What is a contract of affreightment?
A contract of affreightment is an agreement under which an owner carries a defined quantity of cargo over a defined period, on a defined lane, at a fixed per-tonne freight rate, with neither side committing in advance to which specific vessels will perform each individual lift.
The contract of affreightment, almost always shortened to COA in broking conversation, is the workhorse instrument for programme cargo in dry bulk. BIMCO’s VOLCOA form is the canonical standard, and BIMCO’s recommended COA rider clauses sit on top of it for nomination notice, vessel substitution, force majeure and rate review. A COA fixes the freight economics for the cargo interest for the life of the contract while leaving the owner the flexibility to deploy whichever vessel in their pool best fits each individual nomination.
The COA exists because both sides of a repeat trade benefit from price certainty without wanting to commit one specific hull. The cargo interest knows the freight per tonne for every lift across the next 12 to 36 months and can quote landed CIF prices with confidence. The owner books revenue across the contract life and plans the fleet around it. Each individual lift inside the COA is performed as a voyage charter, typically on GENCON-family terms, with the cargo quantity, lane and laycan drawn from the COA nomination schedule rather than from a fresh negotiation.
How a contract of affreightment works in practice
The COA is initiated by the cargo interest, usually a miner, steel mill, utility or trading house with a multi-year programme on a stable lane. The broker assembles a shortlist of owners with appropriate fleet capacity, and negotiations centre on the per-tonne freight rate, the total contract quantity, the lift size band (for example 170,000 mt plus or minus 10 pct on a Capesize COA), the nomination notice (typically 30 to 45 days), and the period of the contract. The principal commercial terms are recorded in the COA itself; the operational terms for each lift sit in the underlying voyage charter party that the parties will use, attached or incorporated by reference. See chartering process for the full negotiation arc.
For each individual nomination, the charterer notifies the owner of the next cargo within the agreed notice window, including lift size, laycan and any specific cargo requirements. The owner nominates a vessel. Once accepted, the lift becomes a voyage in its own right, governed by the COA-attached voyage charter party. Freight is paid at the COA-agreed per-tonne rate, not at the spot rate prevailing on that voyage’s fixture date.
Performance is monitored across two horizons. At the voyage level, the same machinery as any voyage charter applies: notice of readiness, laytime, statement of facts, demurrage. At the contract level, the parties track cumulative lifts against the contract quantity, with reconciliation typically at quarterly or contract-end. Under-lifting and over-lifting both have remedies in the BIMCO rider clauses.
| Cost or risk axis | Owner exposure | Charterer exposure |
|---|---|---|
| Bunker | Owner | None |
| Port costs and disbursements | Owner | None |
| Canal dues and towage | Owner | None unless agreed deviation |
| Off-hire | Not applicable (no hire) | Not applicable |
| Demurrage and despatch | Owner pays despatch | Charterer pays demurrage on laytime overrun per lift |
| Weather and routing | Owner (route is owner's election) | None |
| Cargo claims | Owner (Hague-Visby liabilities) | Owner subject to FIO stow |
| Crew | Owner | None |
| Maintenance | Owner | None |
Contract of affreightment vs consecutive voyages
Both instruments commit a charterer to multiple lifts and an owner to multiple voyages. The difference is what they fix and what they leave flexible. A COA fixes the freight rate and the cargo programme but lets the owner substitute vessels lift by lift. A consecutive voyages charter, governed by BIMCO’s CONSEC form, commits one specific vessel to back-to-back voyages until the cargo quantity or the contract period is exhausted.
| Contract of affreightment | Consecutive voyages | Voyage charter | |
|---|---|---|---|
| Who runs the voyage | Owner | Owner | Owner |
| Who pays bunker | Owner | Owner | Owner |
| Who pays port costs | Owner | Owner | Owner |
| Hire or freight basis | Fixed USD per tonne, multi-lift | Fixed USD per tonne, multi-voyage one ship | USD per tonne, one voyage |
| Cargo risk | Owner per lift | Owner per voyage | Owner |
| Time risk | Owner per lift | Owner across the chain | Owner outside laytime |
| Typical duration | 12 to 36 months | 3 to 12 months | One voyage |
| Best for | Programme cargo, fleet flexibility | Programme cargo, named vessel | Single parcel |
Use a COA when the cargo programme is stable but the cargo interest does not care which specific vessel performs each lift. Use consecutive voyages when the cargo interest wants the operational consistency of one named hull (for example for stowage habits, cargo gear compatibility or charter-party performance history). Use a one-off voyage charter when the programme is not yet stable enough to lock in 12 months of rate. The COA is also the natural alternative to a long time charter when the charterer wants per-tonne freight certainty without the operational stack to run a vessel.
Risk allocation between owner and charterer
The headline cost split is identical to any voyage charter because each COA nomination is performed as a voyage. The materially distinct clauses on a COA are the nomination clause and the spread or rate review clause.
The nomination clause governs how the charterer calls forward each lift. VOLCOA-style nomination requires the charterer to give defined notice (commonly 30 to 45 days) of cargo readiness, lift quantity within the agreed band, and load and discharge port pair within the contractual lane. The owner then has a defined window (commonly 10 to 14 days) to nominate a vessel that meets the description. Short-notice nominations, late owner counter-nominations and non-compliant substitutions are where most COA disputes start, so the recap and the BIMCO rider on nomination must be precise. INTERCARGO and P and I club guidance both emphasise nomination discipline as the single biggest performance risk on a COA.
The rate review or spread clause matters when the contract runs longer than 18 months. Some COAs are flat-rate for the full period; others embed a periodic rate review tied to a Baltic Exchange index basket, with a spread above or below the index. If the COA is flat-rate, the owner bears the full freight-market risk for the contract life. If it is index-linked, the charterer bears the volatility on each lift but with a known relationship to the published market. Bimco’s recommended index-linked rider clauses provide standard wording for this construction.
Worked fixture example
Capesize iron ore COA, 24 month programme
- Cargo
- Iron ore fines, 2.4 million mt total over 24 months
- Lane
- Tubarao region to North China range
- Parcel size
- 12 to 14 lifts, 170,000 mt each, 10 pct molo
- Period
- January 2026 through December 2027
- Freight rate
- USD 19.50 per tonne, flat for contract life
- Demurrage
- USD 36,000 per day per lift, pro rata
- Key clauses
- VOLCOA, 30 day nomination, GENCON 2022 attached, FIO, 96 hours laytime SHINC
Across the contract life, the owner expects to deploy three to four vessels from the Capesize pool, with no specific hull committed. The flat rate of USD 19.50 per tonne sits about USD 3 per tonne below the spot Baltic C3 average over the preceding 12 months but above the trough quarter, which is the standard COA shape: the charterer pays for protection against rate spikes and forgoes some of the upside in cheap quarters.
Nomination notice is 30 days, with a 14-day owner vessel-nomination window. This gives the owner enough lead time to redeploy from prior trades or take vessels off the spot market without ballasting empty. Demurrage at USD 36,000 per day per lift reflects the Capesize TCE band for the 2026 to 2027 horizon, and the BIMCO laytime rider applies to each lift independently.
The COA is flat-rate rather than index-linked because the cargo interest is a steel mill that wants budget certainty for the period. If the COA had been agreed by a trading house, an index-linked spread of for example C3 plus or minus USD 1.50 per tonne would have been the more natural structure.
Common mistakes and misuse
- Treating the COA as a standalone document. The COA fixes the commercial frame but each lift is performed on the attached voyage charter party. If the GENCON-family form is not attached or incorporated by reference, every lift becomes a fresh negotiation and the COA loses its point.
- Underspecifying the nomination clause. A nomination clause that does not state notice length, lift size band, vessel description and the consequences of late or non-compliant nominations will generate disputes within the first six months.
- Confusing the COA with consecutive voyages. The cargo interest who insists on one specific vessel needs a consecutive voyages charter, not a COA. The owner who does not want to be tied to one hull for the contract life needs a COA, not consecutive voyages.
- Locking in a flat rate over a long horizon without a review trigger. A 36 month flat-rate COA agreed at the top of a cycle leaves the cargo interest paying above market for years; one agreed at the bottom leaves the owner under-earning. A periodic rate review or index-linked spread mitigates both.
- Forgetting under-lifting and over-lifting remedies. The BIMCO rider provides default wording for both. Without it, a quarter where the cargo interest cannot generate the expected lifts produces an immediate dispute about whether the owner is entitled to dead freight.
- Mismatched nomination windows. If the charterer’s notice obligation is 30 days but the owner’s vessel-nomination window is also 30 days, the operational schedule cannot work. The owner window must be tighter than the charterer notice.
When a contract of affreightment is the right choice
A COA is the right instrument when the cargo programme is firm for at least 12 months, the lane is stable, and the cargo interest wants per-tonne freight certainty without taking operational control. It beats a long time charter when the desk lacks the bunker and port-agency stack. It beats spot voyaging when the programme is large enough that spot volatility has material P and L impact. It beats consecutive voyages when the cargo interest does not need a specific hull.
If the desk is sizing a programme against the COA, consecutive voyages and time charter options, the ship-brokering team can model the three structures against the cargo schedule and prevailing Baltic indices to identify which one prices best across the cycle.
Scope and what this page does not cover
This page explains the contract of affreightment as a commercial instrument and the BIMCO VOLCOA framework. It does not draft jurisdiction-specific clauses, opine on tax or accounting treatment of COA receivables, or forecast the freight market over the contract horizon. Those questions belong with chartering counsel and the desk’s market analyst against current Baltic Exchange and INTERCARGO data.