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Charter Party

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Charter Party

The major operation under this function is to find continued and suitable

employment for the ships to maximise revenue earnings. These operations aretherefore primarily concerned with finding suitable cargoes for ships irrespectiveof whether the ships are owned or are hired. These operations are concerned withevaluating intended voyages to maximise earning so as to pay for the cost of ship,cost of its operations and to make some profit.

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Charter Party

There are many mutually agreed arrangements between the owners of cargo orshippers and the ship owners or ship operators for transportation of cargoes. Theterms 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 andcargo.

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Charter Party

Charter party is a contract between the ship-owner and the Charterer. Threeimportant elements are; (a) Description of the ship (b) Description of the trade(c ) Description of time period

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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 toprovide all the details of the ship with a guarantee about its accuracy. Anexample such as Shell time and Inter tank having appropriate format which isrequired to contain several pages of information required ship details

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Charter Party

Description of the ShipMany Charterers require the following plans to be supplied by the Owners; (1)General Arrangement Plan ,including loading scale (2) Detailed Cargo manifoldarrangement Drawing (3) Pumping Arrangement Plan (4) Plan of Cargo Tank

Ventilating System (5) Manufacturers Characteristics Curves

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Charter Party

Description of the Ship Cubic Capacity Speed and Consumption Constant Weights

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Charter Party

Description of the Ship These, apart from the name of the ship, include year ofbuilt, flag, dead weight, maximum dimensions, maximum draught, fresh waterallowance, speed, fuel consumption, cargo space in bail and grain capacities,number of hatches and holds, type and safe working load of cargo gear, compliancewith international regulations for carriage of specialised cargo and such other

important details relevant for the intended cargo and trade. For example some bulkcargoes may require that the holds be equipped with carbon-di-oxide fireprotection system, or special requirement of

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Charter Party

Description of the Ship Name of the Ship Year of Build Name and location of OwnersFlag Class Call Letters GRT/NRT Summer Deadweight Fresh Water Allowance FreshWater Allowance

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Charter Party

Description of the Ship Cubic Capacity Speed and Consumption Constant Weights

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Charter Party

Description of the Trade As much as Charterer is interested to know the details ofthe ship in the same way the Owner is interested to know about the type of tradethe ship will be engaged in. Owners will negotiate an entry to that effect the

berths and ports to which the vessel will

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Charter Party

Description of the Trade The Charter Party will guarantee that the vessel willtrade within the Institute Warranty Limits(I.W.L)- a trading area defined byUnderwriters 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 thecharter party.

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Charter Party

Description of the Trade The Charter Party shall also include certain exclusionsfor the cargo to be loaded such as asphalt in bulk ,pitch in bulk ,livestockexplosives ,fish meal ,scrap , sulphur, and logs. In addition ,a modern phenomena

often included in the cargo exclusion clause is nuclear products.

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Charter Party

Description of the Period The period of charter commences with vessels deliveryto the Charterers and ,like all charters with vessels delivery to the Charterersand like all charters, this delivery is either spot

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Types of Charter Parties

There are two types of charters, Nondemise and Demise Charter. The charter bydemise is not very frequent in normal day-to-day business but a number of shipsare chartered on a so-called bareboat basis. This kind of charter ordinarilymeans that the vessel is put at the disposal of a charterer with out any crew. Thecharterer thus takes over almost all of the owners functions except for the

payment of the capital costs and the hull and machinery

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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 complicatedfinancing arrangement ,often with the intention that the charterer should becomethe owner of the ship in due course. Thus a contract for the purchase of a ship byinstallments will often incorporate a demise charter into the contract.

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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 butdemise chartering it to the borrower for the period of the loan. This would enablethe bank to avoid not only the operating costs but also the liabilities which itwould otherwise have to bear in relation to the operation of the ship under amortgage. Demise charters are also concluded between two associated companies fortax

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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 timewithin 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 andher crew to carry an agreed cargo on an agreed voyage regardless for the paymentof freight ( and possibly other remuneration such as demurrage if theloading/discharging is delayed beyond the time agreed for such operations)

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Voyage Charter: Voyage charter is an engagement of a vessel for a single voyagebetween declared ports to transport full shipload of cargo or a certain quantityof cargo. The freight is paid on per tonne of cargo (DWT) bases or on lump sum

basis. The ship owner provides for all the ships costs with its crew, expensesfor fuel, water, canal dues, port dues, loading and discharging expenses etc. inreturn the charterer pays him the hire charges for carrying the cargo as perdescribed or utilised cargo capacity of the ship.

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Voyage Charter: To compensate for the delays that may be encountered in cargoloading/discharging operations, the demurrage and despatch clauses forcompensation to the affected parties are inserted in charter party.

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Voyage Charterparty List of Charterparty Clauses 1.Preamble;This can be extensivein some charterparties .In the Multiform much of what may be found in preambles ofcertain forms is contained in clause 1. There are two important of the brief

Multiform preamble however the place and the date

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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 deemedto 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

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Voyage Charterparty Date equally important the date to be shown is that which byfixture negotiations are concluded with all subjects lifted-in other words ,whenall negotiating formalities are complete.

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Voyage Charterparty Clause 1 ;Name and brief description of vessel The Multiformallows for a more complete vessel description in the main ,printed part of theform than many (e.g compare with AMWELSH). The position of the vessel when the

contract is negotiated is also important

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Voyage Charterparty Clause 2; Condition of vessel It is usual for a shipowner toconfirm that a vessel is in a suitable condition safely and properly to undertakethe contractual voyage.

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Voyage Charterparty Clause 2; Cargo description-Commodity and nature of the goodsto 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 ( eg12,000 tonnes,5% or less in owners option)

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Voyage Charterparty Clause 2; Loading Places- Names of loading place(s) and orrange (eg Bordeaux/Hamburg range); mention of number of safe berths/anchoragescharterers entitled to use at each place; whether vessel to remain always afloator safely aground maximum/minimum available

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Type of Charterparties

Voyage Charterparty Clause 3; Discharging places and port orders/rotation Clause4- Laydays and Cancelling The spread of dates which a vessel is to present herselfat the first (or sole) loading port .This spread should be entered in a contractas well as conditions under which the contract can be cancelled in the event thatthe vessel is unable to meet those dates.

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Voyage Charterparty Clause 5; Freight the amount and currency of freight towhom ,where and when payable .The risk of vessel and /or cargo loss on passage inrelation to freight should be specified-ie whether freight is deemed earned ascargo is loaded or upon delivery.

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Voyage Charterparty Clause 6; Cost of Loading/Discharging which of the parties tothe contract is to appoint and pay for cargo handling at each port. Clause 7;Notice of Readiness/Time CountingAn important clause in the

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Voyage Charterparty Clause 8; Loading/Discharging Rates- the speed at which cargo-handling activities are to be performed. Clause 9; Demurrage/Despatch- dailyamount 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 anystipulations to despatch

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Voyage Charterparty Clause 10; Notices- A shipowner/Master may be required to givecomprehensive notices of a vessels expected arrival at the first (or sole)loading port ,failing which the shipowner may face a penalty in the form of extralaytime allowed a

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Voyage Charterparty Clause 12; Ships Gear- A normal clause in dry cargo shippingspecifying that a vessels gear will be maintained to a high standard andspecifying what happens in the event of gear breakdown resulting in extra expense.

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Voyage Charterparty Clause 14 & 15 Grab discharge/Stevedore damageOwners normallyconfirm that a vessel is suitable for grab discharge and formalities need to beset out in the event that a vessel suffers damage during the cargo handling

processes.

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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 berthsalso whether time so used is to count as laytime The vessel is to be left in safeseaworthy condition

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Voyage Charterparty Clause 13 & 16; Cargo Separation and Tallying Where a vesselis to carry various parcels of cargo,it may not be possible for al separationsbetween individual parcels to be natural. The tallying (checking) of cargo as it

is loaded or discharged is frequently an expensive operation and cargo claims canarise for alleged short delivery ,bad condition etc.

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Voyage Charterparty Clause 20; Dues and Taxes This clause specifies which partyto the contract is responsible for taxes which may be levied against the vesseland/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 responsiblefor the selection of an agent.

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Voyage Charterparty Clause 22 & 34 Bills of Lading-The of lading to be presentedto the Master or his/her agent upon completion of the loading .Master or his/heragent to sign the bill of lading indicating the apparent condition of the cargo.

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Voyage Charterparty Clause 23; Lightening- where cargo lightening is necessary acomprehensive clause covering all facets of this sometimes complex operationshould be negotiated .The MULTIFORM and AWELSH clauses between them cover severalof these facets but nearly all of them.

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Voyage Charterparty Clause 26; General Average; A clause specifying is to beadjusted and or paid irrespective of the ports of call involved and the lawsrelating to GA. Clause 27; Strikes; Both parties to a charterparty have risks and

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Voyage Charterparty Clause 28; Exception- The rights of contracting parties tocancel the charter parties in case of events making its performance virtuallyimpossible eg Force Majeure or Acts of God. Clause 31; Commission- Specifies the

amount and to whom commissions and brokerages are payable ,usually adding thatcommissions/brokerages are payable on freight ,deadfreight and demurrage.

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Voyage Charterparty Clauses 32 & 33 Protecting Clauses-A set of clauses commonlyincluded in the printed form of a charterparty or as additional clauses .This alsoincludes P&I bunkering clause sets out owners rights to deviate for bunkers duringthe contractual

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Voyage Charterparty Clause 24; Lien and Cesser- Most charterparties contain acesser 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 careshould be taken over its

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Voyage Charterparty Clause 33; War Risks- War risks clauses should be examined indetail as some are unfair to shipowners ,others to charterers and/or patentlyunsuitable 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 inan area which has become dangerous due to warlike activity.

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Voyage Charterparty Signature-No Charterparty is complete without the signaturesof or on behalf of the parties concerned.

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Time Charterparty Preamble ;The first page of the charterparty and covering a widerange of subjects within its text ,not least the place where the contract ismade ,the date of the charterparty and the names and domiciles of the contractingparties.

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Time Charterparty Vessel Description ;Depending upon the complexity of theintended trade ,the description of the vessel may be more or less as for voyagecharterparties ,with the important addition of speeds and bunker consumptions.

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Time Charterparty Duration of period ;The duration of a period time charter .Theparties can agree an exact redelivery date ,but in practice this is difficult tocomply with and ,in the event of legal disputes.

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Time Charterparty Clause 6; Trading Intentions/limits -The areas of the world inwhich the vessel is to be employed should be entered-eg worldwide but alwayswithin Institute Warranty Limits and parts of the world specifically excluded fromthe permissible trading area.

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Time Charterparty Clause 12; Cargo Intention/exclusions- This includes details ofcargoes which can and those which cannot be carried. Vessel condition-Just as forvoyage charterparties an undertaking by the vessels owners that the vessel is in

good

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Time Charterparty Clause 1; Owners Responsibilities-Lists what an owner is toprovide. Clause 2; Charters responsibilities-Lists what a charterer is toprovide.

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Time Charterparty Clause 3; Bunkers-It is common practice for time charterers totake over and pay the owner for the bunkers remaining on board a vessel upondelivery on to time charter ,and for owners to act similarly upon redelivery ,thequantities of fuel ,diesel and/or gas oil ,and the prices per tonne of each beingnegotiated when fixing.

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Time Charterparty Clause 4,5 and 29; Hire-Amount when ,where and to whom hire ispayable and arrangements for other payments ,less deductions for items such asport expenses and cash for master Agreement for procedure incase of late paymentof hire.

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Time Charterparty Clause 15; Off-Hire- Provisions leading to off-hire situations eg poor performance ,strike of crew ,drydocking etc- and appropriate deductionsform hire payments. Vessel performance-This includes range of speed and

consumptions say from 8 knots to 15 knots in both laden and

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Time Charterparty Cargo Claims ;For their mutual benefit it is important that thetimecharterers and owners of the time chartered vessels reach an undertaking onhow cargo claims will be handled.

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Time Charterparty Clause 8 &9; Master/Officers-The duties of a ships master aredefined and it is spelt out that although a Master is the owners legal servant hemust act under the orders of the charterers as far as the employment is concerned.

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Time Charterparty Clause 11; Logbooks-The charterers normally add this clause thatthey have the right to check a vessels performance by reference to a specialisedweather routing company eg Ocean routes and in the event that the log books andthe independent reports disagree the independent reports take precedence over thelog books .This is important in respect of off-hre claims and vessels

performance.

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Time Charterparty Clause 10; Supercargo/Victualling-Spells out charterers rightto appoint a supercargo and the costs of exercising this right with regard tomeals and accommodation. Clause 38; Pollution-Many states are becoming extremely

conscious of pollution of their waterways and coastlines and merchant ship ownersmust ensure that their vessels comply with a host of international and nationallegislation in connection with this subject.

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Time Charterparty Clause 19; Salvage-It seems fair that expenses and rewards incases of salvage should be shared and this is normal practice. Clause 37; Layingup-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 ofemployment .What most dry-cargo time charterparties do include ,however isreference to what happens if a vessel is detained in port for periods in excess of30 days

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Time Charterparty Clause 17; Arbitration an essential part of any contract Forexample incase ASBATIME specifies New York since the charterparty is drafted andpublished by a body of resident in New York.

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Time Charterparty Clause 18; Lien-Just as an element of voyage charters eachpartys right of lien must be considered and stipulated. Clause 16; Exceptions-Similar to the voyage charter clause.

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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 caseof paper inconsistencies. Clause 35; Stevedore damage-Provision for notificationof stevedore damage and repairs. Signature ;Not to be forgotten.

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Time Charter: Time charter terms are for longer duration, for a few months to overa year and in certain cases for a number of years. In case of time charter thecharterer 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 boundto operate the vessel on fixed routes. The charterer has to ensure that the vesselis not required to sail beyond the International Warranty Limits or in war

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Time Charter Decision for such operations is entirely the owners prerogative. Thetime 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 handlingrates make the owner liable for compensation to the charterer. In some charterparties 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 fromthe time charter hire.

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Hybrid Charter parties It is becoming increasingly common to see charters whichcombine some of the aspects of both time and voyage charters ,e.g. (1) TripCharters 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.

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Hybrid Charter parties (2) Consecutive voyage charter parties e.g. fourconsecutive voyages between A and B (3) Slot Charters space sharing agreementsi.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 inexchange for the right to use an equivalent amount of space on the ships of suchother operators.

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Hybrid Charter parties Slot Charters This form of arrangement is common in thecontainer trade and remuneration is a complicated equation often calculated withregard to the net profit over a period by all the operators who are part of thearrangement.

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Ship Owners 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 shipis time chartered ,the income of the ship is guaranteed at a fixed period withoutthe need to repeatedly find new employment. However during that period the marketrate of hire may go up or down .If the market rate goes down then the Owner willhave benefited from the time charter. However if the market rate has increased

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Ship Owners standpoint

The Owner may therefore prefer-if he feels that the market rate will improve inthe future to avoid committing his ship to a time charter and fix his shipinstead for a voyage charter on the spot market and when lucrative fixtures becomeavailable.

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The Charterers Requirement

The charterer is usually either a speculator on the chartering market who hopes tomake a profit by a wise strategy of chartering and subchartering or is a traderwho needs transportation for his cargo.

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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 hisobligation under the cargo sale contract to transport the goods to the buyers

chosen port of delivery. He may either decided to secure transportation for aperiod ( i.e. time charter) thereby knowing in advance what the transportationcost element of his cargo sale will be for that period when negotiating the priceof the goods or alternatively ,he may speculate on the market and securetransportation for a

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He will negotiating the sale of that cargo ( i.e. voyage charter) Whether thecharter is a time charter or a voyage charter the charter will be looking forterms which provide him with the maximum flexibility to control the employment ofthe ship since his transportation requirements may well change depending on therequirements of the cargo sale contract.

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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 butnot to terminate the contract.

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Conditions ,Warranties and In nominate Terms Condition is a term of suchimportance that any breach of it will entitle the innocent party to terminate thecontract 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 thevessel is

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Conditions ,Warranties and In nominate Terms Conditions; Example; (d) A statement

relating to the ships flag in wartime. (e) A statement that no dangerous onunlawful goods will be shipped

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Terms of Charter

Conditions ,Warranties and In nominate Terms In nominate ( or Intermediate terms)In general it appears that terms relating to the vessels description will betreated as intermediate terms in which case the question of whether or not thecharter can be terminated will depend upon the

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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 willnot be over ready to do so and will certainly not do so merely to save one of theparties from a bad deal or to make the contract fairer Prima facie that which inany contract is left to be implied and need not be expressed is something soobvious that it goes without saying so that if while the parties were making theirbargain ,an officious bystander were to suggest some

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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 dangerouscargo. (4) That the port nominated by the charter will be safe for the vessel

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Chartering Operations

Liner Tramping

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Liner Operations Liner shipping is associated with fixed sailing schedules ofvessels, 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 tariffrates to organise reliable and regular sailing patterns.

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Liner Operations The ships operating on liner terms may be general cargo ships

carrying break bulk cargo, container vessels, Ro-Ro vessels etc. Liner vesselscarry a mix of smaller parcels of different types of cargoes during the samevoyage. When vessels are operated under liner terms the applicable freight ratesare normally those that are negotiated and decided by the Liner Conferences. Theconferences publish the schedule of freight rates and conditions for carriage.These freight rates remain in force for long periods and have provisions ofadjustments e.g. surcharge for fuel prices, undue delays in some ports etc.

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Liner Operations Marketing; In context of shipping it refers to marketing of theships services (space for cargo). Securing cargo for ships involves continuousmarket survey, advertising ships voyage schedules and direct contact with the

clients. Shipping company may have a marketing department with professionalsdedicated to canvassing for cargo and related documentation.

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Operations on Tramping Terms Vessels operating on tramping terms are mostly thosecarrying bulk cargoes which may be dry bulk cargoes like ore, coal, grain etc. orliquid bulk cargoes like crude oil, petroleum products, chemicals etc. Tramping

terms normally mean carriage of one commodity of cargo involving one shipper, oneconsignee and one bill of lading. Although at times there may be more number ofconsignees and cargo parcels carried under different bills of lading.

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Operation on Tramping Terms The freight rate or hire rate of a vessel is agreedupon, between the ship owner or operating owner and the cargo owner or shipper.Negotiations are made through intermediaries known as the owners brokers andcharterers agents who match requirements of cargoes with the ships and vice aversa.

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Operations on Tramping Terms They get paid for their services by way of brokerage

and address commission respectively. The agreements for carriage of cargo betweenthe owners and the charterers are known as charter parties. There are differenttypes of charter parties for different types of cargoes, geographical locations,terms for carriage, handling of cargoes etc. The standard formats of charterparties facilitate faster agreements as most terms and conditions are known toboth

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Operations on Tramping Terms There are different types of charter parties fordifferent types of cargoes, geographical locations, terms for carriage, handlingof cargoes etc. The standard formats of charter parties facilitate faster

agreements as most terms and conditions are known to both the parties.

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Operations on Tramping Terms Standard formats have been developed or approved byinternationally reputed institutions like Baltic and International MaritimeCouncil (BIMCO); International Association of Independent Tanker Owners(INTERTANKO); General Council of British Shipping (GCBS); Institute of CharteredShipbrokers; Association of Shipbrokers and Agents USA etc. Amendments in a

charter party is made as necessary for a specific voyage byinclusions/replacements/removal of clauses on the basis of agreements between thetwo parties for

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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 involvesestimation of expected revenue and expenses that will have to be incurred formaking a prospective voyage and is an essential exercise to find the best optionout of different alternatives that may be available for a ships 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 DailySurplus, Nett Daily Surplus, the TC Rate or Daily Yield

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When whole ship is fixed on a voyage charter and the freight rates are applied onthe basis of per tonne of cargo it becomes desirable to load maximum amount ofcargo. Then it becomes necessary to calculate the maximum quantity of cargo that

can be carried for the purpose of voyage estimation. This calculation involvestaking into consideration the DWT, hold capacities, stowage factor, availabledepths of water in the loading and discharging ports, geographical areas the shipis required to trade, seasonal draught restrictions, variation of draught that maybe encountered due to the change in water density, quantity of fuel and waterneeded for the voyage and ships

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.On the expense side the costs and time for cargo handling, costs for river orcanal transit as applicable, cost of fuel, vessels standing charges etc. arecalculated to assess the voyage viability.

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Operating Expenses: The expenses involved in ship operations are generally

classified in two types. First are those that are incurred when the ship actuallymakes a voyage, whether it is loaded with cargo or is on ballast. The expenses aretermed as direct operating expenses (DOE). The second types are those that need tobe incurred irrespective of whether the vessel is sailing or not. These areindirect operating expenses (IOE) also called standing charges or the runningcost.

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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 theprospective voyage to assess viability of voyages as well as to facilitatenegotiations. For the purpose of voyage estimations standard forms are used by theestimators. Apart from providing a standard, the use of forms provides andassurance to the estimator that no details are left out. The forms are alsohelpful in assessing the actual value of the estimations after the voyage has beencompleted as well as serve as a reference for future estimations

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Computer Programmes: Custom built computer software programmes are now availablefor the purpose of voyage estimation. The computer database holds the shipsparticulars including fuel consumption at different speeds that in the normalrange of operations. Based on the essential parameters programmed into it, thesystem provides available deadweight capacity once information such as draught;

density of water and bunker remaining on board are entered while it

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Computer Programmes: The programme provides shortest distances between link ports

like Singapore, Suez, Panama etc, requiring only additional distances to beentered in. The programme also calculates the ships draughts applicable to theload line zones deduced from the dates of the prospective voyage. It is integratedwith updated information on the daily bunker prices at major bunker ports toprovide suitable bunkering options on the ports en-route. In case programmed fortankers it can provide tank wise capacities taking into consideration the volumevariations due to temperatures as well as

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" BIMCO NEWS RELEASE MONDAY 29TH JULY 2002 BIMCO, the world's largest shippingorganisation, has just added NORGRAIN '89 to its innovative Internet DocumentEditing Application (idea), officially launched a year ago in Beijing. The numberof companies using idea now exceeds 200 and includes not only ship-owners and

shipbrokers, but also ship management companies, port agents and law firms

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In addition to numerous conventional voyage and time charter parties, idea offerselectronic versions of ship and crew management agreements, towage contracts,bills of lading and statements of fact.

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BIMCO's idea comes with free access to a comprehensive library of popular standardshipping forms, to which BIMCO will add new forms on a regular basis. Among thedocuments currently available on the system are:

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Various BIMCO Contracts;AMWELSH 93 BALTIME 1939 BARECON 89 BIMCO STANDARD BUNKER CONTRACT 2001 BOXTIMEBPTIME 3 CONGENBILL 1994

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Various BIMCO Contracts; CONLINEBILL 2000 CONLINEBOOKING 2000 CREWMAN A CREWMAN BFUELCON GENCON 94 GENTIME HEAVYCON

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Various BIMCO Contracts; HYDROCHARTER NORGRAIN 89 SALEFORM 87 SALEFORM 93 SHIPMAN98 SLOTHIRE Statement of Facts (short form) SUPPLYTIME 89 SYNACOMEX 2000 TOWCONTOWHIRE VOLCOA WORLDFOOD 99.

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More information about BIMCO's idea can be obtained from BIMCO's web site atwww.bimco.dk/idea.

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In the vast majority of cases a charterer is either a trader who is selling orbuying goods or is someone acting for such a party vis--vis the ship-owner andthe main purpose of a chartered ship is to carry goods to the satisfaction of acontract 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 abill of lading ,the trader will have great difficulty in

Relationship between the Charter party and Bills of Lading

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Important points to remember The seller often knows nothing of the fundamentalstanding of the buyer and is taking the risk in considering his good unless he canreasonably certain of being paid for them. The obvious solution that of demandingpayment 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.


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Payment for the goods can therefore be made against the bill of lading and billcan be negotiated ( provided it has been made out to order) from one holder toanother ,thereby transferring from one holder to another the right to obtaindelivery of the goods from the ship.


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A sea waybill-otherwise known as a waybill is also a receipt and a contract ofcarriage. 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 wellsuited to transactions involving documentary credits because banks tend to placegreat importance on security.


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Sea waybill should therefore be used only when there is no intention of onsellingthe goods during the course of the voyage. For this reason they are used mostoften in the container trade


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Which is the governing contract of carriage-The Charter Party or the Bill ofLading? Since the bill of lading is a receipt for the shipment of goods ,it willcome 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 whichhave already been given by the

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Relationship between the Charter party and Bills of Lading Which is the governingcontract of carriage-The

Charter Party or the Bill of Lading? However since the Bill of Lading is also acontract of carriage of goods a potential conflict arises between the twocontracts. It would be commercial nonsense for there to be two contracts betweenthe 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 abill of lading is held by a party who already has a charterparty contract with theperson who is the carrier under the bill of lading ,the bill is to be treated as areceipt and a document of title-but not as a

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Which is the governing contract of carriage-The Charter Party or the Bill ofLading? However once that Bill of Lading is endorsed to a party who is not a partyto the charter party then in his hands ,the bill of lading operates not only as areceipt and a document of title but also as a contract of carriage between him and

the carrier.


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Relationship between the Charter party and Bills of Lading Which is the governingcontract of

carriage-The Charter Party or the Bill of Lading? This is explained by Evans LJ inthe case of Island Archon Legal relations between shipowner and charterer aregoverned by their contract contained in the charterparty. When a bill of lading isissued or is transferred to the owner or person entitled to possession of thecargo who is not the charterer ,then it contains or evidences a separate contractbetween the shipowner and that other person.

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carriage-The Charter Party or the Bill of Lading? Example 1 A is a seller of goodson CIF terms to B .Under that contract it is the duty of A to arrange thetransportation of the goods to B and in order to perform his duties under the saleof contract. A charters a ship from her owner C Once the cargo has been shipped abill of lading is signed by the ships master on behalf of his owner as carriersand released to A as shipper.

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carriage-The Charter Party or the Bill of Lading? Example 1 Whilst the bill oflading is held by A it does not operate as a contract of carriage between A and Csince there is already a Charterparty contract between those two parties. When thebill of lading is endorsed by A to B pursuant to the contract of sale then ,in thehands of B it operates as a contract of carriage between B and C since there is nocharter party contract between B and C.

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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 chartersthe ship C .Once the cargo has been shipped the master releases the bill of ladingto A as shipper. Whilst the bill of lading is held by A it operates as a contractof carriage between A and C since there is no charter party contract between A andC.

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Which is the governing contract of carriage-The Charter Party or the Bill ofLading? 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 alreadya charter party contract between B and C. Once the bill is further endorsed by Bto D it operates as a contract of carriage between D and C since there is nocharter party contract between D and C.


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Conflicting duties under the Charter Party and the Bill of Lading Once the cargohas been shipped under a Chartered vessel it is clear that the ship owner can be aparty to different contracts( the charter party and the bill of lading) with twodifferent contracting parties (the charterer under the charter party and the

consignee under the bill of lading). Therefore unless the two contracts are onback to back terms there is a potential for confusion and conflict.


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Relationship between the Charter party and Bills of Lading Conflicting dutiesunder the Charter Party

and the Bill of Lading Example 1 Employment orders given by the charterer underthe charter party may put the owner in breach of his obligations to the cargoowner under the bill of lading. An order given by a charterer to change the portof discharge from Port A to B after the Bills of lading have been released forPort A would if the shipowner complied with them make him guilty of deviationunder the bill of lading contract. This could seriously prejudice his P&I cover( Insurance)

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Conflicting duties under the Charter Party and the Bill of Lading Example Theissue of a bill of lading may seriously diminish the effectiveness of rights whichthe owner may have under the charter. For example an owner has the right underClause 5 of the NYPE form of charter to withdraw the vessel from the charterers

employment if hire has not punctually been paid.


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Relationship between the Charter party and Bills of Lading Conflicting dutiesunder 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 hecompletely separate obligations to the cargo owner under the bills of lading willcontinue These obligations include the duty to proceed to and deliver the cargo atthe port specified in the bill of lading even though the bill of lading freightmay already have been pre-paid to the

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Conflicting duties under the Charter Party and the Bill of Lading Example Indeedthe owner may even have to pay out of his own pocket port expenses ,stevedoringcharges and other costs which should have been for the time charterers accountunder the time charter if the charter had not been terminated by the

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Oil Tanker Freights

AVERAGE FREIGHT RATE ASSESSMENT (AFRA) Introduction

AFRA and its Terms of Reference was originally laid down and sponsored by Shelland subsequently BP for their internal use. In 1982, shell and BP stoppedsponsoring it. It is now compiled by the London Tanker Brokers Panel and is basedon information relating to transport agreements supplied by various oil companiesand also from all known fixtures concluded on the open

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Oil Tanker Freights

AVERAGE FREIGHT RATE ASSESSMENT (AFRA)

Principle To establish an average transportation cost per ton in a given month forvessel in different size categories. To represents the cost of all charteredtonnage actually operating in the month being assessed, irrespective of when thevessel was fixed. Fixtures concluded during the period of assessment will notaffect the result unless such vessel is actually performing a

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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

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Oil Tanker Freights

Vessels not included in the assessment Government-owned vessels except when oncommercial charter Vessels employed in specialized trades such as the carriage ofclean oils, petrochemicals, lube oils, bitumen, etc. Vessels employed in protected

trades such as the U.S. Jones Act trade. Components in each size category Companyvessels Vessels on long term charter (>18 months) Vessels on short term charter(

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Oil Tanker Freights

The mechanics of AFRA The calculations are made for the period from the 16th of amonth to the 15th of the next month, both dates inclusive. It is the weightedaverage of commercially chartered tonnage as employed in the international

transport of oil during the period considered. Vessels fixtures for each of theabove four vessel categories are supplied by member companies who use AFRA andfrom report of fixtures concluded on the market for loading in the period underassessment.

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Oil Tanker Freights

AFRA Assessment steps The carrying capacity of each vessel operating during theassessment period is calculated using a standard voyage. The weighted average ratein 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 foreach of the four vessel types. For vessels that are on time charter, theTCH/DWT /month is converted into cost per ton of cargo for the standard voyage.

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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 (Weightedaverage rate for that size category) The values arrived are in US dollars per tonand are converted into WS index on the basis of the standard voyage used and arepublished as a

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Oil Tanker Freights

World ScaleThis has proven to be a remarkably successful compromise between the charterersdesire for flexible discharge options and the owners need for a fair predictableincome for his vessel, however there are problems. WORLDSCALE is based upon an

average vessel earning an average rate with average rate with average costs. Thefurther your vessel is away from the WORLDSCALE average and the further away themarket is from WS 100 then the greater the potential for distortions.

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Oil Tanker Freights

World Scale This is why when looking at fixture reports you may see a VLCC fixingat WS 60 whilst a product tanker is fixed at WS 200, the cost per tonne of cargomoved on a VLCC is much lower than the cost per tonne of cargo moved on a producttanker, 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 figuresaccordingly.

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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 conductbusiness. The responsibility of the associations is limited to providingsubscribers with rates for voyages calculated in accordance with the basis of acalculation and to revising WORLDSCALE from time to time. The nominal rate for avoyage does not in itself have any significance as representing a fair orreasonable rate for the standard vessel or any other

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Oil Tanker Freights

World Scale Market levels of freight are to be expressed in terms of a percentageof the nominal freight rate. Thus WORLDSCALE 100 would mean the rate for thevoyage 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 centof 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 partiesshould specify clearly the currency of payment and the method to be used todetermine the rate of exchange to apply if the currency of payment

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Oil Tanker Freights

World Scale Basis of calculation All rate calculations, which are made in USD, areper tonne for a full cargo for the standard vessel based upon a round voyage fromloading 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 purelynominal and for rate calculation purposes only. In particular, the fixed hireelement of USD 12,000 per day is not intended to represent an actual level ofoperating costs, nor to produce rates providing a certain level of income ormargin of profit, either for the standard vessel or for any other vessel

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Oil Tanker Freights

World Scale Standard vessel Total capacity 75,000 tonnes (i.e. the vesselscapacity for cargo plus stores, water, and bunkers, both voyage and reserve; alsosee 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

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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 onedischarging port. Additional 12 hours allowed for extra port involved on a voyage.

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Oil Tanker Freights

World Scale Fixed Hire Element USD 12,000 Per day Bunker price 149,75 per tonneThis 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)

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Oil Tanker Freights

World Scale Examples of Wet Fixtures Source Fair Play October 2008

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Examples of Time Charters

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Baltic Dry Index; Source Fairplay October 2008

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Thank

You & Any Questions

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12944762 charter party

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