tramp shipping in the contract of carriage of goods by sea vessel;
- broker-acquirer (Acquirer), which among other functions performs brokerage attraction of new cargo and shippers to load the vessels in liner shipping;
However, most often, they are engaged in the universal mediation brokerage firms operating in many areas and performing all kinds of brokering
Depending on whose interests are represented by a broker, they are distinguished:
- shipowner’s broker (Shipowner’sBroker);
- Broker Charterer (Charterer’sBroker).
Traditional responsibilities broker at Freight diverse, but they are subject to the same goal: to achieve the most appropriate for its principal terms.
Principal shipowner concerned to the court to work with a maximum time-charter equivalent (financial result of the flight), with no downtime waiting for the next flight to charterers to timely pay the freight and other payments due to the ship, that is polucheniimaksimalnoy payment for a minimum of services.
Principal-charterer requires the broker to the goods exported in accordance with the terms stipulated by the sales contract that he did not arise extra expences : for the storage of goods at the port after the expiration of the grace period; extra insurance for shipping because of use of the vessel over the age of 20 years; for the payment of demurrage, dead or freight to the shipowner, ie to get maximum services for a minimal fee.
Work on the freight market, as a complex of chartering operations of vessels, including the implementation of a number of successive stages:
- Evaluation of the freight market. The broker receives from the principal are two types of orders: market on the quotation (the study of market conditions) and on the conclusion of the transaction. market quotation is usually requested for 3-5 weeks in advance. Principal-charterer (Shipper) requests regarding market quotation of freight rates and conditions of carriage of the goods specified in the particular country or several countries (ranged) before signing a foreign trade contract or wanting to choose the best option of transportation. Principal-ship owner requests a quotation to determine feasibility and effectiveness of chartering his ship after the completion of this voyage, time charter or repair. To this end, it points out what loads and what directions it may be of interest and results in vessel characteristics (capacity, cargo capacity, number of decks, age, etc.).
- Instruction for chartering. Wanting to charter a vessel, the charterer shall issue instructions to your broker to leasing – freight order. Freight warrant (CharteringOrder) – order the broker to perform freight operations for the transaction by chartering vessel in the order set out in the particulars and conditions. Freight Order charterer contain: the name and quantity of the cargo, its transportation characteristics, size ; Is this part of sending a one-time or long-term contract; the ports of loading and unloading; the date of cargo readiness for loading; norm loading operations; who appoints the stevedore and at whose expense paid by the cargo handling; the idea of freight rates and conditions of payment of freight; specific requirements for a vessel (age, presence of commercial vehicles and others.); proforma charter, on the basis of which it is desirable to conclude the transaction. In turn, the owner, searching for a cargo ship to download, gives your broker a freight order, which contains: name of vessel, its technical and operational characteristics, age and flag of the vessel (for vessels older than 20 years – the period of validity of the Register of documents); port area or the ship for the release of the intended voyage; the date of release of the vessel; list of unwanted cargo and transport areas (for example, flying through the Suez Canal; scrap metal, coal).
- Out on the freight market. Receiving a freight order, the broker starts chartering a vessel. This work can be divided into three parts:1) Preparation of negotiations – Prefixing;2) negotiating – Fixing;3)preparing and control of transactions – Postfixing. When preparing to negotiate the broker comes in contact with counterparties with which it has business relations, informing them through the freight market on the availability of goods for which you want to ship. For their part, shipowners and brokers provide their information on their own vessels, which likewise falls on the market.
- Exchange Offer. Once taken into account all technical and commercial considerations regarding the forthcoming transaction, and the choice is made, it begins the second part of the work of freight – negotiations, that is, work on the approximation of the positions of the charterer and the ship owner under the terms of the transaction.Offer each of the possible partners may be embodied in the form of:• firm offers;• conditional offer.A firm offer (FirmOffer) – this commitment with a solid proposal (from lat.Offero- offer) to make a deal on the proposed conditions. It is valid for a specific length of time that it and the same specified. If the partner who receives a firm offer, has accepted it, has agreed to set out in its terms and announced his acceptance during the time of its action, the transaction is considered concluded. Skipping time or disagreement with any of the terms of the offer release from obligations under the offer side, which gave offer. Brokerage ethics requires that each transaction was sent to only one firm offer, in which the broker informs all the information about the planned shipment, which he received from the principal in the freight warrant and on request, and also indicates the size of the brokerage and targeted commission.If a firm offer to the ship owner provides the broker, it should be understood as a proposal for a cargo vessel if a firm offer broker charterer, it means an offer cargo for the ship regardless of the conditions of presentation sequence.But the acceptance of the first offer received from the broker, which has solid credentials from their principals – a rare case in the practice of freight. Usually the party that has received such an offer, expose its counter conditions. This is done in one of two ways, depending on the circumstances:1) if the resulting firm offer radically contradicts the terms sought by the other party rejects it and if there is interest in the transaction make the new firm offer on its own terms, that is, offer another basis for further work;2) if the solid structure of the offer is acceptable, and the differences are mainly quantitative in nature (unacceptable amount of weight or size of the margin, the rules of cargo operations, freight rate, demurrage, etc.), that is, it is amenable to agreement, then get her side may take it as a basis for further work, sending back a counterproposal – the so-called counteroffer (Counteroffer shortly Counter) to read: “Accepting (accept terms) your offer with the following changes …”. The following is a list of changes. Action counteroffer, as the action of the offer is limited to a period specified in the counteroffer. A Party which has made a counteroffer, tied for its validity and this cycle may be repeated several times.As a result of the exchange of the offers and counteroffer parties or bring together the conditions to compromise and make a deal, or disagree, without being able to reach agreement.
- Conditional offer (SubjectOffers) – used when the shipowner at the same time negotiating with several charterers or charterer simultaneously negotiating the charter vessel under his load with several shipowners. The offer is made on the condition that it will be valid if at the time of receiving a positive response will not ship chartered (Subject.Open- if will be free) or, if the charterer is not another vessel under the Charter a given load.
- Conditional offers are found in practice quite often, as ship owners to speed up the chartering of the vessel and ensure the most favorable conditions for freight transactions through their brokers often negotiate with several charterers. So do often, and charterers. Each of the parties at any stage can refuse further negotiations. However, the broker requires ethics say about this partner, and specify which of its provisions are unacceptable. In this case, the partner can repeat his proposal by replacing it appropriate condition. In case of a positive outcome of the negotiations by the party that receives (accepts) the last sentence of the partner in full, without any changes, shall notify him of this, for example, as follows: “Charterer’s confirm the Fixture”. Good brokerage practice recommends that partner, for its part confirmed this by replying “Reconfirm”. After such an answer negotiations actually completed and the vessel “Fixed” for the carriage.
- – Make a deal. This is the final stage of the negotiation process, and is that the charterer or his broker should settle minimum period for agreements reached and send it to the shipowner (his broker) -FixtureRecapitulation (ie “registered non-changes”), including all terms, which had been agreed in the negotiations. If it were made more missing in proforma charterparty, they included vAddendum to charter. After written confirmation by both parties resume (Recapitulation, briefly -Recap) and additions to the contract (Addendum) – the transaction is considered to be perfect (Fixed).PastFixing- a special set of operations which is performed after the transaction brokers. Broker Charterer in full compliance Recap issuing Charter-party and Addendum; signs two original charter for both partners. If there is a power of attorney from each charter brokers can sign on behalf of his principal.