DEFINITION of Address Commission

Address commission is a fee paid by vessel owners to charterers. A charterer is the party who owns cargo. The charterer employs a shipbroker who will find the proper ship to deliver the cargo. The ship owner pays the ship broker a commission for their services. The ship owner pays the address commission to the charterer. The charterer uses this address commission to cover business costs. As a result, the total fees incurred by the charterer are reduced by the amount of the address commission.

BREAKING DOWN Address Commission

The type of ship and charter used determines the total fees and address commissions incurred by ship-owners and the charterers. For example, a time charter enforces costs that are related to the employment duration of a vessel, while a voyage charter's fees are dependent on the total weight of the cargo being transported. "Free of address," refers to a charter which is not paid the address commission.