Get documents about "charterparty
Document Sample
Charter Party
Charter Party
The major operation under this function is to find
continued and suitable employment for the ships to
maximise revenue earnings.
These operations are therefore primarily concerned
with finding suitable cargoes for ships irrespective of
whether the ships are owned or are hired.
These operations are concerned with evaluating
intended voyages to maximise earning so as to pay for
the cost of ship, cost of its operations and to make
some profit.
Charter Party
There are many mutually agreed arrangements
between the owners of cargo or shippers and the
ship owners or ship operators for transportation
of cargoes.
The terms and conditions for carriage of cargo
can either be on liner terms or under different
charter party terms that primarily depend upon
the types of ships and cargo.
Charter Party
Charter party is a contract between the ship-
owner and the Charterer.
Three important elements are;
(a) Description of the ship
(b) Description of the trade
(c ) Description of time period
Charter Party
Description of the Ship
The type of ship to be hired/chartered very much
depends on the nature and whereabouts of the intended
trade.
Its normal for owners to provide all the details of the
ship with a guarantee about its accuracy.
An example such as Shell time and Inter tank having
appropriate format which is required to contain several
pages of information required ship details
Charter Party
Description of the Ship
Many Charterers require the following plans to be
supplied by the Owners;
(1) General Arrangement Plan ,including loading scale
(2) Detailed Cargo manifold arrangement Drawing
(3) Pumping Arrangement Plan
(4) Plan of Cargo Tank Ventilating System
(5) Manufacturers Characteristics Curves of Pumps if
centrifugal pumps are installed.
Charter Party
Description of the Ship
Cubic Capacity
Speed and Consumption
Constant Weights
Charter Party
Description of the Ship
These, apart from the name of the ship, include – year of built,
flag, dead weight, maximum dimensions, maximum draught,
fresh water allowance, speed, fuel consumption, cargo space in
bail and grain capacities, number of hatches and holds, type and
safe working load of cargo gear, compliance with international
regulations for carriage of specialised cargo and such other
important details relevant for the intended cargo and trade.
For example some bulk cargoes may require that the holds be
equipped with carbon-di-oxide fire protection system, or special
requirement of cargo securing in the holds.
Charter Party
Description of the Ship
Name of the Ship
Year of Build
Name and location of Owners
Flag
Class
Call Letters
GRT/NRT
Summer Deadweight
Fresh Water Allowance
Fresh Water Allowance
Charter Party
Description of the Ship
Cubic Capacity
Speed and Consumption
Constant Weights
Charter Party
Description of the Trade
As much as Charterer is interested to know
the details of the ship in the same way the
Owner is interested to know about the type
of trade the ship will be engaged in.
Owners will negotiate an entry to that effect
the berths and ports to which the vessel will
trade are safe and ship will remain afloat.
Charter Party
Description of the Trade
The Charter Party will guarantee that the vessel
will trade within the Institute Warranty
Limits(I.W.L)- a trading area defined by
Underwriters to prevent the more serious risk of
ship causality loss.
The dangerous areas such as war zones and ice
bound areas may be excluded from the charter
party.
Charter Party
Description of the Trade
The Charter Party shall also include certain
exclusions for the cargo to be loaded such as
asphalt in bulk ,pitch in bulk ,livestock
explosives ,fish meal ,scrap , sulphur, and
logs.
In addition ,a modern phenomena often
included in the cargo exclusion clause is
nuclear products.
Charter Party
Description of the Period
The period of charter commences with vessel’s
delivery to the Charterers and ,like all charters
with vessel’s delivery to the Charterers and like
all charters, this delivery is either spot
Types of Charter Parties
There are two types of charters, Non-demise and
Demise Charter. The charter by demise is not very
frequent in normal day-to-day business but a number of
ships are chartered on a so-called ‘bareboat’ basis.
This kind of charter ordinarily means that the vessel is
put at the disposal of a charterer with out any crew.
The charterer thus takes over almost all of the owner’s
functions except for the payment of the capital costs
and the hull and machinery insurance premiums.
Type of Charter parties
Reason for Demise Charters( Bare Boat Charters)
Demise charters are created not so much with a view to
the carriage of goods but more as part of a complicated
financing arrangement ,often with the intention that the
charterer should become the owner of the ship in due
course.
Thus a contract for the purchase of a ship by
installments will often incorporate a demise charter into
the contract.
Type of Charter Parties
Demise Charter
A variant of this would be for a financing bank lend the
funds required to buy the ship ,the bank then acquiring
the ownership of the ship but demise chartering it to
the borrower for the period of the loan.
This would enable the bank to avoid not only the
operating costs but also the liabilities which it would
otherwise have to bear in relation to the operation of
the ship under a mortgage.
Demise charters are also concluded between two
associated companies for tax or employment reasons.
Type of Charter parties
Charter parties other than Demise;
There are two types;
(1) Time Charters i.e. contracts for the use of the ship
and her crew for a specified period of time within
agreed trading limits as directed by the time charterer in
consideration for the payment of hire;
(2) Voyage Charter contracts for the use of the ship and
her crew to carry an agreed cargo on an agreed voyage
regardless for the payment of freight ( and possibly
other remuneration such as demurrage if the
loading/discharging is delayed beyond the time agreed
for such operations)
Type of Charter parties
Voyage Charter:
Voyage charter is an engagement of a vessel for a single
voyage between declared ports to transport full
shipload of cargo or a certain quantity of cargo. The
freight is paid on per tonne of cargo (DWT) bases or
on lump sum basis.
The ship owner provides for all the ship’s costs with its
crew, expenses for fuel, water, canal dues, port dues,
loading and discharging expenses etc. in return the
charterer pays him the hire charges for carrying the
cargo as per described or utilised cargo capacity of the
ship.
Type of Charter parties
Voyage Charter:
To compensate for the delays that may be
encountered in cargo loading/discharging
operations, the ‘demurrage and despatch’
clauses for compensation to the affected parties
are inserted in charter party.
Type of Charter parties
Voyage Charterparty
List of Charterparty Clauses
1.Preamble;This can be extensive in some
charterparties .In the Multiform much of
what may be found in preambles of certain
forms is contained in clause 1.
There are two important of the brief
Multiform preamble however –the place and
the date of the charterparty.
Type of Charter parties
Voyage Charterparty
List of Charterparty Clauses
Place This can be important as ,in the
absence of a clause to the contrary,the place
where a contract is deemed to have may
govern the law which is to be applied to that
contract in the event of dispute.
Thus if the place is London ,English Law
may be very likely prevail.
Type of Charter parties
Voyage Charterparty
Date equally important the date to be shown
is that which by fixture negotiations are
concluded with all subjects lifted-in other
words ,when all negotiating formalities are
complete.
Type of Charter parties
Voyage Charterparty
Clause 1 ;Name and brief description of
vessel
The Multiform allows for a more complete
vessel description in the main ,printed part
of the form than many (e.g compare with
AMWELSH).
The position of the vessel when the contract
is negotiated is also important
Type of Charter parties
Voyage Charterparty
Clause 2; Condition of vessel
It is usual for a shipowner to confirm that a
vessel is in a suitable condition safely and
properly to undertake the contractual
voyage.
Type of Charter parties
Voyage Charterparty
Clause 2;
Cargo description-Commodity and nature of
the goods to be carried eg bulk or bagged
stowage factor( eg about 55 cubic feet per
tonne) and either minimum/max quantity
or cargo size margins and in whose option (
eg 12,000 tonnes,5% or less in owners
option)
Type of Charter parties
Voyage Charterparty
Clause 2;
Loading Places- Names of loading place(s)
and or range (eg Bordeaux/Hamburg
range); mention of number of safe
berths/anchorages charterers entitled to use
at each place; whether vessel to remain
always afloat or safely aground
maximum/minimum available drafts.
Type of Charterparties
Voyage Charterparty
Clause 3;
Discharging places and port orders/rotation
Clause 4- Laydays and Cancelling
The spread of dates which a vessel is to present
herself at the first (or sole) loading port .This
spread should be entered in a contract as well as
conditions under which the contract can be
cancelled in the event that the vessel is unable to
meet those dates.
Type of Charterparties
Voyage Charterparty
Clause 5;
Freight the amount and currency of freight
to whom ,where and when payable .The risk
of vessel and /or cargo loss on passage in
relation to freight should be specified-ie
whether freight is deemed earned as cargo is
loaded or upon delivery.
Type of Charterparties
Voyage Charterparty
Clause 6;
Cost of Loading/Discharging which of the
parties to the contract is to appoint and pay
for cargo handling at each port.
Clause 7;
Notice of Readiness/Time Counting-
An important clause in the calculation of
laytime.
Type of Charterparties
Voyage Charterparty
Clause 8;
Loading/Discharging Rates- the speed at which
cargo-handling activities are to be performed.
Clause 9;
Demurrage/Despatch- daily amount of liquidated
damages (demurrage) payable by a charterer in the
event a vessel is detained in port beyond the
maximum permitted laytime as well as any
stipulations to despatch
Type of Charterparties
Voyage Charterparty
Clause 10;
Notices- A shipowner/Master may be
required to give comprehensive notices of a
vessel’s expected arrival at the first (or sole)
loading port ,failing which the shipowner
may face a penalty in the form of extra
laytime allowed a charterer.
Type of Charterparties
Voyage Charterparty
Clause 12;
Ship’s Gear- A normal clause in dry cargo
shipping specifying that a vessel’s gear will
be maintained to a high standard and
specifying what happens in the event of gear
breakdown resulting in extra expense.
Type of Charterparties
Voyage Charterparty
Clause 14 & 15
Grab discharge/Stevedore damage-
Owners normally confirm that a vessel is
suitable for grab discharge and formalities
need to be set out in the event that a vessel
suffers damage during the cargo handling
processes.
Type of Charterparties
Voyage Charterparty
Clause 17;
Overtime who is to pay for overtime.
Clause 18 & 19;
Shifting/Seaworthy trim -Who is to pay
shifting costs(if any) between berths also
whether time so used is to count as laytime
The vessel is to be left in safe seaworthy
condition between the ports.
Type of Charterparties
Voyage Charterparty
Clause 13 & 16;
Cargo Separation and Tallying
Where a vessel is to carry various parcels of cargo,it
may not be possible for al separations between
individual parcels to be natural.
The tallying (checking) of cargo as it is loaded or
discharged is frequently an expensive operation
and cargo claims can arise for alleged short
delivery ,bad condition etc.
Type of Charterparties
Voyage Charterparty
Clause 20;
Dues and Taxes –This clause specifies which party
to the contract is responsible for taxes which may
be levied against the vessel and/or her cargo and
/or the freight.
Clause 21;
Port Agents- In any charter party it is advisable
that reference be made as to which of the parties is
responsible for the selection of an agent.
Type of Charterparties
Voyage Charterparty
Clause 22 & 34
Bills of Lading-The of lading to be
presented to the Master or his/her agent
upon completion of the loading .Master or
his/her agent to sign the bill of lading
indicating the apparent condition of the
cargo.
Type of Charterparties
Voyage Charterparty
Clause 23;
Lightening- where cargo lightening is
necessary a comprehensive clause covering
all facets of this sometimes complex
operation should be negotiated .The
MULTIFORM and AWELSH clauses
between them cover several of these facets
but nearly all of them.
Type of Charterparties
Voyage Charterparty
Clause 26;
General Average;
A clause specifying is to be adjusted and or
paid irrespective of the ports of call involved
and the laws relating to GA.
Clause 27;
Strikes; Both parties to a charterparty have
risks and liabilities in the event of a strike.
Type of Charterparties
Voyage Charterparty
Clause 28;
Exception- The rights of contracting parties to
cancel the charter parties in case of events making
its performance virtually impossible –eg Force
Majeure or Acts of God.
Clause 31;
Commission- Specifies the amount and to whom
commissions and brokerages are payable ,usually
adding that commissions/brokerages are payable
on freight ,deadfreight and demurrage.
Type of Charterparties
Voyage Charterparty
Clauses 32 & 33
Protecting Clauses-A set of clauses
commonly included in the printed form of a
charterparty or as additional clauses .This
also includes P&I bunkering clause sets out
owners rights to deviate for bunkers during
the contractual voyage.
Type of Charterparties
Voyage Charterparty
Clause 24;
Lien and Cesser- Most charterparties contain a
cesser and lien clause and the MULTIFORM and
AWELSH (clause 26) are no exceptions.
Clause 33;
Ice- Depending on the trade involved it may not
be necessary for an ice clause to be included in a
charter party ,but where one is required ,great care
should be taken over its wording.
Type of Charterparties
Voyage Charterparty
Clause 33;
War Risks- War risks clauses should be examined
in detail as some are unfair to shipowners ,others
to charterers and/or patently unsuitable for the
purpose intended.
A war risk clause should provide a shipowner with
the right to refuse to allow his vessel and her crew
to enter or to remain in an area which has become
dangerous due to warlike activity.
Type of Charterparties
Voyage Charterparty
Signature-No Charterparty is complete
without the signatures of or on behalf of the
parties concerned.
Type of Charterparties
Time Charterparty
Preamble ;The first page of the charterparty
and covering a wide range of subjects within
its text ,not least the place where the
contract is made ,the date of the charterparty
and the names and domiciles of the
contracting parties.
Type of Charterparties
Time Charterparty
Vessel Description ;Depending upon the
complexity of the intended trade ,the
description of the vessel may be more or less
as for voyage charterparties ,with the
important addition of speeds and bunker
consumptions.
Type of Charterparties
Time Charterparty
Duration of period ;The duration of a period
time charter .The parties can agree an exact
redelivery date ,but in practice this is
difficult to comply with and ,in the event of
legal disputes.
Type of Charterparties
Time Charterparty
Clause 6;
Trading Intentions/limits -The areas of the
world in which the vessel is to be employed
should be entered-eg worldwide but always
within Institute Warranty Limits and parts of
the world specifically excluded from the
permissible trading area.
Type of Charterparties
Time Charterparty
Clause 12;
Cargo Intention/exclusions- This includes
details of cargoes which can and those
which cannot be carried.
Vessel condition-Just as for voyage
charterparties an undertaking by the vessel’s
owners that the vessel is in good condition.
Type of Charterparties
Time Charterparty
Clause 1;
Owner’s Responsibilities-Lists what an
owner is to provide.
Clause 2;
Charter’s responsibilities-Lists what a
charterer is to provide.
Type of Charterparties
Time Charterparty
Clause 3;
Bunkers-It is common practice for time charterers
to take over and pay the owner for the bunkers
remaining on board a vessel upon delivery on to
time charter ,and for owners to act similarly upon
redelivery ,the quantities of fuel ,diesel and/or gas
oil ,and the prices per tonne of each being
negotiated when fixing.
Type of Charterparties
Time Charterparty
Clause 4,5 and 29;
Hire-Amount when ,where and to whom
hire is payable and arrangements for other
payments ,less deductions for items such as
port expenses and cash for master
Agreement for procedure incase of late
payment of hire.
Type of Charterparties
Time Charterparty
Clause 15;
Off-Hire- Provisions leading to off-hire
situations –eg poor performance ,strike of
crew ,drydocking etc- and appropriate
deductions form hire payments.
Vessel performance-This includes range of
speed and consumptions say from 8 knots to
15 knots in both laden and ballast conditions
Type of Charterparties
Time Charterparty
Cargo Claims ;For their mutual benefit it is
important that the timecharterers and
owners of the time chartered vessels reach
an undertaking on how cargo claims will be
handled.
Type of Charterparties
Time Charterparty
Clause 8 &9;
Master/Officers-The duties of a ship’s
master are defined and it is spelt out that
although a Master is the owner’s legal
servant he must act under the orders of the
charterers as far as the employment is
concerned.
Type of Charterparties
Time Charterparty
Clause 11;
Logbooks-The charterers normally add this clause
that they have the right to check a vessel’s
performance by reference to a specialised weather
routing company eg Ocean routes and in the event
that the log books and the independent reports
disagree the independent reports take precedence
over the log books .This is important in respect of
off-hre claims and vessel’s performance.
Type of Charterparties
Time Charterparty
Clause 10;
Supercargo/Victualling-Spells out charterer’s right to
appoint a supercargo and the costs of exercising this right
with regard to meals and accommodation.
Clause 38;
Pollution-Many states are becoming extremely conscious of
pollution of their waterways and coastlines and merchant
ship owners must ensure that their vessels comply with a
host of international and national legislation in connection
with this subject.
Type of Charterparties
Time Charterparty
Clause 19;
Salvage-It seems fair that expenses and rewards in cases of
salvage should be shared and this is normal practice.
Clause 37;
Laying up-Unlike tanker time charterparties it is only rarely
that dry-cargo owner and time charterers consider the risks
of a vessel laying up through lack of employment .What
most dry-cargo time charterparties do include ,however is
reference to what happens if a vessel is detained in port for
periods in excess of 30 days
Type of Charterparties
Time Charterparty
Clause 17;
Arbitration –an essential part of any contract
For example incase ASBATIME specifies New
York since the charterparty is drafted and
published by a body of resident in New York.
Type of Charterparties
Time Charterparty
Clause 18;
Lien-Just as an element of voyage charters
each party’s right of lien must be considered
and stipulated.
Clause 16;
Exceptions-Similar to the voyage charter
clause.
Type of Charterparties
Time Charterparty
Clause 8;
Bill of Lading-Specifies the manner in which bills
of lading are to be drawn up ,the signing of same
and protection for an owner in case of paper
inconsistencies.
Clause 35;
Stevedore damage-Provision for notification of
stevedore damage and repairs.
Signature ;Not to be forgotten.
Type of Charter parties
Time Charter:
Time charter terms are for longer duration, for a few
months to over a year and in certain cases for a number
of years. In case of time charter the charterer takes a
ship on daily hire basis for a specific time period and
utilises it for number of voyages in declared
geographical range of ports but is not bound to operate
the vessel on fixed routes.
The charterer has to ensure that the vessel is not
required to sail beyond the International Warranty
Limits or in war zones without the owner’s knowledge.
Type of Charter parties
Time Charter
Decision for such operations is entirely the owner’s prerogative.
The time charter hires are payable in advance, generally on
fortnightly basis. Performance clauses are incorporated in time
charter parties.
Underperformance on account of speed, excessive fuel
consumption and deficiency in cargo handling rates make the
owner liable for compensation to the charterer. In some charter
parties a certain time period may be allowed for the regular
routine maintenance, beyond which the vessel becomes ‘off
hire’, and pro rata deductions are made from the time charter
hire.
Type of Charter parties
Type of Charter parties
Hybrid Charter parties
It is becoming increasingly common to see
charters which combine some of the aspects of
both time and voyage charters ,e.g.
(1) Trip Charters i.e. Contracts obliging the
charterer to pay hire for the time taken by the
ship to complete a specified voyage e.g. round
Atlantic voyage.
Type of Charter parties
Hybrid Charter parties
(2) Consecutive voyage charter parties e.g. four
consecutive voyages between A and B
(3) Slot Charters space sharing agreements i.e.
agreements which enable liner operators to utilize
empty space on their ships by allowing other
operators to use some of the empty capacity in
their vessels in exchange for the right to use an
equivalent amount of space on the ships of such
other operators.
Type of Charter parties
Hybrid Charter parties
Slot Charters This form of arrangement is
common in the container trade and
remuneration is a complicated equation often
calculated with regard to the net profit over a
period by all the operators who are part of the
arrangement.
Ship Owner’s standpoint
From the ship-owners point of view a charter provides
income. However the owner has to decide his
chartering strategy in order to maximize his income .If
the ship is time chartered ,the income of the ship is
guaranteed at a fixed period without the need to
repeatedly find new employment.
However during that period the market rate of hire may
go up or down .If the market rate goes down then the
Owner will have benefited from the time charter.
However if the market rate has increased ,the time
charter will prevent the Owner from exploiting the
higher market rate.
Ship Owner’s standpoint
The Owner may therefore prefer-if he feels that
the market rate will improve in the future –to
avoid committing his ship to a time charter and
fix his ship instead for a voyage charter on the
spot market and when lucrative fixtures become
available.
The Charterers Requirement
The charterer is usually either a speculator on
the chartering market who hopes to make a
profit by a wise strategy of chartering and sub-
chartering or is a trader who needs
transportation for his cargo.
The Charterers Requirement
Example If the charterer is a trader who wishes to sell
goods on CIF terms then ,if he does not own a ship he
will need to charter one in order to satisfy his obligation
under the cargo sale contract to transport the goods to
the buyer’s chosen port of delivery.
He may either decided to secure transportation for a
period ( i.e. time charter) thereby knowing in advance
what the transportation cost element of his cargo sale
will be for that period when negotiating the price of the
goods or alternatively ,he may speculate on the market
and secure transportation for a particular cargo to a
particular destination.
The Charterers Requirement
He will negotiating the sale of that cargo ( i.e.
voyage charter)
Whether the charter is a time charter or a voyage
charter the charter will be looking for terms
which provide him with the maximum flexibility
to control the employment of the ship since his
transportation requirements may well change
depending on the requirements of the cargo sale
contract.
Terms of the Charter
Conditions ,Warranties and In nominate
Terms
Warranty is a term of less importance ,the
breach of which will normally allow the
innocent party to claim damages but not to
terminate the contract.
Terms of the Charter
Conditions ,Warranties and In nominate Terms
Condition is a term of such importance that any
breach of it will entitle the innocent party to
terminate the contract forthwith.
Example;
(a) A statement that the ship is fully classed
(b) The duty to proceed on a voyage without
deviation.
(c ) A statement that the vessel is expected ready to
load by a certain date.
Terms of the Charter
Conditions ,Warranties and In nominate
Terms
Conditions;
Example;
(d) A statement relating to the ship’s flag in
wartime.
(e) A statement that no dangerous on
unlawful goods will be shipped
Terms of Charter
Conditions ,Warranties and In nominate
Terms
In nominate ( or Intermediate terms)
In general it appears that terms relating to
the vessel’s description will be treated as
intermediate terms in which case the
question of whether or not the charter can be
terminated will depend upon the seriousness
of the effect of the breach.
Terms which are implied by law
Even when the charter is silent on a particular issue
,the law may imply a term if it is necessary to do so it
give business efficacy to the contract.
The court will not be over ready to do so and will
certainly not do so merely to save one of the parties
from a bad deal or to make the contract fairer
Prima facie that which in any contract is left to be
implied and need not be expressed is something so
obvious that it goes without saying so that if while the
parties were making their bargain ,an officious
bystander were to suggest some express provision for it
in their agreement.
Terms which are implied by law
Examples
(1) That the ship is seaworthy
(2) That the owner will proceed with the voyage
with reasonable dispatch
(3) That the charterer will not ship dangerous
cargo.
(4) That the port nominated by the charter will
be safe for the vessel
Chartering Operations
Liner
Tramping
Chartering Operations
Liner Operations
Liner shipping is associated with fixed sailing schedules
of vessels, providing predetermined sailing frequencies,
range of the sailing dates, fixed routes and range of
ports that are covered on the voyages.
The system comprises sharing of cargo capacities of
member shipping lines on agreed tariff rates to organise
reliable and regular sailing patterns.
Chartering Operations
Liner Operations
The ships operating on liner terms may be general cargo ships
carrying break bulk cargo, container vessels, Ro-Ro vessels etc.
Liner vessels carry a mix of smaller parcels of different types of
cargoes during the same voyage.
When vessels are operated under liner terms the applicable
freight rates are normally those that are negotiated and decided
by the Liner Conferences.
The conferences publish the schedule of freight rates and
conditions for carriage. These freight rates remain in force for
long periods and have provisions of adjustments e.g. surcharge
for fuel prices, undue delays in some ports etc.
Chartering Operations
Liner Operations
Marketing;
In context of shipping it refers to marketing of the
ship’s services (space for cargo). Securing cargo for
ships involves continuous market survey, advertising
ship’s voyage schedules and direct contact with the
clients.
Shipping company may have a marketing department
with professionals dedicated to canvassing for cargo
and related documentation.
Chartering Operations
Operations on Tramping Terms
Vessels operating on tramping terms are mostly those
carrying bulk cargoes which may be dry bulk cargoes
like ore, coal, grain etc. or liquid bulk cargoes like crude
oil, petroleum products, chemicals etc.
Tramping terms normally mean carriage of one
commodity of cargo involving one shipper, one
consignee and one bill of lading. Although at times
there may be more number of consignees and cargo
parcels carried under different bills of lading.
Chartering Operations
Operation on Tramping Terms
The freight rate or hire rate of a vessel is agreed
upon, between the ship owner or operating
owner and the cargo owner or shipper.
Negotiations are made through intermediaries
known as the owner’s brokers and charterers’
agents who match requirements of cargoes with
the ships and vice a versa.
Chartering Operations
Operations on Tramping Terms
They get paid for their services by way of brokerage
and address commission respectively.
The agreements for carriage of cargo between the
owners and the charterers are known as charter parties.
There are different types of charter parties for different
types of cargoes, geographical locations, terms for
carriage, handling of cargoes etc.
The standard formats of charter parties facilitate faster
agreements as most terms and conditions are known to
both the parties.
Chartering Operations
Operations on Tramping Terms
There are different types of charter parties for
different types of cargoes, geographical locations,
terms for carriage, handling of cargoes etc.
The standard formats of charter parties
facilitate faster agreements as most terms and
conditions are known to both the parties.
Chartering Operations
Operations on Tramping Terms
Standard formats have been developed or approved by
internationally reputed institutions like Baltic and International
Maritime Council (BIMCO); International Association of
Independent Tanker Owners (INTERTANKO); General
Council of British Shipping (GCBS); Institute of Chartered
Shipbrokers; Association of Shipbrokers and Agents USA etc.
Amendments in a charter party is made as necessary for a
specific voyage by inclusions/replacements/removal of clauses
on the basis of agreements between the two parties for
Operations on Tramping Terms:
Voyage estimating:
Voyage estimating is an important function under
chartering and operations. It is a process of estimating
viability of a voyage.
It involves estimation of expected revenue and expenses
that will have to be incurred for making a prospective
voyage and is an essential exercise to find the best option
out of different alternatives that may be available for a
ship’s employment.
Offers for prospective employment are compared on a
common datum of earnings, which may be either daily
Gross Operating Profit (GOP) also called Gross Daily
Surplus, Nett Daily Surplus, the TC Rate or Daily Yield
Operations on Tramping Terms:
When whole ship is fixed on a voyage charter and the freight
rates are applied on the basis of per tonne of cargo it becomes
desirable to load maximum amount of cargo. Then it becomes
necessary to calculate the maximum quantity of cargo that can be
carried for the purpose of voyage estimation.
This calculation involves taking into consideration the DWT,
hold capacities, stowage factor, available depths of water in the
loading and discharging ports, geographical areas the ship is
required to trade, seasonal draught restrictions, variation of
draught that may be encountered due to the change in water
density, quantity of fuel and water needed for the voyage and
ship’s constants
Operations on Tramping Terms:
.On the expense side the costs and time for
cargo handling, costs for river or canal transit as
applicable, cost of fuel, vessel’s standing charges
etc. are calculated to assess the voyage viability.
Operations on Tramping Terms:
Operating Expenses:
The expenses involved in ship operations are generally
classified in two types. First are those that are incurred
when the ship actually makes a voyage, whether it is
loaded with cargo or is on ballast.
The expenses are termed as direct operating expenses
(DOE). The second types are those that need to be
incurred irrespective of whether the vessel is sailing or
not.
These are indirect operating expenses (IOE) also called
standing charges or the running cost.
Operations on Tramping Terms:
Number of estimations are made, with slightly varied freight
rates e.g. in steps of 10 cents per tonne within the expected range.
This done for each of the prospective voyage to assess viability
of voyages as well as to facilitate negotiations. For the purpose
of voyage estimations standard forms are used by the estimators.
Apart from providing a standard, the use of forms provides and
assurance to the estimator that no details are left out. The forms
are also helpful in assessing the actual value of the estimations
after the voyage has been completed as well as serve as a
reference for future estimations
Operations on Tramping Terms:
Computer Programmes:
Custom built computer software programmes are now
available for the purpose of voyage estimation. The
computer database holds the ships’ particulars including
fuel consumption at different speeds that in the normal
range of operations. Based on the essential parameters
programmed into it, the system provides available
deadweight capacity once information such as draught;
density of water and bunker remaining on board are
entered while it picks up the constants form database
and provides for these in the calculations
Operations on Tramping Terms:
Computer Programmes:
The programme provides shortest distances between link ports
like Singapore, Suez, Panama etc, requiring only additional
distances to be entered in. The programme also calculates the
ship’s draughts applicable to the load line zones deduced from
the dates of the prospective voyage.
It is integrated with updated information on the daily bunker
prices at major bunker ports to provide suitable bunkering
options on the ports en-route.
In case programmed for tankers it can provide tank wise
capacities taking into consideration the volume variations due to
temperatures as well as corrections for list and trim.
Operations on Tramping Terms:
Computer Programs
The programme provides a number of figures
for TC rates based on small step variations (10
cents per tonne) of freight rates.
" BIMCO NEWS RELEASE MONDAY 29TH
JULY 2002“
BIMCO, the world's largest shipping organisation,
has just added NORGRAIN '89 to its innovative
Internet Document Editing Application (idea),
officially launched a year ago in Beijing.
The number of companies using idea now
exceeds 200 and includes not only ship-owners and
shipbrokers, but also ship management companies,
port agents and law firms
In addition to numerous conventional voyage
and time charter parties, idea offers electronic
versions of ship and crew management
agreements, towage contracts, bills of lading and
statements of fact.
BIMCO's idea comes with free access to a
comprehensive library of popular standard
shipping forms, to which BIMCO will add new
forms on a regular basis. Among the documents
currently available on the system are:
Various BIMCO Contracts;
AMWELSH 93
BALTIME 1939
BARECON 89
BIMCO STANDARD BUNKER CONTRACT 2001
BOXTIME
BPTIME 3
CONGENBILL 1994
Various BIMCO Contracts;
CONLINEBILL 2000
CONLINEBOOKING 2000
CREWMAN A
CREWMAN B
FUELCON
GENCON 94
GENTIME
HEAVYCON
Various BIMCO Contracts;
HYDROCHARTER
NORGRAIN 89
SALEFORM 87
SALEFORM 93
SHIPMAN 98
SLOTHIRE
Statement of Facts (short form)
SUPPLYTIME 89
SYNACOMEX 2000
TOWCON
TOWHIRE
VOLCOA
WORLDFOOD 99.
More information about BIMCO's idea can
be obtained from BIMCO's web site at
www.bimco.dk/idea.
Relationship between the Charter
party and Bills of Lading
In the vast majority of cases a charterer is either a
trader who is selling or buying goods or is someone
acting for such a party vis-à-vis the ship-owner and the
main purpose of a chartered ship is to carry goods to
the satisfaction of a contract for the International sale
of goods.
The ability of the charterer to obtain a bill of lading
from the ship is a fundamental requirement since
without a bill of lading ,the trader will have great
difficulty in selling the goods.
Relationship between the Charter
party and Bills of Lading
Important points to remember
The seller often knows nothing of the fundamental
standing of the buyer and is taking the risk in
considering his good unless he can reasonably certain
of being paid for them.
The obvious solution that of demanding payment in
advance is unlikely to appeal to the buyer ,who may
have no reason to trust the seller to ship goods of the
promised quantity and description.
Relationship between the Charter
party and Bills of Lading
Important points to remember
The buyer is not usually present or represented
at the load port and is not therefore in a position
to inspect the goods.
Furthermore even after the shipment so long as
the cargo remains at sea its quantity and
condition cannot be inspected by any further
potential buyer.
Relationship between the Charter
party and Bills of Lading
Important points to remember
The cargo whilst at sea cannot be physically
transferred to a new buyer.
The only way in which the seller can effect a
transfer of any part of such cargo is by
transferring instead a document of title
which is accepted as being the documentary
equivalent of that cargo.
Relationship between the Charter
party and Bills of Lading
The Bills of lading was invented to cure these
difficulties and has the following functions;
(1) It is a receipt given by the carrier for the goods
which describes the apparent order and condition and
quantity or weight of the goods on shipment ;and
(2) It is a contract of carriage which sets out the terms
under which the goods are to be carried by the ship.
It is a transferable document of title ,possession of
which proves entitlement to the goods.
Relationship between the Charter
party and Bills of Lading
Payment for the goods can therefore be made
against the bill of lading and bill can be
negotiated ( provided it has been made out to
order) from one holder to another ,thereby
transferring from one holder to another the
right to obtain delivery of the goods from the
ship.
Relationship between the Charter
party and Bills of Lading
A sea waybill-otherwise known as a waybill is also a
receipt and a contract of carriage.
However it is not treated as a document of title since
unlike Bill of Lading it not negotiable and remains at all
times a contract with the shipper.
Since the sea waybill is neither negotiable nor a
document of title it is not well suited to transactions
involving documentary credits because banks tend to
place great importance on security.
Relationship between the Charter
party and Bills of Lading
Sea waybill should therefore be used only when
there is no intention of on-selling the goods
during the course of the voyage.
For this reason they are used most often in the
container trade
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
Since the bill of lading is a receipt for the
shipment of goods ,it will come into operation
once those goods have been shipped.
However if the vessel has been chartered it will
probably come into operation as a result of
orders which have already been given by the
charterer under the charter party.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The Charter Party or
the Bill of Lading?
However since the Bill of Lading is also a contract of carriage of
goods a potential conflict arises between the two contracts.
It would be commercial nonsense for there to be two contracts
between the same two parties for the carriage of the same goods
on the same voyage.
Accordingly the law has adopted a common sense approach and
has held that when a bill of lading is held by a party who already
has a charterparty contract with the person who is the carrier
under the bill of lading ,the bill is to be treated as a receipt and a
document of title-but not as a contract of carraige.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
However once that Bill of Lading is endorsed to
a party who is not a party to the charter party
then in his hands ,the bill of lading operates not
only as a receipt and a document of title but also
as a contract of carriage between him and the
carrier.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
This is explained by Evans LJ in the case of Island
Archon
Legal relations between shipowner and charterer are
governed by their contract contained in the
charterparty.
When a bill of lading is issued or is transferred to the
owner or person entitled to possession of the cargo
who is not the charterer ,then it contains or evidences a
separate contract between the shipowner and that other
person.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
Example 1
A is a seller of goods on CIF terms to B .Under that
contract it is the duty of A to arrange the transportation
of the goods to B and in order to perform his duties
under the sale of contract.
A charters a ship from her owner C
Once the cargo has been shipped a bill of lading is
signed by the ship’s master on behalf of his owner as
carriers and released to A as shipper.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
Example 1
Whilst the bill of lading is held by A it does not operate
as a contract of carriage between A and C since there is
already a Charterparty contract between those two
parties.
When the bill of lading is endorsed by A to B pursuant
to the contract of sale then ,in the hands of B it
operates as a contract of carriage between B and C
since there is no charter party contract between B and
C.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
Example 2
A sells B on FOB terms .In this case the duty to
provide the transportation falls on B and he charters
the ship C .Once the cargo has been shipped the master
releases the bill of lading to A as shipper.
Whilst the bill of lading is held by A it operates as a
contract of carriage between A and C since there is no
charter party contract between A and C.
Relationship between the Charter
party and Bills of Lading
Which is the governing contract of carriage-The
Charter Party or the Bill of Lading?
Example 2
Once the bill of lading is endorsed by A to B the bill of
lading will not operate as a contract of carriage between
B and C since there is already a charter party contract
between B and C.
Once the bill is further endorsed by B to D it operates
as a contract of carriage between D and C since there is
no charter party contract between D and C.
Relationship between the Charter
party and Bills of Lading
Conflicting duties under the Charter Party and the
Bill of Lading
Once the cargo has been shipped under a Chartered
vessel it is clear that the ship owner can be a party to
different contracts( the charter party and the bill of
lading) with two different contracting parties (the
charterer under the charter party and the consignee
under the bill of lading).
Therefore unless the two contracts are on back to back
terms there is a potential for confusion and conflict.
Relationship between the Charter
party and Bills of Lading
Conflicting duties under the Charter Party and the Bill of
Lading
Example 1
Employment orders given by the charterer under the charter
party may put the owner in breach of his obligations to the cargo
owner under the bill of lading.
An order given by a charterer to change the port of discharge
from Port A to B after the Bills of lading have been released for
Port A would if the shipowner complied with them make him
guilty of deviation under the bill of lading contract.
This could seriously prejudice his P&I cover ( Insurance)
Relationship between the Charter
party and Bills of Lading
Conflicting duties under the Charter Party and the
Bill of Lading
Example
The issue of a bill of lading may seriously diminish the
effectiveness of rights which the owner may have under
the charter.
For example an owner has the right under Clause 5 of
the NYPE form of charter to withdraw the vessel from
the charterer’s employment if hire has not punctually
been paid.
Relationship between the Charter
party and Bills of Lading
Conflicting duties under the Charter Party and the
Bill of Lading
Example
However if a bill of lading has been issued in the
meantime a withdrawal may be not much use to the
ship owner since he completely separate obligations to
the cargo owner under the bills of lading will continue
These obligations include the duty to proceed to and
deliver the cargo at the port specified in the bill of
lading even though the bill of lading freight may already
have been pre-paid to the charterer and even though no
further hire will be payable under the time charter.
Relationship between the Charter
party and Bills of Lading
Conflicting duties under the Charter Party
and the Bill of Lading
Example
Indeed the owner may even have to pay out of
his own pocket port expenses ,stevedoring
charges and other costs which should have been
for the time charterer’s account under the time
charter if the charter had not been terminated by
the withdrawal.
Oil Tanker Freights
AVERAGE FREIGHT RATE ASSESSMENT (AFRA)
Introduction
AFRA and its Terms of Reference was originally laid
down and sponsored by Shell and subsequently BP for
their internal use.
In 1982, shell and BP stopped sponsoring it.
It is now compiled by the London Tanker Brokers
Panel and is based on information relating to transport
agreements supplied by various oil companies and also
from all known fixtures concluded on the open market.
It is recognized by tax authorities in many countries for
pricing of intra-company oil movements.
Oil Tanker Freights
AVERAGE FREIGHT RATE ASSESSMENT (AFRA)
Principle
To establish an average transportation cost per ton in a
given month for vessel in different size categories.
To represents the cost of all chartered tonnage actually
operating in the month being assessed, irrespective of
when the vessel was fixed.
Fixtures concluded during the period of assessment will
not affect the result unless such vessel is actually
performing a voyage during the assessment month.
Oil Tanker Freights
Who uses AFRA and why?
It removes the variable factors in shipping costs so that
the rate paid by the affiliate reflects the cost of
chartered tonnage operating in the month being
calculated.
It takes into account transport costs on a worldwide
basis including spot market factor for that month.
It is also used for transactions between oil traders and
also by government bodies
Oil Tanker Freights
AFRA rate DWT categories
General purpose – 16,500/24,000
Medium range – 25,000/44,999
Large range 1 – 45,000/79,999
Large range 2 – 80,000/159,999
VLCC – 160,000/319,999
ULCC – 320,000/549,999
Oil Tanker Freights
Vessels not included in the assessment
Government-owned vessels except when on commercial charter
Vessels employed in specialized trades such as the carriage of
clean oils, petrochemicals, lube oils, bitumen, etc.
Vessels employed in protected trades such as the U.S. Jones Act
trade.
Components in each size category
Company vessels
Vessels on long term charter (>18 months)
Vessels on short term charter (<18 months)
Vessels on single voyage charter
Oil Tanker Freights
The mechanics of AFRA
The calculations are made for the period from the 16th
of a month to the 15th of the next month, both dates
inclusive. It is the weighted average of commercially
chartered tonnage as employed in the international
transport of oil during the period considered.
Vessels fixtures for each of the above four vessel
categories are supplied by member companies who use
AFRA and from report of fixtures concluded on the
market for loading in the period under assessment.
Oil Tanker Freights
AFRA Assessment steps
The carrying capacity of each vessel operating during
the assessment period is calculated using a standard
voyage.
The weighted average rate in US dollars per ton for
carrying a ton of oil on that standard voyage is
estimated for each of the four vessel oil on that
standard voyage is estimated for each of the four vessel
types. For vessels that are on time charter, the
TCH/DWT /month is converted into cost per ton of
cargo for the standard voyage.
Oil Tanker Freights
AFRA Assessment steps
An overall weighted average is calculated for
each size group as follows:
(Total carrying capacity of each size category) x
(Weighted average rate for that size category)
The values arrived are in US dollars per ton and
are converted into WS index on the basis of the
standard voyage used and are published as a WS
Index Figure for each size category.
Oil Tanker Freights
WORLD SCALE
The WORLDSCALE Associations of London and
New York jointly publish a book, listed over 60,000
voyage rates and distances.
The book is revised yearly to take account of changes in
bunker prices and port dues, amendments are also
published from time to time throughout the year.
These “base” rates are given in US$ per tonne of cargo
and take into account bunker prices, canal transit times
and port charges.
Oil Tanker Freights
World Scale
The rate is based on a standard vessel of 75,000 tonnes cargo
capacity costing $ 12,000 per day fixed hire and performing a
round voyage load/discharge and back to load port at 14.5 knots
on 55 tonnes of fuel oil per day. It must be emphasized that
these rates are nominal rates, in practice the ship-owner and
charter will negotiate a rate for the particular voyage is question
as a percentage of the nominal rate.
Thus if the voyage was fixed at WORLDSCALE 100 (WS
100) then the rate would be as published. If the voyage was
fixed at WS 170 then it would be 170% of the published rate.
Oil Tanker Freights
World Scale
This has proven to be a remarkably successful compromise
between the charterer’s desire for flexible discharge options and
the owners need for a fair predictable income for his vessel,
however there are problems. WORLDSCALE is based upon an
average vessel earning an average rate with average rate with
average costs.
The further your vessel is away from the WORLDSCALE
average and the further away the market is from WS 100 then
the greater the potential for distortions.
Oil Tanker Freights
World Scale
This is why when looking at fixture reports you may see
a VLCC fixing at WS 60 whilst a product tanker is fixed
at WS 200, the cost per tonne of cargo moved on a
VLCC is much lower than the cost per tonne of cargo
moved on a product tanker, thus the product tanker
will attract a higher WORLDSCALE percentage.
Prudent owners will be aware of any distortions their
particular vessel specifications and the state of the
market may cause and will adjust their figures
accordingly.
Oil Tanker Freights
World Scale
The new worldwide tanker nominal freight scale
(WORLDSCALE) is intended merely as a standard of
reference to assist subscribers to conduct business.
The responsibility of the associations is limited to
providing subscribers with rates for voyages calculated
in accordance with the basis of a calculation and to
revising WORLDSCALE from time to time.
The nominal rate for a voyage does not in itself
have any significance as representing a fair or
reasonable rate for the standard vessel or any other
size and/or type of vessel at any particular time.
Oil Tanker Freights
World Scale
Market levels of freight are to be expressed in terms of a
percentage of the nominal freight rate. Thus WORLDSCALE
100 would mean the rate for the voyage in question as calculated
and issued by the associations, while WORLDSCALE 175 would
mean 175 per cent of that rate and WORLDSCALE 75 would
mean 75 per cent of that rate.
Rates are calculated and quoted only in USD per tonne.
However, freight may of course by payable in any currency and
the contracting parties should specify clearly the currency of
payment and the method to be used to determine the rate of
exchange to apply if the currency of payment is to be other than
USD.
Oil Tanker Freights
World Scale
Basis of calculation
All rate calculations, which are made in USD, are per tonne for a
full cargo for the standard vessel based upon a round voyage
from loading port or ports to discharging port or ports and
return to first loading port using the under-mentioned factors.
All of the factors shown are purely nominal and for rate
calculation purposes only. In particular, the fixed hire element of
USD 12,000 per day is not intended to represent an actual level
of operating costs, nor to produce rates providing a certain level
of income or margin of profit, either for the standard vessel or
for any other vessel under any flag.
Oil Tanker Freights
World Scale
Standard vessel
Total capacity 75,000
tonnes
(i.e. the vessel’s capacity for cargo plus stores, water,
and bunkers, both voyage and reserve; also see section
5 (2) of part A of the preamble).
Average service speed 14.5 knots
Bunker consumption steaming 55 tonnes per day
Purposes other than steaming 100 tonnes
per round voyage
Oil Tanker Freights
World Scale
In Port- 5 tonne for each port involved during
the voyage.
Grade of Fuel Oil 380 CST
Port Time 4 days for a voyage from one loading
port to one discharging port.
Additional 12 hours allowed for extra port
involved on a voyage.
Oil Tanker Freights
World Scale
Fixed Hire Element USD 12,000 Per day
Bunker price 149,75 per tonne
This price represents the average worldwide
bunker price for fuel oil (380 cst) during the
period 1st October 1999 to 30th September
2000 as assessed by Cockett marine oil limited
(of London)
Oil Tanker Freights
World Scale
Port costs
Port costs used are those assessed by the associations in the light
of information available to them up to the end of September
2000, the rate of exchange used for converting costs in a local
currency to USD being the average applicable during September
2000.
Canal transit time
24 hours is allowed for each transit of the Panama canal.
30 hours is allowed for each transit of the Suez Canal.
Mileage is not taken into account in either case.
Oil Tanker Freights
World Scale
Examples of Wet Fixtures
Source Fair Play October 2008
Examples of Time Charters
Baltic Dry Index;
Source Fairplay October 2008
ThankYou & Any
Questions
