What Is Affreightment?
Affreightment refers to a contractual agreement in shipping where a shipowner agrees to transport a specified quantity of cargo for a charterer over a defined period or across multiple voyages. Unlike a time charter, affreightment focuses on the movement of cargo rather than the use of a specific vessel. The shipowner retains control over vessel selection, crewing, and operations, while the charterer is guaranteed cargo space and transport capacity as agreed.
Contracts of affreightment are commonly used in bulk shipping, commodities trade, and long-term logistics arrangements where businesses require consistent cargo movement without committing to a single ship.
Purpose
The primary purpose of affreightment is to:
Secure reliable cargo transportation over multiple shipments
Ensure consistent freight rates and capacity availability
Reduce uncertainty in long-term shipping costs
Allow charterers to focus on cargo planning rather than vessel management
Affreightment offers flexibility and predictability, making it suitable for companies with recurring or high-volume shipping needs.
Regulation
Affreightment contracts are governed by maritime law, international trade conventions, and the terms defined in the contract of affreightment (CoA). Key aspects typically covered include:
Total cargo quantity and delivery schedule
Freight rates and payment terms
Loading and discharge ports
Permitted cargo types
Liability, force majeure, and dispute resolution
Standard industry frameworks and clauses, often aligned with BIMCO guidelines, are used to ensure clarity and reduce contractual risk.
Types of Affreightment
Contract of Affreightment (CoA): A long-term agreement covering multiple shipments of a specified cargo quantity over a defined period.
Volume Contract: The shipowner commits to carrying a minimum cargo volume, while the charterer commits to providing that volume over time.
Tonnage Contract: The agreement is based on vessel capacity rather than specific shipments, ensuring space availability when needed.
Key Components
An affreightment agreement typically includes:
Total cargo volume or quantity to be transported
Contract duration and shipment schedule
Freight rate and payment structure
Loading and discharge port obligations
Cargo handling and documentation requirements
Penalties for non-performance or short shipment
Understanding these elements is essential to managing risk and ensuring contractual compliance.
Why It Matters
Ensures guaranteed transport capacity for recurring cargo movements
Stabilizes freight costs over the contract period
Reduces operational complexity for charterers
Helps shipowners plan fleet utilization efficiently
Supports long-term supply chain planning and reliability
Conclusion
Affreightment plays a critical role in global trade by enabling the efficient movement of large cargo volumes without tying the agreement to a specific vessel. By focusing on cargo commitments rather than ship usage, affreightment provides flexibility, cost predictability, and operational simplicity. For businesses with regular shipping requirements, it offers a strategic balance between reliability and control.
Frequently Asked Questions (FAQs)
1. What is the difference between affreightment and a time charter?
Affreightment is cargo-focused and guarantees transport of a specified quantity, while a time charter is vessel-focused and grants use of a ship for a set period.
2. Who controls the vessel in affreightment?
The shipowner retains full control over vessel operations, including crewing and routing.
3. Is a specific vessel assigned in affreightment?
No, the shipowner can use any suitable vessel to fulfill the cargo commitments under the agreement.
4. How is payment calculated in affreightment?
Payment is typically based on agreed freight rates per unit of cargo, often linked to volume or tonnage.
5. Why do companies use affreightment contracts?
They offer predictable costs, assured cargo movement, and reduced operational burden for businesses with ongoing shipping needs.