Umm… did someone say “PARTY?” Yes, Halloween just passed but no, this does not have anything to do with a celebration or “partying” as we conventionally know it.
While it is probably ridiculously obvious, I will state it anyway: Without vessels, there would be no international trade. This is because a majority of cargo is “carried” to our shores via steamship lines, which in today’s world typically means by container ship with respect to dry cargo, and a tanker with respect to wet cargo.
A “Voyage Charter” is where a vessel owner agrees to perform a single (or series of) voyages in exchange for the payment of the lease rate of the vessel which is payable upon issuance of the bill of lading.
A "Charter Party" is the name of the actual agreement between the “Charterer,” which is the party that borrows the boat, and the vessel owner.
I found it curious to learn that the Charter Party is prepared by a “Charter Broker.” While this may not seem as if it would be surprising, given that customs brokers file entry records for importers, it nonetheless surprised me because of the length and detail of a Charter Party.
The terms of a Charter Party cover typical maritime issues, such as the freight weight, departure and arriving ports, and demurrage charges. In everyday language, demurrage is the cost for continued use of the vessel beyond the “lay time” (defined below). These agreements however, further contain provisions for cleaning the vessel, and concepts known as “dead freight” and General Average, among other clauses.
“Dead freight” I thought was an interesting one. Wet cargo is contracted to in terms of weight, that is, the freight charge is based on the weight of the cargo. As the Charterer is guaranteeing that the weight will meet a minimum amount of tonnage, irrespective of whether you have a fully loaded vessel with cargo, payment for that amount of tonnage is still required.
For example, crude oil that weighs less, i.e., is lighter, takes up a larger volume of space. Therefore, despite the hull being full with oil, the Charterer is still liable for the payment of the “dead freight,” which is the difference between the weight contracted to (i.e., the guaranteed tonnage) and the actual weight.
“General average,” another concept I find intriguing, deals with the idea of abandoning cargo in the event of say, rough seas, in order to save the remaining cargo onboard and complete the voyage. Due to the cargo being thrown over for the “benefit of the adventure,” a General Average clause then indicates that the cargo owners whose merchandise did safely make the journey, must all chip in to pay those parties whose cargo was essentially sacrificed for the “greater good.”
Coming back to the concept of “lay time,” this is the amount of free time the Charterer has to load the ship with cargo at the “load port,” and unload the vessel at the “discharge port.” Keep in mind that just because you are able to load the cargo in an amount of time shorter than that which is designated, does not automatically mean that an extension of time is available on the discharge end. In order to preserve this, the clause regarding Lay Time in the Charter Party must be contracted to be “reversible,” which will provide for an allowance of the time saved on the front end (load port), for the back end (discharge port).
Lay time may be spelled out as “Laydays” in the contract with a designation for when it commences and is canceled. The commencement date indicates when use of the ship will be available in the port designated in the Charter Party. Typically, the agreement will specify certain notice requirements, such as that to inform the Charterer as to what the estimated time of arrival is for the vessel. When a vessel does not arrive on the agreed upon date however, or when the vessel owner alerts the Charterer to a delay for which the boat will not arrive on the agreed upon date at the load port, then what is a Charterer left to do?
It turns out that the only remedy is to cancel the Charter Party within 48 hours. This can be a difficult remedy however, both for the vessel owner who is en route to the port to drop off the vessel, as well as for the Charterer who now has to scramble to find a vessel to meet its needs within 48 hours.
The long and the short of it is that chartering boats is not for amateurs.
Questions/comments? Post below or email me at clark.deanna@gmail.com
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