4

NAROTTAM MORARJEE

INSTITUTE OF SHIPPING

MUMBAI

STUDY MATERIAL

CHARTERING

FINAL YEAR 2019

REGD. OFFICE
76, Jolly Maker Chambers No.2
Nariman Point, MUMBAI-400021 (INDIA)
Tele: +91-22-22024110 or +91-22-22022495
E-mail: [email protected]
Website: www.nmis.net
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING
MUMBAI

These study materials are strictly for private circulation among the bonafide students
and members of the Narottam Morarjee Institute of Shipping only.

Any unauthorized use, copying or taking extract of these study materials, without the
written permission of the Institute for any purpose other than the prosecution of the
Institute's courses are strictly forbidden.

CONTENTS

CHARTERING

LESSON TOPIC TOTAL PAGE NO.

NO. PAGES
- INDEX/CONTENTS 2 1–2
- SYNOPSIS 1 3

PART - I : BASICS OF CHARTERING

1 INTRODUCTION TO CHARTERING 10 5 – 14
2 CHARTERING PROCEDURE AND ETHICS 6 15 – 20
3 CHARTERING TERMS, PROCESS & NEGOTIATION 53 21 – 73
4 INTERMEDIARIES AND ORGANIZATIONS 11 74 – 84

PART - II : DRY CARGO CHARTERING

5 FREIGHT MARKETS & MARKET PRACTICE 14 86 – 99

6 STANDARD CHARTER PARTY FORMS 3 100 – 102
7 STOWAGE & STOWAGE FACTORS 10 103 – 112
8 CHARTERING CONTRACTS 28 113 – 140
9 BILLS OF LADING & BILLS OF LADING ISSUED UNDER 12 141 – 152
CHARTER PARTY
10 TIME CHARTERING, ILLUSTRATIONS & TC FINAL ACCOUNTS 17 153 – 169
11 VOYAGE ESTIMATING & EXEMPLES OF VOYAGE ESTIMATING 11 170 – 180
12 LAYTIME – DRY CARGO & EXEMPLES OF LAYTIME. 18 181 – 198

PART – III : TANKER CHARTERING

13 CRUDE OIL/TYPES OF TANKER SHIPS & CARGO HANDLING, 22 200 – 221

SOURCES TRADE & PROPERTIES
14 THE MARKET STRUCTURE & FACTORS AFFECTING FREIGHT 8 222 – 229
MARKETS
15 NEW WORLDWIDE TANKER NOMINAL FREIGHT SCALE 25 230 – 254
“WORLDSCALE”, VOYAGE ESTIMATING FOR TANKERS
16 TANKER FIXTURE & TANKER TIME CHARTER PARTY 10 255 – 264
17 LAY TIME CALCULATIONS IN OIL TANKERS & ESAMPLES 9 265 – 273
SOF-BIMCO 2 274 -- 275

Contd….. 2/-
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 PART – IV : APPENDICES

1. ANNEX-1 CHARTERING NEGOTIATIONS - DRY CARGO FIXTURES 4 276 – 279

2. ANNEX-2 TANKER VOYAGE PARTY ASBATANKYOY NEW 6 280 – 285
3. ANNEX-3 WORLD TRADES & TRADING RESTRICTIONS 16 286 – 301
4. ANNEX-4 BASIC GLOSSARY OF TANKER SHIPPING 4 302 – 305
5. ANNEX-5 PRACTICAL GUIDELINES FOR CHARTERING 5 306 – 310
6. ANNEX-6 DRY CARGO SHIP TONNAGES 12 311 – 322
7. ANNEX-7 DRY CARGO SHIPS & SPECIALIZED VESSELS 7 323 – 329

3 MODEL TEST PAPERS (COLOUR PAGES) 8 330 – 337

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 2ND (FINAL) YEAR PGDSM/FELLOWSHIP

Sr. CHARTERING - SYLLABUS

No.
Part I – Basics of chartering
1. Introduction of Chartering: Background; Contract of Affreightment; Charter and charter parties of different
types; Charter Party; Main classification of Chartering/Charter markets. [Types of ships for the trade; major
cargoes; producing areas and trades, their movement; methods of cargo handling for dry cargo and
tankers].
2. Charter procedure & Ethics: Introduction; Voyage charter enquiry; Time charter enquiry; Essential items
in voyage/time charter; Ethics at work; Ethics in chartering.
3. Chartering terms, process & negotiation: Introduction; Chartering terms & definitions. Common
chartering abbreviations. Investigation; Offer, counter offer, negations, finalization of fixture. DOs and
DON’Ts for Chartering Manager
4. Intermediaries and Organizations: Intermediaries - Shipbrokers (six categories); Sale & Purchase broker;
Organizations – BIMCO, ICHCA; FONASSBA; Baltic Exchange, INTERTANKO & OCIMF; Importance of
OPEC. Vetting and TMSA.
Part II - DRY CARGO CHARTERING
5. Freight markets & Market Practice: Introduction; The Baltic Exchange; Market practitioners; Charterers;
Shipowners; Operators; Shipbrokers; E-commerce; Trading; Market reporting; Methods of ship
employment; Joint ventures, Shipping pools;
6. Standard charter party forms : Dry cargo charter parties of major importance; Voyage Forms; Period
forms.
7. Stowage Factors: Stowage factors, Broken stowage, Examples on Stowage factors.
8. Chartering contracts: Introduction; Official charter parties; Charter party library; Charter party wording;
Drawing up charter parties; Signing Charter parties; Adding originals; The Voyage charter party & clauses;
The Time charter party & clauses; The Bareboat charter party & clauses; The Gencon charterparty.
9. Bills of Lading & Bills of Lading issued under Charter party: Introduction; Important clauses included;
Relationship between BL & Charterparties; BsL & Demise charterparties; BsL & Time or Voyage
Charterparties; Employment & Indemnity clauses in Time & Voyage charterprities; Demise clause in the BL;
Incorporation of charterparty clause into the BL; Incorporation of Arbitration clause; UCP 500; Two issues –
in cases where the charterers hold the BL, Where a third party holds a BL.
10. Time Chartering: Explanatory notes to NYPE 93. The new NYPE Form 2015; (Illustrations) : with
Solutions
11. Voyage Estimating: Voyage estimate; Voyage; Earnings; Expenses/Costs; Port days, Port charges; DWT
calculation; Final calculations.
12. Laytime – Dry Cargo: Types of laytime; importance of Notice of Readiness; commencement and
termination of time; detailed knowledge of statement of facts and time sheets; calculation of demurrage and
despatch; charterparty laytime definitions. Steps [Read relevant clauses of the CP; Determine the allowed
laytime; Obtain SOF; Establishment of the commencement of laytime; Allow for interruption; Establish the
cessation of laytime; Final calculations (non-reversible; Reversible; Average; All time saved/laytime
saved)].
NOTE: Study of GENCON and NYPE is recommended along with detailed market reports
Part III - TANKER CHARTERING
13. Crude Oil/Type of Tanker ships and Cargo Handling: Introduction; Crude oil & various types of products
& their movement, oil terminals, oil transportation, technical aspects/classification of tanker operations
Developments in types of tankers and Technical aspects of tanker operations, including cargo handling.
Safety and pollution prevention aspects and requirements. Crude oil – Sources, Trade & Properties :
Introduction; Common derivatives of crude oil; Production; Crude oil – important characteristics; Gravity,
Viscosity, Pour point; SBM; SPM; Top world oil producers, exporters, consumers & importers.
14. The Market Structure & Factors affecting Freight markets: Introduction; Influences on the structure of
the tanker market (which includes ship size; new producing areas, pipelines; etc.)
15. New Worldwide Tanker Nominal Freight Scale “World Scale”: Introduction; Origin of freight rates for
tankers; How the rate is expressed; Basis of Calculation; Usage of World scale; Variable differential; Fixed
differentials; Average freight rate assessment (AFRA). Voyage estimating for tankers
16. Tanker Fixtures: Introduction; A list of Fixtures & their interpretation.
Tanker Time Charterparty: SHELLTIME 4 1984 – Introduction & detailed study of important clauses.
17. Lay Time Calculations in Oil Tankers: The concept, application & calculation of laytime of tanker voyage
charter; detailed study of important clauses such as Laytime allowed, despatch, commencement of laytime,
cessation of lay time, interruptions (under control of charterers; under control of shipowner; under control of
both shipowner & charterer), excess pumping time, COW, Calculations.
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PART - I : BASICS OF CHARTERING
CHARTERING FINAL YEAR

LESSON 1

INTRODUCTION TO CHARTERING
1.0 BACKGROUND

1.1 It was in about 1870 that technical improvements in sea transport brought about a
worldwide trading network and made it possible for whole regions to specialize in a single
commodity for export. The comparative modern system of international exchange and
specialization was made possible by the advent of steamship which enabled merchants to
maintain regular schedules and in turn to make business less speculative and more a matter of
supply and demand. The technological advancement and improvement made in the types of
ships and economy in propulsion contributed to the development of world trade and also in
the pattern of international sea transport.

1.2 Vessels plying on a regular scheduled service between groups of ports and subsequently
container vessels (as also passenger vessels) were termed Liners. The vessels not operating
on fixed sailing schedules were termed Tramps since they, as the term implies, traded in all
parts of the world in search of cargo, primarily bulk cargo.

1.3 As international trade increased more sea routes were opened up and through
efficiency brought about a quicker turn-round of ships. The "Liner" operators in order to
maintain a regular sailing schedule had to resort to chartering ships as and when their own
ships were not available as required by the pre-announced schedules. The "Tramp" trade, on
the other hand, had to cope with the situation arising out of industrialization and export trade
of individual bulk commodities. In order to make the commitments for export in time, the
cargo owners or the traders of bulk commodities resorted to chartering ships required at a
particular port in a particular period of time as dictated by their commitments. Today, a very
large proportion of the world's trade is carried in tramp ships, one commodity filling up the
whole ship. The commodities in tramp trade are coal, ores and concentrates, sulphur,
cement, phosphate, scrap, steel, etc., required to keep the wheels of industries moving; as
also1 essential commodities like grains and fertilizers.

1.4 The contract of carriage of goods by sea in tramp ships is usually, but not exclusively,
contained in a document called the "Charterparty". Several international shipping
organizations devised standard charterparty forms for the particular trade or specific types of
charters. The purpose was to standardise a number of clauses frequently used in different
trades.

1.5 The parties involved in a charter deal are, on the one hand, one who owns or operates a
ship (owner or carrier) and, on the other hand, one who has goods to be carried by sea
{charterer). The owner of the cargo (the shipper) is frequently also the charterer. Both parties
normally negotiate through the intermediary called the shipbroker. Chartering negotiations are
carried out day and night and nearly always under pressure of time and frequently even
concluded in a single day.

1.6 In the early days of chartering, the ships were chartered on a voyage basis, that is, the
ship was chartered to carry a full ship-load or a specified quantity of cargo from one port to
another port for a consideration term as "freight". This type of charter was (and still is) called

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Voyage Charter. Subsequently, another type of charter known as Time Charter came into being
in which the ship as a functioning operating unit was given on hire for a period of time, the
consideration payable on time basis by charterer to owner being termed as charter hire and
the ship traded during the charter period as per the wishes of the charterer. The charterer
acting in the capacity of a "carrier" is called a disponent owner.

2.0 CONTRACT OF AFFREIGHTMENT

2.1 COA is an agreement by a shipowner to carry goods by water or to furnish a ship for the
purpose of so carrying goods, in return for a sum of money called freight for hire). This
definition is a general definition of any contract of transport of goods by water. (This term
has now acquired specific meaning in modern shipping).

3.0 CHARTER PARTY

3.1 A charter party is a contract whereby a shipowner agrees to place a ship, or part of it, at
the disposal of a merchant or other person (known as the charterer) for the carriage of goods
from one port or ports to another port or ports on being paid freight, or to let his ship for a
specified period, the remuneration then being known as hire. The terms, conditions and
exceptions under which the goods are carried are set out in the charter party.

3.2 The charterer may supply the cargo himself or enter into sub-contracts of carriage with
other shippers who provide all or a part of the cargo or he may employ the ship as a general
ship, i.e., a ship put up for a particular voyage to carry the goods of all persons willing to ship
the goods on the ship for that particular voyage.

3.3 After the goods are shipped a bill of lading is issued which serves as a receipt by the
shipowner. The bill of lading issued pursuant to a charter party has implications different from
the one issued for cargo shipped on a liner ship.

4.0 TYPES OF CHARTERPARTIES

4.1.0 TYPES OF CHARTERS

4.1.1 There are basically two types of charters or charter parties viewed from a legal angle:
(A) Demise or Bareboat Charter
(B) Non-demise Charter

4.1.2 Before these charters are further elaborated in this lesson, let us first understand what
is 'Demise Charter'.

4.2.0 DEMISE OR BAREBOAT CHARTER:

4.2.1 In this type of charter, the shipowner puts at the disposal of the charterer merely the
ship (hence also called 'Bareboat' Charter) for a specified period of time as in time charter. But
the main difference is that here the charterer (as against the shipowner, in a non-demise type
of charter) appoints and pays wages to the master, officers and crew. Charterer provides the
cargo and also pays for during the charter period all the expenses such as technical i.e. annual
and periodical surveys, maintenance, operational and, of course, its own commercial expenses
except the capital cost and hull and machinery (H&M) insurance premium which the shipowner
incurs.

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4.2.2 Charterers gets full control of the whole ship and takes over virtually the entire
responsibility of running the ship and for this reason, it is, so far as the shipowner is
concerned a charter of a demise type. It is like a 'lease' of the ship to the charterer for the
charter period Bareboat Charter, as it is also called, is not very frequently used nowadays, but
was frequently used after World War II. However, large oil companies do take ships on
bareboat charter to supplement their own fleet of tankers usually for transportation of crude
oil. Financiers wishing to invest in ships but not having expertise to operate them, buy and give
out the ships on demise charter.

4.3.0 NON-DEMISE CHARTER:

4.3.1 A non-demise charter arises when the shipowner provides the ship and the crew with,
of-course, the master and the officers, whilst the charterer provides the cargo. A voyage
charter and time charter, which will fall in this category, are further elaborated hereunder:

NON-DEMISE CHARTER

VOYAGE CHARTER TIMECHARTER

### Used for carriage of cargo from one ### Ship hired for an agreed period or for
port (or ports) to another port (or ports) or an agreed trip or round voyage on time
for consecutive voyages. basis.
### Consideration: freight per ton of cargo ### Consideration: charter hire payable on
carried or lumpsum freight. time basis, e.g., per day or per 15 days or
per calendar month.

### Usually for full load or parcels of ### May be used for full load in tramp trade
homogenous cargo. or in liner trade.
### Usually time allowed for ### Ship goes "off hire" for such
loading/discharging called laytime is eventualities as machinery/engine
agreed upon. If loading/discharging is breakdown, etc., as. specified in the
completed after the expiry of laytime, charter party for the period the ship or part
demurrage is payable to the shipowner thereof is not available for the services
and if same completed before expiry, required, i.e., hire is not payable or only
despatch is payable usually at half the payable on pro rata basis for such periods.
demurrage rate by the shipowner.
### During the time charter period, such
### Usually all port charges, canal dues, charges/expenses as are otherwise
cost of bunkers and all risks of voyage on shipowner's account are borne by the
delays and also port delays are borne by the charter.
shipowner.

4.4.0 VOYAGE CHARTER:

4.1 The basic practical aspects of the operation of a dry cargo ship which the shipowner or
the ship operator will have to handle in co-ordination with the master, charterer and the
agents at the loading and discharging ports in a voyage charter are narrated hereunder.

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*** The ship arrives at the loading port or place named in the charter party, or if loading
area(s,) or a range of ports are mentioned in the charter party, then to the port as ordered by
the charterer.

(Before this, in case the ship was already at the loading port, notice(s) of expected time of
readiness would have been given, and in case she was not already there, ship would have had
a ballast (empty) leg to the loading port and master would have given before arrival the notice(s)
of the ship's expected time of arrival at the loading port/area, to the charterer and/or shipper,
as laid down in the charter party and the ship's agent would have entered the ship with the
custom and port authorities and free pratique applied for and obtained by the master before or
on arrival at the port from the Port Health Office(r).

*** Ship is presented to the charterer or the shipper by giving notice of readiness during the
period within which the ship is to be presented ready in all respects to load the cargo as per
the charter party called 'Laydays' (or referred to as "Laycan" which is the combined abbreviated
term

For the period between the commencement and cancelling dates for presenting the ship
representing the Laydays).

*** Notice of Readiness is given immediately on arrival by the master or the shipowner's agents
to the shipper or the charterer or his agent on those days of the week and within the
specified period of the day(s) (e.g. on a week day excluding Sundays and holidays during office
hours) indicating readiness of the ship to load the cargo.

*** Notice of Readiness is accepted, if/when the ship is found to be ready in all respects on
inspection of the holds immediately by the charterer or the shipper or, if so stipulated in the
charter party, by an independent surveyor.

*** Laytime commences and runs without interruption except as otherwise provided in the
charter party.

*** The ship berths as and when the loading berth is available or if the port is anchorage port
the ship anchors at the place or buoy allotted by the port.

*** If the cargo is a bulk cargo, the weight of the cargo to be loaded might be determined by a
shore terminal weighing device or by a draft survey which is conducted by a professional
surveyor, who records the quantities, i.e., the weights of the fuel oils, water, etc. on board before
the loading commences.

*** If the cargo is bagged cargo, a tally of the number of bags being loaded is taken by port tally
clerks and as the shipowner is prima facie responsible to deliver the number of bags
acknowledged as having been received in the bill(s) of lading, he might employ professional
surveyors' firm to carry out continuous supervision and record of the number of bags being
loaded, as a measure of protection against future possible cargo claims.

*** Charterer (or shipper) provides the cargo and the loading commences, sometimes even
before the laytime commences, depending on the terms of the charter party,

*** Ship is loaded at the loading berth/s by shore cranes/loading appliances and/or by ship's
cranes/winches and derricks and, if and when at anchorage, from the small boats called barges
which are loaded ashore and brought alongside the ship at the expense of the shipowner or the
charterer as per the type of the terms of the charter party.

***As the cargo is loaded, mate's receipts are signed by the chief officer of the ship every day for
the quantity of the bulk cargo loaded or if it is a bagged cargo, for the number of bags with
weight of the cargo loaded.

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***The mate also signs the daily working reports prepared by the stevedores in which quantity
of the bulk cargo or if it is a bagged cargo, the quantity of number of bags with weight of the
cargo loaded in each shift together with other relevant details such as working time, recess
time, Sundays and holidays, interruptions on account of weather, breakdown of shore cranes or
ship's winches or gears, non-availability of cargo or barges, etc., are recorded.

*** Master loads maximum cargo after taking into consideration load line zones as applicable at
the loading port en route and after providing for the weights of the fuel (bunkers) and water
required for the voyage or upto the intermediate bunkering port, as may have been planned
and also the deadweight already used by stores, spares, provisions, etc., termed as constants
of the ship.

* * * Loading is completed at the loading port and the holds (cargo compartments) and the
hatches (hold openings) are closed. Draft survey, if carried out before the loading had
commenced, is again carried out, when quantities of bunkers, water, etc., on completion of
loading are measured so as to determine the quantity of cargo loaded.

*** Bill(s) of Lading is (are) prepared by the shipper containing inter alia the quantity of bulk
cargo or the number of bags with the weight of the bagged cargo on the basis of the mate's
receipts and signed by the master or the shipowner's agent on behalf of the master as
authorized by the master-and issued on payment of freight or as and when authorized by the
shipowner to the shipper.

*** Statement of Facts is prepared, recording the relevant facts and timings required to
determine "laytime used for loading" (as agreed and stipulated in the charter party) such as
ship's arrival, berthing, commencement and completion of loading, stoppages/delays during
loading on account of congestion, weather, rain, holidays, lack of cargo, barges, etc. and signed
by the master, shipowner's agent and charterer's agent.

*** Shipowner replenishes en route, if planned that way, bunkers (fuel) at economical prices
at the bunkering port adequate to reach and stay at the discharging port(s) and perhaps to
reach the bunkering port of the next anticipated voyage.

*** Master gives notice(s) before arrival at the discharging port, advising ETA (expected time of
arrival) at the discharging port to the charterer and the receiver and applies for free pratique to
the port health authorities and obtains it before or on arrival. The ship's agent enters the ship
with the customs and port authorities and files the ship's manifest showing inter alia the
quantity of cargo to be discharged.

*** Ship arrives at the discharging port/place, if named in the charter party or if area(s) or a
range of ports are mentioned, then as ordered by the charterer or the receiver.

***If there is a congestion and a berth or the particular berth meant for discharge is not
available, the ship anchors at the anchorage within the port or at the place where the ship of
similar size normally anchor awaiting their turn.

* * * Notice of readiness is tendered and accepted as and when found valid.

*** Ship discharges the cargo at the anchorage(s) into barges, which are discharged ashore
and/or at discharging berth(s) at the expense of the shipowner or the charterer or receiver, as
laid down in the charter party.

*** Master or the agent on arrival normally arranges hatch survey to be conducted by an
independent surveyor to get the certificate that on opening the hatches the cargo is found in
apparent good order and condition.

*** Master also records before a notary public the note of protest, if any, in which the master
records the state of bad weather and adverse sea conditions encountered during the voyage

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as a measure of protection against potential cargo claims he may receive from the charterer or
the receivers for the cargo damage, if found during discharge.

*** The charterer/receiver and/or the port authority in case of bulk cargo maintain the records
of quantity offer determine the weight of cargo discharged/cleared from the port premises
and in case of bagged cargo maintain tally of the bags discharged and cleared

*** After all the cargo that is discharged is cleared from the port premises, the port
authority issues to the ship-owner or his agent, what is called the outturn certificate certifying
the quantity of cargo discharged and cleared or issues short-landing certificate in respect of
bagged cargo in the event the number of bags manifested in the ship's manifest filed with the
customs and port authorities is found not to have been discharged in full.

*** In case of bulk cargo, the shipowner would normally arrange for a draft survey by an
independent surveyor before commencement and after completion of discharge in order to
ascertain the quantity discharged as a measure of protection against potential cargo claim for
shortage.

*** In case of bagged cargo, the shipowner may arrange a separate tally by tally clerks or a close
supervision and record of the number of bags discharged by an independent surveyor in order to
protect against the potential cargo claim for short-landing.
(This is because the shipowner is prima facie responsible for delivering the quantity of bulk cargo
or the number of bags in case of bagged cargo as recorded having been received in the bill of
lading).

*** Statement of Facts is prepared (like at loading port/s) and signed by the Master, shipowner's
agents and charterer's agents with protest(s), if any, in case either one disagrees with what the
other party has recorded.

*** On the basis of the statement of facts for the loading and the discharging ports, lay time
statements are prepared in order to ascertain the time used for loading and time used for
discharging cargo so as to determine the time saved or lost in loading and also in discharging in
relation to the lay time allowed for loading and discharging as laid down in the charter party
for the purpose of calculating despatch and/or demurrage amounts.

*** Freight on the basis of per ton of cargo or lumpsum freight as the case may be, will have to
be paid as agreed on or after completion of loading and before release of the bill(s) of lading, in
full or a major portion of it (e.g. 95% or 90%) and the balance freight (if any), on or after
completion of discharging, all as agreed, probably after adjustment of the despatch amount/s,
together with the demurrage amount/s, as the case may be.

*** If the quantity provided loaded by the charterer is less than the stipulated quantity/range,
the shipowner is entitled to freight i.e. deadweight as it is called, for the quantity short loaded.

*** During the voyage, so far as the direct voyage expenses are concerned, shipowner pays for
the cost of bunkers and water, bunkering port charges, canal dues. Depending on the type of
charter, in most cases, he pays port charges at the loading and discharging ports and in some
cases the cost of loading and/or discharging i.e. stevedoring, as it is called The shipowner also
incurs the risk of delays during the voyage such as due to bad weather and adverse sea conditions,
as also delays such as waiting for the berths at the loading and discharging ports congestion and
interruption in the loading and discharging due to bad weather, rain, etc., for which the shipowner
may not have been covered by the terms of the charter party.

*** In the event of disputes regading freight/deadfreight, demurrage payable to the

shipowner and/or despatch payable to the charterers, such disputes are referred to arbitration
as laid down in the charter party.
N.B.(l) The case illustrated above is a case of a voyage charter party for loading cargo at one
port for discharge at one port.

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4.2 All the communications between the shipowner and the charterer during the charter
as well as after the charter are carried out through the broker(s) through whom the voyage
charter was negotiated and concluded.
4.3 Voyage charters may be for a single voyage or for a round voyage or for consecutive
voyages. There are various types of charters in use, defined on the basis of which
charges/expenses are paid for by the shipowner or by charterer. These are explained in tabular
form as follows:

4.5.0 TIME CHARTER:

4.5.1 The responsibilities of the shipowner and the charterer in time charter, whilst the ship is
on hire as follows:

Shipowner's Responsibilities: Charterer's Responsibilities:

Rapairs and Maintenance Employment of the ship

Classification and Surveys Port expenses and canal dues
Crew costs (wages, victualling etc.) Stevedoring and cargo handling
Lubricating oil & fresh water Bunkering and boiler water
Insurance and P&I Club contribution Insurance of cargo
Stores and Provisions

4.5.2 The practical aspects of the operation of a ship on time charter as between the
shipowner, charterer, master, agents are narrated hereunder, together with the phrases,
terms, abbreviations commonly used in shipping.

*** The ship arrives at the agreed port or place of delivery, after ballasting, if not already at
the port/place of delivery and is delivered by the shipowner to the charterer with quantities
of bunkers as mutually agreed,

*** Hire commences to count from the time and date of delivery and is payable for each period
of time, as agreed, (e.g., 15 days) in advance.

*** Bunker survey is carried out by independent surveyor to determine the quantities of
bunkers remaining on board the ship at the time of delivery and payment for the cost of
bunkers on delivery at the agreed prices is made by the charterer with the shipowner.

*** On-hire survey is also carried out, if agreed, especially in case of long term charter in order to
ascertain the condition of holds and hatches at the time of delivery, i.e., to note the then
existing damages to the hull, decks, hatches, winches, derricks, etc.

*** A delivery certificate is prepared showing the place, time and date of delivery and the
quantities of bunkers, etc., remaining on board the vessel at the time of delivery.

***The charterer then takes over the operation of the ship, placing the ship as per his needs in
the tramp trade or the liner trade or may even sub-charter it to a subcharterer either on a
voyage charter or time charter. He always remains responsible for the performance of the
time charter party to the shipowner.

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 * * * The charter may be of a single voyage, called time charter trip or for a round voyage or for a
specific period (called period charter), e.g. 12 months, one month more or less in which case,
charterer may perform as many voyages as he wants within the maximum range of the time
charter period.

*** During the period of time charter, the charterer has to pay the agreed charter hire in advance
before each due date, foiling which the shipowner may exercise the legal right of withdrawal of
the ship from the charter.

*** Before the redelivery, the charterer gives notice(s), as agreed, advising the shipowner
expected date of redelivery on basis of which the shipowner would start working the ship in the
tramp market and fix for the next employment of the ship, so that the ship can commence the
next voyage immediately on redelivery without any loss of time.

5.0 BASIC CLASSIFICATION OF OCEAN TRAFFIC

5.1 There are various modes of ocean traffic. However, the most important distinction one
finds in practice is between liner service and chartering (tramp shipping, chartering in the open
market or free traffic), since these reflect basically different business ideas.

5.2 Liner traffic is carried out on a. regular basis, where the shipowner eventually in
conjunction with another shipowner maintains a regular service between nominated ports. The
freight rates applicable are in accordance with the tariffs announced beforehand and are not
negotiated individually. There, however, may exist rebate systems for regular customers.

5.3 Liner traffic is generally regulated by liner conferences. In liner operations, the
shipowner normally arranges and pays for loading and discharging. The documents used are
the Booking Note (B/N) and the Bill of Lading (B/L).

5.4 A vessel engaged in tramp shipping will seek cargo in the open market, preferably in the
port/area in which it is becoming free of the previous cargo or in the port/area where next cargo
is available. It may, therefore, be necessary to empty the ship of water ballast to load the next
cargo, which is usually a single commodity.

5.5 The documents used in chartering are basically the charterparty (or some times the
Fixture Note) and the Bill of Lading issued pursuant to a charter party. The vessel operating
as a tramp may be chartered by a liner operator, who may need the vessel in order to maintain
the regularity of the pre-announced liner schedule or employ her in his liner business, when
there is a large quantity of cargo available. On the other hand, if there is not sufficient quantity
of cargo available, a vessel intended for and normally used in liner business may be offered and
"worked" in the open market. The distinction between liner traffic and tramp shipping is still
important, but it may be nowadays less concise than before as a result of several forms of
contracts that have come into use.

5.6 One such type is the so-called Contract of Affreightment which term is now used
specifically (as distinct from the general legal definition given hereinbefore) Here a no
shipowner makes an agreement with a charterer to carry for the charterer a large quantity of
goods between certain ports during a specific period. It may be a quantity contract. In order to
fulfill his commitments under the contract, the shipowner may use one or more of his vessels on
consecutive voyages on almost continuous basis which in its regularity is similar to liner traffic.
Shipowner may, depending on the basis of contract of affreightment, fill up the unused 'Space,
if any, by additional cargoes or carry cargo in the return voyage instead of ballasting to the

12
loading port empty. Contracts of affreightment also exist within the framework of liner traffic
and may employ efficiently operated, advanced transportation systems with a regular flow of
cargo.

5.7 In tanker operation, in particular, we may find that large oil companies own several
vessels and are also important charterers.

5.8 It may not be out of place to mention that in modern shipping management
agreements have come into being and are becoming more and more common. In such
agreements, Managers may be entrusted to provide service and/or know-how and also
entrusted with the duty of operating and finding employment for the vessel, as if they were
the shipowners for the account of the actual owner.

5.9 We may summarize the above as follows:

LINER CHARTERING (TRAMP)

Regular service between nominated ports. Operating in open market seeking cargo
wherever available.

Freight rates in accordance with tariff. Freight rates negotiated between shipowner
and-charterer.

Regulated by liner conference. Chartering market governed by law of

supply and demand.

B/N and B/L. C/P and B/L issued pursuant to a C/P.

Loading and discharging normally arranged Loading and discharging arranged and paid
and paid for by the shipowner. for by shipowner and/or charterers, as per
the terms of the C/P.

6.0 MAIN CLASSIFICATION OF CHARTERING/CHARTER MARKETS:

6.1 Although chartering can be classified on the basis of various charter markets, presently
we shall restrict the discussion in the lessons to follow two main types mentioned below:
(a) Dry Bulk Chartering: Comprises of grains, ores, coal and others.

(b) Liquid Bulk Chartering: Comprises of crude oil, petroleum products (clean and
dirty), chemicals and chemical parcels.
6.2 Chartering and charterparties used in these two main trades differ in many respects.
Whilst there are many charterers, small and big in the dry cargo trades each having special
standard forms, charterers in the tanker trade are mainly large oil companies having their
own forms. There could therefore be lengthy negotiations on the details of a dry cargo
charterparty after main terms are fixed. In tanker trade, the scope of extensive negotiations on
the details is negligible or rather nil while working with the major oil charterers.

6.3 Contracts of Affreightments may have characteristics of tramp and liner operations

ooooo

13
 SELF-EXAMINATION QUESTIONS

1. Define a Charterparty?
2. What is the basic classification of ocean traffic?
3. What are the main features of liner shipping and tramp shipping?
4. What is a Contract of Affreightment and what form has it taken in modern shipping?
5. What are the two main types of non-demise C/Ps? How do they differ from each other?
6. What are the important characteristics of bareboat-cum-demise charter? How does bareboat
charter differ from other forms of charters?
7. What is the purpose of:
(a) Notice of Readiness.
(b) Statement of facts.
(c) Note of protest.

RECOMMENDED FOR FURTHER READING:

1. Elements of Shipping - A.E Branch, 7th Ed., 1996.

This book is regarded as a standard work on shipping in over 200 countries. Please go through
Chapter 4, Section 4.2 (Liners) and 4.3 (Tramps), Pages 48-50, and Chapter 15, Section 15.1
(Demise and non-demise C/Ps), Pages 332-337.

2. Sea Transport by -- P.M. Alderton, 4th Ed., 1995.

A handy text-book for beginners; Read Chapter 10 (Dry Cargo, Tramp & Tanker Markets)
Pages 167-170 at present.

3. Shipping Practice - E.F. Stevens & C.S. J. Butterfield, Latest Edition

This text-book is a standard work by an author of international repute and has covered various
topics in shipping practice and law. This book was given to all the students as a prescribed book
along with study materials in 1997 when they had registered for the first year examination.

4. Carriage of Goods by Sea - Hardy Ivamy, 12th Ed., 1985.

Chapter 2 (Pages 8-70) deals with chaterparties.

5. Maritime Law --C. Hill, 4th Ed., 1995.

Charterparties are covered in great detail in Chapter 5 (Pages 185-247). Also useful for your
paper on "Law of Sea Transport."

6. Shipbroking & Chartering Practice - Gorton, Ihre, Etc., 4th Ed., 199S.
Strongly recommended as a basic text-book for chartering and shipbroking.
See Chapter 7, Pages 78-97 on "Chapter Forms."

7. Carriage of Goods by Sea & Multimodal Transport — Dr.(Mrs) Nilima

Chandiramani, 1st Ed., 1997.
Chapter 1, Pages 3-10 deals with Charter-parties in a simple and lucid manner and gives a large
number of relevant case law,

8. Bes* Chartering & Shipping Terms -- N.J. Lopez, 11th Ed., 1992.
This is a classic information book for the entire shipping industry. In its eleven chapters it cover
all aspects of shipping in great detail.

*************

14
CHARTERING FINAL YEAR

LESSON 2

CHARTERING PROCEDURE AND ETHICS

1.0 Chartering, which is carried out between a shipowner and a charterer situated in
different countries has to use the services of a broker. One broker may represent a shipowner
and another a charterer or there may be a common broker representing both. In a dry cargo
charter, the usual brokerage of a broker is 1.25% and charterer may in some case specify his
own commission, which is called address commission. So, in a negotiation involving two brokers
and the charterer specifying say 2.5% as his address commission, the total commission or
totcom' in abbreviated form would be 5%.

1.1 The main centres of Shipping and Chartering are London, New York and Tokyo, the other
centres being Oslo, Hamburg, Paris and Piraeus. With South Korea emerging as a stiff
competitor of Japan, Seoul has also become a busy centre of chartering. In India, the chartering
requirements of the Government of India is channelized through the office of the Chief
Controller of Chartering (CCC), Ministry of Surface Transport, New Delhi, better known as
TRANSCHART. Similarly, Sinochart, Beijing, handles Chinese Government requirements. The
Baltic Exchange, London, is a unique institution, where owners' and charterers' brokers meet
daily a round noon to distribute cargo enquiries and discuss shipping market conditions. Even
formal freight negotiations are carried out and concluded, that is to say, the 'fixtures' are
made. The process of chartering or "fixing" a ship is described hereunder:

*** The shipowner has a ship of a particular size getting free in a certain port or area
during a certain period and he desires, so to say, to 'fix' his ship for the next
employment immediately it becomes free of the cargo she is carrying. A charterer (or a
shipper or the cargo-owner, who might be himself the charterer) has a cargo of the
same size, i.e., quantity which would fit the above ship and requires to transport it to
the desired destination from the same port/area during the same period. There may be
more than one cargo requiring shipment from around the same area during same or
around the same period. This applies to different areas with various sizes of ships.

*** Shipowners make available to the brokers on their list (tonnage list) showing
positions and expected dates of readiness of their ships requiring employment.
Similarly, the charterers circulate the cargo enquiries through the brokers on their list.
The brokers have their own contacts or "associates" in various parts of the world. The
brokers exchange these tonnage lists and the cargo enquiries and pass on the same to
their principals.

*** Brokers match the size, required dates (i.e. laydays and ship readiness dates) and area
or port of shipment of a particular cargo with the size and position of a particular ship
getting free during that period and propose the specific ship or the cargo to their principal
or principals and try to get a 'firm offer* from them.

*** Usually, the charterer through his broker(s) floats an enquiry for the cargo required
to be carried, either on voyage basis or on time basis, for example, thus:
15
2.0 VOYAGE CHARTER ENQUIRY :

"ACC DIRECT FCC 5700 5% MOLOO FR ETH LD ISP PRIOLO OR RAS LANUF CHOPT DISCH
HAZIRA ISA A L/C 8/10 OCT 36 HRS LOAD 1000 MT PD SHINC REV BENDS 2 PCT TTL HERE".

"ACC (Account) DIRECT FCC (first class charterer) 5700 5% MOLOO (5% more or less (FR
(fully refrigerated) ETH (ethylene) LD Goad) ISP (one safe port) PRIOLO OR RAS LANUF
CHOPT (Charterer's option) DISCH HAZIRA ISA (safe anchorage) L/C (laycan) 8/10 Oct 36
HRS (hours) LOAD (laytime allowed for loading) 1000 MT (metric tons) PD (per day) SHINC
(Sundays and holidays included) REV BENDS (both ends, i.e., laytime allowed at loading port
and laytime allowed at discharging port are reversible at both ends) 2PCT TTL HERE (total
commission payable to charterer and/or his broker here is 2%; which means that the
owner's broker has to add his commission while proposing the business to the owner)."

3.0 TIME CHARTER ENQUIRY:

"SAMSUN 21/22000 DWT MAX 20 YRS MIN 15 MT GR APS DEL VCR BC 1TCT BLK SULPHUR
L/C 5-20 SEPT REDLY SPORE/JPN 3.75 PCT HERE INCL 2.5 ADCOM."

"SAMSUN (charterer) 21/22000 dwt. (deadweight) MAX. 20 YRS (age), MIN. 15 MT GR (gear
capacity) APS (arrival pilot station), DEL (delivery) VCR BC (Vancouver, British Columbia) 1TCT (one
time charter trip with) BLK (bulk) SULPHUR L/C (Laycan) 5-20 Sept. REDLY (Redelivery) SPORE/JPN
(Singapore/Japan Range) 3.75 PCT (Percent) HERE INCL. (Including) 2.5% ADCOM (address
commission)."

3.1 Particular enquiry, when received by shipowner's broker, is passed on to his

"associates" in various parts of the world. The shipowner interested in this enquiry makes
a firm offer through the channel of brokers he chooses in case the same enquiry is also
received from another broker or on the 'first come first served' basis. Alternatively, the
broker finds the following ship in the tonnage received by the broker.

Tonnage List: (Extract)

ATRAXIA 90 (Year of Build) 21290 4D (Derricks) 22T JPN. 1/5 SEPT.

As this ship meets more or less charterer's requirements shipwise, also position-wise and
date-wise, after taking into account time taken for the passage to Vancouver (since very
few outward cargoes are available from Japan, which will mostly necessitate ballast to
some loading area), owner may offer the ship through their broker.

3.2 ESSENTIAL ITEMS IN VOYAGE/TIME CHARTER:

*** Owner's firm offer for a voyage charter/time charter would include the following
essential items:

16
 VOYAGE CHARTER TIME CHARTER

Owner's name Owner's name

Ship's name and particulars, viz., summer dwt. and Ship's name and particulars, viz. summer dwt. and
draft, year (yr.), built (bit), flag, bale and grain (or draft, yr. Blt., flag, bale and grain (or tank' for
"tanks' for tankers) capacities, number (no.) of tankers) capacities, number of holds and hatches
holds/hatches (ho/ha) (or of tanks), cargo gear, (or tanks), cargo gear number and capacities(or of
i.e., cranes and or derricks (or of pumps) number *pumps' in tankers) speed and bunker
and capacities. consumption, i.e., fuel oil (FO) at sea and diesel oil
(DO) at sea and in port - all figures 'about'.
Cargo and quantity with 5 to 10 percent more or T/C period, e.g., 1 year + 30 days, or description,
less in owner's option (moloo) usually, but may be, e.g., time charter trip (tct), or round voyage (r/v).
charterer's (chopt) in certain cases, e.g., when estimated duration, say, 60 days without guarantee
specified in minimum/maximum (minmax) (wog).
Loading port(s) and disharging port(s), berth(s) Place(s) or area(s)/range of port(s) of delivery (dely)
and/or anchorages. and redelivery (redely).

Laydays and cancelling date (laycan) for Laydays and cancelling date for delivery at the
presenting the ship ready to load at the loading port or place of delivery.
port.
Loading and discharging rates and terms, e.g., 4 Geographical and trading exclusions, if any,
running days for loading and 1000 met. per generally specified, i.e., world-wide (w/w) within
wwdshex (weather working days Sundays, Institute Warranty Limits (T\¥L, excluding ...
holidays excluded) for discharge. areas/countries excluded).
Demurrage and Despatch rates and terms Quantity/quantities and prices of bunkers on
delivery and redelivery.
Freight rate(s) and terms of payment Charter hire rate and terms of payment

C/P form, e.g., 'Ferticon', subject (sub) details C/P form, e.g. 'Baltime', subject (sub) details.

Total commission (totcom) including (incl.) Totcom including adcom., if any, e.g. 5% Totcom
address commission (adcom), if any. include 2.5% adcom.
Subjects, if any, e.g., sub stem, i.e., cargo Subjects, if any, as may be specified, e.g., owner's
availability in the given laydays, as may be management approval of charterers may be
specified. specified.

In tanker chartering, loading/discharging rates are generally 72 hours AP (all purposes). Freight rate(s), are
generally based on Worldscale (WS) and stipulated as "WHTC, i.e., Worldscale: hours, terms and
conditions. (See Lessons on Tanker Chartering).

*** Owner gives a 'firm' offer through the broker who has proposed or brought the business with a certain
period of validity containing the above main points.

*** Charterers give through the broker his counter offer (counter), to which owner gives his own counter
and so on till the agreement is reached on all the main points. These counters are given either on 'accept
except " basis (accepting certain points from the other's offer and excepting those not agreed to) on
"repeat last except" ....basis whereby the offerer repeats his last offer excepting those which he excepts
from the other's offer. At this stage, the ship is said to have been "fixed sub details".

17
*** The details i.e. the detailed terms and conditions of the charter are then worked upon based on either
a standard form or, and more generally, the proforma charterparty of a ship earlier fixed with the same
party, if any, or with any other party, which will be than provided, more usually, by the charterer. The
negotiations on the details may involve the clauses, phrases, wordings and words, which the parties
consider not favourable and/or involve financial implications.

The offers and counters are given valid for a given period or upto the given time and if any of the parties
does not give his counter within the specified time limit, then the other party is free to break the
negotiations and work any other business, which he has come across and which he considers more
profitable. A 'firm offer* is binding on the offerer upto the time limit given therein. If the party gives a
conditional offer, it is like a counter offer and the offerer can free himself if he does not wish to pursue the
negotiations.

*** After all the detailed terms are also fully agreed to by both the parties, leaving only the 'subjects' to
be cleared within the time limit stipulated, the ship is said to have been 'fixed on subjects'. Once all the
'subjects' are cleared, the ship is then said to have been 'fully fixed' or the 'fixture' is said to have been
concluded.

*** A recapitulation (recap) of the entire fixture is then made by the broker and sent to both the
parties, many a times even after the ship is fixed on subjects. The charter party is then signed either by
the parties or by the broker(s), if and when authorised by the principals, by endorsement to that effect,
above the signature, for and on behalf of the principals.

*** Thereafter, the owner has to give the salient features of-the operational stipulations of the fixture
or the charterer to the master and also to the loading port agent (and later on to discharge port agent
also) and has to then ensure, if the ship is on voyage charter, that the ship is presented to the charterer
at the loading port within the laydays, and if the ship is on time charter, that the vessel is delivered to
the charterer within the laydays at the delivery port or place.

*** As already mentioned earlier, the broker has to be the communication link between the owner and
the charterer. The brokerage is paid after the payment of the freight or the hire, as the case may be, are
made.

4.0 HOW TO CHARTER?

TYPE BAREBOAT TIME VOYAGE
1 PERIOD Usually long Long-medium-trip One (or more) voyage(s)

2 HOW PAID? USD/Day USD/Day USD/ton or lumpsum

3 INFORMATION Considerable Ship details. Laytime

ON SHIP Ship details Start and finish Load/disch.rate
Bunker consumption
Exclusions
4 PROBLEMS Charterers Charterers Shipowners

5 FORMS Specific Standard but Standard but

clauses negotiable. clauses negotiable.
6 WHEN TO USE? Often financing Shipowners use before Shipowners use on
market turns down a rising market
7 COSTS Owner pays Owner pays capital Owner pays
capital cost and cost and daily run- capital cost and
charterers pays ning cost and chart- daily running
daily running cost erer pays voyage cost and voyage
plus voyage cost. cost and hire cost and charterer
pays loading/disch
cost plus freight

18
5.0 ETHICS IN CHARTERING:

5.1 Modern methods of communication has made the world smaller. Instant communication
modes like e-mail, facsimile, telephone and telex have made it possible for organizations in
different parts of the world to come together in the business of international trade of which
shipping is a vital aspect.

5.2 Dealing with absolute strangers on projects which may have at stake vast sums of money as
well as the safety and professional reputation of numerous people calls for strict precautionary
measures to guard against malpractices.

5.3 Most organisations prefer to deal with reputed companies only, those who not only have a
clean financial record but also a good reputation. Importantly, their ethical standards should be
above reproach.

5.4 In the course of a truly international business like shipping, even after the most stringent
investigation of the back grounds of one's partners, individuals are called upon ultimately to rely
upon people from other climates, languages, countries and social and ethical mores.

5.5 This is a situation of extreme and absolute vulnerability. Fortunately, it is well

understood by professional practitioners to the extent that ethical behavior is equated to
professionalism and is treated as a sacred trust -- a fiduciary duty.

5.6 Ethical codes serve as a sort of moral quality control system — upholding honesty and
integrity. The guiding principle in such dealings is best expressed as "DO AS YOU WOULD BE
DONE BY"

In practical terms what this entails is being honest and fair in the implementation of one's role to
the extent that it does not harm others interests.

5.7 Ethics at work suggest:

- Following the correct channel of communication.

- Working within one's warranty of authority.

5.8 While the professionals/practitioners are thus careful to "DO NO HARM" it is an accepted
duty of the other party to use due diligence and initiative to safeguard himself against
malpractice.

5.9 Both parties taking prudent care in the course of their dealings, and adherence to a
common ethical code, makes for peace and goodwill in the global market place and fosters the
trust that one will not be cheated or misled nor his good faith exploited in any manner.
Since mutual trust and confidence is the basis of most of the dealings of the shipping world, the
fostering of this trust is of paramount importance to any practitioner. It is a reflection of his skill
and professionalism.

5.10 In the present day world where ethics often seems to be a defunct word we are discussing it
because in our industry a large number of people follow a code of ethics by choice or by
persuasion.
19
5.11 Most organizations have their own interpretation of what constitutes ethical behaviour
and many have codified their version of ethics in their constitutions, manuals, circulars and so on.

5.12 The most celebrated code of ethics in the industry belongs to the Baltic Exchange. This has
instructions and advice issued by the directors to all members and practitioners ~ those engaged
in chartering and ships' agency business. These communiques deal with various areas of
malpractices and how to avoid committing them. They are applicable to a range of practitioners,
be they owners or freight contractors.

5.13 These guidelines not only restrict the practitioners from indulging in illegal behavior such as
misrepresentation but also from wrongful, unfair or unjust behavior which may be outside the
purview of codified law. To that extent it serves as the morals of the industry. The motto of the
Exchange "Our Word our Bond" symbolises the importance of ethics in trading.

5.14 In conclusion of this section on ethics let us admit that no matter how elaborate the code of
ethics, how stringent its implementation, the only way to successfully propagate ethical
behavior is through people who are enthusiastic in implementing it; through people who believe
in honesty and integrity; through people who can be depended upon to face these judgement calls
in their daily cause of business and choose ethics over material! gains again and again.

ooooo

SELF-EXAMINATION QUESTIONS

1. What is chartering?
2. What are the functions and role of a broker?
3. Which are the main shipping and chartering centres of the world?
4. Which are the main ingredients of an offer for (a) voyage charter and (b) time charter?
5. When is the ship fully fixed?
6. What are the differences between a firm offer and a counter offer?
7. What do you mean by "ethics"? What is its importance in shipping and why shipping
practitioners try to observe it?

RECOMMENDED FOR FURTHER READING:

1. Sea Trading Vol.3 Trading ~ W. V. Packard.

This volume, the third and last in Sea-Trading series, covers the tramp shipping in detail and lays a
lot of emphasis on charterparties and bills of lading.

2. Shipbroking and Chartering Practice, Sixth edition (Lars Gorton, Patrick Hillenius, Rolf Ihre,
Arne Sandevarn), LLP, London.

*************

20
CHARTERING FINAL YEAR

LESSON 3

CHARTERING TERMS, PROCESS & NEGOTIATION

1.0 INTRODUCTION:

1.1 This is an important lesson and students should pay a lot of attention and try to
understand (or at least make on effort to understand) most of the terms. The information is useful
for the examination as well as at the place of work in any shipping office. We would also advise
the students to go through as a revision the lesson on "Basic Shipping Terminology" to be
handed to the students of the first year correspondence course, copy of which will be available
in the Institute's library or with the Director of the Institute shortly.

1.2 The list is not exhaustive. The meanings of the terms are concise. The students- are,
therefore, advised to refer to the reference books listed at the end of the lesson for a more detailed
study. This is all the more important as a good knowledge of chartering terms will not only
make the subject interesting but also easier to understand.

1.3 Students are advised to maintain a separate note-book for "Chartering & Shipping
Terms" and start to enter these as well as new once as they progress in their study. If students
find that a particular explanation is not clear or does not make much sense, they can write the
explanations in their own words substantiating with suitable examples wherever possible.

1.4 We have tried to concentrate mostly on chartering terms and have included only a few
shipping terms which students of chartering are likely to come across in their studies.
INCOTERMS (C & F, FOB, CIF, etc.) are dealt with in a separate lesson and legal clauses
(cesser and lien cause, paramount clause, both-to-blame clause, general average, etc.) appearing
in a charter party will also be covered elsewhere. Terms on general shipping practice, law,
insurance, economics, etc., are not covered here.

1.5 You are advised to memorise (a tall order) various chartering terms given in this lesson, if
you want to attain proficiency in the field of chartering. Whenever you appear for an interview
for a job in a charterer's , a shipbroker's or a shipowner's office you will be asked questions on
terms like Australian hold ladders, TTF, Wibon, etc. All the more-reason to study the chartering
terms (and their abbreviations) first, last and along with all other lessons.

1.6 We have not given the abbreviated forms of the terms in this lesson since they are
covered in another lesson. At the end of this lesson an unusually long list of self-examination
questions is given purposely to familiarise the students with the chartering terms.

21
 Page Number CONTENTS

6 ADDENDUM
6 ADDRESS COMMISSION
6 ADVANCE FREIGHT
6 AFRAMAX
6 AIR DRAFT
6 ALL TIME SAVED
6 ALL WORKING TIME SAVED or ALL LAYTIME SAVED
6 ALTERNATE HOLDS
6 ALWAYS AFLOAT or ALWAYS SAFELY AFLOAT
6 APPROVED CHARTERPARTY
6 ARRIVAL PILOT STATION
7 ARRIVED SHIP
7 AS FAST AS THE VESSEL CAN RECEIVE / DELIVER
7 AUSTRALIAN HOLD LADDERS
7 AVERAGING LAYTIME
7 BACK FREIGHT
7 BALE CAPACITY
7- BALLAST BONUS
7 BAR DRAFT
7 BAREBOAT / DEMISE CHARTER
8 BEAUFORT SCALE
8 BEFORE BREAKING BULK
8 BELOW BRIDGES
8 BERTH
8 BERTH CHARTER
8 BERTH TERMS
8 BLACKLIST
8 BOTH ENDS
8 BRACKISH WATER ARRIVAL DRAFT
8 BREAKBULK
8 BREAKING BULK
8 BROKEN STOWAGE
8 BROKER (SHIP) & BROKERAGE
9 CALCULABLE LAYTIME
9 CALENDAR MONTH
9 CANCELLING DATE
9 CAPESIZE
9 CENTISTOKES
9 CHART DATUM
9 CHARTERING AGENTS
9 CLEAN BALLAST TANKS
9 CLEAR DAY/S
9 COMMENCEMENT OF LAYTIME
9 COMMISSION PAST US
10 CONGESTION
10 CONSECUTIVE VOYAGES
10 CONTRACT OF AFFREIGHTMENT
10 CROSS TRADE
10 CURRENCY ADJUSTMENT FACTOR
10 CUSTOM OF THE PORT
10 CUSTOMARY DESPATCH or CUSTOMARY QUICK DESPA
10 DAILY RUNNING COST
10 DATE ON CHARTERPARTY
10 DAY
11 DAYS ALL PURPOSES

22
11 DEAD FREIGHT
11 DEAD WEIGHT CARGO CAPACITY
11 DEADWEIGHT TONNAGE
11 DECK LINE
11 DEFINITE LAYTIME
11 DELIVERY & RE-DELIVERY
11 DEMURRAGE
11 DESPATCH / DESPATCH MONEY
11 DETENTION & DAMAGES FOR DETENTION
12 DEVIATION CLAUSE
12 DISBURSEMENTS
12 DISPLACEMENT LIGHT
12 DISPLACEMENT LOADED
12 DISPONENT OWNER
12 DISTANCE FREIGHT
12 DISTRESS FREIGHT
12 DOWN TO HER MARKS
12 DRAFT
12 DRAFT SURVEY
12 DROPPING LAST OUTWARD SEA PILOT
12 DROPPING OUTWARD PILOT
13 DUNNAGE
13 ECONOMIC SPEED
13 EVEN IF USED
13 EXCEPTED
13 EXCEPTION CLAUSES
13 EXCEPTIONS TO LAYTIME
13 . EXPRESS CLAUSE
13 FAST AS CAN
13 FIRM OFFER
13 FIRST CLASS CHARTERER
13 FIRST OPEN WATER
14 FIXTURE
14 FORCE MAJEURE
14 FREEBOARD
14 FREE DISCHARGE
14 FREE IN & OUT
14 FREE IN & OUT AND STOWED
14 FREE IN & OUT STOWED AND TRIMMED
14 FREE IN & OUT STOWED AND SPOUT TRIMMED
14 FREE IN & OUT AND TRIMMED
14 FREE IN LINER OUT
14 FREE (OF) TURN
14 FREE PRATIQUE
14 FREIGHT AT DESTINATION
14 FREIGHT TON
14 FRESH WATER ALLOWANCE
14 FRESH WATER ARRIVAL DRAFT
15 FRIDAYS & HOLIDAYS EXCEPTED/INCLUDED
15 FRUSTRATION
15 FULL & COMPLETE CARGO
15 . GRAB/GRAB DISCHARGE
15 GRAIN CAPACITY
15 GROSS TERMS (GROSS CHARTER)
15 GROSS TONNAGE
15 HANDY SIZE/MAX
15 HATCH COAMING
23
15 HEAD CHARTERER
15 HEAVY GRAINS, SOYABEANS & SORGHUMS
16 HEAVY HANDY DEADWEIGHT SCRAP
16 HIRE
16 HOLIDAY
16 IN GEOGRAPHICAL ROTATION
16 IN LIEU OF WEIGHING
16 IN REGULAR (USUAL) TURN / TURN TIME
16 IN TRANSITU
16 IN WRITING
16 ICE CLAUSE
16 INDEFINITE LAYTIME
16 INHERENT VICE
16 INSTITUTE WARRANTY LIMITS
17 INTERCLUB AGREEMENT
17 INTERNATIONAL TRANSPORT WORKERS' FEDERATION
17 INTERRUPTIONS TO LAYTIME
17 JETTISON CLAUSE
17 KEEL CLEARANCE
17 LAY- UP
17 LAYCAN
17 LAYDAYS
17 LAYTIME
17 LENGTH OVERALL
17 LETTER OF INDEMNITY
17 LIEN
18 LIGHT CARGO
18 LIGHTENING (OR LIGHTERAGE)
18 LINER IN FREE OUT
18 LINER TERMS
18 LOWEST ASTRONOMICAL TIDE
18 LUMPSUM FREIGHT
18 MEAN DRAFT
18 MIN/MAX
18 MORE OR LESS CHARTERER'S OPTION
18 MORE OR LESS OWNER'S OPTION
18 NET CHARTER
18 NET TONNAGE
18 NON-DEMISE CHARTERS
19 NON-REVERSIBLE/NORMAL LAYTIME
19 NOTICE OF READINESS
19 OFF-HIRE CLAUSE
19 ON DEMURRAGE
19 ONCE ON DEMURRAGE ALWAYS ON DEMURRAGE
19 OPEN CHARTER
19 OPEN PORT
19 OPEN
19 P & I BUNKERING CLAUSE
19 PANAMAX
19 PER HATCH PER DAY
19 PER WORKING or WORKABLE HATCH PER DAY
19 PORT/PORTSIDE
20 PORT
20 PROMPT SHIP
20 RANGE OF PORTS
20 REACH (OF A CRANE)
20 REACHABLE ON ARRIVAL or ALWAYS ACCESSIBLE

24
20 REVERSIBLE LAYTIME
20 RIDER CLAUSES
20 ROUND VOYAGE
20 RUNNING / CONSECUTIVE DAYS
20 SAFE BERTH
20 SAFEPORT
21 SAFE WORKING LOAD
21 SALE & PURCHASE BROKER
21 SALT WATER ARRIVAL DRAFT
21 SALVAGE
21 SCALE RATES
21 SEGREGATED BALLAST TANK
21 SELF-TRIMMING SHIP
21 SHIFTING
21 SPECIFIC GRAVITY
21 SPOT
21 SS OR SUBSTITUTE
21 . STARBOARD
21 STATEMENT OF FACTS
21 STOWAGE FACTOR
22 STRIKES
22 SUBEJECT STEM
22 SUBJECTS
22 SUEZMAX
22 SUNDAYS & HOLIDAYS EXCEPTED/ INCLUDED
22 SUPERCARGO
22 TAKING INWARD PILOT
22 TIME LOST WAITING FOR BERTH TO COUNT AS LAYTIME
22 TEN PERCENT BAGS FOR SAFE STOWAGE
22 TIMECHARTER
22 TIME SHEET
23 TONS PER INCH/CENTIMETRE
23 TOTAL COMMISSION
23 TRADING LIMITS
23 TRIMMING
23 TRIP TIME CHARTER
23 TURN ROUND TIME
23 ULLAGE
23 ULTRA LARGE CRUDE CARRIER
23 UNLESS SOONER COMMENCED
23 UNLESS USED
23 VERY LARGE CRUDE CARRIER
23 VOYAGE CHARTER
23 WEATHER PERMITTNG
23 WEATER WORKING DAY
24 WEATHER WORKING DAY OF 24 CONSECUTIVE HOURS
24 WHETHER IN BERTH OR NOT or BERTH NO BERTH
24 WHETHER IN FREE PRATIQUE OR NOT
24 WHETHER IN PORT OR NOT
24 WITHOUT GUARANTEE
24 WORKING DAY
24 WORLDSCALE

25
 CHARTERING TERMS

ADDENDUM Whenever the terms in a folly signed C/P are amended by subsequent negotiations
an addendum is prepared by the charterer's broker (and forms a part of the C/P). It comes into
effect only when it is signed by all parties just like the original C/P.

ADDRESS COMMISSION Commission payable to the charterer by the shipowner as a

percentage of freight or hire. Historically it was paid to the charterer to cover up some of the
expenses incurred by him. At present it virtually works out to a reduction in the freight. When
no address commission is payable the ship is free of address.

ADVANCE FREIGHT Freight payable before goods are accepted for shipment. Once paid it
can not be recovered from the shipowner upon frustration of voyage and loss of goods.

AFRAMAX Tanker of maximum 79,999 dwt on the AFRA freight rate assessment scale.

AIR DRAFT This term has various meanings the most common being: The maximum height
from the water line to the top-most point of a ship.

ALL TIME SAVED Means that the time saved to a ship from the completion of loading/
discharging to the expiry of laytime including periods excepted from laytime.

ALL WORKING TIME SAVED or ALL LAYTIME SAVED Both these terms mean the
same. Here the description of the time means that time saved to the owner from the completion
of the loading and/or discharging until the expiry of the allowed laytime excluding any notice
time and periods which are exceptions to laytime.

ALTERNATE HOLDS Iron ore being a very heavy cargo is loaded in alternate holds, leaving
remaining holds empty.

ALWAYS AFLOAT or ALWAYS SAFELY AFLOAT This clause is inserted in a C/P to

prevent a vessel from being ordered to proceed to a berth where she touches the ground during
loading or discharging or which can only be reached after lighterage of part of her cargo or which
can only be reached during high tide.

APPROVED CHARTERPARTY A charterparty which has been agreed upon, adopted or

recommended by BIMCO, G.C.B.S., etc.

ARRIVAL PILOT STATION A point of identification at which a time-chartered vessel is

delivered to the charterer (or re-delivered to the shipowner). In this case the hire commences (or
ends) as soon as the vessel reaches the pilot station. (This term favours the shipowner vis-a-vis
"taking inward pilot" which favours the charterer).

ARRIVED SHIP A vessel is an arrived ship and the laytime allowed under the C/P begins
to count as soon as the following conditions have been complied with:-
(i) The vessel must have arrived at the port, berth or dock as stated in the C/P.
(ii) The vessel must be ready to load or discharge in every way.
(iii) A notice of readiness must have been given in writing to the charterers or
shippers/consignees.

26
AS FAST AS THE VESSEL CAN RECEIVE / DELIVER Means that the laytime is calculated
by reference to the maximum rate at which the ship in full working order is capable of loading or
discharging the cargo, that is, as fast as she can or with customary (quick) despatch. The term
appears in a C/P when laytime is not fixed (indefinite) and is left to the custom of the port.

AUSTRALIAN HOLD LADDERS All vessels trading with Australia must be provided with
ladders acceptable to waterside workers' federation / unions in that country. These ladders are so
constructed as to prevent fatigue due to platforms at regular intervals. Vessels without such
type of ladders can be penalised or delayed.

AVERAGING LAYTIME To average means to make separate calculations for loading and
discharging and any time saved in one operation can be set off against any excess time used in
the other. The option to average laytime is given to the charterer.

BACK FREIGHT Freight charged for the return of goods which have not been accepted at the
port of destination. Also applies to goods discharged at another convenient port.

BALE CAPACITY The cubic capacity of a ship's holds below deck, expressed in cubic feet or
cubic metres, available for the carriage of breakbulk type of cargoes, e.g., packages, bales,
cartons, drums, pallets, etc., which are not capable of filling the space between the ship's
frames.

BALLAST BONUS Sum of money paid by a time charterer to a shipowner (in a good market)
to compensate him for not finding a cargo near the place of re-delivery of the ship at the end of
the charter. The bonus serves as an incentive for the ballast (empty) trip to cover up the cost of
fuel and time. At times a shipowner may pay the charterer a ballast bonus when the vessel is
being re-delivered at the end of a time charter, specially when market is not good for the
shipowner.

BAR DRAFT This relates to the maximum draft enabling a vessel to pass over a bar, e.g.,
Martin Garcia bar in the River Plate. In case the vessel has too great a draft, it will have to
discharge part of the cargo into barges and then reload it after passing the bar. A similar situation
exists at Yangon (formerly Rangoon). Such ports are called bar-ports.

BAREBOAT / DEMISE CHARTER Lease of a ship wherein the charterer takes over the ship
together with the right of management and control. In feet he becomes the virtual owner of the
vessel during the term of the charter. Charterer has the right to engage and pay the master and
crew who are his employees. The shipowner merely receives compensation as hire payments.

BEAUFORT SCALE A scale of wind force expressed from 0 to 12 in which weather

conditions represent wind conditions expressed in numerals, where 0 means calm wind (less that
1 knot speed) and 12 refers to hurricane (speed between 64 to 71 knots). This term is used
mostly in time charterparties, as vessels are not penalized for nonperformance of speed in case
wind speed is more than the agreed Beaufort number.

BEFORE BREAKING BULK Refers to the time when freight is paid. In this case freight is
to be paid any time before commencement of discharge.

BELOW BRIDGES If a ship has to pass under a bridge across a canal to reach the port or berth
it has to ensure that its draft permits the vessel to have sufficient clearance above its highest point
to pass under the bridge with ease.

27
BERTH The specific place where ships are anchored for loading and/or discharging at the
docks in a port.

BERTH CHARTER If a vessel is chartered for loading on a particular berth, the contract is
called berth charter. The term berth charter implies that notice of readiness cannot be given
until the vessel is in the designated berth as required by the charterers.

BERTH TERMS Also referred to as "liner terms". The shipowner pays for loading and
discharging subject to the custom of the port or as fast as the ship can handle the cargo or under
customary despatch.

BLACK LIST List of countries published by a government which will not allow ships to trade at
its ports if they have traded at ports in the countries on that list.

BOTH ENDS The term means that the arrangements agreed upon hold true both at loading
and discharging ports, e.g., rate of loading and discharging; appointment of agents, etc.

BRACKISH WATER ARRIVAL DRAFT Brackish is spoken of water in a river when partly
salt and partly fresh. It has a density between that of fresh water (1000 kgs/cubic metre) and
that of salt water (1025 kgs/cubic metre). When a ship proceeds to a brackish water port, the
ship's draft will be more than the draft in salt water and less than the draft in fresh water.

BREAKBULK Describes loose bales, boxes, packages, etc. Cargo must be neither palletized
not containerized. Describes a cargo vessel that loads its cargo in this manner.

BREAKING BULK The expression means "to start the discharge".

BROKEN STOWAGE The space wasted in a ship's holds when stowing general cargo which
is uneven and packed.

BROKER (SHIP) & BROKERAGE A shipbroker acts as a middleman between the shipowner
and the charterer and negotiates the terms of a C/P. He represents one party (say, shipowner) and
negotiates with the other party (charterer) directly or with another broker who represents the
charterer. (A sale and purchase broker negotiates for the sale of a ship and represents the
shipowner). Brokerage is a commission paid to the shipbroker by the shipowner for the broker's
time, effort and expenses in concluding a (successful) fixture, normally a certain percentage of
the hire or freight earned by the shipowner.

CALCULABLE LAYTIME By doing certain tonnage and hatch calculations one. can work out
the exact laytime available for cargo operations.

CALENDAR MONTH A month according to a calendar, e.g., if a vessel is taken up on time

charter for say 6 months and has been delivered on 10th June, the charter will expire on 10th
December.

CANCELLING DATE The date; mutually agreed upon between the shipowner and the charterer,
on which the vessel must be ready to load at the latest is called the cancelling date. Should the
vessel miss her cancelling date, the charterers are entitled to cancel the C/P.

CAPESIZE Vessels too large for the Panama and/or the Suez Canal are termed Capesize.

28
CENTISTOKES Describes viscosity of fuel oils—380 c/s or 180 c/s (better). The greater the
number of centistokes, the higher the viscosity of the oil and cheaper the cost. (Viscosity is the
ability of the liquid to resist flow, e.g., honey is more viscous than lemon juice).

CHART DATUM Water level calculated on the lowest tide that can ever occur and used as a
basis for chart measurements.

CHARTERING AGENTS They are specially appointed by large importers or exporters to book
space or vessels for their shipments. All enquiries for tonnage are placed in the hands of these
chartering agents to the exclusion of any other broker. The chartering agents act as
intermediaries for their principals.

CLEAN BALLAST TANKS Water carried in a tanker or tanks which have no traces of oil.
Hence such water is referred to as clean ballast. Tanks carrying the water are therefore clean
ballast tanks.

CLEAR DAY/S Means that the day on which the notice is given and the day on which the
notice expires are not included in the notice period.

COMMENCEMENT OF LAYTIME Lay time is said to commence once a vessel has arrived at
a port, complied with all stipulations and tendered the notice of readiness as specified in the
C/P.

COMMISSION PAST US Implies that the quote does not include the normal commission for
the brokers quoting the order.

CONGESTION In order to avoid loss to owners due to non-availability of the berth or waiting
at the anchorage, C/Ps specify that the notice of readiness can be tendered by the master "whether
in berth or not (wibon), whether in free pratique or not (wifpon), and whether customs cleared or
not (wccon)."

CONSECUTIVE VOYAGES A named vessel may be employed on a series of voyages called

consecutive voyages against a single C/P. The vessel proceeds loaded from loading to discharging
port only to return in ballast and repeat the following voyage on same terms and conditions
until all the cargo has been shipped. However, separate calculations of freight and laytime are
made for the individual voyages. It differs from a COA where the shipowner can use any ship
and the freight rates take into account the cost of ballast return voyage from discharge to load
port.

CONTRACT OF AFFREIGTMENT In chartering this term refers to a shipowner (or charterer)

who enters into a contract to carry a large quantity of cargo between named port or regions on
mutually agreed terms and conditions over a period of time. The shipowner may employ his
own vessels or charter other vessels to meet his commitments. The ships used for the carriage are
not named. As each shipment takes place a fresh voyage charter is entered into between the
parties. This gives the shipowner sufficient flexibility.

CROSS TRADE To trade a ship wherever suitable cargoes are available, rather then carrying
cargoes to and from the country where the ship is registered.

CURRENCY ADJUSTMENT FACTOR This takes account of the rate of exchange variations.
Owners are required to pay costs in local currency in the country of loading and discharging. It
is a percentage of the base rate.

29
CUSTOM OF THE PORT This term relates to customs and practices which have been
gradually established in the course of time in a particular port. If a C/P provides loading and
discharging according to the custom of the port (or with customary despatch or as fast as can)
the laytime becomes indefinite, a situation unfavourable to shipowners as they will find it
difficult to put a claim for demurrage or damages for detention.

CUSTOMARY DESPATCH or CUSTOMARY QUICK DESPATCH The charterer is required

to discharge and/or load as quickly as possible (as fast as can) depending on the custom of the
port. There is no fixed time allowed to the charterer. Hence the term is not favourable to the
shipowner as the laytime is indefinite and uncertain.

DAILY RUNNING COST Cost per day of operating a ship.

DATE ON CHARTER PARTY The actual date on which the fixture negotiations are finally
concluded, after all subjects have been lifted.

DAY Means a continuous period of 24 hours which, unless the context otherwise requires,
runs from midnight to midnight.

DAYS ALL PURPOSES Total time for both loading and discharging. (See reversible lay
time).

DEAD FREIGHT Where a charterer or shipper fails to fulfil his contract to load the cargo or
the full cargo, he commits a breach of the contract for which he is liable to pay damages. These
damages are known as dead freight. In other words, payment for space booked on a vessel but
not used,

DEADWEIGHT CARGO CAPACITY Weight of the cargo only which a ship can carry when
immersed to her summer loadline. It is the deadweight all told less weight of bunkers, fresh
water, constants, etc.

DEADWEIGHT TONNAGE Signifies the carrying capacity of a vessel and includes bunkers,
fresh water, cargo and/or passengers and constants. The difference between the displacement of a
vessel on her light draft and her loaded draft represents the deadweight capacity in tons (or
tonnes). Also called deadweight all told.

DECK LINE 12" (or 300mm) line painted amidships on both sides and parallel to the loadlines.
The line is located at the point where the upper most continuous deck, known as the freeboard
deck, meets the side of the ship.

DEFINITE LAYTIME One of the three forms of laytime (the other two being "calculable"
and "indefinite"). The charterparty specifies the days/hours allowed for loading and/or
discharging.

DELIVERY & RE-DELIVERY A time charter commences with the delivery of the vessel to
the charterer and comes to an end with the re-delivery of the vessel to the owner. The
delivery or re-delivery can occur at a port or a place agreed upon, e.g., passing Skaw (northern
tip of Denmark, at the entrance of the Baltic Sea); passing Cape Passero (south-east coast of
Italy); passing Key West (Florida), or any other position.

DEMURRAGE Money (compensation) payable to the shipowner by a charterer for delay for
which the owner is not responsible in loading and/or discharging after the laytime stipulated in
the C/P has expired.

30
DESPATCH / DESPATCH MONEY The money (bonus) payable by the shipowner to the
charterer if the vessel completes loading or discharging before the expiry of laytime stipulated
in the C/P. Usually half the demurrage rate.

DETENTION & DEMAGES FOR DETENTION If demurrage has not been agreed in the
charterparty, the shipowner can claim compensation as damages for detention. A case where a
shipowner can claim damages for detention is when a vessel is chartered to load at a berth where
the vessel must be always afloat. However the charterer directs the vessel to a berth where the
vessel is not always afloat. Since it has been agreed in the C/P that NOR can be tendered and
laytime to commence whether the vessel is in berth or not (wibon), the master refuses to comply
with the berthing orders. The shipowner in this case may not be able to put a claim for
demurrage. However, he may be entitled to "damages for detention".

DEVIATION CLAUSE Deviation is an intentional departure from the set or agreed course of
the voyage. The ship is not permitted to leave this route for any purpose without justification.
To protect themselves the shipowners enter a clause in the charterparty called the "deviation
clause" which allows them to deviate to save or attempt to save life and/or property at sea and
to give the owners the right to deviate for bunkering purpose (by inserting another clause called
the "P & I Bunkering Clause").

DISBURSEMENTS Sums paid out by the ship's agent on behalf of a shipowner and recovered
subsequently.

DISPLACEMENT LIGHT Weight of the vessel without bunkers, fresh water, cargo and/or
passengers and constants.

DISPLACEMENT LOADED Weight of the vessel plus bunkers, fresh water, cargo and/or
passengers and constants.

DISPONENT OWNER A charterer who has control of the vessel (e.g. under a bareboat or time
charter) is referred to as a "disponent owner". During the duration of the charter, he acts as if he
were the real owner.

DISTANCE FREIGHT The expression is used in connection with discharge of cargo at a port
other than the original port of destination. For instance, if the vessel runs the risk of being
frozen in, the master may deem it advisable to deliver the cargo at the nearest safe port. If the
extra distance is worthwhile he can claim distance freight.

DISTRESS FREIGHT When a chartered vessel is being loaded at the berth and charterers
find it difficult to secure completion of cargo at normal rates, they may book cargo at very low
rates (called distress rates) in order to fill up the remaining space rather than allow the vessel to
be despatched with empty space.

DOWN TO HER MARKS When a vessel is immersed to the appropriate loadline and therefore
cannot load any further cargo.

DRAFT Depth of water necessary to float a vessel.

DRAFT SURVEY Survey undertaken to determine the quantities of cargo on board a ship.

DROPPING LAST OUTWARD SEA PILOT Some ports require the service of more than one
pilot to be used, one from the berth to the beginning of the channel and another called the sea-
pilot for navigation within the channel to the river and canal outside the port limits. In this case

31
the off-hire (or on-hire) survey will be carried out only when the sea-pilot (who navigates the
vessel outside the port limits) disembarks from the ship.

DROPPING OUTWARD PILOT A point of delivery on to and re-delivery off a time charter.
The point where an "on-hire" or "off-hire" survey takes place is that place where the pilot who
assists the ship in navigation to the pilot station disembarks from the ship. A point in owner's
favour as expenses into and out of a port (e.g., hire of a tug) will be for charterer's account.

DUNNAGE Material (wood, matting, etc.) used in stowing cargo in a ship's hold either for
separation or for prevention of damage.

ECONOMIC SPEED Speed of a ship which is lower than its normal speed. It provides a
reduction in fuel cost as less fuel is consumed.

EVEN IF USED Time spent in carrying out loading and/or discharging in excepted periods
(e.g., Shex =Sundays and holidays excepted) is not to count as Laytime, even if used. This
qualification of Laytime is favourable to the charterer. "Unless used" has the opposite effect and
favours the shipowner.

EXCEPTED Refers to Laytime. Means that the specified days do not count as Laytime even if
loading or discharging is done on them, e.g., Sundays and holidays excepted. Note that if Laytime
has expired then the exceptions do not apply.

EXCEPTION CLAUSES Clauses in a C/P or B/L which relieve the carriers of responsibility
of certain perils, accidents or neglect. (See Hague Rules and COGSA).

EXCEPTIONS TO LAYTIME The happening of events agreed upon in the C/P which interrupt
counting of Laytime. These give protection to the charterer. For e.g., a clause dealing with
stoppage of work due to strike would be a protective clause.

EXPRESS CLAUSE In case what has actually been agreed is not very clear, then an express
clause is inserted in addition to the printed form drawing attention to the terms specifically
agreed upon.

FAST AS CAN The term appears in a C/P when Laytime is not fixed. It means that the Iaytime
is calculated by reference to the maximum rate at which the ship in full working order is capable
of loading or discharging the cargo as fast as she can. At times this term is combined with the
custom of the port or customary quick despatch.

FIRM OFFER Used by the owner's shipbroker in negotiations to indicate that the vessel is being
offered to only one possible charterer at a time. Conversely, the term could also be used by the
charterer's shipbroker inviting owner's shipbroker to submit a firm offer for a particular order. It
is a normal practice to include certain main terms in a firm offer.

FIRST CLASS CHARTERER When the name of the charterer is not revealed by his broker the
charterer is referred to as a first class charterer. However, it is risky to negotiate with such a
charterer as his record of payments cannot be cross-checked with BIMCO.

FIRST OPEN WATER The first date when a port is free from ice conditions to allow ships to
enter, load/discharge and leave safely, at the start of a new season. The term is commonly used
in the St Lawrence Seaway.

FIXTURE Conclusion of a shipbroker's negotiations to charter (fix) a ship.

32
FORCE MAJEURE Circumstances beyond the control of one of the parties to a contract. E.g.,
Act of God. This can relieve that party from performing the contract.

FREEBOARD Distance measured amidships from the waterline to the main deck.

FREE DISCHARGE The charterer contracts to discharge the vessel, free of expense to the
shipowner.

FREE IN & OUT Indicates that the shippers/consignees or charterers are responsible for bearing
cost of loading and discharging the cargo, free of expense to the shipowner.

FREE IN & OUT AND STOWED Charterer bears the expenses of loading, stowing and
discharging, free of expense to the shipowner (e.g., bagged rice).

FREE IN & OUT STOWED AND TRIMMED Charterer bears the expenses of the cargo to
be loaded, stowed, trimmed and discharged free or expense to the shipowner (e.g., scrap iron).

FREE IN & OUT AND SPOUT TRIMMED Charterer bears the expenses of the cargo to be
loaded, spout trimmed and discharged, free of expense to the shipowner (e.g. bulk wheat).

FREE IN & OUT AND TRIMMED Same as FIO plus that the cargo has also to be trimmed at
the charterer's expense, e,g., bulk cargo.

FREE IN LINER OUT Charterer pays expenses at load port(s), while the shipowner pays the
expenses at the discharge port(s).

FREE (OF) TURN Time lost (if any) by a vessel for waiting its turn to berth to count as
laytime against the charterer. Opposite of "in regular turn".

FREE PRATIQUE This expression means that the vessel has a clean bill of health. (The health
authorities board the vessel in order to ascertain the correctness of the information given by the
master or the agent).

FREIGHT AT DESTINATION Freight payable at destination upon delivery of goods. Also

referred to as "freight collect".

FREIGHT TON Unit of cargo on which freight rate is based, either one tonne or one cubic
metre.

FRESH WATER ALLOWANCE Loadline regulations permit extra draft when a vessel loads in
fresh water, the reason being that the vessel's draft becomes less when she reaches open sea
(salt water) where the density of water is greater.

FRESH WATER ARRIVAL DRAFT Fresh water draft of a ship on arrival at a port.

FRIDAYS & HOLIDAYS EXCEPTED or FRIDAYS & HOLIDAYS INCLUDED Fhex

applies to Muslim countries where Friday is observed as a holiday; Fhinc applies to non-Muslim
countries where Friday is not observed as a holiday.

FRUSTRATION There is a question of frustration when through circumstances entirely beyond

control of parties concerned the commercial object of maritime adventure is entirely frustrated.
The expression "frustration of the adventure" in C/Ps relates to a delay of such a duration-without
the actual fault of either party—as to frustrate the charter.

33
FULL & COMPLETE CARGO Cargo required to fill a ship to capacity either by weight or cubic
measurement.

GRAB / GRAB DAMAGE Grab is a unit of cargo handling, consisting or two quarter circle
metal parts which can be brought together to make a close fit, operated by a crane or winch
power. Grab damage is damage to a ship caused by use of the mechanical grabs.

GRAIN CAPACITY The capacity in cubic feet of the cargo hold in a ship measured to inside of
the shell plating. (If measured to the inside of the frames or cargo battens it is called bale
capacity). It is a part of the description of the cargo-carrying capacity of a vessel. The grain
capacity is used for bulk cargoes e.g. grains, and bale capacity is used for general cargo, e.g.,
pallets.

GROSS TERMS (GROSS CHARTER) Type of voyage charter in which the shipowner pays for
tally, loading, stowing, trimming and discharging costs. The alternative is fio, fios, fiot or fiost
where the cost of tally, loading, discharging, etc., are for charterer's account. (However the port
charges are paid by the shipowner in all cases).

GROSS TONNAGE The vessel's internal space measured in units of 100 cu.ft. The certificate
of tonnage specifies the ship's gross tonnage. (Generally speaking, gross tonnage is a measure
of the volume of a vessel and net tonnage represents the volume available for cargo, that is, the
revenue earning space in a vessel). Different tonnage measurement systems (i.e. British, Suez
Canal or Panama Canal) have different tonnages for the same vessel.

HANDY SIZE / MAX Bulk carriers in the range of 20,000-50,000 tonnes dwt.

HATCH COAMING Steel parapet surrounding a hatchway which rises vertically to prevent (i)
a person from falling into the hatch, and (ii) water from entering the hold.

HEAD CHARTERER Most C/Ps allow the charterer to sub-let or sub-charter the vessel to other
charterers. The original charterer is then called the "head charterer" or "disponent owner".

HEAVY GRAINS, SOYA BEANS & SORGHUMS Wheat [SF44-49], soyabeans [SF48-52]
and sorghums [SF 44-49] are considered as heavy grains. Also rye and maize are heavy grains.
Barley and oats are classified as light grains. In practice heavy grains constitute the bulk of the
grain shipments.

HEAVY HANDY DEADWEIGHT SCRAP "X type of scrap metal cargo. It is neither very light
nor very heavy and is therefore called "handy" with a SF of between 48-52.

HIRE The payment for hiring a vessel on a time-chartered basis.

HOLIDAY Means a day of week (or part thereof) on which cargo work on the ship is suspended
at the place of loading/discharging by reason of the local practice or custom. The day may
usually be used for rest (Sunday) or may be observed as a religious festival (Christmas).

IN GEOGRAPHICAL ROTATION If an option is given to the charterers to load or discharge a

ship in more than one port within a range of ports, it is important to state that if they exercise the
option the ship will proceed to the ports in geographical rotation (without, for example, going
north and south and then again north). This is important to the owner to determine the distance,
time and fuel expenses.

34
IN LIEU OF WEIGHING In case of some charters for bulk commodities the charterer may
agree to an option of stating quantity in a B/L as having been shipped (ascertained by weigh-
bridge or by draft survey), less by an agreed percentage (2%) at receiver's option instead of
getting the cargo again weighed at the discharging port.

IN REGULAR (USUAL) TURN / TURN TIME Turn refers to the sequence in which a vessel
may be allowed to berth for (coal) loading or discharging by the port authorities due to
congestion at the port (or availability of coal). Laytime does not generally count against the
charterer while the ship is waiting its turn. However, if the C/P says "free of turn" then time
waiting for a berth will count.

IN TRANSITU On the passage.

IN WRITING Writing means in relation to a notice of readiness, a notice in any manner or

mode and includes fax, cable, telegram and telex.

ICE CLAUSE To safeguard the shipowner that the vessel is sent to a safe port free from ice, a
protective clause dealing with ice conditions in inserted in the C/P.

INDEFINITE LAYTIME This arises in cases where the shipowner agrees for the vessel to be
loaded/discharged as fast as can, with customary despatch, with customary quick despatch or as
per the custom of the port. In such cases there is no way to determine the exact time the vessel
will take for loading and discharging.

INHERENT VICE Defect due to the nature of the object or goods.

INSTITUTE WARRANTY LIMITS In insurance, a set of warranties (i.e. same as conditions,

in insurance) in a hull policy which prohibit the vessel from entering certain waters (mainly ice
areas) without payment of additional premium or with a change in conditions.

INTERCLUB AGREEMENT An agreement by 14 mutual associations concerning the method of

settling liability of cargo claims between shipowners and charterers. The Inter-Club New York
Produce Exchange Agreement is a clause in the NYPE time C/P.

INTERNATIONAL TRANSPORT WORKERS' FEDERATION Organization which looks

after the welfare of transport workers and deals with their pay and working conditions. It
issues the "ITF Blue Certificate" to a ship if its owner complies with their requirements. Non-
production of such a certificate can cause problems for a vessel in all Australian ports and in
some ports of other countries.

INTERRUPTIONS TO LAYTIME Interruptions to laytime are usually comprised of breakdown

of ship's gear, bad weather, shifting between berths and strikes.

JETTISON CLAUSE Clause in a B/L or C/P setting out the circumstances under which a master
is entitled to jettison goods from a vessel. (Jettison is to throw goods overboard for the purpose
of lightening the ship).

KEEL CLEARANCE Minimum distance between the bottom of a ship and the bed of sea, also
called under keel clearance.

LAY-UP To stop trading a ship temporarily due to bad markets. During lay-up the daily running
lost of the ship is greatly reduced.

35
LAYCAN Stands for "laydays commencing / laydays cancelling" and is a spread of dates
which provides for the earliest date for the ship to arrive and for laytime to commence and
also gives the last date for the charterer to cancel the charter if the vessel does not arrive by that
date.

LAYDAYS The correct interpretation of this is the earliest time when the vessel is expected to
be ready for loading and/or discharging. (Sometimes the word is used to refer to "laytime" but
then this leads to confusion. Laytime is the period allowed for the cargo to be loaded and/or
discharged).

LAYTIME Means the period of time agreed between the parties during which the owner will
make and keep the ship available for loading/ discharging without payment additional to the
freight. The time allowed to the charterer is not indefinite. The time is either "fixed" or
"calculable".

LENGTH OVERALL Maximum length between the extreme ends (forward and aft) of the ship.
(Also referred to as "overall length").

LETTER OF INDEMNITY A written statement in which one party (shipper) undertakes to

compensate another (shipowner) for the cost and/or consequences of carrying out a certain act,
e.g., obtaining a release of goods without producing an original B/L.

LIEN The right to retain control of cargo until the charges related to it are paid.

LIGHT CARGO Goods which fill the ship cubically but do not bring it down to its marks are
called light cargoes. (Goods which bring the ship down to its marks but do not completely fill the
space available for cargo are called heavy cargoes).

LIGHTENING (OR LIGHTERAGE) To reduce the draft of the vessel so as to enable it to enter
the port/berth where the depth of available water is restricted. This may be achieved by
lightening or lighterage by discharging part of the cargo in barges outside the port/berth.

LINGER IN FREE OUT The shipowner bears all costs for loading (stowing, trimming etc.). The
charterer (or receiver/consignee) pays all costs incurred for discharge at the destination port.

LINER TERMS A rate that includes freight plus handling charges at loading and discharging
ports. (Similar to "Gross terms" used in bulk cargo tramp vessels).

LOWEST ASTRONOMICAL TIDE It pre-supposes that at the very worst there would always
be that depth of available water at the particular spot.

LUMPSUM FREIGHT A fixed sum is paid to the shipowner regardless of the quantity of
cargo actually shipped.

MEAN DRAFT Average of forward and aft draft of a vessel.

MIN / MAX Minimum and maximum cargo; a fixed quantity.

MORE OR LESS CHARTERER'S OPTION Gives the option to the charterer to increase or
decrease the quantity of cargo by a percentage agreed in advance.

36
MORE OR LESS OWNER'S OPTION Gives the option to the shipowner to increase or decrease
the quantity of cargo by a percentage agreed in advance, e.g., 10,000 tonnes 5% more or less in
owner's option, means that the shipowner may load between 9500 to 10500 tonnes of cargo.

NET CHARTER After delivery of the vessel in the first port of loading, the charterer pays all
additional port charges, cost of loading and discharging in the first and any additional port of
loading and in the port of discharge. After completion of discharge the vessel is re-delivered to
the owner and the outward port charges from the port of redelivery is for the owner's account.
(Not a popular form of chartering nowadays).

NET TONNAGE The figure represents the total revenue earning space (volume) within a ship
available for the cargo. This is gross tonnage less "deductions" and less "allowances for
propelling machinery space" and is calculated in units of 100 cu.ft. (Net tonnage is also referred
as "register" tonnage).

NON-DEMISE CHARTERS Time and voyage charters fell under this category as opposed to
demise and bareboat charters.

NON-REVERSIBLE / NORMAL LAYTIME Laytime is to be assessed separately for loading

and discharging ports and demurrage/despatch is also paid separately. This is opposite of
"reversible" laytime.

NOTICE OF READINESS Means notice by the master or his agent to the charterer, shipper,
receiver or any other person as required by the charterer, that the ship has arrived at the port or
berth as the case may be and is ready to load/discharge in all respects. Laytime begins to
count from the moment when NOR has been tendered by charterers/consignees.

OFF-HIRE CLAUSE In a time C/P it specifies the circumstances under which hire is suspended
or reduced.

ON DEMURRAGE Means that the laytime has expired. Unless the C/P expressly provides to
the contrary the time on demurrage wiil not be subject to the laytime exceptions.

ONCE ON DEMURRAGE ALWAYS ON DEMURRAGE Time on demurrage is continuous

unless exceptions to demurrage are contained in the C/P.

OPEN CHARTER A C/P in which neither the ports of destination nor the nature of the cargoes
are specified and the vessel may fix for any cargo and for any ports.

OPEN PORT A port that is of ice.

OPEN Said of a ship, which is available at a particular place to load her next cargo, having
discharged the last one.

P & I BUNKERING CLAUSE The ship is permitted to deviate without breaking the contract
for lifting bunkers at ports where it may be cheaper.

PANAMAX A bulk carrier of about 65,000 tonnes deadweight whose dimensions enable her
to transit the Panama Canal where due to locks draft, beam and length are limiting factors.

37
PER HATCH PER DAY The expression is used to calculate laytime with reference to the
number of cargo hatches serving cargo compartments on the vessel. Laytime is to be calculated
by multiplying the agreed rate per hatch of loading/discharging the cargo by the number of
ship's hatches and dividing the quantity of cargo by the resulting sum. Thus,
Laytime = Quantity of Cargo =Days
Daily Rate x Number of Hatches
A hatch that is capable of being worked by two gangs simultaneously shall be counted as two
hatches.

PER WORKING HATCH PER DAY or PER WORKABLE HATCH PER DAY This expression
is more in charterer's favour than "per hatch per day". The word "working" or "workable" hatch
means that hatch can be worked because there is cargo in the hold below it. Workability refers
to the cargo and" not cranes/derricks that serve the hatch in question.
Laytime = Largest quantity in one hold = Days
Daily rate per hatch x Number of hatches serving that hold
A hatch that is capable of being worked by two gangs simultaneously shall be counted as two
hatches.

PORT / PORTSIDE The left side of a vessel when viewed forward. (The right side is called
starboard).

PORT Means an area within which ships are loaded with or discharged of cargo, and includes
the usual place where ships wait for their turn or are ordered or obliged to wait for their turn, no
matter the distance from that area.

PROMPT SHIP Vessel that can be ready to load at short notice, say within a few days.

RANGE OF PORTS Range of ports normally on the same coast, e.g., Antwerp-Hamburg
range.

REACH (OF A CRANE) Maximum distance to which loading and discharging equipment
can extend outwards to lift cargo.

REACHABLE ON ARRIVAL or ALWAYS ACCESSIBLE The charterer undertakes that

when the ship arrives at the port there will be a loading/discharging berth for her to which she
can proceed without delay.

REVERSIBLE LAYTIME An option given to the charterer to add together the time allowed
for loading and discharging. When the option is exercised the effect is the same as a total time
being specified to cover both operations. Until the total time expires, no demurrage becomes
payable. Opposite of normal or non-reversible laytime. (See "days all purposes").

RIDER CLAUSES A set of additional clauses which substitute or supplement the clauses in
the original standard C/P form. If a rider clause contradicts a printed clause the rider clause
prevails.

ROUND VOYAGE Voyage involving two legs, the second of which brings the ship back to
the first port.

RUNNING DAYS / CONSECUTIVE DAYS Days which follow one immediately after the
other. They are continuous. A working day may exclude Sundays and holidays. But a running
day does not exclude any day unless provided in the C/P.

38
SAFE BERTH A berth which, during the relevant period of time, the ship can reach, remain at
and depart without being exposed to danger.

SAFE PORT A port which, during the relevant period of time, the ship can reach, enter, remain
at and depart without being exposed to danger.

SAFE WORKING LOAD Maximum load which can safely be carried by a crane or a derrick.

SALE & PURCHASE BROKER Person who negotiates the terms for the sale of a ship on
behalf of the buyer or seller.

SALT WATER ARRIVAL DRAFT Vessel's draft on arrival in salt water where the density of
water is 1025 kg per cbm.

SALVAGE Action taken to save a ship or her cargo from loss or damage at sea. Property saved
from loss or damage at sea.

SEGREGATED BALLAST TANK Tank which is used for water ballast only.

SELF-TRIMMING SHIP Ship whose holds are shaped in such a way that a bulk cargo loaded
into her will level itself.

SCALE RATES Rates set by organizations which publish standard C/Ps. The scale rates contain
daily loading rates as well as demurrage rates. A,pplicable to bulk cargoes like coal, ores, etc.,
from specific countries.

SHIFTING Time spent shifting between berths is generally taken to be for owner's account,
provided it has been agreed that loading/discharging is at more than one berth. Also time spent in
shifting from the waiting place (anchorage) to the first cargo berth is generally not to count as
laytime.

SPECIFIC GRAVITY Ratio of the weight of a liquid to its cubic capacity. Also called "relative
density". Water has SG of 1.00 (1 cubic metre of water weighs 1 tonne).

SPOT A vessel which can commence loading immediately after the charter has been fixed. Also
used for cargo which is available for immediate loading.

SS OR SUBSTITUTE Such a condition in a C/P entitles the owner to replace the original
vessel by another ship, of same cargo capacity including class and suitability of Laycan, for the
fulfilment of the charter.

STARBOARD The right side of a ship when looking forward. (By remembering that port and
left both have four letters, it is easier to remember which is port and which is starboard).

STATEMENT OF FACTS Statement prepared by an agent showing dates and times of arrival;
commencement and completion of loading and discharging; quantity loaded/discharged daily;
hours worked/stopped with reasons for break-down of equipments, etc.

STOWAGE FACTOR The space occupied by a ton (or tonne) of a commodity in a ship's hold
expressed in cubic feet to the ton or cubic metres to the tonne.

STRIKES Some C/Ps state that delays due to strikes are not to count as laytime.

39
SUBJECT STEM Implies that the vessel is fixed subject to the cargo quantity being
available in the laydays agreed upon.

SUBJECTS Means that the acceptance of the terms offered by the other side is "conditional"
and hence a conditional acceptance is not an agreement.

SUEZMAX Bulk carriers of about 150,000 tonne's dwt with a draft of 53' which can transit the
Suez Canal folly laden.

SUNDAYS & HOLIDAYS EXCEPTED / INCLUDED Under this expression Sundays and
holidays will not count as laytime (excepted) /will count as laytime (included).

SUPERCARGO A person on board representing the charterer who supervises cargo operations.
Owners feed the supercargo at a nominal rate but provide free of charge accomodation.

TAKING INWARD PILOT A point of delivery on to a time charter. The vessel's delivery
commences with the pilot boarding the ship. If weather is bad pilot may not be able to board the
vessel. Hence the ship cannot be considered to be delivered. This term therefore favours the
charterer, whereas "arrival pilot station" is favourable to the shipowner.

TIME LOST WAITING FOR BERTH TO COUNT AS LOADING / DISCHARGING TIME or

AS LAYTIME If the main reason why NOR cannot be given is that there is no
loading/discharging berth available to the ship the laytime will commence to run when the ship
starts to wait for a berth and will continue to run, unless previously exhausted, until the ship
stops waiting. The laytime exceptions apply to the waiting time as if the ship were at the
loading/discharging berth provided the ship is not already on demurrage. When the waiting time
ends time commences to count and restarts when the ship reaches the loading/discharging berth
subject to say notice time if provided for in the C/P, unless the ship is by then on demurrage.

TEN PERCENT BAGS FOR SAFE STOWAGE Some C/Ps stipulate that if a charterer loads in
bulk, e.g., grain, 10% of the cargo must be loaded in bags to bring the ship down to her marks.

TIME CHARTER Employment of a vessel for a specific period of time, say, 2 months. The
charterer has no possession or control of the ship. The shipowner receives "hire" payments from
the charterer, usually so-much per day or pro-rata paid semi-monthly or monthly in advance.
Also called "period charter".

TIME SHEET In order to calculate the time used for loading or discharging a time sheet is drawn
up from the statement of facts to determine if any demurrage/despatch in payable.

TONS PER INCH / CENTIMETRE The weight which must be added to, or taken from, a ship in
order to change its mean draft by one inch or one centimetre.

TOTAL COMMISSION Total of (a) address commission [adcom] to charterer plus (b)
brokerage to shipbroker.

TRADING LIMITS. Limits or restrictions imposed by the shipowner on a time charterer's

freedom to nominate ports to ensure that a list of places considered unsafe is excluded. Usually
followed by the words "within Institute Warranty Limits".

TRIMMING The operation of shovelling grain, coal and other bulk cargoes to the wings or ends
of the holds when loading.

40
TRIP-TIME CHARTER A vessel chartered on time charter terms but for a specific voyage and
expected duration. The charterer pays hire instead of freight and the contract is that of a time
charter.

TURN ROUND TIME Time taken to discharge and/or load a ship at a terminal.

ULLAGE Historically quantity a cask or drum lacks of being full. Nowadays the term is used for
tankers or oil storing tanks representing empty spaces.

ULTRA LARGE CRUDE CARRIERS Tankers above 320,000 tonnes dwt.

UNLESS SOONER COMMENCED Time actually used before commencement of laytime

shall count.

UNLESS USED This refers to the counting of laytime and exceptions to laytime such as Sundays
and holidays. If work is carried out during the expected days the actual hours of work only to
count as laytime.

VERY LARGE CRUDE CARRIERS Tankers in the range of 160,000 to 319,000 dwt.

VOYAGE CHARTER Employment of a vessel for a specific and certain voyage to load at one
or more named ports to be carried to a named discharging port or ports. The owner's
remuneration is known as freight calculated on the amount of cargo carried. Voyage C/P
contains laytime and demurrage/despatch clauses.

WEATHER PERMITTING That time during which weather prevents working shall not count as
lay time.

WEATHER WORKING DAY A working day or part of a working day during which it is
possible (if the vessel is loading / discharging) to load or discharge the cargo without
interference due to weather. If such interference occurs (or would have occurred if work had
been in progress) there shall be excluded from laytime a period calculated by reference to the
ratio which the duration of the interference bears to the time which would have or could have
been worked but for the interference.

WEATHER WORKING DAY OF 24 CONSECUTIVE HOURS A working day or part of a

working day of 24 hours during which it is possible (if the vessel is loading or discharging) or
would be possible (if the vessel is not loading or discharging) to load or discharge the cargo
without interference due to the weather. If such interference occurs, or would have occurred if
work had been in progress, there shall be excluded from laytime a period during which the
weather interfered or would have interfered with the work.

WHETHER IN BERTH OR NOT or BERTH NO BERTH If the ___location named for

loading/discharging is a berth and if the berth is not immediately accessible to the ship NOR can
be given when the ship has arrived at the port in which the berth is situated.

WHETHER IN FREE PRATIQUE OR NOT With the insertion of this phrase, NOR can be
tendered even if the health clearance formalities are not completed.

WHETHER IN PORT OR NOT The vessel need not exactly be within the port limits for NOR to
be tendered. It is possible to do this if the vessel has arrived at the usual waiting place for the
vessel to become an arrived ship.

41
WITHOUT GUARANTEE By the use of this phrase the shipowner is not bound by the veracity
of the statement. The phrase is commonly used during negotiations in order to guard all parties
involved in the transactions.

WORKING DAY Day or parts of a day which are not expressly excluded from laytime by the
C/P and which are not holidays.

WORLDSCALE Scale by which tanker freight rates are quoted.

2.0 COMMON CHARTERING ABBREVIATIONS

Abbreviations are important in chartering and students are advised to memorise

these abbreviations over a span of time. Constant revision is required at regular
intervals as there is a tendency to forget them. The information is useful not
only for this year but also thereafter at your work place in a shipping company.

Students are advised to maintain a notebook wherein they can copy down the
abbreviations and start entering new ones in the course of their study and work.
Some abbreviations need explanations and these should be sought for;
otherwise, such abbreviations by themselves or in their expanded forms have
little meaning, e.g., ADCOM (address commission), BT (berth terms), CAF
(currency adjustment factor), etc. Others, such as ARA (Antwerp-Rotterdam-
Amsterdam range) or LA (Los Angeles) and shortened names of ports need only
expansion.

We have tried to limit ourselves, as far as possible, to those abbreviations which

are commonly used in chartering. Abbreviations used in basic shipping
terminology, insurance, law, banking, etc., have not been covered up, except in
a few cases. For abbreviations commonly used in shipping practice, we would
advise the students to go through lesson 7 on "Abbreviations" in the paper on
"Shipping Practice" in the Correspondence Course materials supplied to First
Year students of Narottam Morarjee Institute of Shipping in August 1998, copy
available in the Institute's library or with the Director of the Institute. This will
give those students who are unfamiliar with or weak in abbreviations a good
foundation to start with.

1 OPT 1 One year, option another one year.

1/2 SB One or two safe berth(s).
1/2 SP One or two safe port(s).
A & CP Anchors and chains proved.
a/f Also for (referring to ports to be touched by the ship).
Aa (AA) Always afloat.
AAAA Always afloat and (always) accessible.
AB Above bridges.

42
Abt About.
ACP African, Caribbean, Pacific countries.
Ad.val. Ad valorem (duty).
ADCOM/Addcomm Address commission.
AF Advance freight.
AFRA Average freight rate assessments.
AFSPS Arrival first sea pilot station.
AG Arabian Gulf (also referred to as PG Persian Gulf or the Middle East).
AGRIPODS Agricultural products.
AGW All going well.
AGWWP All going well weather permitting.
Ah (AH) After hatch.
AH Range of ports between and including Antwerp and Hamburg.
AHL Australian hold ladders.
AICS Associate of Institute of Chartered Shipbrokers, London.
AIMS American Institute of Merchant Shipping.
AOG Act of God.
Ap or A/P Aft perpendicular (of ship); after peak; all purposes; additional premium.
API American Petroleum Institute.
APS Arrival pilot station.
APT After peak tank.
AR Antwerp - Rotterdam - range.
AR Arrived.
ARA Antwerp - Rotterdam - Amsterdam range of ports.
ARAGH Antwerp-Rotterdam-Amsterdam-Ghent.
ARH Antwerp - Rotterdam - Hamburg range.
ARHB Antwerp - Rotterdam - Hamburg - Bremen range.
ASA Always safe(ly) afloat.
ASAP (asap) As soon as possible.
ASBA Association of Shipbrokers and Agents.
ATA Actual time of arrival.
ATDN Any time day and night.
ATRS American Tank Rate Schedule.
ATS All time saved.
ATSB/ATSBE All time saved both ends.
ATSDO All time saved discharging only.
ATSLO All time saved loading only.
AWH Available workable hatches.
AWIWL All within Institute Warranty Limits.
AWTSBE All working time saved both ends.
AWTSDO All working time saved discharging only.
AWTSLO All working time saved loading only.
B (Bl) Bale capacity; bale; ballast.
B.H. Range Range of ports between and including Bordeaux and Hamburg.
b.o. Buyer's option; broker's order.
B.P.(bp/b.p.) Between perpendiculars; boiling point (gases).
B.S. & W. Bottom (or base) sediment and water.
B.S. Boiler survey; bunker surcharge.
b/d Barrels per day.
B/E (Bends) Both ends.
B/E Break even; (customs) bill of entry; bill of exchange.
b/h Barrels per hour.
B/L /b lading (Bs/L) Bill of Lading (plural of B/L).
B/N (b/n) Booking note.
B/O (b/o) Bulk/oil carrier.
B/R Bordeaux or Rouen.
BA Buenos Aires.
BACAT Barge aboard catamaran.
BAF Bunker adjustment factor.
Bar (brl) Barrel.

43
BB (bb) Ballast bonus; below bridges; bar bound; bulbous bow; bareboat; breakbulk.
BBB Before breaking bulk.
BBCD Bareboat-cum-demise.
BC British Columbia; British Channel.
BD Bar draft; below deck.
BD Below deck; bar draft.
BDI Both dates (days) inclusive (or included).
BENELUX Belgium, the Netherlands & Luxembourg.
Bext. Breadth extreme.
BFI Baltic Freight Index.
BFO Bunker fuel oil.
BH (B/H) Bill of health; bulkhead.
BHF Bulk harmless fertilisers.
Bhp (BHP) Brake horse power (oil engines).
Bi/BI Both inclusive.
BIBO Bulk in, bag out.
BIFFEX Baltic International Freight Futures Exchange.
BIMCO Baltic & International Maritime Council, Copenhagen.
BK Bar keel.
BLK Bulk.
BLSEA Baltic Sea.
BLST (BST) Ballast.
BOA Berthing on arrival.
BOB Balance on board.
BOD Board of Directors.
BOD Bunkers on delivery.
BOFFERS Best offers.
BOR Bunkers on re-delivery.
BORO Bulk, oil and roll-on, roll-off vessel.
BS Broken stowage.
BSS Basis.
BST British Summer Time, British Standard Time.
BT (bt) Berth terms.
BTD Butadiene (cargo for gas carrier).
BTU British Thermal Unit.
BW/BWA Brackish water/ brackish water allowance.
BWAD Brackish water arrival draft.
BWDD Brackish water departure draft.

C & F (CFR) Cost and freight.

C and/or J China and/or Japan.
C Shinc, Sundays and holidays included.
C.I.F. & E. Cost, insurance, freight and exchange.
C.I.F. Cost, insurance and freight.
C.I.F.C.I. Cost, insurance, freight, commission and interest.
C.I.F.F.O. Cost, insurance, freight and free out.
C.I.F.I. & E. Cost, insurance, freight, interest and exchange.
c.i.f.l.t. (CIFLT) Cost, insurance and freight, London terms.
c.o.d. Cash on delivery.
C/P(c/p orCP) Charter party.
C/V/E Cable, victuals and entertainment.
CABAF Currency and bunkering adjustment factors.
CABE (cabe) Charterer's agents both ends.
CAF Currency adjustment factor.
CAN Calcium ammonium nitrate (cargo).
CAR (CARIB) Carribean Islands.
CB & H Cont. (BH) Continent between Bordeaux and Hamburg.
CBFT (Cuft) Cubic feet,
CBM Cubic metre.

44
CD Customary despatch.
CENSA (pron.Kensa) Council of European and Japanese National Shipowners Associations.
CH & H Continent between Le Havre and Hamburg.
CHA Customs house agent.
CHINPAC China Sea, Indian and Pacific Oceans.
CHN China.
CHOPT Charterer's option.
CIM International Convention Concerning the Carriage of Goods by Rail.
CIP Carriage and insurance paid to.
CKD Completely knocked down; cars knocked down (loaded in crates).
CLC Convention on Civil Liability for Oil Pollution Damage, 1969.
CMI Committee Maritime International.
CMR Convention on the Contract for International Carriage of Goods by Road.
cnr Charter not reported.
COA Contract of Affreightment.
COB Cargo on board; close of business.
COFR Certificate of Financial Responsibility.
COGS (COGSA) Carriage of Goods by Sea (Act).
COMP Completing.
CONFI Confidential.
CONS Consecutive; consumption.
Cont. (Cont.) Continent of Europe.
COP (C/P) Custom of the port.
COW Crude oil washing.
Cpd (CPD) Charterers pay dues.
CPP Clean petroleum products.
CPT Carriage paid to.
CQD Customary quick despatch/discharge.
CR (cr) Current rate; carrier's risk.
CRD Current rate discharge.
CRISTAL Contract Regarding an Interim Settlement to Tanker Liability for Oil Pollution
Damage.
CRL Current rate of load.
CS Laden Cape, ballast Suez.
CSD Closed shelter deck.
CST (c/s) Centistokes.
CT Centre tank; cargo tank; cubic tonnage of a ship.
CVs (consec) Consecutive voyages.
Cwt. Hundred weight.

D 1/2 D (DHD) Despatch money payable at half demurrage rate. (Also demurrage,half despatch).
d.p. Direct port.
D/A (DA) Discharge afloat
D/C Deviation clause; (in) direct continuation.
D/R/D Dunnage, removal and disposal.
daa Discharge always afloat
DAF Delivered at frontier.
DAP (DAPS) Days all purposes; di-ammonium phosphate (fertilizer).
DB (db) Double bottom.
DBB (d.b.b) Deals, battens and boards (timber).
DBE (dbe) Despatch payable both ends.
DBEATS Despatch (payable ) both ends, all time saved.
DBELTS Despatch (payable both) ends on lay time saved.
DBEWTS Despatch (payable) both ends, working time saved.
DBT (dbt) Double bottom tanks.
DD Daily discharge; dry docking.
DDO (ddo) Despatch discharging only.
DDP Delivered duty paid.
DDU Delivered duty unpaid.

45
DEC Deratting exemption certificate.
DEL (DELY) Delivery.
Dem.des. Demurrage and despatch.
DEM-DES(P) Demurrage and despatch.
DEQ Delivered ex-quay.
Der (DR) Derricks.
DES Delivered ex-ship.
DESP Despatch.
DETS Details.
Df (DF) Dead freight.
DFD Demurrage, free despatch.
Dft Draft (also spelt, draught).
dh Double hull.
DHDWTSBE Despatch half demurrage, working time saved, both ends (Also, DHDWTSBENDS).
DIRTY Crude black oil.
DK Deck.
DLO (dlo) Despatch loading only.
DLOSP Dropping last outward sea pilot.
DLY Daily.
DO (d.o.) Diesel oil.
DOHP Dropping outward harbour pilot.
DOP (dop) Dropping outward pilot.
DOSP Dropping outward sea pilot.
DPD Discharge port disbursements.
DPP (d.p.p.) Dirty petroleum products.
DRATE Discharge rate.
DRC (d.r.c) Daily running cost.
DRI Direct reduced iron (cargo).
DW (dw/Dwt) Deadweight (tonnage).
DWA Dock water allowance.
DWAT (dwat) Deadweight all told.
DWC (dwc) Deadweight capacity.
DWCC(dwcc) Deadweight cargo capacity.
Dwct Deadweight cargo tons.
DWOC Decline without counter.

E East.
e.o.h.p. Except otherwise herein provided.
E.O.P. End (completion) of passage.
EAT Expected (or estimated) arrival time.
Eb Empty ballast.
EC East coast.
ECCP East Coast (U.K) coal port.
ECGB East Coast of Great Britain.
ECI East Coast of Ireland.
ECM East Coast Mexico.
ECNA East Coast of North America.
ECSA East Coast of South America.
ECUK East Coast of United Kingdom.
ECUS East Coast of U.S. A.
EDI Electronic data interchange.
EGM Export general manifest.
EI East Indies.
EIU Even if used.
ENE East North-East.
EP Estimated position.
ERLOAD Expected ready to load.

46
ERV Each round voyage.
EST European Standard Time.
est. Estimated.
ETA Expected (or estimated) time of arrival.
ETBC Easy trimmer bulk carrier.
ETC Expected (or estimated) time of commencement/completion.
ETD Expected (or estimated) time of departure. (Also, expected to deliver).
ETF Expected (or estimated) time of finishing
ETR Expected to be ready.
ETS Expected (or estimated) time of sailing or expected to sail.
EUROMED European Mediterranean.
EXW Ex-works.

F&D Freight and demurrage.

F Fresh water load line mark; forward; forecastle; Fahrenheit.
f.c.s. Free of capture and seizure.
f.d. Free discharge; free of despatch.
F.desp. Free despatch.
f.dis. Free discharge.
f.i.b. Free into barge; free into bunkers.
f.i.t. Free of income tax.
f.i.w. Free into wagon.
f.o. Free out terms; for orders.
f.o.b.s. Free on board and stowed.
f.o.b.t. Free on board and trimmed.
f.o.c. Free of charge.
f.o.d. Free of damage.
f.o.l Free on lighter.
f.o.q. (FOQ) Free on quay.
F.O.R. (f.o.r) Free on rail.
f.o.s. Free on ship.
f.o.t. Free on truck.
F.P. (In) free pratique; flash point.
f.t. Fuel terms; also, full terms.
f.v. Fishing vessel.
FAC(fac) Fast as can.
Faccop Fast as can, according to the custom of the port.
FAF Fuel adjustment factor.
FAS Free alongside; free arrival station.
FBD Freeboard.
FC Fund Convention (for oil pollution damage).
FCA Free carrier.
FCC First class charterer.
FCSSS For Christ's sake say something (slang).
FEU Forty foot equivalent unit.
Ffa Free from alongside.
FFI For further instructions.
FH First half (of the year or month).
FHEX Fridays and holidays excepted.
FHINC Fridays and holidays included.
FICS Fellow of the Institute of Chartered Shipbrokers, London.
FILO Free in and liner out.
FILTD Free in, liner terms discharge.
FIO Free in and out.
FIOLS Free in and out, lashed and secured.
FIOS Free in and out, and stowed.
FIOSpT Fee in and out, spout trimmed.
FIOST Free in and out, stowed and trimmed.

47
FIOT Free in and out, and trimmed.
FISLSD/LO Free in, stowed, lashed, secured and dunnaged /liner out.
FLASH Feeder lighter aboard ship.
FLT Full liner terms; forklift truck.
FMC (U.S) Federal Maritime Commission.
FO Free overside; fuel oil; furnace oil; for orders; free out.
FOB (fob) Free on board.
FOM Flag, ownership and management.
FONASBA The Federation of National Associations of Ship Brokers and Agents.
FOW (f.o.m) First open water; free on wharf; free on wagon.
FPT Fore peak tank.
FTTM First thing tomorrow morning.
FW Fresh water.
FWA Fresh water allowance.
FWAD Fresh water arrival draft.
FWDD Fresh water departure draft.
FYG For your guidance.
FYI For your information.

G Grain capacity.
G.A. General Average.
G.B. Great Britain.
G/B (GR/BL) Grain / bale capacity.
GIB Gibraltar.
GBB Gross ballast bonus.
GC General cargo; great circle.
GENCAR General cargo.

GEOG RTN In geographical rotation.

G-H RGE Gibraltar- Hamburg range.
GLESS Gearless.
GLFD Gross load, free discharge.
GO Gas oil.
GOP Gross operating profit.
GP General purpose (vessel).
GRD Geared.
GRT Gross register ton.
GSSL Ports of Genoa, Savona, Spezia or Leghorn.
GSSLNCV Ports of Genoa, Savona, Spezia, Leghorn, Naples, Civetta or Vecchia (all in Italy).
GT Gross tonnage.
Guar. (Gtee) Guaranteed.

H.A. or D. Le Havre, Antwerp or Dunkirk.

H.H. (H/H) Ports between and inclusive of Le Havre and Hamburg.
Ha Hatch, hatchway.
HAT Highest astronomical tide.
HBR Hamburg range.
HC hatch cover; hold cleaning.
HCHTRS Head charterers.
HCM Ho Chi Minh City.
HD Half despatch.
HDWTSBE Half despatch working time saved both ends (Also, HDWTSBENDS).
HFO Heavy fuel oil.
HG Heavy grain.
HHDWS Heavy, handy, deadweight scrap (iron).
HLESS Harmless.
HMB Heavy motor blocks.
HNS Hazardous and Noxious Substances (excluding oil) (Draft convention).
Ho Hold.

48
Ho/Ha Holds/hatches.
HR/HRDS Hampton Roads.
HSD High speed diesel.
HSS Heavy grains, soyabeans and sorghums (cargo).
HVF Heavy viscosity fuel oil.
HW(M) High water (mark).
HWDW Heavy, handy, dead weight.
HWLTHC Height waterline to top hatch.
HWONT High water at ordinary neap tides (now, MHWN)
HWOST High water at ordinary spring tides (now, MHWS)

I.A.C.S. (IACS) International Association of Classification Societies.

IATA International Air Transport Association.
IBC Intermediate bulk carrier.
ICC International Chamber of Commerce.
ICS Institute of Chartered Shipbrokers; International Chamber of Shipping.
IDL International Date Line.
IFO Intermediate fuel oil.
IGM Import general manifest.
IGS Inert Gas System.
IHAM Immigham (port).
IHP Indicated horse power.
ILO International Labour Organization, Geneva.
ILOHC In lieu of hold cleaning.
ILOW In lieu of weighing.

IMB International Maritime Bureau.

IMDG (C) International Maritime Dangerous Goods (Code).
IMIF International Maritime Industries Forum.
IMO International Maritime Organization.
INDO Indonesia.
INMARSAT International Maritime Convention on Communication by Satellite.
INTERCARGO International Association of Dry Cargo Shipowners.
INTERTANKO International Association of Independent Tanker Owners.
IOPC International Oil Pollution Compensation (Fund).
IOPP International Oil Pollution Prevention Certificate.
IOT (INCLOT) Including overtime.
ISF International Shipping Federation.
ISM International Safety Management (Code).
ISO International Standards Organization.
ITF International Transport Workers' Federation.
IUATUC If used actual time used to count.
IWL Institute Warranty Limits.

j. & w.o. Jettison and washing overboard.

JBL Jubail (port).
Jett Jettison.
JV Joint venture.

K "000" i.e. thousand, e.g. 2K = two thousand.

k, kn, knt, kt, knot Knot; nautical miles (6080 feet or 1853 metres) per hour.
KMT Distance from keel to mast.
KRS Koreans.

49
L Laden.
L/D Loading/discharging.
LA Los Angeles.
LASH Lighter aboard ship (barge carrier).
LAT Lowest austronomical tide; latitude.
Lay/can (L/C, LYCN) Laydays commencing/ laydays cancelling (dates) or laydays/cancelling.
LB Long Beach (USA).
LBP Length between perpendiculars.
LC (L/C) London clause; letter of credit; laycan.
LCI Lambert's Capesize Index.
Lcr Lowest current rate.
LDN London; laden.
LDO Light diesel oil.
LDPT Load port.
LEFO Land's end for orders.
LGFM London Grain Fixtures Market.
LHAR London, Hull, Amsterdam or Rotterdam.
LIFO (lifo) Liner in, free out; last in, first out.
LL Laden legs; loadlines.
LLT London landed terms.
LM Lane metres.
LMC Lloyd's machinery certificate.
LNG Liquefied natural gas (carrier).
LO Lubricating oil.
LO/LO Load-on and load-off or Lift-on and lift-off vessel.
LOA (loa) Length overall (of ship's hull).
LOF Lloyd's Open Form, (Salvage Agreement), 1995.
LOI Letter of indemnity.
LOW Last open water.
LPD Load port disbursements.
LPG Liquified petroleum gas (carrier).
Lpl. Liverpool.
LQT Liverpool quay terms.
LRATE Load rate.
LS Lumber (timber) summer loadline.
LSD Landing ship dock; landing, storage and delivery.
LSLSDU Loaded, stowed, lashed, secured, dunnaged and unlashed.
LT (lt/lts) Long ton; liner terms; London terms.
Lt.V Light vessel.
LTBENDS Liner terms, both ends.
LTS (BE) Laytime saved (both ends).
LW (lw) Low water.
LWNA Lumber Winter North Atlantic (loadline).
LWONT Low water at ordinary neap tides (now, MLWN).
LWOST Low water at ordinary spring tides (now, MLWS).

M Metre; measure; measurement.

M/R Mate's receipt.
MAA Mina Al Ahmadi (port).
MAP Mono-ammonium phosphate (cargo).
MARPOL Convention for the Prevention of Maritime Pollution from ships (1973/1978).
MATS Material(s), (i.e. dunnage).
MB/T Motor blocks/ turnings.
MBTE Methyl, butyl, tertiaer ether (unleaded petrol).
MDO Marine diesel oil.
MED Mediteranean.
MEX Mexico.
MH Main hatch.

50
MHWN Mean high water neaps (formerly, HWONT).
MHWS Mean high water springs (formerly, HWOST).
MIC Man-in-charge.
MICS Member of the Institute of Chartered Shipbrokers,London.
Minmax Minimum or maximum tonnage (to be loaded).
MIO Million(s).
ML Motor launch.
MLD Moulded.
MLLW Mean low low water.
MLS Miles.
MLW Mean low water.
MLWN Mean low water neaps (formerly, LWONT).
MLWS Mean low water springs (formerly, LWOST).
MOL More or less.
MOLCO More or less at charterer's option (Also, MOLCHOPT).
MOLOO More or less at owner's option.
MOP Muriate of potash (cargo).
MOS Months.
MPP Multi-purpose (vessel).
MRX Medium range cross-purpose tanker.
MS Motor ship; motor spirit; machinery survey.
MSA Merchant Shipping Act.
MSC Manchester Ship Canal; Maritime Safety Committee (of IMO).
Mst Measurement.
MSV Motor support vessel.
Mt Empty.
MT Metric ton (tonne); multimodal transport; main terms; motor tanker.
MTL Mean tidal level.
MTO Multimodal transport operator.
MTPA Million metric tonnes per annum.
MV Motor vessel.

N CONT (NO CONT) North Continent.

N(NTH) North.
n.E. Not east of.
n.e.p.(NEP) Not elsewhere provided.
n.m. Nautical mile.
n.N.(N/N) Not north of
N.O.P. Net operating profit.
n.o.p. Not otherwise provided.
n.S. Not south of.
n.W. Not west of.
N.Y.T New York Standard Time.
N/B New building.
N/t New terms (grain trade).
NA North Atlantic; North America; nearest approach.
NAA (naa) Not always afloat.
NAABSA Not always afloat but safe(ly) aground.
NCSA North Coast South America.
NES (n.e.s.) Not elsewhere specified.
NEW North-West Europe.
NEWCT North East of West Coast Italy.
NHP Nominal horse power.
NJ New Jason clause in C/P.
NMPD Nautical miles per day.
NNGWB Not north of George Washington Bridge (i.e. New York).
NOLA New Orleans.
NOPAC North Pacific (ports).

51
NOR (N/R) Notice of Readiness.
NORT Notice of Readiness tendered.
NPK Nitro phosphatic kompound (cargo).
NR T & A Notice of Readiness tendered and accepted.
NR T (nrt) Net register tonnage.
NR Northern Range of ports (in US).
NS No sparring.
NSW New South Wales (Australia).
NT Net tonnage; neap tides; new tonnage.
NTC Not to count.
NTCEIU Not to count, even if used.
NTCUU Not to count, unless used.
NVOCC Non-vessel owning common carrier.
NY (NYK) New York.

O.O. Owner's option.

o.t. Overtime.
O/B On board
O/C Open charter; ore carrier.
O/D Over deck.
O/O Oil/ore (or ore/oil) carrier.
o/w Outward.
OA OK Overage okay.
oa Overall
oaaoop On arrival at or of the port.
Oabe (OABE) Owners agents both ends.
OAFSP On arrival first sea pilot.
OAGE Overage.
OAHPS On arrival harbour pilot station.
OAL Overall length (same as LOA).
OAPEC Organization of Arabic Petroleum Exporting Countries.
OBO Oil, bulk, ore carrier.
OBQ On board quantity.
Oc B/L Ocean bill of lading.
OCC Outward clearance certificate; Oil Co-ordination Committee.
OCIMF Oil Companies International Marine Forum.
ODM Oil discharge monitor.
OECD Organization for Economic Co-operation and Development.
O-H (O/H) Off-hire.
OHBC Open hatch bulk carrier.
OPA (US) Oil Pollution Act, 1990.
OPEC Organization of Petroleum Exporting Countries.
OPT (opt) Option.
OSB One safe berth.
OSD/CSD Open shelter deck or closed shelter deck (vessel).
OSP One safe port.
OSPB One safe port or berth.
OSV Offshore supply vessel.
OWS Owners.

P & I (PANDI) Protection and Indemnity (Club).

P + C (P AND C) Private and confidential.
p.f.t. Per freight ton.
P.P. (pp) Picked ports.
p.p.i. Policy proof of interest.
p.t. (PT) Per ton; private terms.

52
PA (P/ A) Particular average.
pac Pacific coast ports; pacific ocean.
PAD Pacific Australia direct.
PB Permanent bunkers; poop and bridge.
PBF Poop, bridge and forecastle.
pc Part cargo, parcel cargo.
PCC Pure car carrier.
PCM Per calender month (hire).
PCNT Panama Canal Net Tonnage.
PCO (PICO) Port in charterer's option.
PCTC Pure car and truck carrier.
PD Port dues.
PDPR Per day pro-rata.
PG (P/G) Persian Gulf (also, referred as AG = Arabian Gulf or the Middle East Gulf).
PHC Port handling charges.
PHD Per hatch per day.
PHO Port health officer.
PIC person in charge.
PIOPIC P & I Oil Pollution Indemnity Clause.
PMO Passing Muscat outbound.
PMT Per metric ton.
POA Place of acceptance.
POB Pilot on board.
poc (POC) Port of call.
pod (POD) Port of distress.
POL Petroleum, oil and lube.
por (POR) Port of refuge.
PPS Pumps (capacity in cubic metres).
ppt (PPT) Prompt.
PPUK Picked ports of U.K.
PQ Province of Quebec.
PRC People's Republic of China.
PSI Pounds per square inch; pre shipment inspection.
pssg (PSSG) Passing.

R/p Return to port for orders.

R/T Revenue ton.
R/V (RV) Round voyage.
RAPL Rotterdam - Amsterdam Pipeline.
RBAY Richards Bay (port).
RBCT Richards Bay Coal Terminal.
RCN Research octane number.
RDC (rdc) Running down clause.
Rds Roads.
Re-cap Recapitulation (summary of main points).
RED Rate, extras demurrage.
REDEL Re-delivery.
RNR Rate not reported.
Roads (roads) Ports of Hampton Roads.
ROB Remaining on board.
RORO (ro-ro) Roll-on/roll-off (vessel).
RPM Revolutions (or rotations) per minute.
RPS Revolutions (or rotations) per second.
RPT Repeat.
RT Right time of ship departure/arrival or rye terms.
RTBA Rate to be agreed.
RTD Round trip distance.
RUW Ruwais (port).

53
S & P (S AND P) Sale and purchase.
S d/k Shelter deck.
S Summer loadline; south.
s.s. & c. Same sea and country coast.
S/A (S.A.) South America; South Australia; South Africa; safe anchorage; Salvage Association.
S/a Safe arrival; subject to approval.
S/F (SOF) Statement of facts.
S/N Shipping note.
S/o Shipowner.
S/S Suez laden, Suez ballast.
SA Saturday afternoons.
SA/SHEX Saturday afternoon/Sundays and holidays excepted.
SABIO Stem and berth in order.
SATSHEX/SSHEX Saturdays, Sundays and holidays excepted.
SB Safe berth.
SBE Standby engine.
SBM Single buoy mooring (for oil tankers); soyabean meal (cargo).
SBT Segregated ballast tanks.
SCNT Suez Canal Net Tonnage.
SD Single deck; self-discharging.
Sd. Sailed.
SDBC Single deck bulk carrier.
SDR Special Drawing Rights (IMF).
SDWT (sdwt) Summer deadweight.
SEA South East Asia.
SF San Francisco; summer freeboard.
SG Specific gravity.
SH Second half (of the month or year).
SHEX Sundays and holidays excepted.
SHEXEIU Sundays and holidays excepted, even if used.
SHEXUU Sundays and holidays excepted, unless used.
SHINC Sundays and holidays included.
SHU Shuaibu (port).
Sim Sub Similar substitute.
SITPRO Simplification of International Trade Procedures (Board).
SKO Superior kerosene oil.
SLT Sludge tank.
SOB Shipped on board.
SOLAS International Convention on Safety of Life at Sea (1974/78).
SP Safe port.
SPASS Skaw - Passero (range).
spd Ship pays dues; speed.
SPM Single point mooring.
SPN Spain.
SPT (spt) Spot.
SS Service speed; steamship; special survey.
SSW Summer salt water.
STBC Self-trimming bulk carrier.
Stc Said to contain.
STCW Convention on Standards of Training, Certification and Watch Keeping for Seafarers.
STD (std) Standard (timber trade).
Stem Availability of cargo.
Sth South.
STL Steel.
Stoa Subject to owner's approval.
Stw Said to weigh.
Sub open Subject open
Sub stem Subject stem (availability of cargo).
Subdets Subject details (of C/P).
SUBDGS Subject to Director-General of Shipping approval.

54
SUBs Subjects (fixed on)
SUIT Suitable.
SV Sailing vessel.
SW Salt water; shipper's weight.
SWAD Salt water arrival draft.
SWDD Saltwater departure draft.
SWL Safe working load (of cranes, derricks).

T Tropical loadline
T/C Trip (TCT) Time charter trip.
T/P Trans Pacific.
T/S Time sheet; transhipment.
TAFHEX Thursday afternoons Fridays and holidays excepted.
TARV (TA R/V) Trans Atlantic Round Voyage.
TBA To be advised.
TBD To be declared.
TBMA To be mutually agreed.
TBN To be nominated (vessel).
TC (T/C, t/c) Time charter.
TCE Time charter equivalent.
TCH Time charter hire.
TCM Convention on the International Combined Transport of Goods.
TCY Time charter yield
TDK Tween decker.
TDW (tdw) Tons deadweight.
TECH Toxic, explosive, corrosive and hazardous (dangerous cargo).
TEU Twenty foot equivalent unit.
TF Tropical fresh water loadline.
THC Terminal handling charges.
TIB Trimmed in bunkers.
TIP Taking inward pilot.
TMK Tonnage mark.
TNC Time to next cargo.
TNGE Tonnage.
TOTCOM Total commission.
TOVALOP Tanker Owners Voluntary Agreement Concerning Liability for Oil Pollution.
Tp Time in port.
TPC Tons per centimetre (immersion).
TPCM Tons per cubic metre.
TPD Tons per day.
TPI Tons per inch (immersion).
TPRV (TP R/V) Trans Pacific Round Voyage.
TR Tons registered.
TRND To be renamed.
Ts Time at sea.
TSP Triple super phosphate (cargo).
TST Topside tank.
TT Telegraphic transfer.
TTL Total.
TWHD Tons per working or workable hatch per day.
TYT Thanks your telex.

U.K. f.o. United Kingdom for orders.

U.K.H.A.D. United Kingdom and Le Havre-Antwerp-Dunkirk range.
U.K.H.H. United Kingdom and Le Havre-Hamburg range.
U/D Under deck.

55
UK/Cont (G.H.) United Kingdom or Continent (Gibraltar-Hamburg range).
UK/Cont (H.H.) United Kingdom or Continent (Le Havre-Hamburg range).
UK/Cont. (B.H.) United Kingdom or Continent (Bordeaux-Hamburg range).
UKC United Kingdom or Continent.
ULCC Ultra large crude carrier.
UNCITRAL United Nations' Commission on International Trade Law.
UNCTAD United Nations' Commission on Trade and Development.
USAC United States Atlantic Coast.
USC Unless sooner commenced.
USCG United States Coast Guard.
USEC (USEA) United Stated East Coast.
USG United States Gulf of Mexico.
USNH United States North of (Cape) Hatteras (northern range).
USNP United States North Pacific.
USSH United States South of (Cape) Hatteras.
USWC (USWE) United States West Coast.
UU Unless used.

V/C Voyage charter

VGO Vacuum gas oil.
VLOO Very large ore/oiler (carrier).
VOC Vessel operating carrier.
VTMS Vessel traffic management system.
VTS Vessel traffic system.

W Winter loadline mark; Worldscale.

W/M Weight and/or measurement.
WAG West Asia Gulf.
WB Water ballast, waybill.
WB/EI West Britain/East Ireland.
WCA West Coast Africa.
WCCOM (WICCON) Whether (in) customs cleared (clearance) or not.
WCNA West Coast of North America.
WCSC West Coast of South America.
WCUK West Coast United Kingdom.
WCUS West Coast United States.
wd Forward.
WD Working days.
WECON Whether entered (in) Customs or not.
WEST Western Europe.
WFA With following alterations.
WHD Per working (workable) hatch per day.
WHT Wheat.
WHTC Worldscale--hours, terms and conditions.
WIBON Whether in berth or not.
WIFPON Whether in free pratique or not.
WIPON Weather in port or not.
WL Waterline.
WLTHC Waterline to top of hatch coaming.
WNA Winter North Atlantic loadline mark.
WOB Washed overboard.
WOG Without guarantee.
WP Weather permitting.
WS Worldscale.
WT Wing tanks.
WTSBE Working time saved both ends (Also, WTSBENDS).

56
WVNS Within vessel's natural segregation.
WW Weather working.
WWAWIWL Worldwide and Always within Institute Warranty Limits.
WWD (wwd) Weather working days.
WWDSHEX Weather working days, Sundays and holidays excepted.
WWF Waterside Workers' Federation.
WWR When, where, ready.

X Shex, Sundays and holidays excepted.

XS In excess of.
X-Whse Ex-warehouse.

YAR/YA York-Antwerp Rules (also, Y/Ar or Y.A.R)

A point worth bearing in mind is that at times an abbreviation may have one or
more full forms used in chartering Examples:

BB=ballast bonus; below bridges; break bulk, etc.

CT=centre tank; cargo tank, etc.
FO=fuel oil; free out; for orders, etc.

In the above cases all these full forms are given in your lesson. However, it may
so happen that one of the full forms is omitted here. If you find any abbreviation
or its full form missing, you can then enter such expanded full forms in your
personal notebook on "Abbreviations" which you have been advised to
maintain.

At times an abbreviation is written in capital letters, e.g., "B/O" (bulk/oil

carrier). The same abbreviation can also be written in small letters, e.g., "b/o".
Someone may abbreviate using full stops after each letter. Others may
abbreviate without using full stops, e.g., M.L.W.S. ( mean low water springs) or
MLWS; A.P.T. (after peak tank), sometimes written as APT or a.p.t.

Abbreviations are used extensively in telexes to cut down on costs. However,

there are no hard and fast rules on how to abbreviate in a telex. You can only
guess the meaning by the context of the message. Each writer or a company will
have its own way of abbreviating words. Take, for example, the following
appearing in a telex message of a shipping company:

" PLS SEND CHRTS FULL B/GRND N ADV WHT TYPE CGO/DURTN. SHAL TRY OWS TO
DO BIT CLOSR USD 12500. AWT YRS."

57
In this example:
PLS = please CHRTS = charterer's BGRND = background
N = and ADV = advise WHT =what
CGO = cargo DURTN = duration SHAL = shall
OWS = owners CLOSR = closer AWT = awaiting
USD = US Dollars YRS = yours.

Word (and letter) omissions are common in the majority of telexes. The most
frequent word omissions are definite or indefinite articles (the, a), pronouns
(I, we), prepositions (in, on, at) etc. Only practice will make you perfect.

The compilation given below is taken from different sources, telex messages and
reference books and also from the practical experience acquired by the
co-ordinators in the field of shipping/shipbroking.

At the end of the lesson students should please attempt self-examination

questions. Also whenever you are faced with a problem look up the list of books
appearing on the last page of this lesson under the heading RECOMMENDED
FOR FURTHER READING.

3.0 CHARTERING NEGOTIATIONS

3.1.0 A chartering negotiation is normally initiated when a charterer (usually a shipper)

enters the market to find a suitable ship to move his product, or when an owner (usually
acting through a charterer) enters the market to find employment (i.e. a suitable cargo) for his
ship. Within this framework, the key elements that set the entire process for negotiating a
charter into motion (and which determine the parameters of the agreement that is ultimately
concluded) are the quantity and characteristics of the cargo that will be shipped, its ___location at
the time the charterer enters the market, and its destination. In practical terms, the process
that ensues can be divided into two distinct stages (investigation and negotiation, each of
which is governed by its own procedures and terminology.

3.2.0 Investigation:

3.2.1 The Charterer Places an Order:

3.2.1.1 The first stage of the negotiating process, called the period of investigation, begins
when a charterer (either a shipper or an owner) enters the market with an order (either
directly or through a broker). Before doing so, however, the charterer must decide whether he
is ready to immediately engage in firm freight negotiations (provided he finds a suitable
counterpart), or whether his main objective at this stage is collect information regarding
potential shipping opportunities, with a view to beginning negotiations at a later date, and
only after he has analyzed and evaluated all of the information he has gathered.

3.2.1.2 In principle, any order that is circulated on the market by a reputable charterer and
broker will normally be regarded as FIRM if the order does not contain any indication to the

58
contrary. Nevertheless, the charterer may decide to make his intentions even clearer by using
terminology such as FIRM OFFERS INVITED or PLEASE OFFER FIRM. In cases where
the business has been concluded (i.e. the cargo has been purchased) but the charterer does not
want to enter into firm negotiations immediately, he may mark his order FIRM or
DEFINITE, while at the same time adding terminology such as INDICATIONS ONLY or
PLEASE INDICATE or PLEASE PROPOSE. The expression FIRM WITH XX DAYS’
NOTICE indicates that the cargo is ready to be negotiated but loading can take place only XX
days after the fixture has been concluded.

3.2.1.3 On the other hand, if negotiations for purchasing the cargo have not yet been
concluded, but the charterer nevertheless requires a freight quotation or estimate, the order
may open with wording such as PROSPECTIVE ORDER or ORDER EXPECTED TO
BECOME DEFINITE or ORDER NOT YET DEFINITE, or similar. If the charterers have
not concluded any specific business and only wish to make a general investigation of
shipping possibilities, this may be indicated through the use of terminology such as
POSSIBILITY ONLY or CHARTERERS HAVE A POSSIBILITY TO WORK UP
FOLLOWING BUSINESS.

3.2.1.4 At this stage in the process, the contents of the charterer’s order will be limited to the
minimum amount of information that the shipowner needs to determine whether he has a
potential interest in the business. In the case of a voyage charter, such information will
include the charterer’s name and domicile, cargo quantity and description, loading and
discharging ports, period within which the vessel is to be presented for loading (lay/can), any
restrictions or preferences regarding type or size of ship, charterparty form on which the
charterer wishes to base the terms and conditions, commissions to be paid by the owner In
addition to these items, the charterer may also mention the approximate freight level at which
he wishes to begin discussion or negotiation (the charterer’s “freight idea”), although such
information is often omitted from the original order to allow for negotiating maneuverability.

3.2.1.5 An order concerning a time charter arrangement is presented on the market in largely
the same way as for voyage chartering, except that rather than providing details on cargo,
ports, and loading / discharging rates and terms, the charterer provides details about the
intended trade, the duration of the required time charter period, and places for delivery and
redelivery of the vessel.

3.2.2 The Shipowner Reacts:

3.2.2.1 There are a number of ways in which an owner can express his interest in order. If the
order was presented as being FIRM AND READY TO TRADE, the owner may choose to
submit a firm offer right away. This can be done when the trade is well known, the freight
level is more or less established, and the ship’s size and position are in accordance with the
conditions given in the order. A firm offer may also be desirable when the owner expects to
encounter strong competition in the market. What occurs more often, however, is that the
owner presents his ship and his abilities to meet the conditions of the order and submits a
“freight indication.” Such an indication will provide the charterer with an idea of the owner’s
starting point for a possible negotiation, without committing the owner to any specific terms
or figures. Because it does not commit the parties, an indication is often given without any
time limit. Still, if the owner does submit a firm offer later on, he is supposed to present
freight and terms that are no worse for the charterer than those indicated earlier.

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3.2.2.2 Alternatively, the owner can provide the charterer with a “freight idea” indicating a
freight rate that the owner would use as the basis for further negotiations, with the
understanding that the proposed rate could be adjusted either upwards or downwards when
the owner is ready to make an eventual offer.

3.2.2.3 A proposal, a freight idea, or an indication all form part of the negotiation stage and
provide a basis for the charterer’s calculations and evaluations of chartering possibilities. The
charterer may go on discussing proposals, ideas and indications with a number of owners
until he finds a suitable counterpart for negotiations. The charterer will then revert to that
owner asking for a firm offer on the basis of the conditions given in the order or in
accordance with previous discussions. The charterer may then reply to the owner’s indication
with a firm offer.

3.3.0 Negotiation:

The actual negotiation stage can be divided into two parts: the negotiation of the main terms,
followed by the negotiation of details and wording of clauses that were not covered during
the negotiation of the main terms. Since the parties begin by negotiating the main terms and
save the details for a later stage, it is important that every offer or counter offer submitted
during the main stage is accompanied by the words SUBJECT TO DETAILS (or SUB
DETAILS).

3.3.1 The First Offer:

3.1.1 In voyage chartering, the first offer that starts the firm negotiations will contain the
following details:

 Shipowners name
 ship’s name and particulars
 cargo quantity and description of commodity
 loading and discharging ports and berths
 laydays / cancelling day
 loading and discharging rates and terms
 demurrage and despatch rates
 freight amount and conditions for payment of freight clauses covering time
counting, Ice clause, War Risk clause, applicable law and place of arbitration,
 Bunker clause, clauses covering extra insurance premiums, taxes and dues, etc.
which the owner considers to be of prime importance
 charterparty form
 commissions

3.3.1.2 If the charter is for a tanker voyage, loading and discharging rates will not be
provided separately, but as a number of total days for loading and discharge (laytime
allowance all purposes), and the freight rate will be provided by reference to Worldscale
In time chartering, the offer will contain the following details

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  The shipowner’s name
 The ship’s name and particulars
 Description of the time charter arrangement
 Place of delivery and redelivery
 Laydays / cancelling for the delivery
 Intended trade with geographical limits and other trading limits; cargo exclusions
from the owner’s side
 Quantity and price for bunkers on board on delivery and redelivery
 Hire and conditions for hire payment

3.3.1.3 When the main terms of the charter are being negotiated, the required vessel details
are quite extensive and comprise not only the vessel’s name, year of construction and flag,
but also its deadwight, grain and bale capacities of cargo spaces, number of hatches and
holds, cargo gear, speed, bunker consumption and other details of importance for the intended
cargo and trade. Since it is not always possible to give these particulars with exact precision,
the description of the ship is customarily followed by the words ALL DETAILS ABOUT
(which literally means ALL DETAILS GIVEN WITHOUT GUARANTEE BUT GIVEN IN
GOOD FAITH AND BELIEVED TO BE CORRECT).

3.3.2 The Owners’ First Offer & the Charterers’ Reply :

3.3.2.1 The negotiations officially commence when the owners relay a message to the
charterer indicating OWNERS’ OFFER FIRM and provide a time limit for reply. This
commits the owners to adhere to the terms offered either until the stated time limit has
passed, or until the charterers have provided a reply which differs from the owner’s offer.
Normally, the charterer’s reply to the owner’s first offer will be one of the following (the
charterer’s reply will also indicate a time limit within which the owner must reply):

(a) CHARTERERS ACCEPT OWNERS’ OFFER, EXCEPT (which means that

some parts of the owners’ offer is acceptable but other terms are subject to further
negotiations) – In this case, the charterers’ offer is called a “counter” because the
parties have already agreed on a number of terms

(b) CHARTERERS DECLINE OWNERS’ OFFER AND OFFER FIRM AS

FOLLOWS (which means that the charterers will make a full firm offer of their
own rather than negotiating terms that they find unacceptable) – In this case, the
charterer’s offer is called a “counter offer” because the parties have not yet
technically agreed on any point

(c) CHARTERERS DECLINE OWNERS’ OFFER WITHOUT COUNTER

(which means that the charterers find the owners’ offer to be completely
unacceptable and wish to end negotiations) – In this case, the negotiations will be
terminated.

(d) The charterers’ can also make provisions or “subjects” in their counters or
counter-offers:

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 (e) SUBJECT TO CHARTERES’ BOD” APPROVAL (subject to approval by the
Board of Directors)

(f) SUBJECT TO RECEIVERS’ APPROVAL (subject to approval by the receiver

of the cargo, who may have an interest in the terms under which his cargo will be
transported)

(g) SUBJECT TO STEM (subject to confirmation from the shippers or suppliers of

the cargo that the negotiated quantities will be ready for loading at the time agreed
to by the owners and charterers during the negotiations)

(h) SUBJECT TO CHARTERERS’ APPROVAL OF PLAN AND SUBJECT TO

INSPECTION (subject to the charterers’ satisfaction that the vessel is technically
suitable for the intended trade - this is particularly applicable to time charters)

3.3.3 The Negotiations Continue…. :

3.3.3.1 The owner can now offer a variety of replies, such as ACCEPT….EXCEPT (whereby
the owner would list the exceptions he is requesting), or OWNER COUNTERS BY
REPEATING HIS LAST, EXCEPT (whereby the owner reverts back to his previous offer
with only a few modifications), or with an indication that he turns down the counter and
wishes to end the negotiations. The negotiations will continue in this way until the parties
have reached an agreement regarding terms that are acceptable to both of them. The resulting
agreement on main terms, which is always SUBJECT TO DETAILS, will be concluded by a
“confirm.” On the owners’ side, the last reply would be expressed as OWNER ACCEPTS
CHARTERERS’ LAST IN FULL AND CONFIRMS HEREBY THE FIXTURE SUBJECT
TO DETAILS. The charterers’ final reply would then be CHARTERERS’ CONFIRM THE
FIXTURE SUBJECT TO DETAILS AND SUBJECT TO STEM. At this point, the charterers
will immediately compile a full summary of all the terms and details agreed upon so far and
forward same to the owners, with a view to having both parties meticulously check and
confirm the summary as soon as possible.

3.3.4 Negotiation of Details:

3.3.4.1 The parties now enter the second stage of negotiations, in which they finalize the
details and wording of clauses that were not covered during the negotiation of the main terms.
At this stage, the charterers have to present all suggestions and preferences on amendments,
deletions and additions to the printed text (i.e. the agreed upon charter-party form) relative to
the business in question. If the amendments are numerous, it may be necessary to send the
full suggested wording by fax or e-mail, as a result of which the owners will receive an
indication of AMENDMENTS TO PRINTED FORM OR PRO-FORMA. This process is
usually viewed as a discussion, as opposed to a regular negotiation with offers and counter-
offers. As a result, there are not time limits involved and the parties use phrases such as
CHARTERERS SUGGEST THE FOLLOWING AMENDMENTS TO ………, with
discussions continuing until both parties are in full agreement.

3.3.4.2 Once the parties have agreed on every detail, a confirmation of the deal will ensue
indicating HEREBY CONFIRM / RECONFIRM THE FIXTURE. If at the same time all the

62
reservations are removed (the points being waived) a clean fixture has been obtained. The
date of the charter-party will be the last date on which the parties reached a clean fixtures,
which means the date on which the last remaining subject was waived.

4.0 DOs AND DON’Ts FOR CHARTERING MANAGER

4.1.1 Time charter employment has many pitfalls. At the outset considerations regarding the
reputation of the charterer/owner should take precedence over deliberations as to the rate of
hire, the charter party form and terms offered. There are time charterers who vanish once the
first installment of hire has been paid and the vessel has cargo on board with "freight prepaid"
bills of lading.

4.1.2 When fixing on time charter make sure that charterers are of repute.

4.1.3 Brokers should not be indifferent about whom they represent. Their reputation may be
tarnished if time charterers for whom they act turn out to be cheats.

4.1.4 Brokers should be well-advised to check thoroughly on the credentials, financial position
and viability of their Principals whom they represent in fixtures.

4.1.5 It is almost routine in cases of bogus companies that when it comes to honoring an
arbitration award directing payment of a substantial amount, the persons concerned disappear
from the existing address and may already be starting a new company somewhere else.

4.1.6 Brokers must ask for charterers' bank references and check with their own banks
connections.

4.2.0 Time charter party forms :

4.2.1 For dry cargo trade, preference should be given to any standard charterparty form, for
example, "Baltime 1939", "Linertime" or "NYPE 93". The latter represents a general revision
of the NYPE 1946.

4.2.2 For oil tanker trade give preference to "Intertanktime 80" and bear in mind that BIMCO
has introduced time-charter forms for special trades," Supplytime 89" for off-shore service
vessels and "Gastime" for vessels carrying liquefied gas. "Bimchemtime", issued by BIMCO in
1984, should be used for time chartering of vessels carrying chemicals in bulk. Barecon 89",
also issued by BIMCO, is to be used for bareboat chartering.

4.3.0 Terms of hire:

4.3.1 Vague provisions as to the duration are at the root of many disputes. Clear provisions
like "12 months" or "redelivery between 15-30 September" or "minimum 42 months"
preclude any speculative moves in a subsequently changed market. Margins like
"about ..... ", give charterers room to man oeuvre.

4.3.2 A source of many disputes is an agreement to a trip/time charter, e.g., "About 150 days
without guarantee". Shipowners who wish to avoid unpleasant surprises must be more specific
when stipulating the earliest/latest redelivery dates for the vessel.

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4.4.0 Trading limits:

4.4.1 Here again, aim at precise statements. "Baltic in season" may mean different things to
different people.

4.4.2 Bear in mind that consent to charterers' request to break IWL may result not only in
damage to the vessel but also in time lost during repairs/dry docking.

4.5.0 Places of delivery/redelivery:

4.5.1 One should aim at defining certain points/places clearly and check in advance whether
the contractual arrangement matches the actual conditions. "On arrival pilot station..." causes
no problems where the ___location of this point in relation to the particular port can be defined.
There are, however, approaches to ports (e.g. Antwerp) where, depending on the route of access
taken by the vessel, the pilot boards at one or two or more places.

4.5.2 Be especially careful in defining delivery/redelivery points in Japan where pilotage is a

complex operation. "On dropping outward pilot" causes difficulties in the case where there is
a two, three stage port/river non-compulsory pilotage.

4.5.3 Agreeing to "Delivery HP" (taking inward pilot) should be avoided as it is a potential
dispute breeder. Suppose weather conditions prevent the pilot from boarding the vessel
perhaps for several days, then what happens.

4.5.4 Redelivery range "Japan/Colombo including Indonesia/Philippines" seems clear to the

parties when they sign the charter party. When the time for redelivery comes, there may be a
dispute as to whether ports on the mainland between India and Korea are included: Redelivery
"Mediterranean not East of Cape Passero" is also ambiguous.

4.6.0 Geographical maps;

4.6.1 These frequently cause problems. Although a particular range, for instance, “Continent”
may appear reasonably straight forward still parties may differ as to exactly which area is
encompassed in this range. BIMCO has devised a set of definitions of Geographical Ranges
which can minimize the risk of disputes on this point.

4.7.0 Time of delivery/redelivery:

4.7.1 The only sure way to avoid disputes is to stipulate in the charterparty whether GMT
or local times should apply.

4.8.0 On/off-hire survey:

4.8.1 Clause like:

"Owners and charterers are to hold a joint on-hire survey for joint account, on-hire
survey to be on owners' time and off-hire survey to be on charterers' time. The cost of
such survey to be equally shared by owners and charterers. On-hire survey to be held at
first load port and off-hire survey to beheld at last port of discharge "can be vague.

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4.8.2 A preferable clause would be:

"The charterers shall bear all expenses of the off-hire survey including loss of time, if
any, at the rate of hire per day or pro rata ..."

4.9.0 Description of vessel, speed and bunker consumption warranties:

4.9.1 Breach of these warranties or misrepresentation of vessel's particulars on these counts

result in majority of disputes under time charter.

4.10.0 Conclusion; Over-optimistic speed/consumption warranties, acceptance of stringent

modifications like "average service speed" especially in a long-term time charter, or careless
description of vessel's particulars, will be exploited by time charterers. Therefore, be on guard
when (a) giving warranties or (b) on acceptance of stringent speed warranties contractually
linked with reduction of hire.

4.11.0 Certificates:

4.11.1 The charterers often insist on clauses like "vessel to have all certificates necessary to
comply with current requirements at all ports of call". There are open-ended and costly
implications in the acceptance of clauses of this kind.

4.12.0 "Customary " or "Compulsory" words:

4.12.1 The addition of the words "customary" or "compulsory" before the word "pilotage" for
example in the printed text has been bitterly regretted by many owners who had to pay for
non-compulsory, but highly recommendable, pilotage themselves, "Customary" has uncertain
implications as views may differ as to what is customary in certain area, period and size of
vessel.

4.13.0 War clauses and ice clauses:

4.13.1 Insufficient attention to these clauses at the negotiation stage means that you may
discover too late that there is no alternative but to follow time-charterer's orders of
employment which brings the vessel into a dangerous zone, or compels her to navigate in ice.
Beware of attempts to incorporate the Chamber of Shipping War Risks Clauses 1 and 2 in a time-
charter-party. These clauses engender unjustified confidence, and yet it must be kept in mind
that not only are they obsolete but they should never find their way into a time-charterparty.

4.13.2 Remember that the "NYPE 1946" Time-charter has no war risks clause at all, and the use
of this charter should be discontinued in favour of its successor, the "NYPE 93".

4.13.3 The most extensive war risks clause for time-chartering is BIMCO Standard War Risks
Clause for Time-charters, 1993 - Code Name: "Conwartime 1993", This clause entitles owners
to decline orders of employment which would bring the vessel into a dangerous zone and the
right to decide whether to accept or reject an order of employment which would bring the
vessel into a dangerous zone.

4.13.4 It is important to ensure that the war clauses in the charterparty are not at odds with the
war clauses in the Bill of Lading signed by the Master of a time chartered vessel.

65
4.13.5 Be meticulous in seeking the advice of professionals when taking out war risks cover.
Costly gaps in the cover and subsequent disputes with the insurers where millions of dollars
are at stake have been reported in recent years.

4.13.6 In respect of ice, it may be observed that most time-charterparties provide for trading
within Institute Warranties Limits which mostly concern winter conditions.

4.14.0 Redelivery "in like good order":

4.14.1 Agreement to a lumpsum payment in lien of cleaning holds, etc., on redelivery, as a rule,
works out to shipowners' disadvantage. It is simply impossible to envisage how costly an affair
it will be (for instance, when last cargo under the time-charter was coal or cement, etc., and
vessel has to prepare her holds for grain, when remaining dunnage must immediately be
removed from the port area).

4.14.2 Another matter is that there are ports with no or inadequate reception facilities for
tank washing, or even cargo hold washing, and with the ever-increasing environmental
awareness, owners will have no possibility to discharge these slops at sea. The vessel,
therefore, would have to be ordered to a port having adequate reception facilities, even if this
would mean substantial deviation.

4.14.3 Therefore, leaving the duty to redeliver the vessel "in like good order" as delivered to the
time-charterers is the best solution.

4.15.0 The above is based on the Guidelines issued by BIMCO to its members.
14.16.0 AN OWNER'S OFFICE WORKING ON A VOYAGE CHARTER :

14.16.1 ALWAYS, ALWAYS, check for the background of chaterers.

14.16.2 Do not negotiate on the basis of TBN charterers or FCC charterers.

If the charterers are given as "X" as or "nominee" always insist for the nominee's name and
full style. Check the background of the nominee as well. It is general practice to get
background checked with BIMCO and IMB. 1MB is especially very strong in the S. E. Asia
and Far East sectors.

14.16.3 Get the exact name of the load and discharge ports. Some companies take this to
further limits when, to be doubly sure, they ask for the coordinates of the ports.

14.16.4 Check the restrictions and other problems faced by vessels at these ports. Ask for the
latest port costs. Some ports charge special dues for particular kinds of cargoes. This
information should be found out as soon as possible. For example, Vizag has special quay dues
for loading in the ore berth. It should be clearly mentioned in the C/P who will pay these
special dues.

14.16.5 It should be made certain that the vessel can load the required quantity of cargo given
the limitations of the port. (The importance of stowage factor has been dealt with in the chapter
of SF). Ensure that if there is a short-fall in loading maximum quantity the master must issue a
note of protest.

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14.16.6 Many countries require a pollution prevention certificate or a certificate of financial
responsibility (COFR). Vessels are not allowed to enter territorial waters / ports unless the
certificates are on board. In order to avoid last-minute delays, these certificates plus special
fittings like AHL (Australian hold ladders), lakes-fittings, etc., need to be checked in advance.

14.16.7 Check with agents at port the normal load/discharge rates achieved. If there is a
likelihood of delay it would be prudent to have a high demurrage rate.

14.16.8 The load/discharge terms form one of the most important constituents of the fixture.
Each term FHEX, FHINC, SHEX SHINC, SAT PM, SHEXEIU, etc., have different and serious
implications on the practicability of the voyage. Unless otherwise specified, holidays declared
by local Chamber of Commerce are the charterparty holidays. A very good example is "Good
Friday" which, contrary to popular belief, is not a holiday declared by Chamber of Commerce
in some European ports. It is again advisable to check BIMCO's calendar of holidays with
local agents to estimate number of holidays during the vessels stay in a port.

14.16.8 Lay days - Care should be taken that the vessel can be presented at the loadport in the
laydays. It should be remembered that even if the vessel is not able to make the laydays, the
vessel still has to be presented at the loadport. It is then left to the charterer to decide whether
to accept the vessel or not. This obviously leaves the shipowner in a very vulnerable position.

14.16.9 Time when NOR is to be tendered should be borne in mind. Thus if a vessel arrives at the
port of loading/discharging on a Saturday and NOR is to be tendered only on weekdays the
vessel loses one day, i.e., the vessel does not earn for a day.

14.16.10 Better planning a voyage monitoring can ensure that the chances of the above
happenings are reduced. For example, speed in a long voyage can be increased / reduced so as
the time of arrival does not coincide with a holiday.
ooooo

SELF-EXAMINATION QUESTIONS

1. Explain the following terms:

(a) Always afloat. (b) Ballast bonus.

(c) Length overall. (d) Fresh water allowance.
(e) Disponent owner. (f) Inherent vice.
(g) Cancelling date. (h) More or less charterer's option.
(i) Ullage. (j) Weather permitting.
(k) Free of address. (1) Liner in free out.
(m)Fresh water arrival draft. (n) In lieu of weighing.

2. In your own words give the meanings of the following laytime terms:

(i) Clear days. (ii) Holiday.

(iii) Safe port. (iv)Working day.
(v) Berth. (vi) Laytime.

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3. What are the differences between:
(a) Demurrage and despatch.
(b) Delivery and re-delivery.
(c) Deadweight tonnage and deadweight cargo capacity.
(d) Displacement light and displacement loaded.
(e) SHEXWSHINC.
(f) All time saved and all working time saved.
(g) Bar draft and air draft.
(h) Bale capacity and grain capacity.

4. Write short notes on:

(i) Detention and damages for detention.
(ii) International Transport Workers' Federation.
(iii) Notice of Readiness.
(iv) "Arrived" ship.
(v) Beaufort scale.
(vi) Australian hold ladders.
(vii)The custom of the port.

5. Give the approximate deadweight tonnage of following vessels:

(a) Panamax (b) Handysize/max (c) Suezmax
(d) Aframax (e) Ultra large crude carrier.

6. There are various types of freight. Explain what do the following signify:
(i) Back freight (ii) Dead freight (iii) Distance freight
(iv) Lumpsum freight (v) Advance freight (vi) Freight at destination

7. As a charterer, if given a choice, which type of phrases/clauses/charters would you

prefer and why?
(a) All time saved OR All working time saved.
(b) Port charter OR Berth charter.
(c) Taking inward pilot OR Arrival pilot station.
(d) Calculable laytime OR As fast as you can.
(e) Even if used OR Unless used.
(f) Dropping outward pilot OR Taking inward pilot.

8. Which of these statements are incorrect and why?

(a) Interclub Agreement concerns the method of settling GA disputes.
(b) Stowage factor of "heavy handy deadweight scrap" exceeds 75.
(c) The payment received by a shipowner for a voyage charter is called "hire".
(d) " In writing" may also include a notice passed on the telephone.
(e) Date on a C/P is the actual date on which negotiations are concluded after all
subjects are lifted.
(f) Institute Warranty Limits are countries on the "black list".

9. Explain briefly the significance of the following clauses in a C/P:

(i) Jettison clause. (ii) Ice clause.
(iii) Deviation clause. (iv) P & I Bunkering clause.
(v) Exceptions clause. (vi) Off-hire clause.

10. What is meant by the following:

(a) Time sheet (b) Free pratique (c) Clean ballast tank
(d) Grab damage (e) Stowage factor (f) Dunnage
(g) Broken stowage (h) Breaking bulk (i) Letter of Indemnity

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11. What do the following words mean in chartering:
(i) Spot (ii) Open (iii) Hire
(iv) Freeboard (v) Fixture (vi) Draft
(vii) Port (viii)Range (ix) Shifting
(x) Subjects (xi) Supercargo (xii)Brokerage

12. Explain the difference between:

(a) Non-reversible and Reversible laytime.
(b) Working days and Consecutive days.
(c) Per hatch per day and Per hatch per workable day.

13. What is the significance of these terms in a C/P:

(i) Whether in berth or not.
(ii) Weather working day of 24 consecutive hours.
(iii) Reachable on arrival.
(iv)Time lost waiting for berth not to count as laytime.

14. What are the meanings of:

(a) Addendum and rider clauses in a C/P.
(b) Statement of facts.
(c) In geographical rotation.
(d) Brackish water.
(e) Berth terms.
(f) Free In and out.

15. What are the specialties of the following charters:

(a) Bareboat-cum-demise charter.
(b) Trip time charters.
(c) Contracts of affreightment.

16. What is:

(i) A hatch coaming (ii) Frustration
(iii) A head charterer (iv) Lay-up
(v) Light cargo (vi) A prompt ship
(vii) Starboard (viii) Specific gravity
(ix) Force majeure (x) Salvage

17. What are the functions of:

(a) A supercargo (b) Chartering agents
(c) Shipbrokers

18. Expand the following abbreviations:

(a) AAAA (b) BWAD (c) EUROMED (d) FILTD
(e) DBEWTS (f) ATSDO (g) CONS (h) AFSPS
(i) BOFFERS (j) FCC (k) FACCOP (l) ILOW
(m) DLOSP (n) SANDP (o) EDI (p) FIOSpT
(q) F & D (r) GR/BL (s) LDPT (t) MV

19. State the abbreviated forms of:

(i) Baltic International Freight Futures Exchange.
(ii) United States Federal Maritime Commission.
(iii) One safe port or berth.

69
 (iv) International Transport Workers' Federation.
(v) Gearless.
(vi) Feeder lighter aboard ship.
(vii) Currency and bunkering adjustment factors.

20. Give full forms of the following organizations:

(a) OECD (b) MSC (IMO) (c) INTERTANKO (d) TOVALOP
(e) OAPEC (f) UNCTAD (g) IMB (h) OPEC
(i) SITPRO (j) INTERCARGO (k) IATA (l) INMARSAT
(m) ISF (n) IMIF (o) CENSA (p) ISO

21. Following pertain to the range of ports. Can you identify them?
(1) ARHB (2) Cont (BH) (3) NR
(4) G - H (5) CH & H (6) ARH
(7) WCI (8) GSSL (9) HRDS
(10) USSH (11) UKHAD (12) UKHH
(13) WAG (14) ECI (15) ECSA
(16) WCUS (17) GHENT (18) USNH

22. These are international conventions/codes. Please write full forms:

(a) FC (b) SOLAS (c) CLC (d) TCM
(e) STCW (f) MARPOL (g) IOPP (h) HNS
(i) CMR (j) ISM (k) CIM (l) IMDG

23. The following abbreviations describe vessels. How many of these do you know?
(i) OSD (ii) ETBC (iii) GP (iv) MRX
(v) OSV (vi) O/O (vii) BORO (viii) ULCC

24. Give full forms of:

(1) PCNT (2) RTBA (3) PDPR (4) TBN
(5) R/V (6) POL (7) S/F (8) SCNT
(9) SATSHEX (10) S/S (11) SWDD (12) STBC

25. Firstly identify these. Then state abbreviations and full forms of terms almost opposite
(though not in the strict sense) in meaning from the chartering point of view, e.g.,

FILO (free in, liner out) ----- LIFO (liner in, free out)
CPP (clean petroleum products) ----- DPP (dirty petroleum products)
UU (unless used) ----- EIU (even if used).
(a) MLWS (b) HAT (c) GRD (d) OSD
(e) FWDD (f) CRL (g) EGM (h) FPT
(i) Desp. (j) OO (k) NTCEIU (l) n.E.
(m) oabe (n) MOLOO (o) FHINC (p) LOW
(q) NOP (r) HWOST (s) DLO (t) ATS
(u) OWN (v) ETA (w) NT (x) FH

26. These are abbreviated forms of ports. Write names of ports:

(i) MAA (ii) RBAY (iii) SHU (iv) LB
(v) IHAM (vi) JBL (vii) HBG (viii) LA
(ix) NOLA (x) Lpl (xi) HCM (xii) RUW

70
27. These are INCOTERMS. Give full forms:
(i) C.I.F.I. & E. (ii) EXW (iii) FOR
(iv) FCA (v) DEQ (vi) FAS
(vii) CIP (viii) DES (ix) CPT

28. Following are short forms for cargoes. Identify the cargoes.
(a) NPK (b) MAP (c) SBM (d) CAN
(e) MOP (f) TSP (g) CKD (h) DBB
(i) DAP (j) HSS (k) AGRIPODS (l) DRI
(m) HMB (n) MBTE (o) HG

29. Write full forms of the following institutes, associations, etc.

(i) CENSA (ii) ASBA (iii) BIMCO
(iv) FONASBA (v) IACS (vi) SA
(vii) ICS (viii) OCIMF (ix) WWF

30.What are the processes under chartering negotiations?

31. What is offer?
32. Differentiate “offer” v/s “indication”
33. What is counter?
34. Discuss “Subjects”? What are the different types of subjects?
35. Differentiate firm offer v/s indication?
36. What precautions would you advice a chartering manager to take when he is working
on a time charter with regard to ~
(a) Charterers background
(b) Points of delivery/redelivery
(c) "Customary" or "compulsory" words
37. What can an owner do whenever he is confronted with late payment of hire?
38. Why is it important to lay emphasis on war and ice clauses?
39. Explain the significance of the following terms:
(a) Redelivery "in like good order".
(b) On/off-hire surveys.
(c) Trading limits.
40. How should a chartering manager guard himself when he gives his company's vessel
on a voyage charter?

RECOMMENDED FOR FURTHER READING:

1. Bes' Chartering & Shipping Terms -- N.J. Lopez, 11th Ed., 1992.
This dictionary of shipping terms is an excellent reference volume for those who wish to
pursue their studies diligently.
Chapter 1 (pages 1-164) deals with "Chartering Terms" and Chapter 2 (pages 165-227) deals
with "Laytime & Time Sheets". The Index on pages 629-641 will guide you where to locate the
terms in the book.

2. Dictionary of Shipping International Trade Terms & Abbreviations — A. E.

Branch, 2nd Ed., 1982.
A handy reference book by a well-known author on shipping. Precise definitions are given on
almost 4000 terms pertaining to shipping practice and international trade terms in a lucid and
authoritative style. Also see appendix B (page 231) for roles of shipping organizations;

71
appendix D (page 258) for convention of weights and measures, and appendix F (page 265) for
diagrams of various ships and cargo handling equipments.

3. The VNR Dictionary of Ships & the Sea - Capt. J.V. Noel, 1st Ed., 1981.
This book simplifies maritime nomenclature by giving concise entries on various terms covering
all aspects of shipping and ocean world. A highly recommended dictionary.

4. Voyage Estimating -- W.V. Packard, 2nd Ed., 1981.

Companion volume to "Laytime Calculating", this book explains the basics of voyage estimates
in a step-by-step manner and gives detailed explanation of each stage in the process. Refer to
the Index on pages 78-79.

5. Laytime Calculating -- W. V Packard, 1st Ed., 1979, Reprinted 1993.

This book is a sequel to Voyage Estimating by the same author. An excellent book for serious
study and reference on laytime calculations. See pages 59-61 for "Cargo Handling Terms",
pages 65-67 for "Glossary", pages 71-75 for "Clauses" and pages 76-77 for "Index".

6. Chartering Documents -- H. Williams, 3rd Ed., 1996.

Contracts for sea transport are discussed in great detail with their general features. Principal
clauses are explained fully. Recommended for the advanced student who has
chartering/shipbroking background.

7. Shipping & Chartering Practice - Gorton, Ihre, etc. 4th Ed., 1995.
The fourth edition has been largely updated and rewritten in certain parts. The book is a basic
textbook which does not contain legal jargon. Check up the Index on pages 331-337 and look up
the relevant information whenever required.

8. Time Chartering - W.V. Packard, 1st Ed., 1980.

The objective of this book is to provide specific material on the subject of time charters and
explain in detail particular phrases and terms that students encounter. Look up the Index on
pages 98-99 and refer' to the necessary information.

9. Ocean Freight & Chartering -- C. F. H. Cufley, 1st Ed., 1964, Reprinted 1976.
At one time this book was regarded as a basic text book on chartering. Some of the terms are
lucidly explained in an interesting manner. See pages 451-462 for Index.

10. Laytime -- M. Summerskill, 3rd Ed., 1982.

This is a specialized book on laytime and deals with the total amount of laytime- when it
begins, when it ends, how it may be suspended, etc. Over 30 new cases on laytime problems
decided by the English courts are analyzed in great detail. You can refer to the "Contents" on
pages vii-xv, "Charterparty Laytime Definitions, 1980," on pages 302-306; and "Index" on pages
307-317.

11. Sea Trading Vols. I, II, III ~ W.V. Packard, 1984/85, Reprinted in 1996.
Vol. 1- The Ships
Gives a complete description of the vessels used in all modern sea trading, their terminology,
designs and operations, loadlines, drafts, deadweights, etc. Pages 2-3 gives along list of types of
vessels. On page 133-136 is the Index which will direct you to the relevant page(s).

Vol. 2 ~ Cargoes
A guide for cargoes carried by sea, their basic characteristics and factors which should be taken
into consideration, together with useful information on their stowage, carriage and handling. See
Glossary of Terms on pages 139 and Index on pages 145-153.

72
Vol. 3 -Trading
This book covers the trading of raw materials, the world of liner conference and tramp shipping.
It also discusses in detail C/Ps and Bs/L. Freight terms and abbreviations are on pages 93-97.
Index is given on pages 139-143.

All the above 3 volumes on Sea Trading by W. V. Packard are detailed enough to provide
sufficient information with which to tackle shipping examinations.

12. Fairplay Book of Shipping Abbreviations -- P. Kapoor, 1st Ed., 1980.

A reference book dealing with abbreviations used in shipping. Covers up shipping,
shipbroking, marine insurance, export/import, container transport, etc. Published by Fairplay
Publications who are famous for excellent books on shipping for students and practitioners.

13. Chartering Practice - E. F. Stevens & C.S.J. Butterfield, 11th Ed., 1985.
This is a prescribed text book for students of first year NMIS. It was given to all of you as a
part of your study materials last year, when they were preparing for the first year
examination of March, 1998. Please study Chapter 26 on "Definitions & Abbreviations" Pages
130-136.

14. Chartering Documents -- Harvey Williams, 3rd Ed., 1996.

This is a very useful and practical guide, published by Lloyd's of London Press Ltd., to make
students familiar with the standard charterparty forms. It comments upon various C/P clauses
in an easy to understand language. A table of common chartering abbreviations is given on
pages xv-xviii.

15. Shipbroking and Chartering Practice, Sixth edition (Lars Gorton, Patrick Hillenius, Rolf
Ihre, Arne Sandevarn), LLP, London.

*************

73
CHARTERING FINAL YEAR

LESSON 4

INTERMEDIARIES AND ORGANIZATIONS

1.0 INTERMEDIARIES

1.1 SHlPBROKER:

The shipowners as well as the charterers are very busy people. Therefore, it is necessary to have
someone to coordinate their interests. This is where the shipbroker steps in.

1.2 The principal functions of a shipbroker are:

(a) To negotiate and fix charters for cargo liners and tramp vessels.
(b) To act as chartering agents for large trading concerns.
(c) To negotiate for sale and purchase of ships.

1.3 Shipbrokers can be divided into six categories, depending on their proficiency in a
particular area which is their field of specialization.

(a) Shipowner's broker: His business is to look for cargoes for a vessel, according to
availability and ___location of the vessel.

(b) Charterer's broker or Chartering agent: He negotiates with the shipowners to fix
suitable tonnage (ships) that the charterers require.

(c) Coasting broker: He acts on behalf of both, that is, the shipowner and the charterer
but in the coastal trade only.

(d) Exclusive broker: If the owner chooses to do business through one single and sole
broker only, then that broker is referred to as an exclusive or a confidential broker.

(e) Competitive broker: The broker who brings together the exclusive broker of the
shipowner to negotiate with the broker of a charterer.

(f) Cable broker: The broker who constantly keeps on feeding both the charterer and
the shipowner with world market trends and changing political scenarios.

1.4 Generally brokers represent a number of principals, that is, several owners and/or
charterers. But at the same time they may work as exclusive brokers for certain principals. This
ensures that they have fairly regular and secure employment even during lean times.

1.5 The broker is responsible for his principal's fortunes and should act judiciously by:

(a) Apprising his principal of the changing market trends influenced by weather and
political upheavals.

(b) Carrying out negotiations by not exceeding the limit and acting within the parameters
specified by his principal. An example would be that of a vessel's speed. Actual
74
 speed of the vessel may be 12 knots but to conclude the deal he may describe the
speed of the vessel to the chaterers as 13 knots. The shipowner may later find it
difficult to contest claims.

(c) Carrying out the work entrusted to him by his principal loyally, skillfully and
scrupulously.

(d) By not misleading his principal in any way either by withholding information or by
feeding him wrong information. He should not leak out any information about his
principal which would be detrimental to the principal interests and advantageous to the
opposite or competing party.

(e) By correcting any wrongs and making sure they are duly set right, as it is his duty to
protect his principal's reputation and business.

(f) By following up post-fixtures to ensure successful completion of the contract.

1.6 The broker, with his well acquired business talent, should point out any orders (or
clauses) which are wrongfully worded and should make sure that they are duly set right. It is his
prime duty to protect his principal.

1.7 As explained earlier, the broker should actively involve himself in the negotiations by his
assessment of the proposals and compromises that can be made to conclude the deal. In short, the
principal should be satisfied that his broker is an asset to him and that the broker's performance
is satisfactory.

1.8 A shipowner's and charterer's broker is usually paid a brokerage / commission of 1.25% of
the money earned by the shipowner for the broker's time and efforts in negotiating and arranging a
contract. Commissions are paid by the shipowner irrespective of whom the broker represents.

1.9 Shipbrokers generally deal with their associates in other countries, one party representing
the shipowner and the other the charterer.

2.0 SALE & PURCHASE BROKER:

2.1 A sale and purchase broker is a person who negotiates the terms for the sale of ship on
behalf of the buyer or the seller.

2.2 The sale and purchase of vessels is rather complex and requires a thorough knowledge of
the freight market combined with construction of ships, that is, the age, condition, type,
compliance with the present day to day rules and regulations and new rules the vessel would have
to comply with in the future.

2.3 Sale and purchase can be divided broadly into three segments;

(1) Newbuiiding vessels

(2) Second-hand vessels, namely, for trading
(3) Vessels for scrap

2.4 In case of newbuildings, the buyer or the shipyard take the help of sale/purchase brokers
who are specialized for newbuiiding business and also act as financial consultants to chalk out
the terms of payment.

2.5 The second-hand market is highly competitive and secretive. Often unknown/
undisclosed terms, or "price believed to be in the region of, are used.
75
2.6 Thus, there is no clue of the market, unless help of a broker is taken. Here the broker's
role is not that of passing judgemental opinion but to bring to the notice of the buyer any abnormal
condition or history of the vessel.

2.7 On conclusion of a second-hand sale, the seller's broker draws up an agreement which is
the standard form known as the Sale Form 1983. He arranges to have documents delivered for
trading and insurance cover, if any, at the time of delivery of the vessel.

2.8 In case the broker requires to register the vessel in the new owner's name then he has to
comply with the formalities dealt with in detail in the sale and purchase of the ship's contract.

2.9 In case of sale of a vessel for scrap, it is relatively simple. It is carried out by execution and
delivery of a Bill of Sale under seal.

3.0 ORGANISATIONS

3.1 BALTIC & INTERNATIONAL MARITIME COUNCIL (BMCO):

BIMCO with its headquarters in Copenhagen is basically an association of world's shipping

practioners, shipowners, managers, shipbrokers, ships' agents, chartering agents and port agents.
Membership is also open to P & I Clubs and associations of shipwoners and shipbrokers. It is the
largest private organization in the maritime industry.

3.2 Its objectives are:

(i) To unite shipowners and others in the shipping, industry.

(ii) To inform members of unfair practices, charges, etc. and generally pass on useful
information.
(iii) To prepare and improve standard forms of B/Ls and C/Ps.

(iv) To issue improved shipping documents developed either by itself or by like

minded bodies.
3.3 Its services include:

(a) Providing information on wide variety of topics - ports, congestion, ice

conditions, dangerous cargoes and regulations etc.
(b) Advicing port charges, agency fees, double taxation, etc.
(c) Advice on disputes on C/P matters, legal decisions, etc.
(d) Confidential information on standing of charterers, shipowners and others.

3.4 The former name “Conference” in the word B1MCO has now been changed to “Council”.

4.0 INTERNATIONAL CARGO HANDLING CO-ORDINATION ASSOCIATION (ICHCA):

4.1 The aim of ICHCA is to facilitate improved cargo handling techniques. It was established in
1951 and has its headquarters in London. It has an office in Mumbai.

4.2 ICHCA's prime function is to co-ordinate by providing:

(i) An information resource centre.

(ii) A technical advisory service.
(iii) A unique database of cargo handling information.
(iv) Access to internationally recognized experts on cargo handling.
(v) Representations to leading inter-governmental bodies and trade organizations.
76
4.3 ICHCA is the only trade association representing all modes and phases of the transport
chain and can be truly termed as international, interactive and intermodal.

4.4 In 1973 the Financial Advisory Sub-Committee (FASC) was formed. FASC has published
a number of important reports. Some of these are:

 Pre-slinging and Strapping of Cargo;

 Condensation in Containers;
 Securing of ISO Containers;
 The Safe handling of Flexible Intermediate Bulk Containers (FIBCs).

4.5 ICHCA is likely to play an even greater role in the field of cargo handling in future.

5.0 FEDERATION OF NATIONAL ASSOCIATION OF SHIPBROKERS AND AGENTS (FONASBA):

5.1 FONASBA is a non-profit making international representative body of international

association of shipbrokers and agents.

5.2 Broadly speaking it has following aims and objectives:

(a) To represent shipbrokers and agents at international level.

(b) To co-operate with other bodies involved in shipping.
(c) To promote the profession of shipbrokers and agents including standardization of
shipping contracts and documents.

6.0 THE INTERNATIONAL ASSOCIATION OF DRY CARGO SHIPOWNERS (INTERCARGO):

I
6.1 NTERCARGO was founded in 1980 as an association concerned with promoting the welfare
of the dry bulk sector of shipping. Its head office is based in London.

6.2 Its main objectives are:

(a) To protect the interests of its members at national and international levels.

(b) To deal with inter-governmental bodies and other international shipowners groups
with due representation at UNCTAD, IMO and WTO.

(c) To provide a forum for dry bulk shipowners to exchange views and to frame
guidelines/policies.

(d) To publish a monthly bulletin giving market trends, etc.

6.3 INTERCARGO avoids duplication of work by not offering services already provided by other
international bodies such as BIMCO.

6.4 Membership is open to dry bulk shipowners, managers or operators worldwide, with dry
bulk cargo ships of more than 3000 GT as long as they accept the principles of free enterprise, free
competition and freedom of the seas. Shipbrokers, banks and other interested parties can also
join as associate members.

7.0 BALTIC EXCHANGE:

7.1 The Baltic Exchange situated in London is the only Shipping Exchange in the world.

77
7.2 Today the membership of the Baltic includes over 600 companies on whose behalf about
2000 individuals are entitled to trade on the floor of the Exchange. Foreign concerns may become
members if they have their office in Britain.

7.3 The business carried out at the Baltic Exchange provides a vital service for world trade.
Servicing the various trades are brokers. Many merchants and shipowners are members of the
Exchange and have broking staff who act for them. The Baltic Exchange is a private limited
company and on admission members are required to become share holders of the Exchange.

7.4 Shipping is the main activity of the Baltic Exchange. It has been estimated that three-fourth
of the world's tramp market bulk cargo movement is at some stage handled by members of the
Baltic Exchange.

7.5 Baltic Exchange members are responsible for a large proportion of all dry cargo and
tanker fixtures as well as the sale and purchase of merchant vessels.

8.0 Baltic Exchange services:

 Independent, high quality dry, wet and gas freight market information
 Self-regulated chartering, sale and purchase and freight derivatives markets
 Central forum for competing freight market interests
 Framework ensuring high standards of business practice and co-operation
 London-based business facilities for members

8.1 The Baltic Exchange publishes the Baltic Freight Index (BFI) daily. There is also vessel's sale
and purchase department. The Baltic International Freight Futures Exchange (BIFFEX) was
opened in 1985 and provides a means by which the elements of the international freight and
shipping industry can protect themselves against adverse price movements.

8.2 The Baltic Exchange is a major earner of foreign exchange for Britain.

8.3 The Baltic Exchange is the world's leading source of independent maritime data. Their
information is used by shipbrokers, owners, operators, traders and charterers as a reliable
assessment of the dry bulk and tanker markets.

8.4 The information is compiled and published during both the European and Asian working
day by London and Singapore offices.

8.5 Based on professional assessments made by a global panel of shipbrokers, Baltic

information is used as a settlement tool for freight derivative trades, for benchmarking physical
contracts and as a general indicator of the bulk market's performance.

9.0 Freight forward agreements (FFA):

9.1 What is an FFA?

Freight derivatives provide a means of hedging exposure to freight market risk through
the trading of specified time charter and voyage rates for forward positions.

10.0 The Baltic Exchange Forward Assessments (BFA) are a mid price of bids and offers for
the dry and wet market submitted and published at 1730 (London).
78
10.1 Dry routes:

BFA Capesize (C3, C4, C5, C7, C8_03, C9_03, BCI T/C average)
BFA Panamax (P1A, P2A, P3A, BPI T/C average)
BFA Supramax (BSI T/C average)
BFA Handysize (BHSI T/C average)

10.2 Wet routes:

Clean (TC2_37, TC4, TC5, TC6, TC14)

Dirty (TD3, TD5, TD7,TD11)

11.0 TRANSCHART:

11.1 Transchart is the chartering wing of the Government of India, functioning under the
Ministry of Surface Transport (MoST) and is responsible for finalizing ship charters for all import
and export of Government of India and Public Sector Undertakings (PSUs) cargoes. In fact,
"TRANSCHART is the telegraphic address of Chartering wing of Ministry of Surface Transport.

11.2 Ministry of Surface Transport looks after the entire surface transportation (road and sea
transport) in the country including development of roads, shipping and ship building in the
Government sector.

11.3 TRANSCHART is the single largest Government agency arranging charters in the country
handling large variety of cargoes — both dry and liquid cargoes.

11.4 Dry cargoes include:

Coal — mainly coking coal for steel plants

Foodgrains — mainly wheat
Fertilisers and ores - Urea, DAP, MOP, MAP, Rock Phosphate, etc.
Coal is the single largest dry cargo handled by TRANSCHART followed by fertilizers.

11.5 Liquid cargoes include crude and petroleum products and some chemicals.

11.6 IMPORTANCE OF TRANSCHART:

i. To develop national maritime cargo fleet by assured preference to Indian vessels

subject to their being competitive internationally.

ii. To charter vessels (both Indian and foreign) at competitive rates by judicial
negotiations of freight rates and terms and conditions, resulting in considerable
saving of foreign exchange for the country.

iii. Commercial, transparent, non-bureaucratic working (unlike most other

Government departments).

iv. Maximum possibility of utilization of available tonnage due to various types of

cargoes handled.

11.7 TRANSCHART is headed by Chief Controller of Chartering (CCC), assisted by one Deputy Chief
Controller of Chartering (DCC) and Chartering Officers (COs) who have Assistant Chartering
Officers (ACOs) under them.
79
11.8 In the recent past, the role of Transchart has reduced substantially as many charterers
(Viz. SAIL, Indian Oil, BPCL and HPCL ) has obtained dispensation and have their own chartering
desk who in-charter ships to meet their respective company’s requirement..

12.0 INTERTANKO:

Intertanko is the Independent Association of Independent Tanker Owners. It represents the

owners of over 1800 tankers, totaling 160 million dwt of tanker tonnage, approximately 71 %
of the world's independent tanker fleet. Intertanko's 260 member companies are based in
some 45 countries worldwide. In addition the Association has 250 Associate members.
Membership is open to owners and managing operators of tankers which are independent,
excluding tonnage owned by oil companies and governmental agencies.

12.1 Of the tankers entered into Intertanko, crude oil and chemical tankers account for the
largest portion.

12.2 Membership Criteria:

2.1 Intertanko applies strict criteria on membership of the Association. Members' tankers
need to be classed with a full member of the International Association of Classification Societies
(IACS). It also requires members to have a US$ 500 million P&I Insurance with a reputable P&I
club. Finally, it requires its members to have achieved the ISM Code compliance by 1 st July
1998. Intertanko's strict enforcement of membership criteria reinforces the industry
programmes leading to improved operations.

12.3 Mission Statement of Intertanko:

a) Committed to working for safe transport, cleaner seas and free competition. Where
necessary to ensure maritime safety and environmental protection, Intertanko will provide
leadership in the development and implementation of technically sound, cost effective
regulations and industry standards.

b) Committed to strengthening the position of the independent tanker owners in the tanker
industry in particular in society in general.

c) Intertanko recognises that the responsibility for upholding the principles of safe transport,
cleaner seas and free competition depends on many participants in the tanker industry
who are closely linked together. Intertanko is committed to ensuring that the independent
owners are a strong link in a Chain of Responsibility. Intertanko encourages the other links
to maintain and develop similar high standards.

d) To achieve its goals through active participation by its members and by seeking support
from and co-operation with Authorities, other shipping organisations, its Associate
members the general public and other interests.

12.4 Some of Intertanko's ahievements?

a) Intertanko has pioneered and published forms for all types of tanker chartering -
Intertanktime, Intertankvoy and Intertank COA.
80
 b) It conducts research and publishes about trends in the supply and demand of tankers.
Besides, it publishes regular bulletins informing members on port and bunker costs,
regulatory developments, agencies etc.

c) It has consultative at IMO and UNCTAD where it represents the tanker industry with
aims as per its mission.

d) It introduced the Freight and Demurrage Information Pool in 1983. The FDIP helps in
collecting/ settling claims.

e) Intertanko's considered policy to "go public" during a tanker accident, when public
interest is at its most intense, was highly successful during the Sea Empress incident in
the UK.

13.0 THE OIL COMPANIES INTERNATIONAL MARINE FORUM (OCIMF)

13.1 The OCIMF is a voluntary organization, formed in 1970, involving oil companies with a
special interest in shipment and terminating of crude oil and oil products. OCIMF was
organized to consult with, and represent its members before IMO and other international
organizations on matters related to the shipment and terminating of crude oil and oil products,
this including marine safety and pollution. The organization is based at London which is run by
a full time Secretariat. The costs of the Secretariat are borne by the members in accordance
with the quantity of oil received by them each year. Currently, the organization has 41
members.

13.2 As mentioned above, the prime function of OCIMF is to co-ordinate oil industries views at
IMO meetings, review technical documents circulated by IMO, advice members on legislation.
One more important function of OCIMF is to undertake research projects which have resulted
in the publication of various technical guidelines. Guidelines of OCIMF have been accepted as
the standard industrial practice. The most important of these are with regard to hose handling,
moorings, off-shore terminals, safe mooring of ships, and handling of disabled ships including
Towing Fittings. Guidelines with regard to ship-to-ship transfer have become very popular and
most charter parties now include a clause wherein it is mentioned that transhipment
operations conform to standards not less than those set out in the OCIMF guidelines.

13.3 A Chairman and three Vice-Chairmen who are elected at an Annual General Meeting
govern OCIMF. For day-to day functioning an executive committee takes over which is
supported by various sub-committees handling legal, port and general matters.

13.4 OCIMF primarily looks into the aspects of tanker safety and oil pollution by maintaining
adequate standards. In November, 1996, Gerhard Kurz, Chairman of OCIMF and President of
Mobil Shipping and Transportation, USA mentioned in a seminar that Flag States can no
longer turn a blind eye to their responsibility for ensuring adequate standards. He said that
shipping has become a truly international business and it is dependent on the clear and
consistent implementation of international rules. He further stated that sub-standard ships
must be banished and the same can be done by rigidly enforcing the existing regulatory
system.
81
14.0 IMPORTANCE OF ‘ORGANISATION OF PETROLEUM EXPORTING COUNTRIES’ (OPEC):

14.1 In 1960 a conference was held in Baghdad which was attended by representatives of
the governments of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela which gave birth to the
OPEC. The treaty establishing OPEC was registered with the UN in 1962.

14.2 The principle objective of the organization is to determine best means for safeguarding
their interests and the unification of petroleum policies of member countries. Over the years
OPEC has been devising ways of stabilizing oil prices in international markets with a view to
eliminating harmful and unnecessary fluctuations; keeping the interest of producing nations
foremost to secure a steady income. In this process OPEC also tries to ensure that there is
regular supply to consuming nations.

14.3 Any country with substantial net exports of crude and interests fundamentally similar to
those of member countries may become a full member of the organization if accepted by a
majority of % of the full members. The organization has the following 11 members:

Middle East: Iran, Iraq, Kuwait, Qatar, Saudi Arabia, UAE (Abu Dhabi, Dubai, Ras
Al Khaimah and Sharjah)

North Africa: Algeria, Libya

West Africa: Nigeria

South East Asia: Indonesia

South America: Venezuela

Ecuador and Gabon in recent times have withdrawn from OPEC.

14.4 OPEC members meet twice in a year and formulate the general policy of the
organization. The secretariat consisting of an Executive General carries out extensive
functions of the organization and monitors the legal, economic, technical and political aspects
of the petroleum industry.

14.5 Since its formation in 1960 OPEC has played an important role in placing control over oil
production and oil prices in the hands of the producing countries and promoted the
harmonization of hydrocarbon policies and legislation in member countries. It has helped its
members/assess developments in the international petroleum field and has trained nationals
in the technical and economic aspects of the industry.

14.6 Market analysis is regularly carried out to ascertain how much should be produced to
maintain price levels and maximise revenue. In the past, the quota system employed by OPEC
has come in for criticism, being labeled as a "fictitious system" as not all members observed
quotas. A number of countries have increased their production beyond the ceiling by drilling
more wells and bringing in foreign companies on joint ventures. Saudi Arabia, Kuwait and UAE
are three countries that have tended to observe their quotas, even producing less than their
allowance. However, in recent times even Saudi Arabia has also started to exceed its quota.

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14.7 Above is not the only problem, which OPEC has. Recently, Mexico, though a non-OPEC
country played an important role in breaking a deadlock between Saudi Arabia, the world's
largest producer, and Venezuela, a fast growing producer that is hungry for market share. For
much of the past few years, the two have been fighting over oil prices. Saudi Arabia blames
Venezuela for its policy of producing well above its OPEC quota, while Venezuela blames the
Kingdom for failing to cut production from its windfall quota increase after Iraqi oil was
embargoed. The finger pointing had got so bad till the deadlock was broken that a frustrated
Venezuelan oil minister called OPEC a meeting of "Pinocchios".

15.0 Ship Inspection Report Programme (SIRE):

One of the most significant safety initiatives introduced by OCIMF is the Ship Inspection Report
Programme (SIRE). This programme was originally launched in 1993 to specifically address
concerns about sub-standard shipping. The SIRE Programme is a unique tanker risk assessment
tool of value to charterers, ship operators, terminal operators and government bodies
concerned with ship safety.

15.1 The SIRE system is a very large database of up-to-date information about tankers and
barges. Essentially, SIRE has focused tanker industry awareness on the importance of meeting
satisfactory tanker quality and ship safety standards. Since its introduction, the SIRE
Programme has received industry-wide acceptance and participation by both OCIMF Members,
Programme recipients and by ship Operators. The expansion of Barges and small vessels into
SIRE was inaugurated in late 2004.

15.2 Since its introduction, more than 180,000 inspection reports have been submitted to SIRE.
Currently there are over 22,500 reports on over 8000 vessels for inspections that have been
conducted in the last 12 months. On average Programme Recipients access the SIRE database
at a rate of more than 8000 reports per month.

15.3 The SIRE programme requires a uniform inspection protocol that is predicated by the
following:

a) Vessel Inspection Questionnaire (VIQ)

b) Barges Inspection Questionnaire (BIQ)
c) Uniform SIRE Inspection Report
d) Vessels Particulars Questionnaire (VPQ)
e) Barge Particulars Questionnaire (BPQ)

15.3.1 These features have been established to make the program more uniform and user
friendly and to provide a level of transparency unique in the marine transportation industry.

15.4 SIRE has established itself as a major source of technical and operational information to
prospective charterers and other programme users. Its increasing use corresponds with oil
industry efforts to better ascertain whether vessels are well managed and maintained. OCIMF is
in no doubt that better informed vetting decisions are leading to improvements in the quality
of ships, accelerating its continuing drive for safer ships and cleaner seas.

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16.0 Tanker Management and Self Assessment (TMSA):

The Tanker Management and Self Assessment (TMSA) programme provides companies with a
means to improve and measure their own safety management systems.

16.1 The programme encourages companies to assess their safety management systems (SMS)
against key performance indicators (KPIs) and provides a minimum expectation (level 1) plus
three levels of increasing best practice guidance. Self assessment results can be used to develop
phased improvement plans that support continuous improvement of their ship management
systems. Companies are encouraged to regularly review their self assessment results against
the TMSA KPIs and to create achievable plans for improvement.

16.2 Aligning their own policies and procedures with industry best practice helps companies to
improve their performance and attain high standards of safety and pollution prevention.

ooooooo

SELF-EXAMINATION QUESTIONS

1. Define the term "Shipbroker".

2. Write a note on the different types of shipbrokers and their areas of specialization.
3. How does a shipbroker safeguard his principal's interest?
4. State the duties of a sale and purchase broker.
5. State the objectives/functions of the following international organizations involved in shipping.

(a) Baltic & International Maritime Council.

(b) International Cargo Handling Co-ordination Association.
(c) Federation of National Association of Shipbrokers & Agents.

6. Write a short note on the Baltic Exchange.

7. Discuss the role of Transchart .
8. What are the objectives of INTERTANKO ?
9. List out some of the achievements of INTERTANKO.
10. What is the role of OCJMF in the tanker trade?
11. Name the members of OPEC. What is the principle objective of this organization?
12. In what ways does OPEC help the oil producing countries?

RECOMMENDED FOR FURTHER READING:

1. Fairplay Book of International Organisations, 1st Ed., 1990.

2. International Shipping - Bruce Farthing, 2na Ed., 1993.
3. Liquid Gold - A History ofthe Tanker -- Ratcliffe, 1st Ed., 1985.
4. Elements of Shipping - A.E. Branch, 7th Ed., 1996.

*************

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PART - II : DRY CARGO CHARTERING
CHARTERING FINAL YEAR

LESSON 5

FREIGHT MARKETS AND MARKET PRACTICE

1.0 INTRODUCTION:

1.1 The Dry Cargo Chartering Market cannot be rigidly divided into separate segments, but it is
possible to identify local and world-wide business 'arenas' in which chartering activity takes place.
Nevertheless, the all-embracing world-wide international dry cargo market has its rough divisions,
according to ship type and size, and according also to particular commodities, whilst geographical
markets exist that concentrate on regional trades, often specializing in smaller, coastal or 'short-sea'
as opposed to 'deep-sea' tonnage.

1.2 One example of a highly sophisticated international chartering arena is that developed around
specialist 'heavy-lift' business, although from time to time ships may be employed in this sector that
would more commonly be found in another market. Alternatively, for example, there is a 'reefer'
market, comprising refrigerated ships and cargoes only.

1.3 There is no single geographic centre, since this 'market-place' is truly international, business
being conducted by word of mouth, on the telephone, facsimile, electronic mail (E-Mail) either through
the Internet or specialist providers, while telex is still important to some areas where the telephone is
less reliable. All you need to participate in this 'market' is the responsibility for some goods, e.g. a
ship or a cargo, the appropriate communication equipment, and a lot of courage.

1.4 Even so there was a time when such wonders of modern communication equipment were not
available and freight markets therefore developed around 'traditional' shipping centres. Many of these
historical centres remain active in dry cargo shipping today, and participants are likely to maintain
offices in places such as London, Oslo, Hamburg, Piraeus, New York, Singapore, Hong Kong and Tokyo.
There are also regional centres, such as Paris, Sydney (Australia), Bangkok, Montreal, Rio de Janeiro,
Stockholm and Seoul, from which those specializing in locally controlled tonnage and cargoes-
negotiate locally or 'plug-in' to the international market to cover their requirements.

2.0 THE BALTIC EXCHANGE:

2.1 The only physical market place in the world specializing in the chartering of dry cargo ships
and commodities is the Baltic Exchange, in London, although with the advent of modern
communications fewer and fewer fixtures are being made every year. Nevertheless, members of the
Exchange, both corporations and individuals are engaged in numerous other spheres, ranging from the
sale and purchase of ships and aircraft through to commodity trading and futures markets.
The motto of the Exchange, "Our Word Our Bond", is the same as that of the Institute of Chartered
Shipbrokers, and symbolises the importance of ethics in trading, the principal of treating others as
you would wish to be treated yourself, and it remains possible to walk on to the Exchange in a
Broker member's capacity and to leave an hour later having verbally committed your Principal to
employ a ship or to provide transportation for a cargo.

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3.0 Market Practitioners:

3.1 It can be seen that the persons populating the international dry cargo shipping 'market' have
nationalities, knowledge and backgrounds as varied as the range of commodities and ship types and
sizes that are to be found. But the people at least can be sub-divided a little more certainly into the
following categories.

4.0 Charterers:

4.1 Those who 'charter' ships to carry commodities. There are many kinds of Charterers, from
individuals operating small corporations and concerned only with the carriage of a particular
commodity, through to major international trading houses whose involvement in the
international dry cargo market (significant as that may be to that market) represents a very small
part of their overall corporate activities. Consequently, some Charterers are involved as Traders' in the
world-wide purchase, sale and transportation of a range of goods, e.g. grains, fertilisers, minerals, etc.,
others, perhaps Manufacturers, Mine-Owners, Farmers, Shippers or Receivers, for a single commodity
or from a particular geographic area.

4.2 Still other Charterers may be state operations e.g. the President of India (in other words
the Indian Government), Government employees being given the task of securing suitable ships for
the state needs. It is a worthwhile exercise for those learning about this subject to make a point of
studying as regularly as possible lists of reported dry cargo fixtures, and to try to categories
Charterers into one or more appropriate headings.

4.3 To help you get started, sample pages from Fairplay International Weekly Shipping Magazine
will be found in listing representative fixtures for particular weeks a month apart, and not only will
this type of data supplement what should already have been learned about ships and cargoes in
Chapters One and Two of this book, but trades, types of Charterers and markets can be identified.

5.0 Shipowners:

5.1 Just as for Charterers, there is a wide variety of Shipowners. Some Owners are of a single
ship; others of larger fleets. Some concentrate on ships of a particular type (e.g. tweendeckers) or size
(e.g. panamax bulk carriers). Others operate a varied collection of vessels. Some are state-controlled,
or run their ships under the flag of the country in which they reside, whilst others operate 'offshore'
under a 'convenient' flag, from which derives the term 'flag of convenience'.

5.2 The term 'Flag Of Convenience' (FOC) is applied to vessel registries of nations offering
registration facilities to any Shipowner who meets their local requirements irrespective of the
Shipowner's nationality or place of business. An FOC country may provide all or any of the following:

1) Anonymity for a Shipowner, who may operate his vessel(s) from behind a 'faceless'
corporation registered in the same nation as the flag flown by the vessel(s).
2) Freedom for the vessel to be manned by a crew in whatever numbers or nationality the
Shipowner selects, at whatever wage scale the crew/Owner negotiates.
3) Levies a very low tax against the vessel Ownership and little or no taxation against the
earnings of the vessel. Some are more concerned about the quality of the vessel
management and condition than others, but it is fair to say that some of the best
maintained ships in the world fly a Flag of Convenience, as well as some of the worst.
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5.3 Flags of Convenience are subjected to a great deal of criticism from many organizations
inside and outside the shipping industry. In some cases the criticism is justified but for every
substandard vessel trading under a Flag of Convenience there is another just as bad flying a national
flag. One of the most common accusations levied against FOC countries is that they allow their ships
to flout international regulations. Perhaps it is worth reflecting upon the fact that every IMO
resolution and convention requires the support of a certain number of nations representing a
certain percentage of the world fleet for that convention to become internationally binding.
Without the support of Panama, Liberia, Cyprus and Malta, all FOC countries, none of those
conventions would ever become law, such is the percentage of the world fleet that is flagged out.

5.4 A number of traditional maritime nations have created second registers as a means of
'competing' with FOC countries, e.g. Norway, while in other cases the Owners have found a national
route that offers similar advantages, e.g. Isle of Man. In such cases the advantage to the Owner is
related to taxation or crew nationality, wages and social security costs and not to any relaxation of
safety standards or crew size.

5.5 Many Shipowners operate from one or more of the traditional or regional centres that
maintain an important presence in the international dry cargo market. Others operate their
enterprises from these or from locations in their own country, although (in order to avoid taxes
levied against ship earnings) often under an 'agency agreement' with the 'offshore' owning
corporation officially located, perhaps, in a more exotic and 'convenient' part of the world.

6.0 Operators:

6.1 This is a term used to describe an organization or individual experienced in the market and in
its mechanisms, setting out to create income from 'trading' in ships and cargoes. Some Operators
specialize in securing ships on charter from Shipowners, thereafter hoping to reemploy the ship(s) to
other Charterers at a higher freight/hire rate, thereby securing a profit. Other Operators concentrate
on securing contracts for the carriage of cargoes and, by fixing-in outside ships at lower freight rates,
thereby cover their commitment to the original Charterers and, at the same time, make themselves
a profit.

6.2 Certain Operators trade in both ships and cargoes and, at any one time, have a mix of short,
medium and long-term commitments to Charterers and/or Shipowners, needing great skill and a
reasonable level of good fortune to maximize potential returns.

6.3 Of course trading as an Operator is a high-risk business, and losses can be sustained as well
as profits gained. Consequently, although many Operators perform their undertakings perfectly well,
it must be appreciated that inevitably a few Operators will become bankrupt, being unable to
discharge their commitments satisfactorily. This is a risk that Operators and those trading with them
have to consider and, ultimately, may have to bear. Nonetheless, Operators nowadays form a vital
element of the international dry cargo market and are a prominent feature of international
trading.

6.4 Indeed some well known container liner companies are actually Operators as they run their
liner services entirely with container tonnage chartered in for the service.

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6.5 Operators who employ a ship and then 're-employ' (or 're-let') that vessel for further business,
charter her out in a new role, are described as 'Disponent' or 'Timecharter Owners'. A disponent
Owner is a party deemed to be the Shipowner having control of the vessel by timecharter. Some
Operators, having secured a vessel for a period, only to find to their good fortune that freight rates
increase substantially in their favour, are liable to 're-let' the vessel to a Charterer or to another
Operator, thereby locking-in a profit for the remainder of their commitment to the original
Shipowner.

6.6 We have seen that from time-to-time the party acting as the "Owner" may, in fact be the
"disponent Owner" such as the party who has the ship on timecharter. Occasionally there may be
more than one link in the chain between the actual Owner and the disponent Owner involved in the
immediate fixture.

6.7 In the case of charterers it is probably more the rule than the exception for more than
one entity to be involved; three different parties would not be at all unusual. A typical situation
might be that the actual charter being arranged with a merchant who could have bought the cargo
FOB from the producer who will then be the shipper; the merchant could then have sold the cargo
to the consignees who would be the third element. One should also remember that the producers
and the consignees could well have to employ terminal operating companies to do the physical
loading and discharging of the material. The term Operator is used in a wider sense to include true
Shipowners, managers and disponent Owners.

7.0 Shipbrokers:

7.1 The individuals or corporations who, acting as Brokers in the middle of this market-place
of Charterers, Shipowners and Operators of all corporate sizes and of many nationalities, identify
supply and demand for ships and cargoes and thereby help the main players to secure cargoes for their
ships and ships for their cargoes. In other words, Shipbrokers provide the lubrication that enables
the market mechanisms to function.

7.2 A Shipbroker's income is in the form of the reward of 'commission' (known also as
'Brokerage') paid for a successful introduction and negotiation between Shipowner and Charterer,
leading to a 'fixture'. Even after much hard work and expense, a negotiation that does not lead to a
fixture will normally result in no payment of any kind to the Shipbroker in the middle. Thus,
Shipbrokers are naturally keen on 'fixing'. Near misses, however exciting, are not only profitless but
a drain on resources, time and energy. (More information about commissions will be found in
Chapter Five, under the heading "Financial Elements of Charter Parties").

7.3 Some Shipbrokers are specifically hired as employees by Shipowners or by Charterers to

'work' their tonnage or cargoes. Most, though, are separate individuals or corporations acting for
principals in an 'exclusive' or 'semi-exclusive' capacity or fixing as an opportunity presents itself, as
'competitive' Brokers.

7.4 The term 'Shipbroker' is, however, wide-ranging. Other functions than that of a dry cargo
Shipbroker abound. Activities, for example, covering Port Agency work; the Sale and Purchase of ships,
the employment of specialist vessels such as tankers of 'offshore' craft; Liner Agency and Ship
Management. All are roles in which Shipbrokers will be found.

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7.5 A Shipbroker specialising in acting for merchants seeking ships to carry cargoes may be
known as a 'chartering Broker' or as a 'chartering agent' and, as noted above, such a Broker may
be either the employee of the merchants, dealing solely with that merchant's business, or the
Broker may be retained on an exclusive basis, i.e.: the merchant's business is his or his company's to
handle exclusively. This exclusivity may be limited to a chartering centre, e.g: 'exclusive in London',
or it may be world-wide. Certain merchants prefer to employ a chain of 'semi-exclusive' Brokers to
cover several shipping centres, perhaps feeling that this will enable a more thorough coverage of the
'market' for suitable ships, and the Brokers concerned may possibly describe themselves as 'direct
brokers' for the merchants concerned.

7.6 A Shipbroker in one centre may have 'correspondent brokers' that will be used co-operatively to
seek suitable tonnage or cargoes in another centre. Most Brokers will act 'competitively' if they find
a suitable 'non-exclusive' ship for a 'non-exclusive' cargo during their forays around the international
marketplace, and a few merchants will not employ Brokers in an exclusive role but prefer to treat all
Brokers as competitors with one another, releasing details of their requirements onto the freight
market as widely as possible and negotiating thereafter with the Owners of any suitable ship that is
proposed to them through whichever broking channel the Owner selects.

7.7 Shipbrokers are naturally keen to secure 'exclusive' accounts, not only does the Brokerage
these create provide valuable financial underpinning to their company, but working for an
'exclusive' principal enables the Broker to exercise his or her full professional potential in terms of
providing a continuous flow of market information and expert advice. Principals operating
competitively sometimes tend to push their Brokers into a purely 'dealer1 role. Few can afford to rely
totally on 'exclusive' accounts, however, and most Brokers compete against others for additional
income.

7.8 It is therefore important for Shipbrokers to circulate details of new business - 'orders' - as
soon as possible, and to maintain good and close contact not only with those principals providing
business, but also with 'correspondent' Brokers and with those representing Shipowners, whose
vessels they may need to fix. Even when there is no particular order to quote, it is advisable to
maintain chartering and shipowning relations current and good-tempered, in order to foster
relationships and, hopefully, to make it easier to conclude future business.

7.9 Certain Shipbrokers specialize in finding and fixing cargoes for the ships of exclusive and
semiexclusive client Shipowners, maintaining a list of 'open' tonnage expected to become available
in the weeks ahead and, just as other Shipbrokers circulate details of available cargoes, so they
circulate this 'tonnage list' to Chartering Brokers and their principals, in their quest to locate
suitable cargoes. The larger Shipbroking companies will probably have broking staff representing both
Chartering and Shipowning clients, as well as those acting in a competitive capacity.

7.10 But securing a 'fixture' is only part of a Shipbroker's responsibility. Following his function as
the sole or one of several Brokers involved in negotiations leading to a 'fixture' the Charterers'
Shipbroker then has the task of:

a) drawing up the charter party faithfully recording all that has been agreed,
b) dealing with any subsequently amendments and/or additions to the negotiations,
c) handling communications between the parties, and,
d) dealing with financial exchanges, e.g. payments of freights, voyage balances and hires.

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7.11 Although it is normal practice for a Charterer's Shipbroker actually to draw up charter parties,
the Shipowner's Broker must check the draft version of that document, and attend to the other
activities details above on behalf of his own principal.
7.12 Consequently, most medium-sized and large shipbroking companies maintain a 'post-
fixture' department, the duties of which are to handle efficiently the operations of a concluded fixture,
leaving the 'front-line Broker to concentrate on the fixing of further business. With smaller
companies, or individuals, however, the Broker will handle the entire operation from original
negotiations through to the final financial transaction.

7.13 A typical deep-sea dry cargo fixture will involve at least two Shipbrokers, one representing
the Shipowner, the other the Charterer, sometimes there will be more Brokers in the 'chain'. Whereas
it is comparatively unusual for just one Shipbroker to be employed on a deep-sea dry cargo fixture, for
short-sea and some specialized trades occasionally only one Shipbroker will be engaged between two
principals. Therefore more than ever, if acting as a sole Shipbroker, that Broker must act in a
scrupulously professional manner, using all his endeavours to promote harmony in the
negotiations and in post-fixture activities.

8.0 E-Commerce:

8.1 Because of its international nature, chartering might seem an ideal subject for carrying out
over the Internet directly between Charterer and Owner. And yet despite several attempts, no solid
Internet-based chartering platform has been successful. Without doubt, many Charterers and
Owners who were first introduced by Brokers, continue to work together but dispense with the
unfortunate intermediaries. In some ways this is a compliment to the Brokers because the principals
are obviously satisfied with the caliber of partner they have been introduced to.

8.2 Direct contact through the Internet is not yet trusted because very often the principals have
no way of establishing the other party's credentials in the way Brokers do. Moreover the meat of
negotiations varies with every fixture, and what one Owner is quite happy to concede, another
may resolutely refuse to give way on. Points needing clarification are unlikely to be the same in every
case, and so a constant stream of questions back and forth is inevitable.

8.3 The Internet has been adopted successfully by some liner companies but there the cargo is
invariably containerized, the itinerary published and well known in advance and freight rates non-
negotiable except for a very few favoured clients. The difference between liner trades and
chartering could be likened to the difference in buying an "off the peg" suit or an individually
tailored one.

8.4 Conceivably, there will come a time when Internet chartering will become accepted but, in the
opinion of many, only some specialist trades with standard terms and conditions, tankers for
example will prove to be suited to this form of negotiating.

9.0 Trading:

9.1 The dry cargo shipping market is closely identified with letters of credit and these documents
frequently influence charter party terms and conditions and the manner in which 'bills of lading'
are worded and released, and in which freight is paid, it is therefore vital that those engaged in this
part of the international shipping industry have a good basic knowledge of ail aspects of
international trade.
91
9.2 Freights will be dealt with in Chapter Five, and trading documents, such as Bills of Lading, in
Chapter Eight. Nevertheless, a brief acquaintanceship with trading practices will assist in
understanding this and the following Chapter Four.

9.3 The International Chamber of Commerce (ICC) publishes a standard set of terms for the
international sale of goods. These terms are updated on a regular basis with the 2010 version
becoming effective in January 2011. As from 1 January 2011 some sales contracts will be done using
the new Incoterms 2010 definitions whilst others will continue to use the older version. The parties
to a sales contract are free to choose which rules apply but they should make clear exactly which
set of rules are in operation.

9.4 The new Rules have been revised to take into account developments in international trade
over the past ten years as the volume and complexity of global sales has increased, to address security
issues arising in recent times and to provide for the ongoing changes in electronic communication.
The new Rules also recognise the growth of customs-free areas.

9.5 With the introduction of the new rules, there are some entirely new terms that might be
used.

9.6 Four terms (DAF, DES, DEQ and DDU) from the previous version have been replaced by just
two new terms; Delivered At Place (DAP) which should be used in place of DAF, DES and DDU; and
Delivered At Terminal (DAT) which replaces DEQ. These terms may be used irrespective of the mode
of transport.

9.7 The starting point is that the merchant sells his goods where they are at his place of business,
that is *ex works' (Incoterm EXW) and the Buyer will have to make arrangements for storage of the
goods, transportation to the carrying vessel and eventual loading. More commonly Free Onboard
(FOB) terms are used under which the Seller will arrange delivery to the port and loading the cargo
onboard. Note that the actual point at which responsibility for the cost of handling and transport
moves from the Seller to the Buyer is at the ships rail. The Buyer is responsible for any stowage,
lashing and securing costs. However, in most places there is a 'custom of the port' by which the
separation of the costs is made. The Buyer also has to arrange the chartering of a vessel, payment of
freight, insurance of the goods and delivery at the port of discharge. Variations may be 'FCA' ('Free
Carrier') and 'FAS' (Free Alongside Ship), under both of which terms a Seller undertakes to deliver
goods to the loading place, leaving loading procedures and costs to be arranged by the Buyer.

9.8 Where a Seller arranges a sale 'CFR' (Cost and Freight), goods are sold on the basis that the
Seller himself arranges carriage and delivery to the Buyer 'CIF' (Cost, Insurance and Freight)
stipulating that in addition the Shipper arranges and pays for insurance.

9.9 No two contracts are necessarily identical, and it is important to all concerned to follow
carefully basic safeguards and to avoid documentary shortcuts.

9.10 It is also important not to confuse these Incoterms (FOB etc.) which relate to the contract
between the Seller and Buyer of goods, with the shipping terms FIO, Free in etc. which describe
the division of responsibility and costs between a Charterer and a Shipowner.

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9.11 A Seller will not wish to release his property until he is assured that the correct payment will
be safely received by the time of this release. Equally, a Buyer will be reluctant to pay for goods
which have not been safely received and/or have not been confirmed as being in the condition
described in the contract. Furthermore, the transaction will perhaps be complicated by Seller and
Buyer being located thousands of miles away from each other, with the goods perhaps being
located far away from either party.

9.12 The transfer of goods and money must obviously take place at a time and in a manner which
ensures that both parties are satisfied their contract has been properly honoured. There are various
ways of achieving this objective, depending on market forces (i.e. on the pressure or otherwise for a
Seller or a Buyer to trade) and on degrees of trust between the parties concerned.

9.13 The simplest means of all, is for a Buyer to pay in advance for goods, e.g: cash with order.
The opposite case is where goods and their documents are despatched, the Seller awaiting payment
against his invoice.

9.14 Where either Seller or Buyer are then exposed, however, they suffer loss of cash flow in that
funds are tied up awaiting finalization of trading arrangements. For this reason alone, these payment
methods are unpopular, quite apart from the risks involved.

9.15 A satisfactory alternative and one widely utilized is for the Buyer to draw up and to issue a
'Documentary Letter of Credit' through a bank of good repute, satisfactory to the Seller. A
documentary letter of credit may be 'revocable' or Irrevocable', although the former, being open to
cancellation or amendment by a Buyer provides little security for a Seller and is therefore rarely
utilized. Irrevocable Letters of Credit instead are commonly used and under the terms of such a
document, the bank involved will undertake to pay the Sellers without fail (i.e. irrevocably) but only
when appropriate pre-conditions have been met within the time stipulated, these pre-conditions
and times being clearly specified in the letter and usually being scrupulously adhered to by the
bank.

9.16 Major preconditions specified in a 'Letter of Credit' naturally include some safeguard in
respect of the condition of the goods received and, since it is impracticable for a bank to examine
the goods themselves, bankers will often rely solely upon the description of the condition of the
goods as provided in a 'Bill of Lading' (see Chapter Eight).

9.17 If a Shipowner (or a Ship's Master) confirms that cargo received aboard is in good condition at
the port of loading, bills of lading will be issued containing no adverse remarks about the
condition of the cargo, in other words 'unqualified' or 'clean' bills will be issued, and these are
frequently a pre-requisite before a Letter of Credit can be honoured. Having issued 'clean' bills at a
loading port, the Shipowner assumes responsibility for the carriage of the cargo and for its safe
delivery into the custody of the eventual holder of the bill(s) of lading at the port of discharge, when
the cargo should be in substantially the same condition as received onboard.

9.18 Other than bills of lading, documents commonly required as pre-requisites to release funds
under a letter of credit are:

1) Insurance papers (either a policy of certificate) in accordance with the sale

agreement.
2) Invoices covering the goods,
3) Certificates of origin of the goods.
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9.19 A further method of transacting international payments is by 'bill of exchange', a traditional
and versatile document which can be used either as the vehicle of payment under a
documentary letter of credit, or in place of the letter of credit.

10.0 Market Reporting:

10.1 As with many professions, it is of little use learning a large amount of information and
expertise if you are unable to communicate this knowledge to a third party. The whole basis of a
Shipbroker's working life is based on the giving of information and advice and, whilst a certain
amount can be done verbally, a great deal of communication is in writing.

10.2 Consequently, all those engaged in shipping, and Shipbrokers in particular, must gain
experience and ability in the preparation of written reports to their principals and seniors. Some will
concentrate on a relatively small market sector perhaps designed to provide data on the shipment of
a particular commodity, ship type or size, or geographic region, reporting fixtures, available cargoes,
trading deals, market gossip, etc.

10.3 Other reports will be of a general nature, intending to illustrate in overall terms the state of
the freight market. Examples are those produced by broking houses such as Galbraiths and Clarksons.
In Appendix the dry cargo Panamax, Capesize and handysize markets are reported upon briefly
together with relevant reported fixtures, the weekly report designed for mailing to various clients,
not one in particular.

10.4 One of the fascinations of the international dry cargo freight market is that one can see in day-
to-day trading activities the effects of far-off political and climatic events affecting the demand for ships
and for cargo space and, consequently, freight rates. A world-wide depression in trade will ultimately
have its effect on the shipping market and ships will lay-up for want of profitable employment. On the
other hand, a buoyant freight market will result from active trading and there might be too few ships
to satisfy demand, leading in turn to high freight income for those Shipowners/Operators fortunate
enough to be in particular trading areas at particular times.

10.5 Read your national newspaper with a view to transposing the events recorded in the general
news, political and business pages into what you believe will be the effect on the dry cargo shipping
markets, whether local or international. Will the bankruptcy of a grain dealer seriously affect freight
rates for that particular market sector and whether for better or for worse? And what about a
serious famine and subsequent aid relief cargoes destined for a beleaguered community in the Third
World? What effect will they have on immediate, medium and long term trade in, for example,
grain?

10.6 So your source of information in producing reports for your principals should be obtained
not only from market sources but relative also, every now and then, with reference to the probable
effect of 'outside' events. After all, your particular freight market does not exist in isolation from the
others or from the effects of world trades, events and politics.

11.0 METHODS OF SHIP EMPLOYMENT:

11.1 These can conveniently be divided into the following main elements:

94
 1) Voyage Chartering
2) Consecutive Voyages
3) Time Chartering
4) Bareboat Chartering
5) Contracts of Affreightment
6) Joint Ventures
7) Shipping Pools
8) Parcelling
9) Project Cargoes
10) Slot Charters.

12.0 Voyage Chartering:

12.1 Voyage Chartering occurs when a vessel is employed for a single trip, loading cargo from one or
more ports for discharge at one or more ports.. In return for the carriage of the cargo and, perhaps
for the expenses of loading and/or discharging the cargo, the Shipowner will receive monetary
reward termed 'freight'. This freight can either be in the form of a lump sum payment or, more
commonly, it will be payable pro rata in respect of the quantity of cargo carried, usually so much
per tonne.

12.2 It is normal to specify the amount of time a Charterer is allowed for loading and discharging
the vessel the laytime' and should this time be exceeded, then liquidated damages, termed
'demurrage' will become payable.

12.3 The dates between which the vessel is required to be presented at the loading port, the
laydays', will also be recorded, as well as the cargo type and size that is to be carried.

13.0 Consecutive Voyages:

13.1 Sometimes the parties to a voyage charter are content to co-operate on pre-agreed
repeat business. They will then sign an agreement which commits the ship to performing a number
of voyages, either a predetermined number, or occasionally for as many as can be accommodated
within a fixed period of time. All the voyages are covered by the same basic terms and conditions
although it may be agreed that the freight rate fluctuates over the period of the contract.

13.2 Each of the voyages is treated as a separate contract for purposes of demurrage and
despatch.

13.3 Should the ship be lost for any reason, then the contract comes to an end and the Owner is
relieved of any further commitment to the contract. In this the Consecutive Voyage Contract differs
materially from the apparently similar Contract of Affreightment.

14.0 Time Chartering:

14.1 Where vessels are hired for a specific period, e.g. for 12 months (15 days more or less) the
responsibilities of the parties differ substantially from those involved in voyage chartering. A Time
charterer assumes control of the operational (let us call it, the 'commercial') destiny of a vessel
including, for example, the appointment and payment of port agents, purchase of bunkers, etc.
leaving the Shipowner responsible for the management of the ship, with particular regard to
maintenance, crewing, insurance, etc.
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14.2 The Shipowner is rewarded by the payment of regular amounts of hire money, normally
paid monthly or semi-monthly in advance. However, should the vessel fail to perform properly or
suffer such interruptions to the smooth performance as mechanical breakdowns, she may be
considered 'off-hire', during which period the Owner will not be entitled to remuneration.

14.3 Many Charterers find it expedient to employ vessels on a timecharter basis for single or
round-trip voyages and this practice has given rise to 'the term 'trip-chartering'. A trip-charter is
similar to voyage chartering with regard both to the duration of the venture and to the fact that the
intention of the parties is to employ the vessel for, say, one or two voyages, but there the similarity
ends, and the roles of Charterer and Owner are identical to those assumed for time charters of
longer periods.

14.4 Quite often a time chartered vessel is employed on a liner service operated by the time
charterer. Some vessels are taken on very long charters for this purpose, while others may be taken for
short periods to cover dry-docking, repairs or seasonal fluctuations in cargo levels.

14.5 Charterers usually negotiate the right to temporarily rename the vessel if it is to be employed
on a liner service so that its new name can be more easily connected with the route or line it is
trading on. Occasionally the parties may even agree to a change of flag as well.

15.0 Bareboat Chartering:

15.1 Sometimes termed 'demise' chartering, Bareboat chartering arises on those occasions where
Shipowners hire out their vessel to a Charterer, who virtually runs the ship as if he were the
Shipowner, assuming both the Time Charterer's responsibilities (as defined above) and most, if not all,
of the responsibilities of the Shipowner. In return, the Shipowner receives a lower hire payment,
commensurate with reduced responsibilities and risks.

15.2 Strictly defined, 'demise' chartering differs from 'bareboat' chartering in that it may be agreed
between the parties that the Shipowner provides a Master and/or officers and/or crew and,
perhaps, organizes the vessel's insurance.

15.3 Demise and Bareboating are in reality finance tools, designed to enable Investors to purchase
ships, leaving the operation and management of the ships to Charterers with more expertise in those
areas. The Charterers may, in fact, be Shipowners without the financial resources to fund such a
purchase directly.

16.0 Contracts of Affreightment:

16.1 These occur when a carrier, either a Shipowner or an Operator, contracts to carry a given
quantity of cargo between named ports on agreed voyage chartering terms over several voyages.
The carrier may thereafter employ his own vessel(s) or charter-in outside ships in order to fulfil
contractual obligations. Unlike a consecutive voyage contract, the governing detail is the cargo and,
in the unfortunate event of the Owner's intended ship sinking or being effectively eliminated from
carrying, the Owner is obliged to make other alternative arrangements to complete the contract.

16.2 The advantage of such a contract to a Shipowner is that security of employment is obtained
for his vessel(s) for the duration of the Contract of Affreightment, especially valuable if the
Shipowner considers that freight rates are about to fall. For Operators in a similar freight market
96
situation, the advantage is in the profits they hope to realize by taking advantage of being able to fix-in
tonnage at lower freight rates than those they will receive from the Charterers.

16.3 But the Charterers may also be able to obtain financial advantage in the event that market
freight rates rise once they have committed Owner or Operator 'locked-in' to the Contract, always
assuming that the Owner/Operator will keep their end of the deal and perform. But even if the
market stays in 'neutral' or moves against the Charterer by freight rates falling, at the very least
the Charterer has exchanged the unreliability of the daily market place, for freight rate stability,
thereby enabling emphasis to be placed in the development and marketing of the commodities
involved.

16.4 Under a Contract of Affreightment, the covering document is basically a modified voyage
charter party form, with each voyage ship being nominated in a booking form detailing dates and
cargo quantity.

17.0 Joint Ventures:

17.1 Where those controlling cargoes negotiate and come to terms under a 'joint venture'
arrangement with those controlling ships. Normally profits and losses will be shared, not only perhaps
on the seaborne freight element, but also on production and/or purchase and/or sale costs of the
goods involved. These ventures can be fairly simple and of a short duration, perhaps for a single,
occasional cargo, or they can be of major importance, involving the mutual exploitation of a
nation's mineral deposits, the building and administration of ports, marketing of products, as well
as the training of personnel for each section of the entire structure. An example of this degree of
joint venture was the liaison between the Norwegian Klaveness Group and the Guinean Government
in the bauxite production, transportation and marketing of the joint venture concern 'Guinomar'.

18.0 Shipping Pools:

18.1 Where a group of Shipowners band together to 'pool' their tonnage and collectively market
their combined fleet. They may well become involved in extensive contracts of affreightment and
joint ventures with outside groups, and this type of operation is often used where a specialized
commodity or trade is involved (e.g. reefers where numerous Charterers may become involved in
contracts with the pool).

18.2 Pool income is collected together and once pool running costs have been deducted, remaining
income is distributed amongst members by means of a 'weighting system' by which each entered
vessel's individual characteristics are taken into account and measured against a 'pool model
average', debits and credits being applied accordingly.

18.3 Freight market risks are somewhat alleviated for an individual Shipowner, perhaps with
little or no previous shipping experience, gaining admission to a well run pool. Furthermore,
management overheads will be considerably reduced by collectively managed chartering,
commercial and financial operations.

19.0 Parcelling:

19.1 Generally in dry cargo shipping, the smaller the quantity of a commodity, the more expensive
it is to ship. Recognizing this, some Operators specialize in transporting smaller parcels of a

97
commodity by grouping them together in a vessel sailing from one or more ports in a particular
region to one or more ports in another area. This trade is prominent, for example, in commodities
exported from Australia to destinations in the Far East and in the Atlantic Basin. Specialist Operators in
the area contract to move parcels of commodities, thereafter grouping these together with other
parcels in one 'bottom', probably contracted in on a trip-timecharter basis. (Even today you will
encounter the old fashioned expression 'bottom' as an alternative to the word 'ship' or 'vessel'
tradition dies hard in the shipping industry).

19.2 Consequently, in addition to negotiating the highest possible, freight rate and best terms for
each, individual parcel, the" Operators seek the widest possible date speed during which to load
the parcel and a wide cargo quantity margin, so as to give themselves maximum flexibility to fit the
individual hold compartments of whatever ship they contract, thus easing their chartering
restrictions for suitable tonnage.

19.3 Having identified the most suitable vessel, the Operators then rely on their shipping expertise
to time charter the ship at a cost which is, overall, less than the freight they expect to earn from the
collection of various parcels the ship will carry the difference, less their overheads, creating the
profit element they seek.

20.0 Project Cargoes:

20.1 A specialized form of joint venture/contract of affreightment is terms a 'project cargo' or a

'turnkey project', a term commonplace in the heavy-lift market, whereby a marine specialist
undertakes complete responsibility for the seaborne movement of both small and large
prefabricated structures, constructional equipment, and raw materials (e.g. cement) together with all
the paraphernalia of major projects (e.g. site huts and machinery) to the project's eventual
___location. An example would be the movement of material and equipment necessary to construct a de-
salinisation plant or cement factory in a developing nation.

21.0 Slot Charters:

21.1 We have seen how a liner operator may have an interest in timechartering a vessel for his
liner service.

21.2 There is another form of chartering space prevalent in liner (particularly containerized)
trades.

21.3 As liner ships have increased in size the Owners have sometimes found themselves having
difficulty in filling their ships. Some freight forwarders and even former Operators of smaller liner
ships that have lost out to the bigger competitors have found themselves in a position whereby they
were controlling large quantities of cargo. Rather than merely contracting with the liner Operator as a
Shipper they have contracted to take a set amount of space or slots on each voyage the ship makes.
They then sell this space on to their customers as if they were in fact the line Operators. People who
do this are known as NVOCCs (Non Vessel Owning Common Carriers). The NVOCC pays the head
Owner freight based on a fixed rate for each TEU slot he has contracted for possibly with a premium
for hazardous cargoes. It is usual for the Owner to agree a reduced rate for any cargo supplied in
excess of the contracted amount.

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21.4 The contract, usually on the standard SLOTHIRE form, allows them to issue their own bills of
lading, set their own freight rates and generally act as if they were the vessel Operator. Of course
they have obligations too and should only contract to carry on terms similar to the true Operator,
furthermore they will be responsible for settling their clients' cargo claims and if the vessel is making
a call at a port solely for their convenience, to cover the port costs incurred.

21.5 The head Owner can make any number of slot agreements with different NVOCCs so the
same ship may appear to be running on several different lines at the same time.

oooooo

SELF-ASSESSMENT AND TEST QUESTIONS

Attempt the following and check your answers from the text:

1. Under what headings do the main practitioners in the dry cargo freight market fall?
2. In what different roles may a dry cargo chartering Broker be acting?
3. What are lNCOTERMS?
4. How many methods of ship employment can you list?
5. For what items would a time charterer be responsible which would not be the responsibility of a
voyage charterer?
6. What is meant by 'breach of warranty of authority'?

*************

99
CHARTERING FINAL YEAR

LESSON 6

STANDARD CHARTER-PARTY FORMS

1.0 DRY CARGO CHARTER PARTIES OF MAJOR IMPORTANCE

1.1: Voyage Forms :

General Purpose

Title Date Codename PUBLISHER

Uniform General As revised 1922 GENCON BIMCO

(1966 layout)

Uniform General As revised 1944 GENCON BIMCO

(Boxtype) (1994 layout)

General 1982 (revised MULTIFORM FONASBA

1986)

Grain:

Approved Baltimore Berth 1913 BALTIMORE

Grain C/P~ Steamer (adapted 1971) FORMC

North American Grain 1973 (amended NORGRAIN 89 ASBA
1989)

Grain Voyage 1966 (revised GRAINVOY

1974)

Continent Grain 1957 (amended SYNACOMEX 90 Syndicat National du Commerce

1990) Exterieur des Cereales
Australian Wheat 1990 (amended AUSTWHEAT Australian Wheat Board
1991)

Australian Barley 1975 (revised AUSBAR Australian Barley Board

1980)

River Plate of Shipping 1914 CENTROCON UK Chamber

100
DRY CARGO CHARTER PARTIES OF MAJOR IMPORTANCE (continued)

Feritiliser:
Fertilisers Charter 1942 (amended FERTICON UK Chamber of Shipping
1974)
North American Fertiliser 1978 FERTIVOY 88 Canpotex Shipping Services,
(revised 1988 Vancouver
Phosphate C?P 1950 AFRICANPHOS

Coal:

South African Anthracite 1974 SAFANCHART S. African No. 2 Anthracite

Producers Assn,
Johannesburg

Americanised Welsh Coal 1953 (revised AMWELSH ASBA

1993)
Australian Coal Charter AUSCOAL
Ore:

Mediterranean Iron Ore C(ORE)7

Iron Ore 1973 NIPPONORE The Japan Shg Exchange Inc

Standard Ore 1980 OREVOY BIMCO
Suear:

Sugar C?P 1969 (revised -

1977)

Bulk Sugar Charter - USA 1962 (revised -

1968)
Cuban Sugar 1973 CUBASUGAR
Australia/Japan - Bulk 1975
Raw Sugar
Fiji Sugar 1977 -
Mauritius Bulk Sugar - MSS Form

Timber:

Baltic Wood 1964 NUBALTWOOD UK Chamber of Shipping

C/P for Logs 1967 NANYOZAI The Japan Shg Exchange Inc

101
DRY CARGO CHARTER PARTIES OF MAJOR IMPORTANCE (continued)

1.2: Period Forms

Timecharter

Uniform Time Charter 1939 1974) BALTIME B1MCO

(amended

Uniform Time Charter 1968 1974) LINERTIME B1MCO

(amended

New York Produce 1981 ASBATIME ASBA

Exchange T/C
New York Produce 1993 NYPE 93 ASBA
Exchange T/C
Uniform Time Charter 1990 BOXTIME BIMCO
for container vessels

Bareboat:

Standard Bareboat Charter 1989 BARECON BIMCO

ooooo

SELF-EXAMINATION QUESTIONS

1. Give the code names of the following C/Ps ~

(a) Chamber of Shipping Fertilizers Charter

(b) European Petrochemicals Association Charter
(c) The Baltic and White Sea Conference Coal Charter
(d) Japan Shipping Exchange Coal Chaterparty
(e) Australian Grain Charter
(f) Standard Slot Charterparty

2. Give the full forms of the following C/Ps —

(a) CHEMTANKVOY (b) SOVCONROUND

(C) GENCON (d) NIPPONORE
(e) NYPE (f) NORGRAIN

*************

102
CHARTERING FINAL YEAR

LESSON 7

STOWAGE FACTORS
1.0 STOWAGE:

1.1 Stowage is done to ensure that:

 The cargo will not endanger the ship's crew or passengers.

 There will be no loss or damage to cargo or ship and that cargo can be delivered in
the same condition as it was received.
 Cargo space is fully utilized by giving good stow. This directly affects the earning
capacity of the ship.
 Loading/discharging operations should be at maximum possible rate for quicker turn
round of the vessel.
 The cargo spaces are clean, dry and free of any kind of a odor to prevent tainting of
cargo.
 No cargo is overstowed. Cargoes must be stowed port-wise as per the rotation of
ports of call.
 Heavy packages must be stowed below and lighter packages on top to prevent
damage by crushing.
 Goods stowed within the same compartments are compatible with one another or
each other.
 Cargo is arranged in such a manner that the vessel attains an even keel draught thus
enabling it to carry maximum cargo. This achieves particular importance when
loading at river ports with draft restrictions.
 Proper distribution is done to enable maximum number of hooks to work at each port.
 Stability is given to the ship. Stowage should be compact so that it does not shift at
sea. Vessel is not over-loaded at any stage and also while crossing various loadline
zones.
 Load density of steel plates on deck is not exceeded, especially when loading heavy
density cargoes such as ore, billets, steel channels, etc.
 Explosive and dangerous goods comply with the rules and regulations governing their
carriage.
 Cargo is properly secured prior to proceeding to sea.

1.2 Special cargoes such as timber, grain or seeds/pulses are stowed in compliance with
special regulations governing their stowage. Timber is liable to absorb moisture upto 15%. This
should be taken into account for calculating quantity loadable to ensure ship does not get
overloaded at sea or become unstable. Severe penalties are imposed by the authorities for
overloading besides resulting in risking the ship, its cargo and lives on board. Grain/pulses loaded
in bulk are prone to shifting when vessel is in rough weather. Hence, to prevent this and
consequential danger of losing the ship very stringent rules govern this loading and special gain
loading plans are prepared and approved by MMD (Mercantile Marine Department).

103
1.3 In ports like Calcutta, with its draft restrictions, the ship has to take note of a number of
considerations before stowage is organized. Some of these are:--

The ideal condition is to have cargo ready and then start loading. Once calculations are
done, goods can be stowed and results achieved as desired. However, often the loading is
to be decided on basis of not on the cargo bookings but what has actually arrived, passed,
and is ready for shipment. Spaces calculated and released on initial bookings would lead
to disaster, if strictly followed. Stowage is so decided to give minimum bottom space,
keeping options open should there be shortfall in the quantity of cargo or when it is not
available, or getting ready after arrival in shed, day after day. Such method of receiving
cargo for shipment on day-to-day basis poses considerable difficulty and delay and
sometimes ready cargo cannot be lifted for sometime to maintain the discharge port
rotation.

2.0 STOWAGE FACTORS:

2.1 Stowage Factor (SF) is a numeral which expresses the volume (space) in cubic feet (or in
cubic metres) occupied by 1 tonne of cargo when stowed in a vessel's cargo compartment. It is
an empirical (approximate) figure reached by experience and takes into account dunnaging. SF
may be different from the actual cubic measurement of 1 tonne of the commodity because of
the method of packing or nature and origin of the commodity.

2.2 Formerly SFs were expressed in cubic feet per long ton (of 2240 pounds). Now it is
expressed in cubic feet per 1 metric ton (of 1000 kilos). Since the difference between long ton
and metric ton is only 1.6% it can be disregarded. Alternatively, SFs are expressed in cubic
metres per 1 metric ton. However, because SFs in cubic feet are easier to remember, the
"market" prefers to work in cubic feet than in cubic metres when describing SFs. It is important
to bear in mind that 1. cubic metre - 35.3148 cubic feet. You can, therefore, convert one into
another.

2.3 SFs are useful at the planning stage before a cargo is loaded to know how best to
maximize available space with greatest safety. To find the space required by any consignment
the weight of the cargo is multiplied by the SF.

2.4 The lighter a commodity the more space it will occupy and therefore its SF is higher. As a
result a ship with less cubic capacity would have difficulty in loading upto full deadweight
capacity. (Corn, for example, occupies about 50 cubic feet per tonne on average in bulk, whilst
iron ore concentrate occupies about 13 cubic feet on average).

2.5 Most ship operators charge on volume basis for cargoes stowing at more than 40 cubic
feet (or more than 1 cubic metre) per t6nne and on a tonnage basis for goods stowing at less
than 40 cubic feet per tonne. This has given rise to the term measurement tone for calculating
freight.

2.6 Hence it is safe to say that goods having an average of more than SF 40 are considered as
light cargoes whilst goods averaging less than 40 are classified as heavy cargoes. (Some authors
maintain 50 as the cut-off line). Shelter deck vessels which provide ample under deck space are
preferred for light cargoes, against the single deck vessels which are preferred for heavy
cargoes where plenty of space is not required.
104
2.7 SF is usually given without any reference to the units of volume or weight, that is, the
number of cubic feet or cubic metres per tonne is not mentioned.

2.8 In case of bulk liquids, SF is replaced by SG (Specific Gravity). This is the reverse of SF and is
the mass (or weight) of one unit of volume of the liquid expressed as a ratio to the mass per unit
volume of pure water. This is because bulk liquids fill up the compartment into which they are
loaded. SG has no units but is simply a number. Crude oil is lighter than water and, therefore, has
a specific gravity of less than 1.00 which is the SG of pure water.

2.9 For free-flowing bulk cargoes, shipped in a dry state and capable of being trimmed and
levelled, it is safe to say that their stowage factor will be the same as the number of (grain)
cubic feet of ship space they require per tonne. Such goods, e.g., loose grain or finely divided
minerals, will settle down and spread to fill all the interstices between the ship's frames and
other projections. This is not the same as saying that a vessel will necessarily be able to load a
full deadweight cargo with them.

2.10 Stowage factors are not of great importance in respect of extremely 'close-weight' cargoes
such as the ores used in steel-making, the denser coals and other minerals shipped in bulk. A
modern shelterdecker is able to take a full cargo in the lower holds only. There are times,
however, when it does pay to give close attention to the space occupied by the very dense
cargoes. Such occasions arise when, instead of taking a full shipload, an owner has the
opportunity to charter his vessel for a combined cargo of light and heavy goods.

2.11 At one time many vessels were fixed from India, taking manganese ore as 'bottoming' and
filling up with unshelled groundnuts, the latter having a stowage factor of well over 100 cubic
feet to the ton. Combinations like these avoid the wastage of ship space which occurs when the
heavy materials are shipped on their own as full cargoes, or the loss of deadweight involved in
filling entire ships with goods of very low density. The aim must be to put the ship down to her
loadline and at the same time make use of all available cubic capacity. As ores generally pay poor
freights one would not wish to load more than the minimum necessary to achieve the objective of
'full ship load and down to her marks'. This can only be ascertained after close calculations in
which it is vital to know, for example, whether the heavy cargo needs, say, 15 or 20 feet to the
ton, notwithstanding the fact that the space-to-deadweight ratio of the whole ship may be as
much as 55 cubic feet per ton.

2.12 With cargoes whose density is uncertain, such as scrap metal, which may consist of
anything from broken ingots to bundles of tinplate clippings, it is reasonable that shipowners
should ask of charterers what is the guaranteed maximum stowage factor for the aggregate of the
cargo to be shipped. But, it is far from wise for the charterers, unless they have great experience
and know the ship (or similar vessels) intimately, to guarantee, under penalty of dead freight,
that she will be able to load a certain number of tons. The quantity taken aboard of cargoes like
the lighter grades of scrap and timber depends to a considerable extent on the care and skill of
the stevedores who do the work. Because of this, even with a constant stowage factor,
differences in liftings between one voyage and another one experienced by vessels engaged in
executing a series of consecutive trips in a particular trade.

105
2.13 The owners of a small ship alleged that the S.F. was only 51 when the Charterers had
represented the cargo as being "about 54/55. The owners claimed that there was a breach of the
voyage charter because the cargo had not filled the cargo spaces. Owing to this, the ship would be
unsafe at sea because one hold had slack space at the top of the bulk grain. (Slack grain can shift
because of a vessel's movement in a seaway, thus affecting the ship's stability). This cargo had
to be secured by bagged grain and the securing was time consuming and expensive.

2.14 The arbitrators decided that the charterers were liable for not providing cargo of the
promised stowage factor. Had the owners known the actual SF they would have required the
cargo to be loaded in such a manner as to safeguard the vessel's stability. The owners were able
to obtain damages.

3.0 BROKEN STOWAGE:

3.1 Broken Stowage is the space which is lost to cargo because of the shape of the cargo,
dunnage, shape of the vessel's compartments, pillars, etc. One of the effects of palletisation is the
increase in broken stowage.

3.2 Stowage factors do not take into account the volume of ship-space — completely non-
earning to the owners — which is the lost owing to broken stowage.

4.0 DUNNAGE:

4.1 Dunnage is material used, such as timber battens, boards, mats, plastic sheets or paper,
etc., (a) to prevent cargo from shifting; (b) to prevent damage (including sweat damage) to the
cargo; and (c) to separate different lots of cargoes.

4.2 Dunnaging serves the following purposes:

(a) Prevents cargo coming in contact with ship-side steel frames, thus helping in avoiding
moisture contact damage.

(b) Any leakage from other cargo carried passes between the dunnage pieces laid on the
tank top into the bilges. This also holds good for any leakages from oil tanks and
water tanks in the double bottom.

(c) Any condensation on the bulkheads, pillars, etc. likewise drips along with gaps and
goes to the bilges, preventing any stain damage.

(d) These gaps formed serve chambers for ventilation purposes.

(e) Shoring of cargo can be done.

(f) Specifically a ship loaded in the tropics or hot climate proceeding to cold climate
ports, the condensation on the steel work in the holds can be very heavy causing
extensive damage. In such cases all efforts are put to cover the top layer of the cargo
with separation tarpaulins. Ventilation is necessary which is by fans on modern
ships.

106
5.0 COMMON STOWAGE FACTORS (All figures are approximate):

5.1 It must be emphasized that any such table should not be used other than as a general
guide and that in the final analysis it is the duty of the shipowner to know his own ship and be
able to reckon what she is capable of loading.

COMMODITY SF PACKING
1. Bauxite 35/40 Bags
26/30 Bulk
2. Caustic Soda 34 Drums
3. Cement Portland 35/40 Bags
22/30 Bulk
4. Chrome Ore 13/16 Bulk
5. Coal 40/50 Bulk
6. Copra 95/110 Bags
7. Corn 50/55 Bags
47/50 Bulk
8. Cotton 80 (variable) Bales
9. Cotton Piece Goods 140/170 Bales
10. Coffee (Beans) 60/65 Bags
11. Flour 43/48 Bags
12. Groundnuts (Shelled) 60/65 Bags
13. Iron Ore Concentrate 11/15 Bulk
14. Jute 65/67 Bales
15. Manganese Ore 17/18 Bulk
16. Oats 83 Bags
17. Maize 80 Bags
18. Petroleum Coke 48 Bulk
19. . Furnace Coke 70/75 Bulk
20. Rock Phosphate 33/35 Bulk
21. Rice 48/50 Bags
22. Rubber 65/67 Bags/Bales
23. Rubber Sheet 60 Sheets
24. Salt . 35/40 Bulk

38/40 Bags
25. Scrap Iron 35 Bulk or Loose/Bales
26. Sugar 44/46 Bags
35 Bulk
27. Sulphur 30/32 Bulk
35/37 Bales
28. Tea 60/100 Chests
70/75 Drums
29. Wheat 52/54 Bags
47/49 Bulk
29. Urea 50/52 Bulk
60 Bags

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6.0 EXAMPLES ON STOWAGE FACTORS

Problem 1

Vessel description of M. V. NMIS is as follows:

Summer Deadweight = 38000 Draft = 11.180M SSW

TPC = 47 Cube = 49250 M3

Quantity to be loaded at 10.03 M SSW

Given IFO on board - 600MT MDO - 100 MT FW - 100 MT

Constants - 200 MT

Solution 1

Total Bunkers + Constants = 1000 MT

DWAT at 10.03 M = 38000 - 5405 = 32595 MT

[5405 is obtained as follows: 11.18- 10.03 = 1.15 metres or 115 cm
115 cm x 47 (TPC) = 5405 MT]

DWCC = 32595 - 1000 (Bunker + Constants) = 31595 MT

Problem 2

M.V. NMIS- Summer DWAT =38000 Draft =11.180M

TPC - 47 DRAFT AT LDPORT = llM CUBIC GRAIN = 49250 M3

CUBIC BALE =46295 M3 Constants + Bunkers -1850 MT.

Shipowner has the option to load either Oats at $ 9 PMT or Manganese Ore at $ 5 PMT.

SF of Manganese Ore =18 and SF of Oats = 83

(a) Which cargo will generate more revenue for the shipowner?

(b) Will his decision change if there is no draft restriction at loadports ? [Also assume in
both ernes there is no draft restriction at discharge ports].

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Solution 2

At draft of 11 M: DWAT = 38000 - 846 = 37154 MT

(11.18- 11.00-18 cm x 47 TPC = 846 MT)

DWCC at 11 M = 37154 - 1850 (Bunkers + Constants) = 35304 MT

For Manganese, loadable quantity at 11 M draft = 35304 MT

ForOats-SFintermsofCBM = 83 = 2.35
35.32
.'. Quantity that can be loaded = 49250 = 20957 MT

2.35

Freight earned on Manganese Ore = US$ 5 x 35304 MT = US$ 176520

Freight earned on Oats = US$ 9 x 20957 MT = US$ 188613

Answer; Oats will generate more revenue.

If there is no draft restriction - Vessel can load 38000 - 1850 = 36150 MT

Freight earned on Manganese Ore if there is no draft restriction = US$ 5X36150MT -

US$180750

.'. Loading of Oats would still generate more revenue.

Problem 3

A shipper has two alternatives (A) bring the ship to Visakhapatnam on or around 15th
November or (B) around 20th December.

The vessel's particulars are:-

Vessel's Summer DWT-38000 MT Cubic = 49250 M3

Vessel's Summer Draft- 11.180M TPC =47
Vessel's Tropical Draft-11.740 M Constants + Bunkers = 1800 MT

The cargo has a SF of 20.

If the shipper makes the delivery by 15th November, he is paid US$ 10 per metric tonne
and if he delivers on 20th December, he is paid US$ 9.20.

For maximising revenue, when should the shipper make the delivery, assuming that the
buyers are prepared to buy the entire quantity the vessel can load?

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Info> VTZAG IS IN SEASONAL TROPICAL AREA
TROPICAL - 1 DEC TO 30 APRIL -SUMMER - 1
MAY TO 30 NOV
NO DRAFT RESTRICTION AT VTZAG

Solution 3

Since SF = 20, the cargo is obviously a weight cargo (i.e. heavy cargo) and not volume
cargo.

If delivery is made on 20th November, vessel can load only upto her summer draft, i.e.,
11.180M

.'. Quantity loadable = 38000 DWAT - 1800 (Constants + Bunkers) = 36200 MT

Amount receivable = $10 X 36200 = $ 362000.00

If delivery is made on 20th December, vessel can load till her tropical draft of 11.740 M

.". Excess quantity that can be loaded = 11.740 (tropical draft) - 11.180(summer draft) = 56 cm

Extra quantity that can be loaded = 56cm X 47 tpc = 2632 MT

DWAT at tropical draft = 38000 + 2632 = 40632 MT

Quantity that can be loaded (DWCC) at tropical draft = 40632 - 1800 = 38832 MT

Amount receivable will therefore be= $ 9.20 X 38832 = $ 357254.40

// would be better if shipment is made in the month of November as the amount receivable will
he higher.

Problem 4

What would be your recommendation if the following changes were to happen:

(i) If the rate for the December shipment is made to US$ 9.30?
(ii) If tropical draft was actually 11.84 M? (Hi) If SF of the cargo
was 70?
{Analyse each one independent of the other}

Solution 4

(i) If rate were increased the amount would be = $9.30 X 38832 MT = $ 361137.60
Now the shipment in December would generate more revenue.
(ii) Since tropical draft = 11.745M

Excess draft available over summer draft = 11.84 M- 11.180M = 66 cm

Extra quantity loadable due to increase in draft = 66 cm X 47 tpc = 3102 MT

DWAT at tropical draft = 38000MT + 3102MT = 41102MT

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DWCC at tropical draft = 41102 MT - 1800 MT = 39302 MT

.". Amount receivable will be = $ 9,20 X 39302 = $ 3615.78.40

.'. If tropical draft is 11.84 M it would be more profitable if the shipment is effected in
December.

(iii) If SF is 70, then SF in terms of M3 = 70 = 1.98 M3

35.32
Total quantity that can be loaded = 49250 M3 = 24873 MT
1.98

Since vessel can load only 24873 MT (due to non-availability of space) it does not make
a difference whether cargo is shipped in November or December. In this case, draft is not
a problem but the cubic i.e. volume available is a constraint.

Problem 5

The summer deadweight of the vessel is 26710

The tropical deadweight of the vessel is 27570

The TPC of the vessel is 36.9 The summer draft is 10.467M

Find the tropical draft.

Solution 5
Difference in tropical deadweight and summer deadweight = 27570 - 26710 = 860 MT
.*. Extra draft = 860 = 23.30 cm
36.9 Hence tropical draft = 10.467 + 23.30 cm - 10.7 M

ooooooo

SELF-EXAMINATION QUESTIONS

1. Define "Stowage Factor". How is it expressed?

2. What is the importance of stowage factors? Discuss quoting examples.
3. What procedure is applied to determine whether cargo is "light" cargo or "heavy" cargo?
4. What is SG? Why is it used only in case of liquid cargoes?
5. Explain the terms "dunnage" and "broken stowage".
6. Give approximate SFs of:
(a) Cement (bulk) (b) Cotton (piece goods) (c) Iron Ore (concentrates)
(d) Tea (chests) (e) Rubber (bales) (f) Wheat (bulk)
(g) Maize (bags) (h) Sugar (bulk) (i) Urea (bulk)

7. Why is dunnaging used on a vessel?

8. What are the factors to be borne in mind while stowing cargo on board a vessel?

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9. Vessel's summer deadweight = 38800 MT
Summer salt water draft = 11.480 MSSW
TPC = 50
Cubic = 51000 M3
What is the quantity that can be loaded at a draft of 11.00 SSW assuming — (i)
SF = 18 (ii) SF = 40 (iii) SF = 93 ?

10. The vessel has the following consumption:

Laden = 13 knots on 24 MT IFO + 2 MT DO
Ballast - 13 knots on 22 MT IFO + 2 MT DO
Other details of vessel are as follows:
Summer deadweight = 26000 MT
Draft = 10.36 M SSW
TPC = 36
Cubic = 34000 M3

The shipowner wishes to carry a minimum quantity of 20,000 MT to break even (i.e., no
profit, no loss). The bunkering points are at a distance of 4400 NM from each other.
What is the maximum cargo the vessel can carry assuming the vessel has unpumpable
ballast + constants + fresh water on board of250MT.

11. A vessel has option to load two cargoes: -

Metcoke of SF 63 or Ore of SF 15
The vessel is described as follows:
Deadweight = 36000 MT
TPC =44
Cubic = 46000 M3
Draft = 11.00M SSW
The draft at loadport ■ = 9.5 M The freight for Ore = $ 4.50 PMT The freight for
Metcoke = $ 15.00 PMT
a)What is the quantity of each cargo that can be loaded?
b)What is the difference in total freight earned?

RECOMMENDED FOR FURTHER READING:

1. Shipping Practice - Stevens & Butterfield, 11th Ed., Reprinted 1997.

2. Elements of Shipping - A. E. Branch, 7lh Ed., 1996.
3. Sea Transport - P.M. Alderton, 4th Ed., 1995.

*************

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CHARTERING FINAL YEAR

LESSON 8

CHARTERING CONTRACTS
1.0 INTRODUCTION:

1.1 In this Chapter we will examine the documents which control the whole chartering market
and form the cornerstone of ship-broking life. So much of the practical life of a Broker revolves around
the various requirements of charter parties that it is absolutely essential you understand them as fully as
possible. No one expects every Broker to understand every charter party in detail, but Brokers
should be aware of the basic structure of voyage and time charter forms, and should also be
capable of nominating a suitable charter party for any particular commodity or trade.

1.2 Whilst in shipping almost anything is possible (provided it is legal) there are usually specific
charter parties which relate to particular trades, and a Shipbroker should recommend and use these if
possible, since most will have stood the test of time both in practical everyday usage and, as
important, in legal dispute. An example of what can happen when the wrong form is chosen is given
in Chapter Ten (The Jordan II case).

1.3 To help you in this aim, Appendix lists a selection of important dry cargo charter parties
under the headings of various commodities.

1.4 As you can see from this list, some dry cargo charter parties in use today are around eighty
years old and, although many during that period have grown unsuitable for the trade for which
they were originally intended and/or the trade itself has become obsolete, leading to the
discontinuation of use of those charter parties, some of these older forms have still a valid role to play
and have been updated when and where necessary to keep step with market developments.

1.5 Even so new dry cargo charter party forms are published from time-to-time and older ones are
revised and updated, and active in this field are two bodies that you will encounter in particular, The
Baltic International Maritime Council (BIMCO), and The Association of Shipbrokers and Agents (USA)
Inc (ASBA). BIMCO, based in Copenhagen, has an international membership and originated as a
Shipowners lobby group before expanding its Broker and Charterer membership in recent years.
ASBA is an American organization, based in New York and, as its name implies, is an association of
Shipbrokers and Agents.

1.6 As will be seen in Appendix, other bodies are also active in drafting charter parties, some
international (e.g. FONASBA) some national (e.g. UK Chamber of Shipping, now part of the General
Council of British Shipping) and in some trades, the Charterers themselves have drafted the charter parties
for their own commodities (e.g. S. African Anthracite Producers Assn.).

1.7 In general all these parties co-ordinate their activities with one another and in particular
through the Documentary Committee of BIMCO. We have selected two forms which contain an
illustrative structure in their printed versions, and which are of value for our purposes in this publication.
The two selected are the MULTIFORM of FONASBA (The Federation of National Associations of
Shipbrokers and Agents), as our voyage charter party, and the ASBATIME of ASBA) for our time
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charter, supported by the AMWELSH and the New York Produce both of ASBA. More about these
later. In the meantime we will start with examining charter parties in general terms.

1.8 A charter party, properly signed, by those authorized to do so, sets out in written form the
contract that has been made between the Owner (or disponent Owner) and the Charterer, it factually
records all the details of the agreement reached between the parties but you should always
remember that the charter party is the memorandum of the agreement; the contract itself will have
been made (as we have seen in Chapter Three) by word of mouth, fax exchanges or whatever. It can
exist independently of the physical movements of the vessel and in some cases, especially in the
fast-moving world of short-sea trading where a vessel may complete two or even three cargoes in
one week, frequently the drafting of charter parties is some way behind physical events, and a ship
may have loaded, carried the cargo and discharged, freight may have been paid and laytime
calculated and settled even before a hard pressed Broker has set to work to draw up the contractual
agreement, the charter party.

1.9 On the other hand, the availability of the charter party may be an essential for trading purposes,
the release of letters of credit, etc. and it should be the aim of every Broker, no matter how hard
pressed, to prepare a charter party as soon as possible following the successful conclusion of a
negotiation. Just occasionally, the preparation of the charter party reveals an error in the negotiating
process, and the sooner such errors are brought out into the open and reconciled the better for all
concerned.

2.0 'Official Charter Parties':

2.1 Certain charter parties are 'official', in that they have been inspected and passed by an
authoritative body, e.g. a chamber of shipping, whilst others have not been so treated or may have
been found lacking in some respect. Certain organizations take it upon themselves on behalf of
their members and, in the case of BIMCO, as a service to world shipping, to inspect and, where
possible, to 'recommend' or 'approve' various forms, going so far as to themselves draft and issue
some documents.

2.2 The explanation of certain varied words of recommendation at the head of some charter
parties can be briefly described as follows:

 Agreed or Trade: The charter party wording has been 'agreed' between a body such as
BIMCO (broadly representing Owners' interests) and a Charterers' organization for a
particular trade. The printed conditions of such a charter party may not be altered in any
way without the express agreement of all the organizations drawing up the document,
which is compulsory for all engaged in the particular trade.

 Adopted: Where a body (e.g. a Chamber of Shipping) 'adopts' a charter party that has
been 'agreed' between say, a Charterers' organization and BIMCO. An example is the
POLCOALVOY charter party, adopted by the General Council of British Shipping. Such a
body can also adopt a charter party that has not been 'agreed', should it approve of
that document's contents, although in the latter case the clauses can be altered by
mutual consent by contracting parties in the trade.

 Recommended: Where charter party text is liable to alterations in negotiations, although

the wording of the printed text meets with the approval of the inspecting body, the form
can be used as a 'recommended' document. An example is the GENCON charter party.
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  Approved: Simply an expression describing 'recommended', 'adopted', or 'agreed'
charter parties.

 Issued: A charter party for which a group such as BIMCO is responsible for drafting and
making available for use.

3.0 Charter Party Library:

3.1 For those faced with the awe-inspiring task of studying popular dry cargo charter party forms,
it will be found productive for the purposes of both examinations and practical trading, to
examine such blank printed documents as can be obtained alongside final, negotiated and duly
amended charter parties. In this way commonplace alterations, deletions and additions to printed
wording can be observed and lessons learned for future negotiations. Additionally, for students and
for practicing Brokers alike, the maintaining of a comprehensive file of sample charter parties, both
blank and worked examples, is an excellent habit and one which will repay the time and trouble
involved many times over during a career in the industry.

3.2 In large centres such as London and New York, blank copies of most charter party forms
can be obtained from specialist stationers supplying maritime documents, failing which local
Shipbrokers or the organization publishing the form may be able to provide guidance on its
availability in particular areas. For those with Internet access copies of many BIMCO approved forms
can be downloaded from the BIMCO website at www.bimco.dk

4.0 CHARTER PARTY WORDING:

4.1 The wording of most charter parties (other than in 'agreed' documents) is used only as a basis
for negotiation and, where necessary, the printed text is altered, deleted or added to, so as to
reflect the specific agreement reached. To the amended 'main' form will usually be added various
typed additional clauses, known also as riders, or as side clauses, and peculiar to the particular
business. On some occasions, an addendum or a side letter, or two, will be added to the charter party,
to record a particular clause or clauses that one or other of the contracting parties wish kept
confidential from certain others who might subsequently refer to the charter party. For example, the
rate of freight or hire may be treated in a confidential manner, with the main charter party clause
referring only to a rate/hire 'as agreed', the actual figure decided upon appearing only in a
detachable addendum or side letter to the charter party. Therefore, port agents, etc. would be
unaware of the rate of freight/hire agreed upon, since they would need only the main charter party
and rider clauses to perform their functions satisfactorily.

4.2 Occasionally, additional agreement(s) will need to be made subsequent to the fixture and the
drawing-up of the charter party, and these subsequent agreements are normally recorded in
additional addenda.

4.3 It is good practice to refer to the number of any additional clauses at the foot of the main
charter party form, with such wording, for example, as 'additional clauses 29 to 55 inclusive, as
attached, are deemed part of and are incorporated into this charter party'. Such is not necessarily
the case with addenda, however, and it may not be apparent to those reading the main charter party
and additional clauses that other agreement has been reached. If addenda are drawn up, though, they
should for good order's sake be accorded a reference number in numerical sequence, i.e:
Addendum No. 1, 2, etc.
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4.4 A side letter is an alternative to an addendum for recording, agreements that both parties
consider fob sensitive for general perusal, e.g. the guaranteeing by one company of a sister
company's performance of the contract. The general market feeling, however, is that a side letter is not
quite so close to the heart of a contract (the charter party) as is a numbered addendum and perhaps, if
legally tested, a side letter would not carry the weight of an addendum.

4.5 It is common practice in sea-trading, however, not to draw up a charter party from a blank form
but to base negotiating upon a previous fixture, altering main terms and additional clauses alike as
required. This system is both labour-saving and expedient, at the same time providing evidence to
Shipowners and their Brokers that certain clauses they encounter in the charter party and perhaps
find unattractive have been previously agreed by other Owners.

4.6 In certain cases, where chartering business is sub-let by a head charterer, the sub-charterer
may be restricted to negotiating strictly on the basis of the head-charter party, using only clauses
that are identical, termed back-to-back, with the main, governing contract.

4.7 Each charter party may differ in some particular aspect, some including peculiarities not seen
in others. It is the task of the sea trader to be aware of the pitfalls and advantages of major charter
party forms, and for Shipbrokers to advise their principals of these when conducting chartering, so
that by adept negotiation the most favorable conclusion can be reached.

4.8 With some documents it is commonplace during fixing to negotiate that printed sections of
text be deleted or amended in some way. These negotiations are always subject, however, to the
relative strengths of the parties involved and, although one or other may be fully aware of the
potential pitfalls of a certain clause, it may not be possible to alter it favourably if the other party is
negotiating from a position of strength. Additionally, depending upon the particular circumstances
of the voyage under negotiation, certain wordings may well have little effect whilst, for another
voyage and another set of circumstances, the phraseology agreed upon may make all the difference
between the success or financial failure of the venture.

4.9 But to start with a sea-trader owes it to himself and his principals to be at least aware of
common charter party wordings and alterations so that act advantageously or otherwise to
prospective ventures. Unfortunately, it is not possible to learn all of these technical peculiarities from
books on the subject. Much must be learned from experience and from the advice of colleagues.
Knowledge can also be gained from comparison between blank pro-forma and previously
negotiated contracts, and from intelligent perusal of shipping newspaper and magazine reports of
shipping disputes and legal decisions. Implications for chartering of legal decisions are reported in
circulars issued by bodies such as BIMCO, P&l Clubs and the like, all essential reading for the sea-
trader.

5.0 DRAWING UP CHARTER PARTIES:

5.1 Once negotiations leading to a fixture have been concluded, it becomes the task of the
Shipbroker acting for the Charterer to draw up the charter party, amending the printed text where
necessary, and adding appropriate side clauses and addenda. Care should be taken to avoid
repetition and the inclusion of irrelevant and unnecessary clauses which are liable to creep in if the
fixture is based upon a completed charter party drawn up on a previous occasion. But nothing
should be deleted, inserted or altered without the agreement of the Owner's Broker. It is also
116
advisable to include the text of all clauses agreed upon, not merely to mention them. For example, if
protective clauses are included, e.g. the Both to Blame Collision Clause, it is not really good enough to
state that it is deemed to be included. It should actually be attached for all to read if required.

5.2 There are schools of thought on what should happen next. Ideally, before any person signs a
charter party, it should be checked by all concerned so as to confirm their agreement with the
contents. It is also polite to follow this course of action. However, where the parties are spread across
the globe, this is impracticable and time-consuming. Of course, a fixture has been made verbally or
in a series of telex messages or cables, and the charter parties existence or otherwise does not alter
that agreement. But a charter parties prime function is to factually record an agreement in an easily
read document, so as to avoid later misunderstandings or poor memory.

5.3 Thus its early production is indeed desirable.

5.4 For practicable purposes, therefore, it is best that the Charterers Broker promptly prepares
the document and either submits same to his Principal, or signs on his Principal's behalf under his
authority, before despatching the half-signed original to the Owner's Broker, retaining working
copies for his own and his Principal's use. Any errors which the Owner's Broker discovers upon
checking the charter party should be discussed with the Charterer's Broker and, if necessary,
rectified. Once content that the document before him factually represents all that has been agreed,
the Owner's Broker should similarly arrange for his Principal to sign or should himself sign under
appropriate authority.

5.5 It is then a matter of courtesy, the Charterer's Broker having drawn up the original document,
for the Owner's Broker to provide whatever copies are required by the various parties to the
contract, the original charter party usually being retained by the Owner.

5.6 But this procedure is by no means sacrosanct, and can be varied at the whim of the parties
concerned, the above formula being suggested merely from the point of view of convenience and
practicality.

5.7 There are several commercially available charter party editors that can be installed on office
computers, and which can produce charter parties at the press of a button. Programs like this are
very useful in busy offices and have dramatically cut the time taken to prepare a final charter party.

5.8 BIMCO, has developed an Internet based charter party editor, named "BIMCO's idea". It is
built around a widely used word processing package meaning that most users will already be familiar
with the layout and controls. Templates of BIMCO approved documents are kept and are available in a
central, common storage, whereas edited documents are stored on a private area only accessible by the
individual user who must pre-register and subscribe to the system

5.9 This ensures the integrity of the original BIMCO form and allows new forms to be added rapidly
to the catalogue of available documents. Upon printing, the edited document is e-mailed to a pre-
registered e-mail address in the shape of a pdf file. The document may subsequently be distributed
by e-mail to the relevant parties. Another great advantage over the old, PC based BIMCO Charter
Party Editor is that the application is not locked to one computer, but may be accessed by anybody in
your organisation, from any computer, without the need for registering that particular PC with
BIMCO.

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6.0 Signing Charter Parties:

6.1 Care should be taken by the Brokers when and if signing on behalf of their Principals to show
the means of that authority, e.g. :

By telex authority from

MEGABULK UK CORPORATION, Monrovia

For and on behalf of

ABACUS CHARTERING LIMITED, London
(as agents or Brokers only)
John Smith, Director

6.2 It is important to include the wording: '...as agents (or Brokers) only', to illustrate clearly that
the role of Abacus is not that of principal.

6.3 With such a qualified signature, a Broker will not be held personally liable for the performance
of the contract unless there is a clause or wording in the charter party clearly showing that the Broker is
in fact a Principal

6.4 Addenda and side letters should be treated in the same fashion as charter parties, being
signed by both parties or their Brokers, in the manner described above.

7.0 Adding Originals:

7.1 Occasionally, perhaps in agreements where documentary credits are involved, it may become
necessary to produce two or more 'original charter parties'. In such cases, each document should
bear its proper title, e.g. 'First Original', or 'Second Original'.

8.0 The Voyage Charter Party:

8.1 This document covers the largest proportion of any fixtures arranged on the chartering market,
despite the trend in recent years for charterers to take more vessels on trip time charter terms than
was once the case.
8.2 Whilst the following list of clauses is by no means exhaustive, it provides some idea of the
normal clauses required in a voyage charter party for dry cargo vessels:

List of Voyage Charter Party Clauses

1. Preamble
2. Cargo Description/Quantity
3. Loading Places
4. Loading Orders/Rotation
5. Discharging Places
6. Discharge Orders/Rotation
7. Laydays and Cancelling
8. Freight
9. Cost of Loading/Discharging
10. Notice of Readiness/Time Counts
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 11. Loading/Discharging Rates
12. Excepted Periods
13. Demurrage/Despatch
14. Notices
15. Ship's Gear
16. Grab Discharge/Stevedore
17. Overtime
18. Shifting/Seaworthy Trim
19. Cargo Separation and Tallying
20. Dues and Taxes
21. Ports Agents
22. Bills of Lading
23. Lightening
24. General Average
25. Strikes
26. Exceptions
27. Commissions
28. Protection Clauses
29. Lien
30. Ice
31. War Risks
32. Signature

8.2 The MULTIFORM Charter was produced by FONASBA in an attempt to create a modern and
even handed, as between Owner and Charterer, general purpose voyage charter. It has unfortunately
found little favour in the market perhaps because for those very reasons that make it an excellent
study form.

8.3 You will probably find the best way of understanding the following references is to first read
the relevant text in the MULTIFORM Charter Party and then the written commentary below:

1. Preamble: This can be extensive in some charter parties. In the MULTIFORM much of what
may be found in preambles of certain forms is contained in clause 1. There are two important
aspects of the brief MULTIFORM preamble, the place and date of the charter party.

2. Place: This can be important as, in the absence of a clause to the contrary, the place where a
contract is deemed to have been made may govern the law which is to be applied to that contract
in the event of a dispute. So, if the place is London, English Law may very likely prevail. The place
can be defined as where the contract is made, usually the domicile of the Charterer's Broker, not
necessarily the abode of one or other of the Principals.

For certainty so that a dispute can be heard under a particular jurisdiction, it is strongly
advisable that a contract should include an 'exclusive jurisdiction clause', in other words,
the charter party should state, for example, that 'English Law is to apply'.
119
3. Date: Equally important, the date to be shown is that by which fixture negotiations are
concluded, with all subjects lifted, in other words, when all negotiating formalities are
complete.

4. Names and Domiciles of Contracting Parties: (Clause 1). The names of the Shipowner (or
disponent Owner) and Charterer, and their domiciles i.e; their 'full styles'.

5. Name and Brief Description.of Vessel: (Clause 1). The MULTIFORM allows for a more complete
vessel description in the main, printed part of the form than many (e.g. compare with the
AMWELSH), others utilising an additional, rider clause, to provide concise details relevant to the
trade/cargo envisaged. The position of the vessel at the time the contract is negotiated is also
important {see line 4) as this governs its likely readiness to load (see line 5). These lines are often
treated very light-heartedly in contemporary negotiations and you will frequently encounter the
simple word 'trading' after the printed word 'now' as in line 4. The courts, however, attach
considerable importance to the accuracy of information about expected readiness to load and
any substantial error in the stated position of the vessel can be considered misrepresentation.
This could, therefore, be treated as a breach of condition entitling the Charterer to rescind the
contract. In the absence of any more specific stipulation, the ship is obliged to proceed to the
loading port with 'reasonable despatch'. It would not, for example, be right for a Shipowner who
had fixed his ship with laydays and cancelling 1/20 July stating 'now trading and expected ready
to load 3rd July' to slip in an additional short voyage and turn up on the 17th July instead of
around the 3rd. The time span between laydays and cancelling is to cover the Owner against
unforeseen delays and if the Owner has been reckless or deliberately misleading in the
expected readiness of his ship, the Charterer would be entitled to claim damages for any loss
attributable to the undue delay. The Charterer would not, of course, be permitted to rescind
the charter unless the result of the breach was such as to frustrate the entire object of the
contract.

In the last year or so, many owners have begun exploring the possibilities of slow steaming
at one or two knots below normal service speed. This is done both to reduce fuel
consumption for economic reasons and to reduce a ship's environmental impact (less fuel
used means less C02 emitted). Unlike time charter parties where a ship's speed is warranted,
voyage charters may not always contain references to the speed at which the vessel should
complete the voyage.

The description of the vessel will usually include the normal service speed of the ship which
some owners will reduce slightly as time elapses after the last drydocking due to the
inevitable deterioration in performance over time. However, there is always an expectation
that the ship will proceed at the fastest service speed commensurate with weather
conditions and safety of the ship and cargo.

This issue has been tested many times in the courts and the accepted position is that there is
an implied obligation that the Master should prosecute voyages with reasonable/ due/utmost
despatch. Most of the past legal judgements concerned instances of deviation or some other
delay such as waiting for spare parts or additional cargoes and the question of economic or
environmental reasons has not really been decided upon legally.

It could be that slow steaming without consulting and agreeing first with the charterer, may
open an owner up to claims for damages.
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6. Condition of Vessel: (Clause 2). It is usual for a Shipowner (or disponent Owner) to confirm
that a vessel is in a suitable condition safely and properly to undertake the contractual
voyage (line 24).

7. Cargo Description and Quantity: (Clause 2). Commodity and nature of goods to be carried
(e.g. in bulk or bagged); stowage factor (e.g. about 55 cubic feet per tonne); and either
minimum/maximum quantity or cargo size margins and in whose option (e.g. 12,000 tonnes,
5% more or less in Owner's option).

8. Loading Places: (Clause 2). Names of loading place(s) and/or range (e.g. 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.

9. Loading Port Orders/rotation: (lines 31 to 34). Rotation can be very important, since extra
steaming can be involved, adding to an Owner's expenses, whereas it might be essentia!
for a Charterer to negotiate loading in a particular rotation so that ship availability fits in
with cargo availability.

10. Discharging Places and Port Orders/rotation: (Clause 3). The comments under 3 and 4
above apply.

11. Laydays and Cancelling: (Clause 4). The spread of dates during 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.

12. Freight: (Clause 5). 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, i.e;
whether freight is deemed earned as cargo is loaded (as in the MULTIFORM) or upon
delivery (e.g. as in the C ORE 7).

13. Cost of Loading/Discharging: (Clause 6). Which of the parties to the contract to appoint and
pay for cargo handling at each port. (See also Clause 11 of the AMWELSH).

14. Notice of Readiness/Time Counting: (Clause 7). An important clause in the calculation of
Laytime, (see Chapter Six).

15. Loading/Discharging Rates: (Clause 8). The speed at which cargo handling activities are to be
performed.

16. Excepted Periods: (Clause 8). Periods when cargo handling normally does not take place and,
therefore, will not count in the computation of laytime unless work is actually carried out
during such times 'when only time actually used shall count'. You will, later on, encounter
charters where the loading takes place at highly automated terminals (e.g. iron ore) where
there are no excepted periods and the abbreviated SHINC (Sundays and holidays included)
will appear in the negotiations.

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17. Demurrage/Despatch: (Clause 9). 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 (at usually half the rate of demurrage) - see
Chapter Six.

18. Notices: (Clause 10). 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.

19. Ship's Gear: (Clause 12). 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.

20. Grab Discharge/Stevedore Damage: (Clauses 14 & 15). 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.

Frequently, however, Masters are required to notify Charterers or stevedores upon

'occurrence' of damage, even though this may not be discovered until overstowed cargo is
unloaded at ports of discharge. It is therefore reasonable that the word 'occurrence' be
replaced by 'discovery'.

21. Overtime, (Clause 17). Who is to pay for overtime.

22. Shifting/Seaworthy trim: (Clauses 18 & 19). 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 ports. It is important to add in a clause of this nature that it is
up to the Master to decide whether a vessel is in safe seaworthy trim or not. Silence on this
point may lead to eventual dispute.

23. Cargo Separations and Tallying: (Clauses 13 & 16). Where a vessel is to carry various parcels of
cargo, it may not be possible for all separations between the individual parcels to be
'natural' - i.e. separated by bulkheads and/or, in the case of tweendeckers, by tweendecks.
The parties may need to agree between themselves on how parcels loaded in the same
compartment are to be separated - e.g. by polyethylene sheeting or by tarpaulins and on
who is to supply and pay for this facility. The tallying (checking) of cargo as it is loaded or
discharged is frequently an expensive operation and, if not carried out conscientiously,
substantial cargo claims can arise for alleged short delivery, bad condition, etc. It is essential
that some provision as to who is responsible at least for payment of tally clerks be entered in
a charter party covering the loading of bagged or similar cargo.

24. Dues and Taxes: (Clause 20). 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.

25. Port Agents: (Clause 21). 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. It is important to remember
that the Agent remains the servant of the Shipowner, and the Shipowner remains responsible for
paying the port costs and the agency fee. Nevertheless, the appointment of an efficient Agent is
also important to a Charterer, who will need to feel secure in the knowledge that proper
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 liaison is being maintained between the Agent and, say, a cargo shipper. Consequently it is
often the case that Charterers specifically negotiate that they have the right to nominate the
Port Agents that will be appointed by the Shipowner.

26. Bills of Lading: (Clauses 22 & 33). The full import of these provisions will be better
understood after reading Chapter Eight. For the present it is important to make sure that similar
provisions should be contained in all voyage charter parties.

27. Lightening: (Clause 23). Where cargo lightening is necessary, a comprehensive clause covering
all facets of this sometimes complex operation should be negotiated. The MULTIFORM and
AMWELSH clauses between them cover several of these facets but not nearly all of them.

28. General Average: (Clause 26). A clause specifying where General Average (if any) is to be
adjusted (e.g. 'in London') and/or paid, irrespective of the ports of call involved and the laws
relating to GA e.g. 'as per York/Antwerp Rules 1974'. Earlier charter parties may refer in
their printed text to York/Antwerp Rules 1950, which should be amended during negotiation
to reflect the latest Rules. It is sometimes negotiated also that where._ a cargo involves
voyages to/from the United States or United States Principals, the New Jason Clause be
incorporated into the contract, dealing with General Average law and practice for
adjustments made in the United States (see Clause 24 of the AMWELSH).

29. Strikes: (Clause 27). Both parties to a charter party have risks and liabilities in the event of
a strike. Various clauses exist, some in far greater detail than in others. The MULTIFORM
repeats the Strike Clause from the GENCON charter party, notorious for its confusing language
and very much in the Owner's favour. Most strike clauses are in fact biased in favour of
Charterers, placing the risk of strikes on Owners - e.g. compare the sweeping provisions of
the AMWELSH Clause 9.

30. Exceptions: (Clause 28). The rights of contracting parties to cancel the charter party in case of
events making its performance virtually impossible - e.g. Force Majeure or Acts of God.

31. Commission: (Clause 31). Specifies the amount and to whom commissions and brokerages
are payable, usually adding that commissions/brokerages are payable on freight,
deadweight and demurrage.

32. Protecting Clauses: (Clauses 32 & 33). A set of clauses commonly included in the printed form
of a charter party or as additional clauses. The New Jason already mentioned is one such clause
(Clause 26). However, others have their roles to play, which are:

33. P&l Bunkering Clause: sets out Owners' rights to deviate for bunkers during the
contractual voyage.

34. Clause Paramount: incorporates a set of rules into the contract (and into bills of lading issued
under the contract), which govern the rights and responsibilities of the carrier. Appropriate
amendment should be made to the older forms to ensure that the latest rules apply, the
MULTIFORM updating the long established Hague Rules, to incorporate the Hague/Visby
Rules of 1968. Other charter parties involving voyages to/from America and/or Canada
should utilize either the USA or the Canadian Clauses Paramount (see the AMWELSH, Clause
24).
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 A new set of rules developed by the UN and now known as the Rotterdam Rules were made
open for ratification in early 2009. if these rules attract an appropriate number of ratifications
and are adopted into national legislation by states they are likely to become the new standard
rules. While parties to a charter party are free to negotiate conditions applying, the
Rotterdam Rules may well at some future time apply to bills of lading issued under the
c/p.

35. Both to Blame Collision: covers an Owner's rights in respect of American Law in case of
collision at sea.

36. Lien and Cesser: (Clause 24). Most charter parties contain a cesser and lien clause and the
MULTIFORM (and AMWELSH Clause 21) are no exceptions.

37. Ice: (Clause 32). 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.

The MULTIFORM uses the BIMCO recommended GENCON ICE CLAUSE, which is widely
reproduced in other charter party forms.

The object of an ice clause should be to prevent a Shipowner and his Master being left with
no alternative but to attempt to proceed to a contractual destination irrespective of ice
conditions, and to avoid damage that may be caused to ship and cargo as a result.

38. War Risks: (Clause 32). 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. For example, the Chamber of Shipping War Risk Clauses 1 and 2 are some
fifty years old, out of date, and silent on several important issues, one being cancellation
rights in the case of an outbreak of war before or after a vessel's voyage to her loading
port, or after arrival. Yet still the Chamber of Shipping Clauses are widely utilized.

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. To accomplish this objective, MULTIFORM uses the VOYWAR 1950 Clause, itself forty
years old and although better suited to current needs, biased in the Owner's favour. BIMCO
recommended their own Standard War Risk Clauses - "Voywar 1993" and "Conwartime 1993"
and these represent the best current position.

39. Signature: No charter party is complete without the signatures of or on behalf of

the parties concerned:

9.0 THE TIME CHARTER PARTY:

9.1 As we have seen from Chapter Three, time chartering can be sub-divided between period
time charters perhaps involving several years and trip time charters, for one or several trips. There
are no charter party forms designed purely for trip charters, an employment technique that has
become particularly popular during recent years, trip charters being negotiated on standard time
charter forms and adapted slightly where appropriate.
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9.2 Although considerably fewer in number than the wide choice available for voyage chartering,
there is an adequate number of dry cargo time charter forms for use in the industry, although by far
the largest number of deep-sea dry cargo trips and periods are fixed on the basis of the New York
Produce Exchange (NYPE) Charter Party, first drawn up as long ago as 1913. It has been updated
since, most notably in 1981, when it was renamed ASBATIME. Nonetheless, by that time the 1946
version had become widely used and, to the basic printed text, many charterers had added over the
years numerous side-clauses. It transpired that few Charterers were prepared to abandon their
NYPE 1946 + side clauses charter party and so, despite the availability in the ASBATIME of a neater,
more up to date charter party incorporating many of the previous NYPE clauses, and standard rider
additions, the 'market' remains wedded to the NYPE 1946 c/p. It has again been revised in 1993 and
renamed New York Produce Exchange Time Charter (NYPE 93) incorporating many of the side
clauses commonly used in conjunction with the 1946 version, in the hope that this will create a more
suitable replacement. While it is still too early to confirm that it is generally replacing the earlier
versions, there is no doubt that it has met with great market interest.

9.3 For convenience we will examine the elements of a time charter party based on the
ASBATIME, you will also find the NYPE 93 form enclosed in the appendices

9.4 Whilst the following list is by no means exhaustive, it provides some idea of the normal
clauses required in a time charter party for dry cargo vessels:

List of Time Charter Party Clauses

1. Preamble
2. Vessel Description
3. Duration of Period/Description of Trip(s)
4. Trading intention/limits
5. Cargo Intention/exclusions
6. Vessel Condition
7. Owners' Responsibilities
8. Charterers' Responsibilities
9. Delivery and Re-delivery
10. Bunkers
11. Hire
12. Off-hire
13. Vessel Performance
14. Vessel Maintenance
15. Cargo Claims
16. Master/Officers
17. Logbooks
18. Supercargo
19. Pollution
20. Salvage
21. Laying-up
22. Arbitration
23. Lien
24. Assignment
25. Exceptions
26. Requisitioning
27. Bills of Lading
28. Stevedoring Damage
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 29. Commissions
30. Protective
31. Clauses.

1. Preamble: Contrary to the MULTIFORM and the AMWELSH, the preamble of the ASBATIME is
lengthy, taking up most of the first page of the charter party, and covering a wide range of
subjects within its text, not least the place where the contract is made, the date of the charter
party and the names and domiciles of the contracting parties. (NYPE 93 follows the same
pattern.)

2. Vessel Description: (Preamble lines 5/23). Depending upon the complexity of the intended
trade, the description of the vessel may be more or less as for voyage charter parties, with the
important addition of speeds and bunker consumptions. For the sake of clarity, it is also advisable
to include clarification of the term 'good weather conditions' (in line 19), usually with reference to
weather and sea conditions (e.g: Beaufort Wind Scale and, perhaps Douglas Sea State see NYPE
93 and Chapter Nine) against which factors a vessel's performance should be measured. Not
forgetting the vessel's position and readiness (line 23) which is as important to a time charterer
as to a voyage charterer.

3. Duration of Period/Description of Trip(s): (Preamble lines 27/30). The duration of a period

time charter should be entered, together with a margin either side of the formal period, e.g; '15
days more or less, at Charterers' option*. The parties can agree an exact redelivery date, but in
practice this is difficult to comply with and, in the event of legal disputes, most courts would
imply a reasonable margin.

For trip charters designed for specific voyages, it is commonplace to insert an approximation
of the voyage duration, e.g: '45 days', although this is normally qualified by the addition of the
words 'all going weil5 or 'about' or 'without guarantee'. (Here a word of warning for Shipowners
and their Brokers. Legally 'about' will be given a reasonable implication. An actual duration of '50
days', for example, could be interpreted as 'about 45 days'. However, 'without guarantee' means
exactly that. In effect redelivery after only '10 days' is legally satisfactory).

4. Trading Intentions/limits: (Preamble lines 57/62 - Clause 6). The areas of the world
in which the vessel is to be employed should be entered, e.g: 'world-wide, but always
within Institute Warranty Limits' (see Chapter Nine), as well as listing those countries and
parts of the world specifically excluded from the permissible trading area. Where there is
insufficient space to type in the full agreed data, it may be necessary to include the same
in a rider clause, using blank lines in this part of the charter party to refer the reader to
the relevant rider clause.

This also becomes a logical point in some charter parties to include limitation to the effect that
a vessel must trade always between 'safe berths and ports', usually 'always afloat'.

5. Cargo Intention/exclusions: (Preamble lines 45/56 - Clause 12). Include details of cargoes
which can and those which cannot be carried (see reference to cargo exclusions in Chapter Two).
Trip time charters often specify the actual cargo to be carried although, if this is only an
'intention', a cargo exclusions clause must still be included.

6. Vessel Condition: (Preamble - lines 8/9 and lines 41/454). Just as for voyage charter parties, an
undertaking by the vessel's Owners that the vessel is in good condition.

7. Owner's Responsibilities: (Clause 1). Lists what an Owner is to provide.

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8. Charterer's Responsibilities: (Clause 2). Lists what a Charterer is to provide.

9. Delivery and Redelivery: {Preamble lines 34/41, Clauses 28 and 34). Places of delivery/ redelivery,
laydays/cancelling, notices to be given by Owners prior to delivery and by the Charterer prior to
redelivery.

10. Bunkers: {Clause 3). It is common practice for time charterers to take over and pay the Owner for
bunkers remaining onboard a vessel upon delivery onto 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. It is often the case that about the same quantities and
prices prevail at both ends of the time charter, although occasionally one side or the other
benefits by shrewd negotiation, and obtains either inexpensive bunkers or sells at a good
profit.

With some trip-charters of short duration, however, this system of taking over and paying for
bunkers remaining onboard may prove unnecessarily cumbersome, and it may be arranged
that Charterers supply sufficient bunkers for the trip at their own expense, or that they pay an
Owner for only the estimated quantity of bunkers required for the trip out of the total
remaining onboard. Balances in one side's favour or the other are settled upon completion of the
time charter in the financial reconciliation.

The grade and quality of bunkers supplied to a vessel has developed during the 1980Js into a
subject of considerable importance. The wording of the printed ASBATIME does not reflect this
importance, however, restricting itself to just a brief reference in the preamble, lines 15/18.
Almost certainly an additional rider clause will be required, which contains a full specification of
the quality of bunkers that must be supplied to a time chartered vessel and this has been
addressed in NYPE 93, Clause 9.

11. Hire: (Clauses 4, 5 and 29). 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 the Master. Agreement for procedure in case of late payment of hire. (The subject of time
charter hire is dealt with at length in Chapter Five).

12. Off-Hire: {Clause 15). Provisions leading to off-hire situations, e.g; poor performance; strike of
crew; dry-docking; etc., and appropriate deductions from hire payments. {See also Chapter
Five).

13. Vessel Performance: There is no especial stipulation about vessel performance in the ASBATIME
which, in common with most dry cargo charters penalises through its off-hire provisions (see
Clause 15) for poor performance but, in contrast to tanker time charter parties, does not
reward dry cargo Owners in the event that their vessel performance exceeds the contractual
speed and/or consumes less bunkers than specified. There is a valid case for dry cargo time
charterers to copy tanker traditions and to enter in the charter party a range of speeds and
consumptions, say from 8 knots up to 15 knots, in both laden and ballast conditions. Ideally a
Master should be given specific instructions at the commencement of each voyage leg as to a
Charterer's performance requirements, and failure to perform as per charter commitments
should be penalised whereas extra performance should be rewarded.

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14. Vessel Maintenance: (Clauses 20 & 21). The ASBATIME restricts its comments to dry-
docking and to ship's gear. Yet there might well be additional rider clauses depending
on the complexity of the ship type and/or trade involved, e.g; a reefer or a logger.

For trip charters it is customary to delete the dry-docking clause and replace it by a simple
statement such as 'no dry-docking during this time charter, except in cases of emergency'.

15. Cargo Claims: For their mutual benefit, it is important that time charterers and Owners
of time chartered vessels reach an understanding on how cargo claims (if any) will be
handled, which of the two is to handle them, and under what authority. Clause 30 of the
ASBATIME sets out a very brief division of responsibility but many time charter parties draft
a rider clause incorporating into the charter party the detailed NEW YORK PRODUCE
EXCHANGE INTER-CLUB AGREEMENT.

16. Master/Officers: (Clauses 8 & 9). 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 vessel's employment is concerned. It is frequently the case that a rider
clause lists the duties expected of a time chartered ship's Officers and crew, whereas Clause 9 is
a universal clause giving the Charterers rights should they feel that the Master and/or his
Officers are not carrying out their responsibilities towards the Charterers in a reasonable
manner.

17. Logbooks: (Clause 11). Another protection clause for Charterers' interests. In fact, it is frequently
the case that Charterers add a clause, or wording to this clause, that they have the right to check a
vessel's performance by reference to a specialized weather routing company, e.g. Ocean routes,
and in the event that the logbooks and the independent reports disagree, the independent
reports take precedence over the logbooks. This is important in respect of off-hire claims and
vessel's performance.

18. Supercargo/Victualling: (Clause 10). Spells out Charterer's right to appoint a supercargo and the
costs of exercising this right with regard to meals and accommodation. A right not exercised
very frequently, but an invaluable means not only of watching over a time chartered ship's
performance, but of providing training to a Charterer's personnel.

The second part of the clause deals with meals which are to be provided by the Owners, and the
cost of these meals.

19. Pollution: (Clause 38). Many states are becoming extremely conscious of pollution of
their waterways and coastlines and merchant Shipowners must ensure that their vessels
comply with a host of international and national legislation in connection with this
subject. Not only does this affect tankers. The cost of cleaning up and fines levied following
pollution can be considerable, even if caused by, say, a dry cargo ship's ruptured
bunker tanks. Contracts should therefore specify the rights and responsibilities of the
parties, as well as listing the certificates that the contracted vessel is expected to carry.

P&l Clubs usually provide insurance cover for entered vessels against oil spillages and resulting
fines and clean-up expenses. Certain states, however, may insist that Owners of all vessels calling
at their ports (dry cargo as well as tanker ships) provide evidence of financial responsibility for
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 pollution liability in case of oil spillage, such evidence being usually in the form of a certificate
of financial responsibility. Potential amounts demanded as security can be huge and entail the
tying-up of immense sums of capital against relatively small risks of pollution.

As a result, P&l Clubs do not encourage states to insist on their own, individual demands for
security, instead providing dry cargo Owners with just the United States Federal Water
Pollution Control Act Certificate. Further P&l Club assistance with certification to comply with
any requirements of individual governments is not possible. Consequently, Owners should not
agree time charter party clauses that provide for same.

20. Salvage. (Clause 19). It seems fair that expenses and rewards in cases of salvage should be
shared, and this is normal practice.

Laying-up: (Clause 37). Unlike tanker time charter parties it is only rarely that dry cargo Owners
and time charterers consider the risks of a vessel laying-up through lack of employment. For a
trip-charter this is, of course, not necessary, but for lengthy period employment, this attitude
should be carefully reconsidered. What most dry cargo time charter parties do include,
however, is reference to what happens if a vessel is detained in port for periods in excess of 30
days.

22. Arbitration: (Clause 17). An essential part of any contract. The ASBATIME specifies New York,
since the charter party is drafted and published by a body resident in New York. Frequently,
however, this clause is either deleted and replaced by a rider arbitration clause specifying some
other venue, or the reference to 'New York' in the clause wording is replaced by, say 'London'.

23. Lien: (Clause 18). Just as an element of voyage charters, see above, each party's right of lien
must be considered and stipulated.

24. Assignment: (Preamble lines 31/33). Defines a Charterer's right to sub-let the vessel to another
Charterer.

25. Exceptions: (Clause 16). Similar to the voyage charter clause.

26. Requisitioning: (Clause 33). Arrangements in the event a vessel be requisitioned by the
government of her Flag State.

27. Bills of Lading: (Clause 8). 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.

28. Stevedore Damage: (Clause 35). Provision for notification of stevedore damages and repairs.

29. Commissions: (Clauses 26 & 27). Specifies amount and to whom commissions and brokerages
are payable.

30. Protective Clauses: You will recognize most of the protective clauses from the above comments
under the elements of a voyage charter party, including, Clauses Paramount; New Both to Blame
Collision and the New Jason. It is important, however, that only War Clauses designed for time
charter parties are used, not voyage clauses. In case of a major war between the so-called
'superpowers', or involving nations connected in some way with the charter party, the contract
129
 may become null and void. It is common practice to incorporate a clause to this effect, listing
the nations involved and spelling out the rights and remedies of the parties in the event of
such war-like activities.

There is also protection for an Owner (see the last paragraph of Clause 16) for the vessel to
have various 'liberties'.

As in the voyage charter party counterpart, the object of a time charter ice clause should be to
prevent a Master being left with no alternative but to proceed to a contractual destination
irrespective of ice conditions. Clause 24 achieves this to a certain degree.

The advent of the ISM and ISPS Codes introduced by the IMO has led BIMCO to draft new
protective clauses aimed at setting out the rights and responsibilities of both parties in relation to
the safe management of ships and security issues.

31. Signature: Not to be forgotten!

10.0 The Bareboat Charter Party:

10.1 Bareboat chartering, or 'chartering by demise' as lawyers call it, is the contracting for the lease
of a vessel, whereby the Owner charters away the ship to another party who, in turn, assumes more
the role of Owner than Charterer, the vessel coming under the complete control of the bareboat
charterer, who has to supply everything including Master, officers and crew.

10.2 The true Owner assigns to the bareboat Charterer all responsibility for operating the vessel,
and thus entitlement to any profits (or losses!) the ship may make, in return for an agreed and
regular payment of hire. Naturally, such a method of period employment is designed for years
rather than for months, and bareboating serves the admirable purpose of allowing persons who are
not experienced in shipping to invest in a ship without the responsibility of organizing its day-to-day
affairs, at the same time permitting those with experience and an entrepreneurial spirit to assume
the role of an Owner without the necessity of raising finance to purchase a vessel.

10.3 Indeed bareboat chartering is in effect a way of financing shipowning. The bareboat Charterer
can register the ship under the flag of his own country, even if that is different to the actual Owners.
To the outside world the bareboat Charterer of a vessel is seen as the Owner.

10.4 BIMCO designed two bareboat charter parties in the 1970's to meet increased demand for
suitably worded contract forms; one intended for the bareboating of existing vessels {with or without
mortgages), the BARECON A, the other for newbuildings financed by a mortgage, the BARECON B.
Recently reflecting changes in bareboat practice with particular regard to 'flagging out' and the
registration of mortgages under 'off-shore' ship registries, a BIMCO documentary sub-committee
designed a new bareboat charter party, incorporating the updated BARECON A and BARECON B
provisions into one form, the BARECON 89, together with optional sections.

10.5 Although a system of vessel employment of which it is important to have a general knowledge,
it is not essential in a book of this nature for readers to have as detailed an understanding as for
voyage and time chartering. Consequently, the BARECON 89 charter party text is included under and
whilst it is recommended that the largely self-explanatory clauses be studied, there is not the need
for analysis of the elements of a bareboat charter party in the same way as for voyage and time
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charterparties described above. A STUDY OF GENCON 94 CHARTERPARTY

10.6 The reader must have understood by now what are voyage charters and time charters and
the difference between the two.

10.7 There are many charterparty forms used for voyage charters, depending on the cargo and
the trade. Some of the frequently used ones are:

1) CHAMBER OF SHIPPING FERTILISERS CHARTER* 1942 --CODENAME: hEIWCON. As the name

suggests it is for carriage of fertilisers.
(2) AUSTRALIAN GRAIN CHARTER, 1972 -CODE NAME: AUSTWHEAT. For carriage of grain from
Australia.
(3) THE MEDITERRANEANIRONORE CP-CODENAME: FORM - C (ORE) 7. This is a widely used
charterparty for carriage of various ore cargoes.
(4) THE BALTIC & INTERNATIONAL MARITIME CONFERENCE UNIFORM GENERAL CHARTER
(ASREVISED 1922, 1976AND 1994) - CODENAME: GENCON

10.8 This is a widely used charterparty and as the name suggests - "General" ~ it is not
mentioned for any specific trade and can be used for various types of cargoes/trades.

10.9 Though individual charterparties are used for different trades, they have to be recognized
either by a national or an international body like BIMCO, FONASBA, U.K. Chamber of Shipping, etc. in
order to be recognized in international trade.

10.10 The GENCON CHARTERPARTY was recognized in 1922. Thereafter it was revised in 1976 and the
latest revision was effected in 1994. We are now referring to the latest edition i.e. the 1994
version.

10.11 These charterparties are only a base. The parties to the charter mutually negotiate and
makes several deletions and amendments to the form. Furthermore, additional clauses (known as
"rider clauses") are added to form an integral part and parcel of the charterparty.

10.12 A copy of 1976 version showing markings where changes have been made in the 1994 version
is attached as an amiexure to this lesson.

11.0 The Gencon Charterparty:

The Gencon Charterparty 1994 consists of two parts

PART I

This page (in the 1994 version) consists of several boxes (twenty six). Hence, this charterparty is also
referred to as GENCON Box-Type. This page gives the summary of the main terms agreed in the
charterparty, unlike other charterparties . A beginner may find it difficult to locate the main terms
in other charterparties.

PART II

Consists of two pages with clauses numbered from 1 to 19. As mentioned earlier, several
deletions and additions are made in these clauses.
Some of the clauses are discussed below:

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CLAUSE 1

PARTIES TO THE CONTRACT

Contains details of the parties to the contract, the names of the owners and the charterers, the
name and main description of the vessel. It does not essentially cover all details. Hence, there will
be a separate description clause in the rider clauses.

The second paragraph refers to proceeding to loadport, loading the cargo and then proceeding to
the discharge port(s) or place(s) ordered on signing the Bills of Lading. The Bills of Lading may or
may not have the name of the discharge port(s) mentioned as the charterers may not have sold the
cargo. Hence, the receivers of the cargo require time to decide which place/port would give a
better turnaround. Hence, the Bills of Lading could just mention discharge port -- "one safe port
either on the West Coast or East Coast of India." The charterparty will clearly indicate when the
port will be nominated.

If a vessel is fixed to load or discharge from a named port it is the responsibility of the
vessel/owners to check and ensure that the vessel is workable on dimensions to load/discharge at
that port.

Say, a vessel is fixed to discharge a cargo of fertilisers at Mumbai. The draft available at Mumbai
is 30 feet. The vessel should be loading the agreed cargo quantity with the agreed tolerance and
arrive at Mumbai within the specified draft limit. If the draft exceeds 30 feet, the charterers will ask
the owners to lighten the cargo at owners' cost and time till the draft reaches the permissible level
of 30 feet. This additional cost and time would affect the owners' voyage economics.

CLAUSE 2

0WNERS' RESPONSIBILITY CLA USE

Owners are to' ensure that the vessel is seaworthy in all respects. Seaworthiness does not apply
only to the vessel. The vessel should have the required complement/trained personnel on board,
proper certificates of manning, machinery, hull insurance, P&I cover, etc. and sufficient bunkers tc
perform the voyage or to reach the next bunkering port, enough stores/provisions for the crew,
etc.

CLAUSE3

DEVIATION CLAUSE

This mentions the owners' right to deviate the vessel if required.

CLAUSE 4

PA YMENT OF FREIGHT

Intaken quantity of cargo refers to the quantity of cargo the vessel has loaded. This is
determined either by draft survey or the figure given by shore Joading installations depending
upon the practice followed by a particular port.

Freight pre-paid Bill of Lading implies that freight has already been paid to owners in advance. Bills of
132
Lading are required to be pre-paid for the purpose of negotiating the Letter of Credit. Owners are
at risk if they agree to issue freight pre-paid Bills of Lading without receipt of freight.

When mention is made of freight payable on out-turn quantity, it means on quantity that will
discharged at destination. However, presently charterers make a provision in the rider clauses
that they have the option of agreeing to 1% margin in lieu of weighment, i.e. the freight is
payable on 1% less than the Bill of Lading quantity.

CLAUSE 5

LOADING-DISCHARGING

This clause clearly states that all loading and discharging operations are to be done without any
expense to owners, i.e., on free in and free out (FIO) terms.
Charterers are to have free use of vessel's gears, if so described, in the vessel's description during
negotiations.

STEVEDORE DAMAGE

This was one of the important clauses which were missing in earlier versions of the charterparty.
However, this is now taken care of by owners by inserting a rider clause.

If damages occur to. a vessel while loading and discharging mainly due to negligence of
stevedores who operate the vessel's gears or shore equipment, these damages are to be reported
to ti.e charterers/their agents immediately on occurrence, so that they can give a suitable notice to
the stevedores and make good the damages without any delay to the vessel. Otherwise any delay
caused to the vessel it on charterers account.

CLAUSE 6

LAYTIME

Choice of
(a) separate laytime for loading and discharge, or
(b) total laytime for loading and discharging is made on the basis of the terms agreed.

In most cases, loading and discharging laytime are separate. This is also called "non-reversible
laytime".

COMMENCEMENT OF LA YTIME

This is the cause of major disputes. Laytime is counted depending upon its commencement. The
present version (94) is very much in favour of owners as the vessel can tender notice of readiness if
berth is unavailable and. laytime is to count as if the vessel were on berth. In case the inspection
of the holds is not passed, vessel will be off-hire from the time of rejection till the inspection" of
the holds fit for loading is passed.

In previous versions this was always a point of dispute as charterers' contention would be that the
vessel's earlier notice of readiness (NOR) was invalid as the vessel's holds were not ready and fresh
NOR was supposed to be given and time was to commence only thereafter.
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CLAUSE 7

DEMURRAGE

Contrary to what is mentioned here, it may not be practical to pay demurrage on daily basis. It is
agreed that demurrage is paid within certain number of days after completion of discharge on
receipt of owners' time-sheets and statement of facts for load and discharge ports.

No mention is made about despatch money earned by charterers for completion of vessel's
loading or discharging operations before the completion of the stipulated laytime.

This amount is also payable on per-day basis. It is generally half the demurrage rate.

CLAUSE 8

LIEN CLAUSE

This is a clause to protect owners' interests for non-receipt of freight but is seldom effective as
once a pre-paid Bill of Lading is issued and has been negotiated, by receivers or buyers of cargo,
owners are bound to deliver the cargo to the holder of the Bill of Lading.

CLAUSE 9

CANCELLING CLAUSE

In all charter parties charterers have an option to cancel the charter if vessel is not presented
within the agreed cancelling date, owners being always at the grace of the charterers. It is
required that the vessel must be presented at the load port and it is then left to the charterers
whether to accept or cancel the fixture. This could involve ballasting of the vessel as the
loadport may be far away from the port where the vessel is free.

The present version covers this possibility and offers solace to the owners. Owners can now
inform charterers the vessel's inability to arrive at the loadport/delivery within the cancelling date
and request for acceptance of revised cancelling date or whether they could exercise the option
of cancelling the charter- party.

CLAUSES 11 & 12

PRO TECTIVE CLA USES

Clauses 11 and 12 "Both-to-Blame Collision Clause" and "New Jason Clause" are called
protective clauses as they are of no commercial significance but are legally necessary to protect
owners interests.

CLAUSE 19

LAW & ARBITRATION

There was no mention of this aspect in previous versions of the charterparties. The present
version has incorporated this. Also included is Arbitration in accordance with Small Claims
Procedure of LMAA (London Maritime Arbitrators' Association).
134
IMPORTANT: STUDENTS MUST STUDY GENCON CHARTER, 1994, PROVIDED IN THE APPENDIX

12.0 A STUDY OF NYPE 93 CHARTERPARTY:

12.1 NYPE is the most commonly used Time Charterparty Form for carriage of dry cargoes. NYPE
stands for New York Produce Exchange. As the name suggests it had its origin in New York.
This form too has been amended and revised on several occasions to meet the changing needs of
its users. The last revision was approved in 1993.

12.2 NYPE 1993 consists of forty five (45) clauses.

12.3 Like all agreements, the charterparty begins with place and date and details of the
contracting parties. The name of the vessel and its description follows. This includes the speed of the
vessel and fuel consumption.

12.4 Speed and consumption is not described in a voyage charter as the owners themselves
undertake to perform the voyage whereas in a time-charter, charterers execute the voyage.
While describing the vessel, shipowners must take care that the vessel is not described wrongly as
charterers have the right to make full use of vessel's space as stated during negotiations and if
there is any misrepresentation, charterers are entitled to claim damages or even cancel the
charter.

12.5 One major claim under time-charter is the speed claim i.e. if the vessel does not maintain
the speed as described the charterers are eligible for compensation.

CLAUSE 1

DURATION

Under time-charter the vessel is hired for a period of time ............... one time-charter trip (TCT)
via West Coast of India to Arabian Gulf, duration about 20/25 days WOG (without guarantee). For a
time-charter, charterers are expected to give the duration of the charter in good faith. However,
charterers always mention the duration without guarantee, the reason being the delays at the load
port or disport are not known to them in advance and these are beyond their control. If they
guarantee duration, the owners can claim damages both if the vessel is re-delivered earlier than the
agreed duration or delayed beyond the agreed duration.

There are instances when charterers overlap the duration according to owners' interpretation
mainly due to the period not being specified by use of terms like "about" 7 months. To avoid
any ambiguity owners have started qualifying the term "about" to mean 10 or 15 days. Otherwise
the minimum and maximum period is mentioned, such as minimum 6.5 months to maximum 7.5
months.

CLAUSE 2

"DELIVERY

The point of delivery is to be clearly mentioned. If only delivery "Mumbai" is stated it is not clear.
Suppose a vessel is discharging in Mumbai for the preceding voyage and for the next time charter,
the vessel is to proceed to load from Kandla. It is not clear who will incur pilotage and other
expenses to leave the Mumbai port. It also involves time. Hence, in such cases it is advisable to
mention delivery "Dropping Outward Pilot (DOP)" i.e. the owners will deliver the vessel on DOP basis
after paying for all expenses and the vessel will be ready to proceed from that point.
135
Similarly if the vessel is to be delivered at Kandla, charterers' loadport, then owners are required to
ensure that the terms "Arrival Pilot Station (APS)" are mentioned as owners' responsibility ceases
when the vessel arrives at that point.

Vessels are also delivered on time-charter on passing certain positions (latitude/longitude) or

passing certain ports like Singapore.

CLAUSE 3

ON-OFF HIRE SURVEY

On-hire and off-hire surveys are conducted to ascertain the bunkers remaining on delivery and
redelivery. Similarly to ascertain the condition of the vessel i.e. if there are any damages to the
vessel at the time of delivery, same is taken note of to avoid any dispute that may arise at a later-
stage as to how/when the damage has occurred when a comparison is made between on-hire and
off-hire report. Any damages if occurred during the charter are on account of the charterers and
charterers must make good the same. (Also refer to clause 35 « Stevedore damage).

CLAUSE 4

DANGEROUS CARGO CARGO EXCLUSIONS

Depending upon the vessel's design and condition owners may like to exclude certain cargoes in
addition to dangerous and inflammable cargoes.

Cargoes like sulphur are corrosive in nature and if loaded will affect vessel's holds. Fearing
damage to the holds which are in good condition, owners avoid to carry such cargoes.

Petcoke due to its oily nature and discolouration to holds, besides requiring extensive cleaning, is
one of the other cargoes excluded by the owners.

Bulk cement solidifies while in contact with water. Hence vessels which are not certain of water
tightness of hatch covers avoid carrying this cargo, fearing claims due to damage to cargo.

Certain cargoes like grain and mineral sands require high standards of hold cleanliness. If holds are
not clean to the expected standards, surveyors will reject the vessel and the vessel will be off-hire till
cleaned further to the satisfaction of surveyors. If shipowners are not certain of the condition of
cargo holds they should avoid such cargoes.

CLAUSE 5

TRADING LIMITS

Vessel is expected to trade within Institute Warranty Limits (IWL). The limit is set by hull
underwriters and the vessel is insured for trading only within these limits. However, at times
owners agree to break the limits if charterers are willing to pay the additional premium charged by
the underwriters.

Certain countries have their exclusions (country flag exclusions); example, Indian flag vessels are
not permitted to call Pakistan.

Several countries had boycotted South Africa during apartheid days. Due to Arab League's
136
boycott of vessels calling Israel, Israel is excluded as vessels calling at Israel are not permitted to
call at Arab countries.

Ships which employ non-ITF crew exclude countries which have strong 1TF unions such as
Australia.

CLAUSES 6, 7and 8

OWNERS TO PROVIDE CHARTERERS TO PROVIDE PERFORMANCE OF VOYAGES

These clauses explain in detail functions of owners and charterers while the vessel is on hire.

CLAUSE 9

BUNKERS
The agreed quantity of bunkers on delivery and redelivery along with the prices are mentioned in
this clause.

To ensure that quality and compatible bunkers are supplied, provision is made to specify the
grade of fuels to be supplied.
CLAUSE 10

RA TE OF HIRE' REDELIVERY AREAS & NOTICES

Charter hire is generally calculated on daily basis.

The port or range where the vessel is expected to be redelivered is mentioned in this clause.
Owners would require a redelivery notice so that they have sufficient time to seek further
employment for the vessel elsewhere.

CLAUSE 11

HIRE PAYMENT

Charterers are expected to remit charter hire in full (including banking charges) so that the
owners' bank receives entire charter hire without any deduction.
If by any chance charter hire is not received in time, owners can withdraw the vessel only after
giving sufficient notice to charterers.

CLAUSE 12

BERTHS

It is the charterers' responsibility to ensure that the vessel goes to a safe berth or a safe anchorage
where the vessel can lie afloat safely.

CLAUSE 13

SPACES AVAILABLE

The vessel with cargo space as described is to be made available for charterers' use along with
137
the vessel's gears.

CLAUSE 14

SUPER CARGO & MEALS

Though mention is made of supercargo accompanying the vessel presently, with the improved and
faster means of transport, this clause is not of much use except if the ports are closeby and
inaccessible by other means of transport.

CLAUSE I5

SAILING ORDERS AND LOGS

Charterers have a right to inspect the vessel's log book to ascertain if there was any diversion or
speed loss etc. as the time involved is on charterers' account.

CLAUSE 16

DELIVERY CANCELLING

This clause refers to the vessel's laytime cancelling (laycan). Provision is made whereby owners can
request for extending vessel's cancelling date and charterers are to confirm the extension or cancel
the charter.

CLAUSE 17

OFF-HIRE

Vessel will be off-hire if there is any breakdown of ship's equipment or stoppage/detention due to
fault of ship's crew. Diversion to collect stores or land sick crew will be considered as off-hire.
Any detention to the vessel due to the fault of the charterers or their representatives are always
on charterers' account i.e. the vessel will be on-hire.

CLAUSE 18

SUBLET

Charterers have an option to sublet the vessel or sub-charter it to others. However, charterers will
always remain responsible for payment of hire to owners.
CLAUSE 25

GENERAL AVERAGE

Mention is to be made whether General Average is to be in London or New York.

CLAUSE 26

NAVIGATION
Even when vessel is on time-charter, the vessel owners will be responsible for the faults of pilots and
138
tugboats.

CLAUSE 27

CARGO CLAIMS

Cargo claims are to be settled between owners and charterers as per the Inter-Club Agreement.

CLAUSE 28

CARGO GEAR AND LIGHTS

This clause highlights owners' responsibility for maintaining the vessel's gears.

CLAUSE 30

BILLS OF LADING

Bills of Lading are always to be in conformity with the Mate's receipts.

Since owners are not responsible for deck cargoes, the Bills of Lading in such cases are to be
claused as mentioned.

CLAUSE 31
PROTECTIVE CLAUSES

These are to protect owners' interests and are of no other commercial value.

CLAUSE 33

ICE

It is very risky for a non-ice classed vessel to go to a port which is ice-bound.

CLAUSE35

STEVEDORE DAMAGE

Charterers will be responsible for all stevedore damages. However, the Master is to ensure that
the damages are reported in time. Charterers are to make good the damages.

CLAUSE 36

CLEANING OF HOLDS
Intermediate hold cleaning, if required, is charterers' responsibility. However, charterers can
make use of the services of the crew by paying them the agreed amount.

CLAUSE 37

TAXES
Unlike voyage charter, where freight tax is paid by the owners, in time-charter all taxes are on
charterers' account.

139
CLAUSE 38

CHARTERS COLORS

Charterers require this option when the vessel is on long term charter.

CLAUSE39 ;

LAID UP RETURNS

If the vessel is at a safe berth or safe anchorage for more than 30 days, owners can claim laid-up
refund from the hull underwriters. Since the vessel is on a time charter, charterers have a right to
the same.

CLAUSE 40
DOCUMENTATION

Vessel, is to have on board all necessary certificates.

CLAUSE 45

ARBITRATION

This clause gives choice of Arbitration to take place either in New York or in London.
STUDY THE NYPE 93 CHARTERPARTY ATTACHED HEREWITH, AS ANNEXURE TO THIS LESSON.

oooooo

SELF-ASSESSMENT AND TEST QUESTIONS

Attempt the following and check your answers from the text or appendices:
1. Who pays for the cost of loading when 'gross terms' apply?
2. What charter party form would you expect to use for a cargo of coal from Australia?
3. Name four bodies active .in drafting charter party forms.
4. What effect does an Ice clause have?

*************

140
CHARTERING FINAL YEAR

LESSON 9

BILLS OF LADING &

BILLS OF LADING ISSUED UNDER A CHARTERPARTY
1.0 BILLS OF LADING

The Bill of Lading is a document under which cargo is carried on board a vessel. It is a receipt for goods
placed on board (or to be placed on board) a vessel, signed by the master, or any other duly authorized
person on behalf of the shipowner.

1.1 FUNCTIONS:

1.1.1 It is a very good evidence of the contract but is not the contract itself.
It sets out the terms of the contract of carriage in writing but is not the actual contract itself, the
contract having been made earlier by offering of cargo for shipment by the shipper and
acceptance of that cargo by the shipowner. The "Ardennes" (Owner of cargo) v. The "Ardennes"
(Shipowners) [Page 12 COGSA-NM.C]

1.1.2 It is a receipt for goods.

It is a receipt acknowledging that the goods have been shipped and contains certain information
as to the leading marks, quantity and condition of the goods when put on board.

(a) As to quantity:
The bill of lading is prima facie evidence in favour of an indorsee that the quantity of goods alleged
to have been shipped has in fact been shipped.,
Smith & Co v. Bedouin Steam Navigation Co Ltd. [Page 18 COGSA -NM.C]
If a bill of lading contains the words "weight and quantity unknown", in order to succeed in an
action for non-delivery, the indorsee must show that the goods of the correct weight were in
fact shipped.
Oricon Waren-Handels v. Intergrann Nv [Page 19 COGSA - NMC].

(b) As to condition:
If a bill of lading states that the goods have been shipped "in apparent good order and condition",
the shipowner will be estopped as against an indorsee by such a statement as far as defects
which are apparent on reasonable examination. Silver v. Ocean Stemship Co. Ltd [Page 20 COGSA-
NMC]

If the words "received in apparent good order and condition" are qualified by other clauses in
the bill the lading, the owner is entitled to prove the actual condition in which goods were shipped.
In Canada and Dominion Sugar Co. v. Canadian Natural (West Indies) Steamships a bill of lading
relating to a shipment of sugar contained the qualifying words "Signed under guarantee to
produce ship's clean receipt." The receipt contained the words "many bags stained, torn and re-
sewn." Held, if the ship's receipt was not clean, the bill of lading was not a clean bill of lading
specially when the statement of "apparent good order and condition" in the bill of lading was a
qualified one, stamped on the face of the document and obvious to one and all.

Note: N.M.C. refers to the text-book on CARRIAGE OF GOODS BY SEA & MULTIMODAL TRANSPORT by Dr.
(Mrs.) Nilima Chandiramani.

141
 (c) As to leading marks:
Under the Bill of Lading Act, the master can show that the goods shipped were marked
otherwise than as stated in the bill of lading. But he can do so only if the marks are not
material to the description of the goods. Parsonsv. New Zealand Shipping Co [Page
17COGSA-NMC]

1.1.3 It is a document of title:

It is a title of the document shipped on board the vessel without which delivery of goods
cannot normally be obtained.
Horst Co.v. BiddellBros. [Page22 COGSA-NM.Q.
Sanders v. Maclean [Page 22 COGSA - NMQ.
The holders of the bill of lading can transfer the possession of the goods by transferring the
bill of lading. Also the endorsement of only one bill of lading out of a "set" is enough to pass
the property in the goods.

1.1.4 Quasi-Negotiable Instrument:

It is a commercially quasi-negotiable document enabling transference of goods by
endorsement and/or delivery.

1.2.0 INFORMATION (Appearing on page 2 of the B/L):

1. Full description of cargo

(a) Marks and numbers
(b) Number of packages
(c) Contents
(d) Weight» gross and net in kilos
(e) Measurement

2. Name of the ship

3. Voyage number
4. Port of shipment
5. Port of discharge
6. Name of the shipper (including address)
7. Name (or order) of consignee (including address)
8. Notify party's name and address
9. Freight

(a) Paid in advance or payable at destination

(b) Place of payment if other than at loading or discharging port.

10. Copies of negotiable (original) bills of lading

11. Master's or other duly authorized person's signature on behalf of the shipowner that
goods were loaded on the vessel
12. Date and place of issue
13. Bill of lading number
14. Detailed terms of contract of carriage on page 1.

1.3.0 SOME OF THE FEATURES:

1.3.1 When goods are placed on board the vessel the shipper is entitled to receive a bill of lading
signed by the master or on his behalf.

1.3.2 It is the shipper's duty to complete the blank bills of lading supplied by the shipping company
and return the same to the shipping company for their attention and action.
142
1.3.3 The information entered in a bill of lading is an evidence that the goods have been shipped.
For example, if a mistake has been made in tallying and, say, 25 packages are recorded as snipped on
board, when in fact only 24 packages have been actually loaded, at the discharging port a third party
(receiver or the consignee) holding a bill of lading issued for 25 packages is entitled to raise a claim
against the shipowner for the value of one package even though that package was not shipped.

1.3.4 The words "in apparent good order and condition" appear in all bills of lading. This is a
description of the outward condition of the goods. The carrier's responsibility is to deliver goods in
the same condition in which they were loaded. If goods are found damaged when loaded, then it is
necessary in the shipowner's interest to state the same in the bill of lading. The bill of lading should
then be endorsed or "claused" accordingly to avoid a claim. If it is not done, then the carrier is liable
to settle the claim.

1.3.5 The bills of lading are signed in sets normally, comprising one to three copies, marked first,
second and third original. The number of negotiable bills of lading, constituting a set, is endorsed on
the bills of lading. All original bills of lading have equal value. If one of these original bills of lading is
lost and falls into the hands of an unauthorized person, then the unauthorized person can claim
delivery of the goods and the carrier is bound to make such delivery, provided that there is no
known fraud.

1.3.6 Copies of bills of lading have no value at all and are issued only for record and information
purposes.

1.3.7 All original Bs/L are of equal standing, one of which being accomplished the others stand void.

1.3.8 If there is any conflict between the printed text of the bills of lading and any clauses or words
hand written or typed, hand-written or typed text will be held to overrule the printed word.

1.4.0 KINDS OF BILLS OF LADING:

1.4.1 Shipped Bill of Lading:

This type of bill of lading is a definite statement that the goods are actually on board the
vessel. This is the most satisfactory type of receipt and the shippers prefer such a bill of lading
as there is no doubt about the goods being on board and consequent discussion on this point
with bankers or consignees or P & I clubs or underwriters will not arise.

1.4.2 Received for Shipment Bill of Lading:

This type of bill of lading is valuable and as legal as the shipped bill of lading. But it merely
states that the goods have been "received for shipment" and there is no definite statement by
the shipping company that the goods are actually loaded on board. This bill of lading may be
issued and goods may still be in the shed awaiting loading. The steamer may load the
available cargo and leave the port without the goods in question, in which case the shipper
has no claim on the carrier even though he holds a bill of lading. In letters of credit it is
mandatory that bills of lading should be "Shipped Bs/L" only, except from U.S. A. and Canada
where "Received for Shipment bill of lading" is in vogue. In most letters of credit there is a
condition that bills of lading have to be "shipped" only. Hence banks refuse to accept
"received for shipment Bs/L" unless specific instructions are issued by the shipper to the
banks.

It is a practice to issue "Received for Shipment" bills of lading for goods emanating from
landlocked countries like Switzerland, Luxembourg, Austria, Hungary, etc., and subsequently
shipped on board on vessels from the nearby ports.

143
 1.4.3 Clean Bill of Lading:
If a bill of lading is issued stating that the goods are "in apparent good order and condition"
without any qualification, then that bill of lading is called clean bill of lading.

1.4.4 Unclean Bill of Lading (Dirty or Foul Claused Bill of Lading):

If the clause "In apparent good order and condition” is qualified by the addition of other
remarks in the margin of the bill of lading such as "case damp and stained" or "damaged
case" or "drums leaking" or "bags torn" or "bars rusted" or "tea chests broken" etc., then the
addition of such qualifying clauses make the bill of lading unclean, dirty or foul.

1.4.5 Combined Transport Bill of Lading (CTD):

This is issued when several modes of transport are involved or door-to-door concept is involved
for carriage of containers.

1.4.6 Through Bill of Lading:

This type of bill of lading states that trans-shipment is required enroute, that is, carriage by
sea is handled by two or more vessels.

1.4.7 Direct Bill of Lading:

When a bill of lading is issued without mentioning that the goods are to be transshipped
enroute, it is called a direct bill of lading.

1.4.8 On Deck Bill of Lading:

This is issued for cargo loaded on deck and states that "Vessel is not responsible for loss or
damage to goods howsoever caused".

1.4.9 Under Deck Bill of Lading:

It is issued for cargo loaded under deck.

1.4.10 Short Bill of Lading:

In such a B/L only the essential information required is mentioned, without stating all the terms
and conditions of a full-fledged B/L. Nevertheless, the B/L is subject to all the terms and
conditions of a regular bill of lading.

1.4.11 Stale Bill of Lading: ' '

Documentary credit (L/C) rules provide 21 days from the date of shipment for negotiating the
bill of lading with the bank by the shipper. If he goes to the bank after 21 days, the bank will
deem the bill of lading as stale and will not pay!

1.5.0 NON- ARRIVAL OF THE BILL OF LADING:

1.5.1 The bill of lading is the document of title without which delivery of the goods cannot be
effected. It may happen that the bill of lading has not been received by the consignee by the time
the ship arrives at the discharging port. The receiver is naturally anxious to take delivery of his goods
(i) to avoid demurrage charges and/or (ii) same may be required for any other purpose. He, therefore,
approaches the shipowner's agent and arrangements are made for the goods to be delivered without
presentation of the original bill of lading if the receiver is named as consignee in the manifest.

a) If the receiver is named as 'to order' then reference is made to the shipper at the loading
port through the loading port agents to seek his consent to part with the goods. The
shipper will agree only if he has received the value of goods from the consignee through his
bankers.
b) The consignee gives a Letter of Indemnity, indemnifying the shipowner against any
consequences arising if the goods are delivered to a wrong person.

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 c) Letter of Indemnity is supported by a banker's guarantee as to the reliability of the
receiver and undertakes to reimburse the carrier full value of the goods in the event of
fraud or consignee's inability to reimburse the value.

1.6.0 LETTERS OF INDEMNITY:

1.6.1 If any packages are found to be damaged or defective when goods are received on a vessel,
the nature of such damage or defect is noted on the bill of lading and the document is then said to be
"claused" or "foul" or "dirty". The seller of the goods is required to deliver to the buyer a clean bill of
lading in order to satisfy the bank who is negotiating the documents as per the letter of credit terms.

1.6.2 It has become customary, when goods are so found to be damaged at the time of loading, for
the shipper to give a "Letter of Indemnity" to the carrier in order to secure a "clean" document.

1.6.3 This practice, though prevalent in shipping, is detrimental to the interests of the
underwriters because it nullifies to a certain extent their rights to subrogation. Efforts have been
made to make the practice of issuing clean bills of lading against letters of Indemnity illegal or
fraudulent but without effect.

1.6.4 Many Courts have held that the practice of issuing clean bills of lading against indemnities by
the shippers, are against public policy and such indemnities exist between the shipowners and the
shippers only. Shipowners cannot claim immunity for claim by the buyers (consignees) of the goods and
the shipowners are held responsible for the indemnities as per law to the buyer.

1.6.5 Shipowners may claim indemnity from the shipper for the loss paid to the buyer under the
indemnity.

1.7.0 WHY IS A B/L CALLED A "QUASI - NEGOTIABLE INSTRUMENT"?

1.7.1 The bill of lading is not only a document of title which enables the holder to take delivery of
goods, but it is also a quasi-negotiable instrument which entitles its holder to transfer the goods
during transit.

1.7.2 The bill of lading, though transferable, is not a negotiable instrument as defined under the
Negotiable Instruments Act, 1881. Section 13 of the Negotiable Instruments Act, 1881, defines a
negotiable instrument as a promissory note, bill of exchange or cheque payable either to order or to
the bearer. The holder of a bill of lading who endorses it to an indorsee cannot, therefore, give a
better title than he himself has. Thus, if he has no title, he can give no title to the indorsee.

1.7.2 Every negotiable instrument is either a promise to pay money or an order to pay money. As
symbols of money, negotiable instruments function as instruments of credit as a means of transferring
value from place to place and as a convenient mode of assigning debts. Bills of lading, on the other
hand, represent goods and not money and are, therefore, not regarded as negotiable instruments.

1.7.3 The bill of lading is not a negotiable instrument in the real sense but resembles it in some
respects. Title of indorsee of the B/L will depend on title of the original holder. What the transfer of
a negotiable B/L does pass is constructive possession i.e. the right to demand from the carrier the
delivery of the goods on presentation of the B/L.

1.8.0 ROLE OF THE BILL OF LADING IN INTERNATIONAL TRADE:

(a) When the cargo is loaded the master issues the bill of lading.
(b) The seller/shipper checks the bill of lading.
(c) The seller/shipper takes the bill of lading to his bank.
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 (d) The seller's/shipper's bank compares the bill of lading with the instructions of the
buyer/consignee sent by the buyer's/ consignee's bank to the seller's/shipper's bank.
(e) If the bill of lading passes the checks in the buyer's bank, the bank pays the purchase price
to the seller/shipper.
(f) The seller's/shipper's bank then sends the bill of lading to the buyer's/consignee's bank.
(g) The buyer's/consignee's bank tells the buyer that the original bill of lading can be collected
by him.
(h) The buyer goes to his bank and studies the bill of lading to ensure that it is as per the sales
contract and his instructions to his bank.
(i) If the buyer is satisfied he pays the purchase price to his bank.
(j) The buyer's / consignee's bank gives the original bill of lading to the buyer.
(k) The buyer's/consignee's bank transfers the purchase price to the seller's/shipper's bank.
(l) The buyer/consignee uses the original bill of lading to collect his goods discharged from the
vessel.

1.9.0 WAYBILLS:

1.9.1 A waybill could be described as a non-negotiable bill of lading, in that it fulfils two of the
functions of an ordinary bill of lading. These are a receipt for goods shipped on board the
vessel and the best available evidence of the contract of affreightment.

1.9.2 However, a waybill lacks the all important third and major function of the bill of lading, that
of a document of title. It is this missing third feature that makes a waybill attractive to some
but highly disliked by others in the shipping industry.

2. Bill of Lading issued under Charterparty:

2.1 In the case of full cargoes of grain, coal, ores and other bulk goods the bill of lading
contains nothing more than the information relating to its function as a RECEIPT TOR GOODS, plus a
clause to the effect that the goods were received on board in APPARENT GOOD CONDITION and that the
master has himself no direct knowledge of the quantity, weight, value and condition of the goods.
This is achieved by a clause to the effect that '"weight (or quantity), value and quality are unknown".

2.2 A bill of lading issued under a charterparty is a bill of lading which is different from the usual
(e.g. liner) bills of lading. It is frequently signed by the master or by the specific agreement of the
master or owners. The terms and conditions are in accordance with those incorporated in the
charterparty (normally governed by the rules of Common Law) and only a few clauses are
enumerated in the document. These include:

(i) General Paramount Clause

(ii) General Average Clause
(iii) New Jason Clause
(iv) Both-to-Blame Clause
(v) War Risk Clause
(vi) Demise Clause, and, may be, a few others. .

2.3 When a bill of lading is signed by the captain under a charterparty, he does so on behalf of
the shipowner, not the charterer because the bill of lading is an owner's document.

2.4 There is a clause in the charterparty to the effect that "The Master, Charterers and/or their
Agents are hereby authorised by Owners to sign on Master's and/or Owners' behalf Bills of Lading
as presented in accordance with Mate's Receipts and/or Tally Clerk's receipts without prejudice to
this Charterparty".

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2.5 The BIMCO 'CONGENBHI: is an example of a bill of lading widely used with charterparties. (See
Annexure at the end of the lesson).

2.6 As far as bills of lading for use in voyage chartering are concerned, BIMCO has prepared several
bills of lading forms. There are specific forms for specific trades, such as the POLCOALBILL OF LADING to
be used for shipments chartered on the POLCOALVOY CHARTER in the Polish coal export trade.

2.7 The bill of lading differs from a charterparty in that the latter is actually a contract of
carriage. An important feature is that where the shipper is also the charterer of the vessel the terms
of the charter prevail over those of the bill of lading.

3.0 RELATIONSHIP BETWEEN BILLS OF LADING AND CHARTERPARTIES:

3.1 Whenever cargo is shipped aboard a chartered vessel, the important issue is whether the
contract of carriage is made with the shipowner or the charterer. In other words, does the master (or
charterer's agent) sign bills of lading on behalf of the owner or the charterer? Which of these parties,
therefore, does the cargo-owner sue if the cargo is lost or damaged on the voyage?

3.2 This question is of utmost importance. For example, if the charterer has gone bankrupt, and
if there is no action against the shipowner then there is no action against anyone. Another
possibility is a fraud by the charterer involving theft of the cargo. The charterer in this case will
usually disappear and the question will then arise as to the liability of the shipowner.

3.3 It should also be remembered that where the Hague Rules or Hague-Visby Rules apply to the
bill of lading contract, the carrier is entitled to the benefit of a time-bar of one year after delivery of
the cargo. It is therefore important for cargo-owner to be able to identify as soon as possible who
the real carrier is.

3.4 The issue is of equal significance to shipowners and charterers as to cargo-owners. Suppose,
for example, cargo is damaged through the negligence of the shipowner in the navigation of the
vessel. If the cargo-owner sues the shipowner in tort the shipowner can only rely on exemption
clauses in the bill of lading if he is party to the carriage contract. If the contract is made with the
charterer, the exemption clauses do not protect the shipowner.

3.5 It follows that where a bill of lading incorporates terms from a charterparty, voyage
charterparty terms are generally suitable for incorporation directly. Many of the terms of voyage
charterparties are similar to those of the bills of lading. However same is not true of time
charterparty terms.

3.6 The terms of a demise charterparty are inappropriate for incorporation into a bill of lading.
The master acts under the direction of the charterer, rather than the shipowner, and that the
charterer rather than the shipowner is therefore party to the carriage contract.

3.7 Charterers are normally allowed to sub-charter vessels. It is not unusual for the sub-
charterer to enter into a further sub-charter. The shipowner will not, of course, be a party to a sub-
charter. For this reason it is usually more appropriate for a bill of lading to incorporate terms of the
head-charterparty rather than the sub-charterparty.

4.0 BILLS OF LADING AND DEMISE CHARTERPARTIES :

4.1 Where the vessel is chartered by demise, it is well-settled that the master signs on behalf of
the charterer and not the owner. This has been decided in BaumwoU Manufactur von Carl Scheibler
v. Furness (1893).

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 "The vessel was chartered for a period of four months. The charterparty provided that the
captain and crew were the servants of the charterer. They were paid and appointed by him.
Goods were shipped under bills of lading signed by the Captain and some of the charterer's
agents, without any actual authority from the owner. The bills of lading contained no
reference to the charterparty and the shippers were completely in the dark about its
existence or terms. Owing to the unseaworthiness of the vessel the goods were lost at sea.
The shippers sued the owner”.

4.2 The House of Lords held that the owner was not liable. The bills of lading were not signed on
his behalf. The charter was by demise."

4.3 The decision seems unfair. The shippers who had no notice of the terms of the charter had lost
their goods. By depriving the shippers and consignees or indorsees of their action, the verdict
reduces the value of bills of lading as "negotiable" documents. The reasoning, however, is
confined to demise charterparties which are treated rather like a lease of land.

5.0 BILLS OF LADING AND TIME OR VOYAGE CHARTERPARTIES:

5.1 In a time or voyage charterpary, by contrast, the master or charterers' agent usually act as
agents for the shipowner.

5.2 Often the charterparty itself contains a demise clause which stipulates whether the master
signs on behalf of owner or charterer. While there are no problems about enforcement of a
"demise clause" as between owner and charterer (the parties to the charterparty), in principle a
"demise clause" in a charterparty can not bind a shipper (or receiver/endorsee) who is not also the
charterer of the vessel. He is not a party to the contract and knows nothing of its terms.

5.3 The Boston City was chartered under a time charterparty, which contained the following
demise clause:

"The captain and crew, although paid by the owners, shall be agents and servants of the
charterers for all purposes, whether of navigation or otherwise, under the charter. In signing
bills of lading it is especially agreed that the captain shall only do so as agent for the
charterers; and the charterers hereby agree to indemnify the owners from all consequences
or liabilities (if any) that may arise from the captain signing bills of lading, or in otherwise
complying with the same."

5.4 This was not a charterparty by demise, and the above clause was inserted into what was
otherwise a conventional time charterparty.

5.5 The charterers shipped coal aboard the vessel, and the master issued bills of lading to them
as shippers without the remark "And other conditions as per charterparty". The bill of lading stated
Rio de Janeiro as the port of destination, but the charterers induced the master to discharge at
Buenos Aires without the production of the original bills of lading. The charterers endorsed the bills to
the plaintiffs bank to secure an advance, but fraudulently sold the coal to a third party.

5.6 The plaintiff sued the shipowner for damages for non-delivery at Rio. The shipowner denied
liability on the basis of the demise clause in the charterparty, which purported to relieve him of
liability.

5.7 The plaintiff (cargo-owner) won in spite of the demise clause. By contrast with demise
charterparties, in time and voyage charterparties there is a presumption that the master (or the
charterer's agent) acts as agent of the shipowner and not of the charterer.

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5.8 Had the demise clause been effective to relieve the shipowner of liability, it would have been
unfair on the holder of the bill of lading, who was unaware of the terms of the charterparty. The
demise clause is effective only as between shipowner and charterers. Because the plaintiff-indorsees
had no notice of the clause in the charterparty, the shipowner could only have protected himself
by an explicit term in the bill of lading itself, of which the indorsee would have taken note of.

6.0 EMPLOYMENT AND INDEMNITY CLAUSES IN TIME AND VOYAGE CHARTERPARTIES:

6.1 It is usual in time charterparties for the master to sign bills of lading as presented by the
charterer. The charterers actually control the terms of the bill of lading contract. The same practice
also occurs with voyage charterparties, but it is less common in such charters". Because of the
Manchester Trust presumption, however, and sometimes because of an express demise clause, it
is usually the shipowner who becomes liable to the cargo-owners on the terms of the bill, of
lading. The shipowners are consequently bound by a contract whose terms are dictated by the
charterers.

6.2 Charterers are therefore required to indemnify the shipowners against liabilities arising from
signing bills at their direction. Thus, employment and indemnity clauses are virtually universal in dry-
cargo time charterparties. The shipowner is indemnified against the consequences of signing bills
of lading that do not conform to the requirements of the charterparty or from other irregularities
in documentation.

6.3 A good example is "The Caroline P". Bills of lading made the shipowner liable for bad
stowage; whereas under the charterparty stowage was the responsibility of the charterer. The cargo
6.4 interests sued the shipowner for bad stowage, and the shipowner successfully recovered
from the charterer on the basis of the NYPE employment and indemnity clause.

6.5 Whether or not the charterparty contains an express clause, the Courts will in any case imply
an indemnity. The implied indemnity covers loss caused to the shipowners because of any order
given by the charterers, and obeyed by them, which results in injury to the rights of third persons.
The implied indemnity is also wide enough to cover the issue of onerous bills of lading.

7.0 DEMISE CLAUSE THE IN BILL OF LADING:

7.1 The reason is probably that where liner operators "charter in" extra tonnage on a time or
voyage basis, and issue their own bills. But for the demise clause the charterer would be regarded as
carrier. It is more likely that a shipowner could become liable in tort since it is more likely that the
shipowner, rather than charterer, will damage the cargo-owner's goods. By expressly providing-that
the carriage contract is made with the shipowner, the demise clause ensures that the cargo-owner
cannot avoid the contractual exemptions by suing in tort.

7.2 Firstly, this clause does two things: it makes clear that the contract is with the owner or
demise charterer, and not with voyage or time charterer.

7.3 Secondly, it attempts to protect stevedores and other people who are not parties to the
carriage contract.

7.4 "The Berkshire" was time-chartererd to a liner operator and the bill of lading had been issued
by agents of the charterer on their own standard form. But for the demise clause the charterers
would almost certainly have been regarded as the contracting carrier. The cargo-owners succeeded
in an action against the shipowners for damage to the goods. Unlike a demise clause in a
charterparty, a demise clause in a bill of lading is capable of binding the shipowner. However, where
the Hague or Hague-Visby Rules apply it is at least arguable that such a clause, purporting as it
does to relieve either the charterer or shipowner from liability, is void under Article HI (8).
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8.0 INCORPORATION OF CHARTERPARTY CLAUSE INTO THE BILL OF LADING:

8.1 It is quite common for bills of lading to contain a clause which incorporates the provisions of
the charterparty.

8.2 It used to be quite common to insert a simple clause of incorporation, such as "and all other
conditions as per charterparty". However, over the years the courts have given this type of
incorporation clause very narrow construction and it has been held, in the case of Hogarth Shipping
Co v Blythe that the word "conditions" usually only incorporates "conditions" to be performed by the
consignee of the bill of lading. Hence, this old form of clause will not incorporate any exceptions
contained in the charterparty, unless the clause uses express words such as "all other conditions and
exceptions as per charterparty".

8.3 It is now very common to use much wider words of incorporation such as "all the terms,
conditions, clauses and exceptions contained in the said charterparty apply to this bill of lading and
are deemed to be incorporated therein." Even these wide words of incorporation do not automatically
incorporate terms which may be inconsistent with the nature of the bill of lading contract. For
example, they do not incorporate the arbitration clause of the charterparty into the bills of lading.
Therefore, care must be taken to ensure that an arbitration clause or, alternatively, a jurisdiction
clause is specifically incorporated by express words.

8.4 Nowadays words of incorporation, whether wide or narrow, will not normally incorporate the
terms of the charterparty which are inconsistent with any express terms in the bill of lading.

9.0 INCORPORATION OF ARBITRATION CLAUSE:

9.1 It is well established that a term in a bill of lading incorporating "...all conditions and
exceptions as per charterparty..." does not incorporate an arbitration clause. Arbitration clause has
to be specifically mentioned in the bill of lading independent of its inclusion in a charterparty.

10.0 UCP 500 :

10.1 The charterparty is not a shipping document and need not be tendered. Often, therefore,
endorsees of bills of lading will be bound by clauses of which they have no knowledge. For this reason
banks do not usually accept bills containing such clauses. Article 26 (c) of the Uniform Customs and
Practice provides:

“Unless otherwise stipulated in the credit, banks will reject a document which indicates that it is
subject to a charterparty…”

11.0 TWO ISSUES:

11.1 The issue of bills of lading pursuant to charterparties, therefore, raises two question, viz.,

(a) What are the terms of the contract - the bill of lading terms or the charterparty terms?
(b) Who is the carrier when goods are carried on a chartered vessel?

11.2 There are two important points to bear in mind ;

(i) In cases where the charterers hold the bills of lading, and
(ii) In case where the third parties hold the bills of lading.

11.3 In case of (i) it is the charterer who has contracted with the shipowner from whom he has
chartered the vessel.

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11.4 In case of (ii) both situations (a) and (b) arise. The third party would like to know as to whom to
sue (shipowner or charterer) and on what terms (the bill of lading terms or the charterparty terms).

11.5 When the bill of lading is given by a shipowner to the charterer, then it is obvious that the
contract is contained in the charterparty and the bill of lading only serves merely as a RECEIPT for the
goods and to enable the charterer to deal with the goods while transit.

11.6 Where the charterer takes the bill of lading not directly from the shipowner but indirectly
from the shipper of the goods, a slightly different situation arises.

11.7 Suppose a buyer who buys goods on F.O.B. basis, charters a vessel to carry the goods he has
purchased against the bill of lading issued by the shipowner to the seller (who is the shipper). The
shipper then transfers the bill of lading to the buyer who is now the charterer.

11.8 Earlier the accepted position was that, where a charterer took the bill of lading other than
directly from a shipowner, the bill of lading the document defining the contractual relationship
between those parties. However, after the decision of the court of appeal in The President of India v.
Metcalfe Shipping Ca Ltd, the contractual arrangements between the shipowner and the charterer
contained in the charterparty still prevail.

11.9 However, where a charterer had originally taken goods on board a general cargo vessel, as a
service to other traders, and subsequently bought the goods, then it is clear that the charterer and
the shipowner are bound by the terms of the bill of lading, which are irrespective and separate from
the original charterparty and the bill of lading governs their relationship where the charterparty
contains a cesser clause.

12.0 WHERE A THIRD PARTY HOLDS A BILL OF LADING:

12.1 Generally the consignee has no information of the existence and the terms of the
charterparty. The only document which he has in front of him is the bill of lading. This is the only
contract binding him. Where bill of lading has been endorsed over to the consignee, a new contract
exists between the shiponwner and the consignee on the terms of the bill of lading.

12.2 Whereas the Rules applicable to the Carriage of Goods by Sea Act do not apply to
charterparties, its provisions may be incorporated by a clause known as the Clause Paramount. There
are difficulties when the charterer is himself the shipper of his own goods and he issues himself with
a bill of lading. In such instances the Hague Rules would apply as a matter of contract under the
charterparty but not under the bill of lading, unless and until the bill of lading is negotiated to a third
party.

12.3 However where a shipowner A 'charters-in' tonnage to supplement his fleet, then he (A) would
issue the shippers his normal bills of lading for any cargo loaded without any reference to the
charterparty and a contract of carriage would then exist between the shipper and the charterer (i.e.,
disponent owner A who charters-in tonnage).

13.0 SUMMARY:

13.1 Where the charterer is the shipper, the right and obligations of the parties including the
liability of the shipowner will be regulated by the charterparty. And if the bill of lading is issued to
the charterer, it is merely a receipt for goods and a document of title. It cannot vary or amend or add
to or delete the terms and clauses of the charterparty.

13.2 Where the charterer puts the ship up as a general ship and if a bill of ladling is issued by the
master to each shipper, the contract of carriage is evidenced by the bill of lading and the shipper is
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deemed to have contracted with the shipowner. But if the shipper is aware of the charterparty, he is
deemed to have contracted the charter and can sue him or be sued by him.

13.3 In time and voyage charters it is the shipowner who is the appropriate party to the contract
of carriage. But in a demise charterparty, the charterer is the appropriate party to the contract of
carriage.

13.4 Should any of the terms of the bills of lading and charterparties be in conflict, then those of the
bill of lading take precedence over those of the charterparties. The bill of lading is a "document of title"
and a consignee/ holder of the bill of lading is unaware of the agreement and negotiations between
the shipowner and the charterer. His only document is the bill of lading and that is what he has
bought over.

ooooo

SELF-EXAMINATION QUESTIONS

1. Briefly explain the different aspects of a bill of lading.

2. What are the three requirements which a bill of lading highlights among other things?
3. What is the relevance of the statement "Shipped in good order and condition"?
4. Why is the B/L considered as a quasi-negotiable document and not a negotiable
instrument under the Negotiable Instruments Act, 1881?
5. "Bill of Lading is described as the most important document in shipping." Elaborate.
6. "The endorsement of only one B/L out of a set is sufficient to pass the property in the
goods."-Substantiate.
7. What is the information shown on page 2 of the bill of lading?
8. Write a short note on the letter of indemnity.
9. Which LOI is legal and which LOI is illegal?
10. What is the role of the B/L in international trade?
11. Write short notes on:
(a) Dirty B/L (b) Received for shipment B/L
(c) Clean B/L (d) State B/L

12. In what ways a B/L issued under a C/P is different from a liner B/L?
13. What are the issues raised in case of Bs/L issued pursuant to C/Ps?
14. What is the situation where a third party holds a B/L issued under a C/P?
15. Why are banks reluctant to accept a charterparty B/L?
16. On whose behalf does the master sign in case of demise C/Ps? How does this position differ in
voyage and time C/Ps?
17. In a B/L explain the significance of
(a) Demise clause (b) Employment and indemnity clause
(c) Arbitration clause (d) Paramount clause

RECOMMENDED FOR FURTHER READING:

1. Carriage of Goods by Sea - Hardy Ivamy, 12th Ed., 1985.
2. Bills of Lading- A. Mitchelhill, 1st Ed, 1982.
3. Bills of Lading - Copt. D.E Driver, 2ndPrint, 1995.
4. Modern Bills of Lading - Paul Todd, 2nd Ed, 1990.
5. Carriage of Goods by Sea and Multimodal Transport by Dr. (Mrs.) Nilima Chandiramani.
6. Law Relating to Bs/L, C/Ps and COA - B. C. Mitra, 2nd Ed, J993.

*************

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CHARTERING FINAL YEAR
LESSON 10

TIME CHARTERING

1.0 Explanatory notes to NYPE 93

The New York Produce Exchange Time Charter - Revised 14 September 1993

Explanatory Notes on Clauses

Preamble
To conform to modern ship technology, a reference to "GT" has been added.

It is left to the parties to fill in the actual figure agreed in respect of maximum force on the Beaufort
wind scale depending on the size and type of vessel and her engine power.

In the Preamble as well as in various other places in the charter, it is necessary to specify whether "long"
or "metric" tons which is also important in relation to the rate of hire (Clause 10) if fixed per ton on the
vessel's total deadweight carrying capacity.

An Appendix "A" has been provided for filling-in such further details of the vessel as may be required. It
is of particular importance to insert in Appendix A a full specification of the bunker fuel oil to be
supplied for burning in the vessel's main engines and auxiliaries (for further comments on this subject
see also comments on Clause 9 below).

Clause 1 - Duration
To avoid recurring disputes on the duration of charter, it is recommended to specify clearly the exact
period of hire with any margin, if also agreed.

Clause 2 - Delivery
The NYPE 1946 provided in Line 22 for the vessel to be "in every way fitted for the service". This was
amended in the ASBATIME 1981 revision to read "in every way fitted for ordinary cargo service" which
was found to be clearer and has, therefore, been maintained in the NYPE 93.

Clause 3 - On-Off Hire Survey

Whereas the NYPE 1946 Charter contained no On-Off Hire Survey Clause, such clause was included as an
optional clause in the ASBATIME Rider of Suggested Additional Clauses.

This clause has now been incorporated in the NYPE 93 and has been clarified to take into account, inter
alia, the fact that nowadays vessels are often delivered/re-delivered during sea passage or on
arrival/departure pilot station where no such surveys can be conducted.

Clause 4 - Dangerous Cargo/Cargo Exclusions

Instead of a blanket exclusion of dangerous cargoes as found in the NYPE 1946, Line 25, this clause
follows the corresponding clause in the ASBATIME 1981 which permits the carriage of dangerous cargo
if carried in accordance with the requirements of relevant authorities but still excludes the carriage of
livestock, arms, ammunition, explosives, as well as nuclear and radioactive materials (sub-clause (a)).

Recognizing that many hull insurance policies put a limit on the amount of dangerous cargo to be carried
on any voyage, new provisions have been included (sub-clause (b)) which, if IMO - classified cargo is
agreed to be carried, require the parties to agree and fill in the maximum amount of such cargo; the

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clause also gives clear rules as to the packing, labelling, loading and stowing of such cargo according to
IMO regulations.

Clause 5 - Trading Limits

The printed provisions in the NYPE 1946 (Lines 27-31) specifying trading areas and limits are obsolete
and often amended in practice. This was changed in the ASBATIME 1981 leaving it to the parties to
specify the agreed trading limits and excluded areas. The NYPE 93 also provides accordingly.

Clause 6 - Owners to Provide

and
Clause 7 - Charterers to Provide
These clauses, which are common in all time charter party forms, remain essentially the same as in the
ASBATIME 1981, with some minor revision of wording.

Clause 8 - Performance of Voyages

This clause, whilst keeping the basic owners'/charterers' division of responsibility for cargo, has been
clarified in order to remove uncertainties existing in Clause 8 of the NYPE 1946 including its serious
shortcoming of omitting any reference to "discharge" which, therefore, is usually being type-added in
practice. In the ASBATIME 1981 (Clause 8), instead of describing charterers' cargo responsibilities in
terms of an obligation "to load, stow and trim" as found in the NYPE 1946, the clause provides that the
charterers are "to perform all cargo handling". This provision which encompasses the previously
described functions (including "discharge" as omitted in the NYPE 1946) has been kept in the NYPE 93
and does not, as said, alter the basic owners'/charterers' division of responsibility for cargo in the
original NYPE 1946.

Both the NYPE 1946 and the ASBATIME 1981 contain provisions regarding signing of bills of lading, etc.,
which, it has been found to be somewhat misplaced in a clause which basically deals with the
performance of the voyage. Provisions covering the signing of bills of lading, etc. are now found in a self-
standing clause (Clause 30) for comments on which see below.

Clause 9 - Bunkers
The provisions found in Clause 3 of the NYPE 1946 according to which payment of bunker fuel oil on
delivery and re-delivery, respectively, should be settled on the basis of "current price" in the respective
ports often give rise to disputes. This has now been clarified in Clause 9 of the NYPE 93 which requires
the parties to agree and fill in not only the quantities of bunker fuel oil on delivery/re-delivery, but also
the prices.

The supply of inferior bunker fuel oil has become a growing problem over recent years and serious
damage to main engines or auxiliaries caused by unsuitable bunker fuel oil has frequently occurred.

Sub-clause (b) of Clause 9 addresses this problem and the parties are strongly recommended to agree
and specify clearly in Appendix A the specification(s) of bunker fuel oil(s) required for the particular
vessel and her main auxiliary engines.

Clause 10 - Rate of Hire/Redelivery Areas and Notices

Whereas the NYPE 1946 only provided for a monthly hire based on the vessel's deadweight carrying
capacity, the ASBATIME 1981 provided for the parties to agree either a daily rate of hire or a hire based
on the vessel's total deadweight carrying capacity. These options have been maintained in Clause 10 of
the NYPE 93 and nowadays most but not all fixtures are based upon a daily rate of hire.

To avoid recurring disputes on whether local time or GMT shall apply for the purpose of hire calculation
or termination, Clause 10 now solves this problem by providing that for this purpose the times of
delivery/re-delivery or termination of charter shall be adjusted to GMT.

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Clause 11 - Hire Payment
The Hire Payment Clause in the NYPE 1946 (Clause 5) was significantly changed when revising the
charter in 1981 and the resulting ASBATIME 1981 Charter in Clause 5, combined with Clause 29 in the
Rider of Suggested Additional Clauses, introduced some novelties including a grace period for payment
of hire as well as stipulations which entitle the owners to withhold the performance of any of their
obligations while hire is outstanding. Both the NYPE 1946 and the ASBATIME 1981 contain the important
principle which gives the owners the right to withdraw the vessel in the event of failure of the charterers
to pay hire on time.

Rather than continue to make some of these provisions optional as in the ASBATIME 1981, all these
elements have now been integrated in Clause 11 of the NYPE 93 also because, in practice, they are
commonly added to the basic NYPE 1946 form, albeit often in a badly drafted manner.

The right of withdrawal (cancelling) when the charterers are in default of payment of hire is a traditional
and very important safeguard for owners. This principle has, therefore, been fully maintained in sub-
clause (a) of Clause 11.

In recent years there have been frequent delays of remittances through banks and in order to avoid
abuse of the right of withdrawal, it has become common practice, in many instances, to insert in time
charter forms a so-called "Anti-Technicality" Clause or a "Grace Period" Clause. In some charter forms,
the length of the period of grace has been arbitrarily determined, whereas other charter forms leave it
open to the parties to agree on the length of the period of grace normally stipulated as "banking days"
and, usually, combined with notification to the charterers.

This latter choice has been included in sub-clause (b) of Clause 11 and it is strongly recommended to
study carefully the provisions of sub-clause (b) and to fill in the number of days of grace etc., as agreed,
in a correct manner.

These provisions are also fair to charterers since they should prevent cancellations for trifling delays
where the situation is no signal of lasting failure to pay.

On the other hand, any abuse of the period of grace by constant late remittance should be safeguarded
against by the provisions in the last paragraph of sub-clause (b) entitling owners to withdraw in the case
of continued "misuse" of the grace period.

If the hire happens to be still outstanding on the expiry of the grace period, or any time thereafter, the
second paragraph of sub-clause (a) of Clause 11 entitles the owners, without prejudice to the liberty to
withdraw, to withhold the performance of any and all of their obligations under the charter. The hire
may happen to be missing, for instance, just when the vessel is about to load for a new voyage and with
a charterer who is about to go bankrupt, the owners then run the risk of being saddled with the
performance of a new voyage without hire being paid and without cover for expenses falling upon the
charterer. It is too late to withdraw the vessel if cargo has been loaded and bills of lading have been
signed obliging the owners to perform the voyage according to the bill of lading contract. Such risk is
guarded against by the last paragraph of sub-clause (a).

In matters such as late hire payment, the parties must know where they stand, both when it comes to
trifling delays or protracted delays, not to speak of complete failure to pay. It is believed that Clause 11
solves these problems in a fair and equitable manner.

It should also be noted that, whereas the Hire Payment Clause in both the NYPE 1946 and the ASBATIME
1981 provided for payment of hire in U.S. currency only, Clause 11 provides for the option of agreeing
on payment in a currency other than United States currency.

Finally, sub-clause (c) deals with last hire payment and sub-clause (d) covers the matter of cash
advances.
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Clause 12 - Berths
This is self-explanatory.

Clause 13 - Spaces Available

Sub-clause (a) is identical with Clause 7 of the ASBATIME 1981 whereas sub-clause (b) is new and has
been included as a consequence of charterers' right to carry deck cargo (see also comments on Clause
30 below).

Clause 14 - Supercargo and Meals

This is a usual clause in time charters and follows the pattern of Clause 10 in both the NYPE 1946 and
the ASBATIME 1981.

Clause 15 - Sailing Orders and Logs

This is another standard clause which follows closely the text of Clause 11 in both the NYPE 1946 and
the ASBATIME 1981 with a new provision added to the effect that the English language shall apply in so
far as matters dealt with in this clause are concerned.

Clause 16 - Delivery/Cancelling
The principle normally observed in charter parties for both voyage and time chartering that the
charterers shall have the right to cancel if the vessel is not ready for delivery (loading) latest on the
cancelling date agreed is fully maintained in the first paragraph of Clause 16.

The second paragraph titled "Extension of Cancelling" is a so-called Interpellation Clause. It is an attempt
to avoid the sometimes harsh result to an owner who cannot make a cancelling date but, nevertheless,
is legally obliged to tender his vessel perhaps at a remote port after having performed a long ballast
voyage, only to be cancelled and find himself with a spot prompt vessel. With today's high capital
investment in new vessels and high daily running costs this is not considered fair and equitable when,
for bona fide reasons, the vessel is delayed because of events beyond owners' control.

Within certain time limits, the clause requires the charterer either to cancel in advance or extend the
cancelling date in circumstances when the vessel cannot make her cancelling date.

Over the last 10-15 years it has become common practice to include such interpellation provisions in
modern charterparties for both voyage and time chartering.

Clause 17 - Off Hire

The Off-Hire Clause in the NYPE 1946 (Clause 15) is an example of a clause which, because of its short-
comings, is commonly amended if not deleted in its entirety and substituted by a far more elaborate
rider clause.

This practice was already recognized and acknowledged in connection with the ASBATIME 1981 revision
which contained a very detailed off-hire clause. Subject to a few minor amendments, the text of the
ASBATIME Off-Hire Clause has also been incorporated in Clause 17 of the NYPE 93 and should, hopefully,
meet the requirements for a modern off-hire clause acceptable to both sides.

Clause 18 - Sublet
This is a clause found in most modern time charter forms.

Clause 19 - Drydocking
With modern paints and ship technique, the provisions in Clause 21 of the NYPE 1946 requiring
shipowners to drydock the vessel "at least once in every six months" has become obsolete.

A modern solution which reflects present-day practice, is now offered in Clause 19 and leaves it to the
parties to agree between themselves as to whether option (a) or (b) shall apply.

Clause 20 - Total Loss

This is self-explanatory.
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Clause 21 - Exceptions
This is a mutual exceptions clause for the protection of both charterers and owners, similar to Clause 16
in both the NYPE 1946 and the ASBATIME 1981.

Clause 22 - Liberties
This is standard and self-explanatory.

Clause 23 - Liens
This is another standard clause found in most time charter forms and follows closely the pattern of
Clause 18 in both the NYPE 1946 and the ASBATIME 1981.

Clause 24 - Salvage
This is self-explanatory.

Clause 25 - General Average

This clause has been considerably simplified as compared with the extremely lengthy provisions
contained in Clause 19 of both the NYPE 1946 and the ASBATIME 1981, which provides for general
average to be adjusted and settled in the United States in U.S. currency.

Given the global use of the NYPE Charter, it is now left to the parties to agree on the venue and currency
for adjustment/settlement of general average.

Clause 26 - Navigation
This clause follows very closely the text of the corresponding clauses in the NYPE 1946 (Clause 26) and
the ASBATIME 1981 (Clause 25).

Clause 27 - Cargo Claims

In daily chartering practice, a so-called "Inter-Club Agreement" Clause is often found to be attached as a
rider clause to the NYPE 1946.

The background to this clause is a more than 25 year old dispute resolution agreement between the
International Group of P & I Clubs, the objective of which is to avoid costly litigation in matters of cargo
claims.

According to the Inter-Club Agreement, ultimate liability for cargo loss or damage is allocated in
accordance with a widely accepted formula based on the cause of damage. Basically, cargo claims
caused by unseaworthiness of the vessel are borne 100% by the owners; cargo claims resulting from
improper loading, stowing or discharging are allocated 100% to charterers and shortage claims are split
equally between owners and charterers.

Regrettably, the Inter-Club Agreement has been considerably undermined over the years by owners and
charterers agreeing on numerous deletions, alterations and additions to the printed text of the basic
NYPE 1946 form resulting in a very considerable increase in litigation and arbitration over cargo claims
arising under charterparties agreed on the NYPE 1946 form.

In the ASBATIME 1981 revision an attempt was made to curb the problem by including a so-called Cargo
Claims Clause (Clause 30) which may, at best, be described as a simplified version of the Inter-Club
Agreement, but without making any express reference to the Inter-Club Agreement itself. Moreover,
and unfortunate enough, it was decided at that time to include the Cargo Claims Clause in the Rider of
Suggested Additional Clauses instead of incorporating the clause in the printed body of the ASBATIME
1981, thus, limiting the use of the clause in practice.

157
This problem has now been solved in Clause 27 of the NYPE 93 which makes an express reference to the
Inter-Club New York Produce Exchange Agreement and also includes a catch-all provision which will pick
up any further modification or replacement thereof, thus, avoiding the necessity of revising the charter
solely for the purpose of any future revision or replacement of the Inter-Club Agreement.

In this connection it may be mentioned that a sub-committee under the International Group of P & I
Clubs is presently reviewing the Inter-Club New York Produce Exchange Agreement with a view to re-
enforce the principle of the agreement, viz., to allocate the risks and costs of cargo claims between
owners and charterers in a fair and equitable manner. For that purpose, the provisions in Clause 27 of
the NYPE 93 expressly specifying that all cargo claims between the owners and charterers shall be
subject to the Inter-Club New York Produce Exchange Agreement will be most helpful.

In this context there is reason to warn the commercial parties against any attempt to tamper with the
text of Clause 27 or, for that matter, all other pertinent clauses in the printed text of the NYPE 93
including but not limited to Clause 8 (Performance of Voyages) and Clause 26 (Navigation) by way of
amendments, deletions or additions as this may destroy the equitable allocation of responsibility for loss
of or damage to cargo laid down in the Inter-Club Agreement and which, it is submitted, is not in the
interest of either owners or charterers.

Clause 28 - Cargo Gear and Lights

Such a clause is commonly added to the NYPE 1946 and, in recognition of this practice, a similar clause
was also included in the ASBATIME 1981 (Clause 21), the text of which has also been embodied in Clause
28 of the NYPE 93.

Clause 29 - Crew Overtime

The provisions in Clause 23 of the NYPE 1946, according to which charterers shall pay crew overtime in
accordance with "the rates stated in the ship's articles" is frequently amended in practice and a
lumpsum payment is usually agreed instead. This practice is now reflected in Clause 29 of the NYPE 93,
the text of which follows closely the wording of Clause 22 in the ASBATIME 1981.

Clause 30 - Bills of Lading

As mentioned in the comments on Clause 8 above, it has been found more appropriate to make the
provisions concerning signing of bills of lading etc. appearing in Clause 8 in both the NYPE 1946 and the
ASBATIME 1981 appear in a self-standing clause as now suggested in

Clause 30 which, in addition, now also includes a reference to waybills as well as provisions dealing with
clausing of bills of lading when deck cargo is carried.

Clause 31 Protective Clauses

In the NYPE 1946 Charter, Clause 24 makes the charter subject to the Harter Act as well as making the
charter and all bills of lading issued hereunder subject to the Carriage of Goods by Sea Act of the United
States. Given the use of the NYPE form world-wide as the most used time charter form for dry cargo
vessells and also considering that in many instances no U.S. interests are involved, it has been found
that it is no longer appropriate to make the charter subject to the Harter Act, the reference to which,
therefore, has been left out.

Clause 31 of the NYPE 93 makes the charter and all bills of lading or waybills issued hereunder, subject
to the provisions of the Carriage of Goods by Sea Act of the United States, the Hague Rules or the
Hague-Visby Rules, as applicable, or "such other similar national legislation as may mandatorily apply by
virtue of origin or destination of the bills of lading", as stipulated in sub-clause (a) (Clause Paramount) as
well as the other protective clauses specified in sub-clauses (b), (c), (d) and (e).

158
Whereas sub-clause (b) (the Both-to-Blame Collision Clause) and sub-clause (c) (the New Jason Clause)
are standard clauses, sub-clauses (d) and (e) may call for some observations.

Sub-clause (d) (U.S. Trade - Drug Clause).

It is a regrettable fact that during recent years the incidence of drug smuggling on board vessels has
increased dramatically and has caused serious problems to the shipping industry, also resulting in the
introduction of strict legislation and its enforcement in an attempt to curb this evil. To ignore this
serious problem in a modern charterparty form would be wrong and the fact is that such an "anti-drug
abuse clause" in one or the other form is commonly included in or added to the basic form of many
charterparties. Sub-clause (d) of Clause 31 is an example of a clause commonly attached to, for instance,
the NYPE 1946 and has been chosen for inclusion in the NYPE 93.

Sub-clause (e) (War Clauses).

One of the serious shortcomings of the NYPE 1946 is that it contains no war clause in its printed text
which, from time to time, has caused serious problems when parties having fixed on the basis of the
NYPE 1946 form were confronted with a war or warlike situation. Even worse, in order to rectify this
obvious shortcoming, there are many examples of parties having agreed to include as a rider clause to
the NYPE 1946, the old Chamber of Shipping War Risks Clauses 1 & 2 which since long have been
withdrawn as obsolete clauses and which were drafted way back in 1935 in connection with the Spanish
Civil War for use with voyage charter parties only and, therefore, totally unsuitable for time chartering.
This problem was recognised in the ASBATIME 1981 which in Clause 23 (Clauses Paramount) included a
proper war clause. In addition, a war cancellation clause as well as a war bonus clause were included as
well, but only in the form of Rider Clauses in the Rider of Suggested Additional Clauses for use with the
ASBATIME 1981 which limited the use of these clauses in practice.

Conscious of the necessity of including a proper war clause which would apply not only to the
charterparty itself but also to all bills of lading and sea waybills issued under the charter, Clause 31 in
the NYPE 93 now provides that the charterparty is subject to the war clause (sub-clause (e)) which is also
to be included in all bills of lading or waybills issued hereunder. The war clause as such contains no
cancellation rights and for practical reasons provisions dealing with the parties' right to cancel in case of
war has been kept separate from the war clause and are to be found in the self-standing War
Cancellation Clause (Clause 32).

Things are changing fast in a fast-changing world and as far as international shipping is concerned, the
necessity of up-dating and modernising charterparties to match changes and new developments is more
important than ever before. This also applies to war clauses - be it for voyage or time chartering - and
has recently prompted the Documentary Committee of BIMCO to revise its time-honoured and well
tested standard war clauses, i.e., the CONWARTIME 1939 War Risk Clause for Time Charters and the
VOYWAR 1950 War Clause for Voyage Chartering because of recent developments and, in particular, the
fact that new supranational organisations such as the United Nations and the European Community are
daily acquiring more power to intervene in war situations (the Gulf War and the situation in former
Yugoslavia are recent examples of such intervention by the issuance of U.N. Security Council Resolutions
and Directives issued by the European Community seriously affecting trading to and from war zones).

In connection with the discussions on how best to deal with the matter of a war clause in the NYPE 93,
BIMCO had suggested that the revised CONWARTIME Clause known as the CONWARTIME 1993 War
Risks Clause for Time Charters, be incorporated in the NYPE 93 since this clause has been thoroughly
revised to meet present-day requirements for a modern war clause including the possible action or
intervention by supranational bodies or organisations as referred to above; besides, given the multitude
and characteristics of war or warlike operations now seen, the Definitions in the CONWARTIME have
been considerably expanded and clarified.

159
Whilst acknowledging that the CONWARTIME 93 Clause is a great improvement, since the revision of the
clause is of very recent date ASBA would prefer to see the clause in use and tested for some time before
including the CONWARTIME Clause in the NYPE 93. However, ASBA would be prepared to circulate the
CONWARTIME 93 Clause to its members as an alternative clause and to consider including the clause in
an amendment to the NYPE 93 at a future date when time had shown that the clause works
satisfactorily.

Clause 32 - War Cancellation

This clause is intended to give either party the right to cancel the charter in case of outbreak of war.

The parties should ensure to fill in the names of the countries as may be agreed. In the event of the
charter being concluded on the basis of world-wide trading, it may be advisable to mention the five
Permanent Members of the U.N. Security Council, i.e., the United States of America, Russia, the United
Kingdom, France and the People's Republic of China, whose conflict, in case of a conflict between
themselves, may spread throughout the world or a large part of it.

If a vessel is chartered to trade in a restricted part of the world only, parties may wish to restrict the
name of countries to be inserted, accordingly.

Clause 33 - Ice
This is a traditional clause similar to Clause 25 in the NYPE 1946 and Clause 24 in the ASBATIME 1981 but
has been somewhat broadened to include an obligation for the vessel to follow ice-breakers subject to
the conditions stated in the last sentence of the clause.

Clause 34 - Requisition
Such clause was not found in the NYPE 1946, but included in the Rider of Suggested Additional Clauses
to the ASBATIME 1981 (Clause 33), the text of which has also been incorporated in Clause 34 of the
NYPE 93.

Clause 35 - Stevedore Damage

No such clause is found in the NYPE 1946, failing which it is common practice nowadays to add a rider
clause dealing with stevedore damage; unfortunately, some of these clauses found in executed charter
parties based on the NYPE 1946 form would appear to have serious shortcomings resulting in frequent
disputes. An attempt to address this problem was made in Clause 35 in the Rider of Suggested
Additional Clauses recommended for use with the ASBATIME 1981.

The text now included in Clause 35 of the NYPE 93 has been carefully drafted in order to overcome the
shortcomings of many home-made stevedore damage clauses presently seen in current charterparties
and also with a view to ensure a balanced and equitable solution fair to both sides, thus, representing a
new approach to a long-standing problem.

Clause 36 - Cleaning of Holds

This is another example of a clause commonly added as a rider clause to the NYPE 1946 basic form,
which contained no such clause in its printed text, nor does the ASBATIME 1981 Charter. The text
proposed in Clause 36 of the NYPE 93 reflects current practice and the parties should ensure to agree
and insert the relevant figures in the fill-in spaces.

Clause 37 - Taxes
Neither the NYPE 1946 nor the ASBATIME 1981 contain any such clause even if such a clause is a
common feature in other time charter forms for both dry cargo and tank vessels. Clause 37 aims at
remedying this short-coming in an equitable manner.

Clause 38 - Charterers' Colors

This is self-explanatory.
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Clause 39 - Laid Up Returns
Although a common feature in many other time charter forms, still, such clause is not found in the NYPE
1946 but is included in the Rider of Suggested Additional Clauses for use with the ASBATIME 1981
(Clause 37), the text of which has been followed in the NYPE 93.

Clause 40 - Documentation
This is a new clause which obliges owners to provide all necessary documentation relating to the vessel
as may be required to permit the vessel to trade within the agreed trade limits.

Clause 41 - Stowaways
As will, undoubtedly, have been seen from the international shipping press, during recent years the
number of incidents of stowaways has increased considerably and has become a growing problem in
many parts of the world. To ignore this problem in a modern charterparty form would be wrong; hence
the provisions now laid down in Clause 41 which, in a balanced manner, attempt to allocate the risks
and costs between owners and charterers in the case of stowaways gaining access to the vessel.

Clause 42 - Smuggling
This is new and it has been found useful to address this problem in a proper manner.

Clause 43 - Commission
No comments.

Clause 44 - Address Commission

It is, of course, left open to the parties to decide whether address commission should be paid and, if not,
the provisions of Clause 44 may be disregarded.

Clause 45 - Arbitration
As a matter of consistency, ASBA has suggested that the arbitration clause in the various charter parties
issued under the auspices of ASBA, including the NORGRAIN 89 Charter, the NYPE 93 and the now
revised Amwelsh Charter (AMWELSH 93), be identical by using the text of the Arbitration Clause in the
NORGRAIN 89 Charter (except for deleting the reference to "grain trade" which is peculiar to the
NORGRAIN Charter). This was agreed and, as will be seen, Clause 45 provides for a choice between New
York or London as venue for arbitration. It is not unusual that arbitration clauses in various charter
parties provide for an optional choice of venue of arbitration but, surprisingly enough, there have been
quite a few examples showing that the parties by oversight or ignorance have forgotten to decide which
of the alternatives should apply. In order to avoid any surprises later on, it is therefore important to
remember this during negotiations and to delete sub-clause (a) or sub-clause (b) as appropriate.
Similarly, if the parties should wish to avail themselves of the possibility of conducting arbitration
according to the Shortened Arbitration Procedure in New York or the Small Claims Procedure in London
the actual figures as may be agreed during chartering negotiations should be duly filled in in (a) or (b) as
the case may be.

2.0 The new NYPE Form 2015

The Baltic and International Maritime Counsel (BIMCO) has released a revised version of the New York
Produce Exchange (NYPE) time charter party

Widely used in the dry cargo sector of the shipping industry, the NYPE form was last updated in 1993.
The new version is intended to appeal to a modern, global shipping industry, retaining the familiarity
of the previous version while reflecting current commercial practices and the latest developments in
shipping law. New clauses have been added and some existing clauses updated, reducing the need for

161
users to include supplementary clauses with the risk that key clauses could be overlooked or additional
clauses added which conflict with other provisions.

The new form also seeks to create a more balanced agreement between Owner and Charterer than
previous versions and is the result of three years of intensive discussion between BIMCO, copyright
holder the Association of Ship Brokers and Agents (ASBA) and the Singapore Maritime Foundation
(SMF)

162
3.0 TIME CHARTERING (ILLUSTRATIONS)

MV Seawave was fixed on time charter basis at a daily charter-hire rate of US$. 15000/- PDPR. The
vessel was delivered at 1500 hrs UTC on 3rd April 2010 and re-delivered at 0700 hrs UTC on 10th July
2010.

The vessel was off-hire for 3 full days from 1 July to 3 July 2010 due to ship main-engine repairs. During
the on-hire period, owners received a sum of US$ 1 million.

Draw out a charter-hire statement for the period? and determine what is the balance amount payable
by charterers to owners or vice versa? (EXAM PAPER YEAR 2011)

163
Solution:-

CHARTER HIRE : US$ 15,000/- PDPR

CHARTER PERIOD COMMENCES : 3 APRIL 2010 1500 HRS UTC
CHARTER PERIOD ENDS : 10 JULY 2010 0700 HRS UTC

DD:HH:MM

APRIL 2010
3 APRIL ’10 (1500 HRS TO 2400 HRS) 00:09:00
4 APRIL ’10 TO 30 APRIL ’10 27:00:00
MAY 2010
1 MAY ’10 TO 31 MAY ’10 31:00:00
JUNE 2010
1 JUNE ’10 TO 30 JUNE ’10 30:00:00
JULY 2010
1 JULY ’10 TO 3 JULY ’10 00:00:00 (OFF-HIRE PERIOD)
4 JULY’10 TO 9 JULY ’10 06:00:00
10 JULY’10 TO 10 JULY ’10 00:07:00
(0000 HRS TO 00700 HRS)
THEREFORE, TOTAL CHARTER PERIOD : 94 DAYS 16 HRS
VIZ. 94.666 DAYS

TOTAL CHARTER-HIRE DUE : US$ 1420000-00

(94.666 DAYS X US$ 15000)

LESS: TOTAL CHARTER-HIRE PAID : US$ 1000000-00

NET AMOUNT PAYABLE BY : US$ 420,000-00

CHARTERERS

CONCLUSION: CHARTERERS HAVE TO PAY RS. 420,000-00 TO OWNERS.

ooooo

164
 TIME CHARTER - FINAL ACCOUNTS
1.0 Under time charter the charterer hires the ship for a stipulated period and operates it as per his
requirements. The responsibilities of shipowner and charterer are defined and detailed in the charter
party. Such responsibilities also include the sharing of costs and same is briefly enumerated below:

2.1 Shipowner pays for:

2.1. All indirect operating expenses e.g. manning, repairs & maintenance, surveys, stores,
lubricating oil, insurance, capital cost, salaries .etc.

2.2 Charterer pays for:

2.2.1 All direct operating expenses e.g. bunkers, port and canal charges, stevedoring and cargo
handling costs.

2.2.2 Though above expenses are to be paid by the respective parties, in actual fact at the time of
operation of the vessel an expense may be paid by either of the party. Therefore, there is a need to
prepare an account, reconcile it and establish as to what monies are to be paid by either of the parties.

2.2.3 In a short-term charter this reconciliation is carried out at the end of the charter. For a long term
time charter though, the account reconciliation may be made after a stipulated period e.g. 3 months or
6 months.

3.0 Process of preparing final accounts:

1. Documents required - Charter party; on-hire survey report; off-hire survey report; delivery
and re-delivery certificates; all supporting statements/ vouchers for payments; statement of
facts with respect to the performance of the ship; periods of off-hire etc. Port agents and
other departments of the organization may have to be requested to provide all necessary
information, e.g regarding damage to ship, cargo etc.

2. Charter party details - All clauses of the charter party affecting the aspect of settlement
should be closely studied. Most of them will be referred in this presentation.

3. Total period of hire - The complete period of hire should be calculated. This should be from
the date and time of delivery of the vessel till the date and time of its re-delivery to the
owners. In the absence of contrary, all timings should be converted to GMT before such
calculation.

4. Charter hire payment - All remittances made to the shipowner should be verified with the bank
statements.

5. Off-hire periods - A statement of off-hire period should be prepared. Such off-hire may
result due to failure of equipment, failure to provide necessary certificates on board, of the
vessel; failure to provide necessary manpower to man the ship; deviation etc.

The details for their off-hire must be available and substantiated. The fuel consumption
during these periods is also on shipowner's account and therefore fuel remaining on board
(ROB) figures should be available. Further the bunker prices applicable should also be
available.

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 6. On-hire/Off-hire Survey - Such surveys are usually carried out during the charter
period. These are normally on the charterer's and shipowner's account respectively. Based
on the charter party and the statement of facts such times and bunker consumed therein
should be calculated.

7. Bunker or board - The vessel is delivered with curtain bunkers on board. The applicable
prices for such bunker is also fixed. Similarly the vessel is to be re-delivered with a
stipulated quantity of bunkers and such bunkers are to be valued at a stipulated price. The
relevant classes of charter party must be closely examined.

8. Performance - the ship's performance is guaranteed by the ship owner at the

commencement of the charter and the same is incorporated to the charter party. The main
parameters included are speed (e.g. 14 knots up to and including Beaufort scale 4); fuel
consumption (e.g. H.O. 26 Tons/day) and pumping performance for oil tankers. Ship owner
is required to pay under performance penalty if the actual performance is below the
stipulated limit. Documentary evidence will be necessary for calculating such claim.
Sometimes an over performance claim may be payable to the shipowner by the charterer.

9. Damage to ship- Any damage to the vessel by the stevedores during the cargo operations
have to be paid by the charterers. Provision of the charter partly will have to be checked and
the claim substantiated with documents and accordingly the amount is to be debited to the
charterer. Further there may be some other claims on the charterers and it is imperative
that operating department coordinates with the technical department for necessary
information and documentary evidence. One example may be the damage to ship's engines
by the poor quality of bunkers supplied by the charterer.

10. Hold Cleaning - At times holds come to be cleared by the charterer at his expenses.
However, in actual fact the same may be done by the ship's staff and accordingly the
required sum would be required to-be paid by the charterer to the owner.

11. Disbursement - Any disbursement made by the ship, on behalf of the charterer must be on
the charterer's account. Similarly at times advance may be made by the charterer for
monies required for ship's use. This should be on owner's account.

12. Victual expenses - Any charges paid by the owner for the food taken by the employees of
the charterer should be paid by the charterer.

13. Communication Expenses - Any expenses e.g. cable charges, fax and telephone charges on
the charterer's account should be debited to them.

14. Overage insurance - This may be necessary under certain circumstances. It must be paid by
the ship owner and should be charged to them if paid by the charterer.

15. Pending accounts - some accounts may not be available or finalized at the time of making final
account. It is therefore necessary to add a remark qualifying that such account will have to be
taken into consideration as and when they are finalized.

3.1 A detailed statement should be made after all above aspects have been considered and a final
figure is arrived. Ideally such final accounts should be prepared by both shipowner and the charterer and
compared thereafter. This helps in removing the areas of disputes.

166
4.0 Case Study:

4.1 Vessel details –

m.v. HANDY, DWT 45,000, flag - Malta, 5 holds / hatches geared bulkcarrier, speed 14 knots,
fuel consumption HO-26 tons/day. Charter Hire = US $ 4,800 per day or prorata.

4.2 Charter party details -

Bunkers:

The charterer on delivery and the owner on redelivery, shall take over and pay for all fuel
remaining on board the vessel as hereunder. The vessel shall be delivered with not more than 300
m.t. of fuel oil at the price of US $ 140 per ton. The vessel shall be redelivered with a maximum
of 400 m.t. at a price of average of price prevailing at Singapore and Rotterdam on the day of
redelivery.

On-Off-hire Survey –

On-hire survey shall be on the charterer's time and off-hire survey shall be on owner's time.

Cash advances –

Cash for ship's disbursement may be advanced by the charter subject to 2 ½ % commission.

Supercargo –

Accommodation and food may be provided to the super cargo for which charterer may be
charged at the rate of US$ 100 per day. Further charterer shall pay for the meals taken by them
or their agents etc at the rate of 10 $ per meal.

Crew overtime -

In lieu of any overtime paid for the work ordered by the charterer, the charterer shall pay the
owners US$ 1000 per month or prorata.

Clearing of Holds -

The charter shall provide and pay extra for cleaning of holds between voyages. If this is done by
the ship's crew the owner shall be entitled for an amount of US $ 750 per hold.

Spend and consumption -

The owner's guarantee that the vessel is capable for maintaining a speed of 14 knots in good
weather conditions up to and including maximum wind force 4 on the Beaufort scale on a
consumption of 26 tons fuel oil per day. Owners to pay for any under performance in this
regards.

Statement of facts:

Delivery - passing Gibraltar 0600 hrs. on 2nd January 1999, Bankers ROB 280 m.t. On-hire survey at
Casablanca on 4th January 1999 from 0900 to 1130 hrs.

167
 ReDelivery - DOP Gothenburg at 1200 hrs. on 23rd July 1999. ROB HO 390 m.t. Off-hire survey
conducted on 22nd July 1999 from 1800 to 2000 hrs.

Off-hire periods –

15l Feb 99 - at Sea - Engine break down - 6 Hrs 30 min

2nd April 99 - JNPT - Delay for safety certificate 11 Hrs 12 min.
13th Jan 99 - at Sea Engine break down - 27 Hrs

Total fuel consumption during these periods - 10 m.t.

Deviation for dropping sick seaman –

6th April 99 - 0930 Hrs to 1500 Hrs.

Fuel consumption 5.5 m.t.

Time lost due to speed less than 14 k - 28 Hrs.

Extra fuel consumed -17 m.t.

HO price at Singapore and Rotterdam on 23rd July - 160 /180 $ per m.t.

Advance made by the charterer to ship on 9th May at Naples - US 25,000.

All the cargo holds were cleaned six times by the crew during the period of charter.

Capt. Peter, super cargo sailed on the vessel - total period - 17 days.

Meals taken by the charterer or their person - 65 meals.

Communication charges incurred by ship for charterer's account - 750 $

Charter hire already paid @ 4800 $ / day, 15 day in advance - Total 13 payment made.

Charterer paid for custom clearance - transportation of urgent ship spares received from Singapore-$
1250.

ooooooo

168
 Case Study - m.v. HANDY - Final Accounts after Time Charter

On Hire 2-Jan-99 0600 hrs

Off Hire 23-Jul-99 1200 hrs Total period : 202.25 days
Less off hire on 15/2 : 6.5
on 2/4: 11.2
on 13/6: 27
44.7
Less Deviation: 5.5
Less off hire survey: 2
Total deduction (hrs) 52.2 2.175 jays
i
Net days for which charter hire is to be paid : 200.075 days
! i I
Hire already paid for 15 days each -13 instalments: 195 days

Balance to be paid : 5.075 days

@US$4,800perday: 24,360.00 $

Charterer to pay:

1 Crew overtime @ $ 1,000/ month or prorata :

Total months (200.075 days/30.4): 6.5814145 months
6,581.41 $

2 Charges for supercargo @ $ 100/day for 17 days : 1,700.00 $

3 Victualling charges @ $ 10/meal for 65 meals : 650,00 $

4 Communication charges: 750.00 $

5 Hold cleaning @ $ 750. Hold for 6 times * 5 holds each : 22,500.00 $

6 Bunkers ROB on delivery : 280 m.t. @ $ 140 per tons 39,200.00 $

TOTAL TO BE PAID BY THE CHARTERER : 95,741.41 $

Ship Owner to pay :

1 Advance paid at Naples : 25,000.00 $

2 Commision on advance @ 2.5 % 625.00 $

3 Under performance claim due to less speed = 28 hrs = 1.1666667 days® 4800/day:
5.600.00 $

4 Under performance claim due to hiqh fuel consumption = 17 m.t.

I assumed @ $ 140/ton 2,380.00 $

5 Fuel during off hire & deviation = . . ____

10 + 5.5 m.t. assumed @ $ 140/ton : 2.170.0C $

6 Bunker ROB on re-delivery:

1 390 m.t. (3> average of Rottedam & Singapore
prices :@$170/ton : 66,300.0C $
|
7 Agent charges for connecting spares : 1.250.0C $

TOTAL TO BE PAID BY THE OWNER : 103.325.0C $

|
NET TO BE PAID BY SHIP OWNER : 7,583.591 $

***********************
169
CHARTERING FINAL YEAR

LESSON 11
VOYAGE ESTIMATING
1.0 Voyage Estimate:

1.1 The objective of such estimate is to assess the financial result of a planned voyage. The
shipowner is thus able to calculate the approximate returns of a voyage when he is planning to offer
his vessel for a voyage charter. This mechanism also helps him in making a choice between the
available alternatives.

1.2 The necessary inputs for calculating the result of the voyage are two folds, namely revenue
or earnings called freight, and costs comprising of various heads, both direct and indirect.
NOTE: The students should refer to the lesson on "Cost Structure in Shipping" in Economics of Sea Transport subject as a
revision of various types of costs.

2.0 Voyage:

2.1 At the outset it is necessary to define 'voyage' so that a uniform pattern is adopted. It must
be remembered that it is highly unusual to have cargo available for next loading at the port of
discharge and thus the vessel has to ballast to next port.

2.2 Considering this, for voyage estimation purpose the voyage should commence immediately
after the completion of discharge of the earlier cargo and will complete on the completion of
discharge of cargo. Therefore the voyage would include the following:

■ Sailing from Port of discharge to Load port

■ Loading activity
■ Sailing from Load port to the discharge port
■ Discharging activity till the completion of discharge

3.0 Earnings:

3.1 The freight is usually indicated as a rate per ton of cargo or as lump sum. If rate is indicated
then gross profit is calculated by multiplying the rate by the cargo quantity. This quantity will have
to be calculated by considering the following:

Charter party terms - The charter party may indicate a quantity with a fixed percent, say
5% more or less owner's option (MOLOO) e.g. 40,000 tons 5% MOLOO. This provides
the flexibility to shipowner to load anything, by his option, between 38,000 to 42,000
tons.

Bunker position - The quantity of bunkers on board, quantity necessary, bunker prices
availability of bunkers at load port, discharge port or an intermediate port etc.
NOTE: The students should refer to the lesson on "Fuel Economy and Bunker Management" in Economics
of Sea Transport for this.
170
 Draft restriction - Any draft restriction in the load/discharge port will have to be
considered.

3.2 The commission charged will have to be deducted from the gross freight for getting the
net freight. Similarly any brokerage, address commission, freight taxes etc. should also be
reduced.

4.0 Expenses/Costs:

4.1 The direct operating expenses/costs are estimated. This includes following:

■ Bunker Costs,
■ Port Charges and Dues, and
■ Canal Charges

4.2 Before progressing any further, it must be appreciated that for calculating bunker costs, it
is necessary to calculate the number of days the voyage will take. This will include sea passage
days and the days in ports. For calculating above not only the distance between ports are
required but ship's speed and daily fuel consumption are required. It is therefore imperative
that the relevant ship's particulars are available before attempting to work voyage estimate. A
standard distance table, e.g. Reeds Distance Table and a calculator also must be handy. A
suitable package for working on computer may be made available, though for really
understanding, manual calculations should be done.

4.3 Sea Passage Days :

This calculation shall be made separately for each leg of voyage. At times a vessel may have
different speeds for laden and ballast voyages. Further the fuel consumption may be
different.

It is better to round up to the next complete figure e.g.

Distance 3,500 nautical miles (nm); speed 14 knots

Sea passage days = 3500/(14*24) = 10.42 days rounded to 11 days
If average daily fuel consumption is 26 tons/day and the fuel price is $ 90/ton
Fuel costs = 11 * 26 * 90 - $ 25,740

5.0 Port days

5.1 Total time in port will have to be estimated. It is necessary that correct information is
available. The stipulated laytime in the charter party can be used as a guideline. However it must
be remembered that the laytime may be subject to exclusions, e.g. SHEX and thus the actual time
may be more.

45,500 tons to be loaded @ 6,000 tons/WWD SHEX

Thus laytime = 45500/6000 = 7.58 days
171
5.2 However during this period there may be at least one Sunday and may be a holiday. Further
depending upon the time of the year, weather may become difficult and thus effective time for
cargo operations may be more than 7.58 days. As a rule of thumb, the figure may be multiplied by
1.45 or 1.05 to estimate port days for SHEX or SHINC cargo operations respectively. Thus in our
example 7.58 x 1.45 = 11 days may be considered.

5.3 The port bunker consumption shall be on the basis of ship's particulars. Mostly the diesel
oil is consumed every day, both during sea and port days, for auxiliary engine used in
developing power. Multiplying the total diesel oil consumption, both sea and in port, by the
diesel oil prices will give the total D.O. costs. This and the H.O., for the main engines, cost will be
the total bunker costs for the voyage.

5.4 A total of sea passage days and days in port will give the total period of the voyage.

6.0 Port Charges:

6.1 This information may be made available from the port agent and may depend on the ship's
particulars including GT? length, beam, draft, flag etc.; the type and quantity of cargo; services
required etc. Certain information may be obtained from BIMCO and INTERTANKO, who also
publish any charges in tariff and any other charges levied by the port authorities.
Canal Charges

6.2 An indication of the necessary charges will have to be obtained so that it can be considered.

7.0 DWT Calculation:

7.1 This part of the calculations are necessary, to arrive at the quantity of cargo which may be
loaded and thus eventually the freight earnings. Following aspects may be considered:

1. Carter party terms e.g. 45,000,5% MOLOO

2. Draft restrictions, if any at both load and discharge ports.
3. Bunker on board and quantity of bunkers that has to be lifted during the voyage.
4. Bunker prices at various ports during the voyage
5. Freight rate.
6. Stowage Factor of the cargo - cubic capacity of the holds. This may be significant aspect
for light cargoes e.g. grain

76,000 DWT, cubic capacity 92s300 cu. m.

Bunkers = 1500 tons Fresh water = 200 tons Constants =300 tons
Thus DWT available for cargo = 74,000 tons

If cargo is grain with a stowage factor of 1.42 cu.m./ton, only 65,000 tons of cargo can
be loaded as the cubic capacity will be fully used. (92300/1.42).

On the other hand, full 74,000 tons can be loaded if the cargo is iron ore with the
stowage factor of 0.6.
172
8.0 Final Calculations:

Gross Operating Profit (GOP) - Net Freight Earnings - Direct Operating Expenses

GOP per day = GOP/Number of Voyage days

Time Charter Yield (TC Yield): The voyage estimate normally is for a vessel being considered
for a voyage charter. However the ship owner may be interested to know the equivalent
time charter rate for the considered voyage. In other words what time charter rate will
give him the same return as the freight rate indicated for the voyage in consideration. This
is called the TC Yield.

TC Yield = GOP/day adjusted by the commission

Break Even Freight Rate = Total Operating Expenses/Total Cargo
Net Operating Profit (NOP) = GOP/day - Standing Charges per day

Note: It is important to remember that the Voyage Estimate is only an estimate and can only be
as good as the data and information used, including assumptions, if any.

oooooo

RECOMMENDED FOR FURTHER READING

Voyage Estimating : EV. Packard

*************

173
 EXAMPLES OF VOYAGE ESTIMATING

EXAMPLE 1

SWEETY DWT 73000 MT getting free at Aquaba and possible cargo is as follows:
60000 5% MOLOO, iron ore, Marmagao/Ghent, 12$ FIOT, 25000 SHINC loading,
15000 SHINC discharging, 5% total commission

Speed 13k at 25/28 HO ballast/laden, 1.5 D.O; bunker price - 90/155 $/t
Port Dues - Marmagao: 45,000; Ghent: 86,000; Suez: 115,000 Distance
- Aquaba/Marmagao - 2850; Marmagao/Ghent - 6300 Standing Charges
$ 5,500/day

Calculate TC Yield and daily returns.

(Note: In these examples we have rounded calculations to the whole number. All calculations are
'about').

m.v. SWEETY Voyage: Aquaba/Marmagao/Ghent

DWT 73000 tons Distance: Aquaba/Marmagao 2850
Marmagao/Ghent 6300

Speed B 13 knots Port Dues: Marmagao 45000 Days 3

SpeedL 13 knots Ghent 86000 . 4
HO/dayB 25 tons Suez 115000 1
HO/dayL 28 tons
DO/day 1.5 tons
HO Price 90 $/ton
DO Price 155 $/ton Standing Charges 5500 $/day.

Note : In all these examples we have taken T/C yield as equivalent to GOP per
Day.

174
 Voyage days & banker calculations Direct Operating Expenses

DAYS HO DO
Aquaba/Marmagao 9 225 13.5 Bunkers HO 72900
Marmagao 3 4.5 DO 8835
Marmagao/Ghent 20 560 30 Port Dues 246000
Ghent 4 6 Others 0
Suez 1 1.5
Extra allowance 1 25 1.5

TOTAL = 38 810 57 TOTAL: 327735

DWT Calculations

HO for Voyage 810

DO for Voyage 57 Stowage Factor 0.6
Fuel reserve 150
Fresh water 300 DWT available 71483
Constants 200

TOTAL - 1517 Cargo Quantity 63000

Freight Calculations

Freight Rate 12$ Ton Commission 5.00%

Gross Freight 756000" Less Commission 37,800

Net Freight 718200

GOP US$ 390465 (Net Freight Minus DOE)

TC Yield US $ 10275 (GOP Divide by 38 days)

N.O.P/Day US $ 4775 (GOP per day minus 5500 standing charges)

*************

175
EXAMPLE 2

A vessel is ready at Mauritius to load 14,000 tons MMMAX bulk sugar for London at 35 $/ton
FIOT, 1500/750 LOADING/DISCHARGING, TOTAL COM 5%.

The vessel is 15,000 DWT, 13k at 16 t/d HO and 1.5 t/d DO at prices 90/160 $/t
Standing Charges $ 2,300/day.

Port Dues - Mauritius : 20,000; London : 38,000; Suez Canal: 40,000

Distance - Mauritius/London - via Cape = 8,450; via Suez - 7,300

Please advise which route is more advantageous to the shipowner i.e. via Suez or Cape?

Freight Calculations

Freight Rate 35 $/ton Commission 5.00%

Gross Freight 490,000 Less Commission 24,500

Net Freight 465,500

Voyage: Mauritius/London
Via Suez

Speed 13 knots Distance via Suez 7300

via Cape 8450
HO/dayL 16 tons Port Dues: Mauritius 20000 Days: 10
DO/day 1.5 tons London 38000 19
HO Price 90 $/ton Suez 40000 1
DO Price 160 $/ton Standing Charges 2300$/day

176
 Voyage days & bunker calculations Direct Operating Expenses

DAYS HO DO
Via Suez 24 . 384 36 Bunkers HO 36000
Mauritius 10 15 DO 13200
London 19 28.5 Port Dues 98000
Suez 1 1.5 Others 0
Extra allowance 1 16 1.5
TOTAL= 55 400 82.5 TOTAL = 147200

GOP 318300

TC Yield 5787 NOP/Day 3487 Voyage Days 55

Voyage : Mauritius/London via Cape

Voyage days & bunker calculations Direct Operating Expenses

DAYS HO DO
Via Cape 27 432 40.5 Bunkers HO 40320
Mauritius 10 15 DO 13680
London 19 28.5 Port Dues 58000
Extra allowance 1 16 1.5 Others 0

TOTAL = 57 448 85.5 112000

GOP 353500
3902 Voyage Days 57
TC Yield 6202 NOP/Day

Cape Route is giving better results i.e. NOP/day.

Again, via Cape the vessel is engaged for more number of days.

************************

177
EXAMPLE 3

M. V. UMEGA is open at Baltimore and is described as 66,000 DWT; 2,491,000 cuff grain on
45 feet summer draft; FWA 12 inches; TPI175; Standing charges 10,000 $/day Speed 13 k,
45/41 HO laden/ballast, 3 D.O; bunkers 125/215 $/t.

Cargo 50,000 10% MOLOO Petcoke, SF 47 cuft/t. at Lake Charles 40 ft. fresh water for
Iskenderu, 15,000/10,000 SHINC/SHEX; $ 15/t FIOT; 5% totcom.

Distance: Baltimore/L. Charles 1600 Port Dues : Lake Charles 31000

L.Charles/Iskenderu 6500 Iskenderu 39000

Calculate TC yield & Daily Returns

Maximum loading possible as per cubic capacity = 2,491,000/47 = 53,000 tons.

Maximum draft at Lake Charles 40 feet fw with FWA 1 foot. Thus vessel can load only upto 39
feet.

Hence sw draft is 6 feet less (45-39) i.e. 6 x 12 = 72 inches x 175 tons per inch = 12600 tons
Thus DWT available 66,000 - 12,600 = 53,400 tons.

Maximum cargo which can be loaded is 53,000 tons, while the available DWT is 53,400.

m.v. UMEGA Voyage: Baltimore/Lake Charles/Iskenderu

Speed B 13 knots Distance: Baltimore/L.Charles 1600 L.

Speed L 13 knots Charles/Iskenderu 6500
HO/day B 41 tons
HO/day L 45 tons Port Dues: L. Charles 31000 Days 4
DO/day 3 tons Iskenderu 39000 “ 6
HO Price $125 /ton
DO Price $215 /ton Standing Charges 10000 $/day

178
 Voyage days & bunker calculations Direct Operating Expenses
DAYS HO DO

Baltimore/L. Charles 5 205 15 Bunkers HO 148875

L. Charles 4 12 Port Dues DO 23865
L. Charles/Iskenderu 21 945 63 Others 70000
Iskenderu 61 18 0
Extra allowance 41 3
TOTAL = 37 1191 111 TOTAL= 242740

DWT Calculations

HO for voyage 1191

DO for voyage 111
Fuel reserve 150 DWT available 53400
Fresh water 300
Constants 200 Cargo loadable 51448

1952

Freight Calculations
Freight Rate 15 $/ton Commission 5.00%
Gross Freight 771720 Less Commission 38586
Net Freight 733134

GOP 490394

TC Yield 13254 NOP/Day 3254

***********

179
NOTE: STUDENTS MAY NOTE THAT BUNKER RATES CONSIDERED FOR ALL THE PROBLEMS
ARE SMALLER VALUES FOR EASY ARITHMETIC CALCULATIONS. STUDENTS MAY REFER TO
APPENDOX NO.1 TO GET THE LATEST BUNKER RATES PREVAILING IN DIFFERENT
BUNKERING PORTS.

SELF-EXAMINATION QUESTIONS

Voyage Estimating of Dry Cargo Vessel

1. What are the objectives of making a voyage estimate?

2. A realistic voyage estimate depends on the accuracy of the information used while preparing
estimate. List and explain at least four such items.

3. With the following information prepare a voyage estimate and calculate TC yield; NOP per
day and the break even freight rate:

MV PANAMAX, 73,000 DWT; presently at Capetown; speed 14 k at 33 t/d ballast and 35 t/d
laden; DO 2 t/d; Bunker price HO 80 $/t and DO 150 $/t; Standing charges 10,500 $/day.

Cargo coal 65,200 tons; Richards Bay/ Rotterdam; 14 $/t; 2.5% commission; 15,000 t/d SHINC
both ends.

After discharge the vessel is to proceed to US Gulf and the estimate should include this
information.

Distances: Cape Town/Richards Bay - 920

Richards Bay/Rotterdam - 7120 (via Cape)
Rotterdam/US Gulf- 4880

Port Charges: Richards Bay - 15,000 $ and Rotterdam - 60,000$

**************************

180
CHARTERING FINAL YEAR

LESSON 12

LAYTIME - DRY CARGO

1.0 Firstly, let us study important definitions related to Laytime.

1.1 List of Definitions for Laytime:

a) PORT shall mean any area where vessels load or discharge cargo and shall include, but
not be limited to, berths, wharves, anchorages, buoys and offshore facilities as well as
places outside the legal, fiscal or administrative area where vessels are ordered to wait
for their turn no matter the distance from that area.

b) BERTH shall mean the specific place where the Vessel is to load or discharge and shall
include, but not be limited to, any wharf, anchorage, offshore facility or other ___location
used for that purpose.

c) REACHABLE ON ARRIVAL shall mean that the charterer undertakes that an available
loading or discharging Berth be provided to the Vessel on arrival at the Port which the
Vessel can reach safely without delay.

d) ALWAYS ACCESSIBLE shall mean that the charterer undertakes that an available loading
or discharging Berth be provided to the Vessel on arrival at the Port which the Vessel
can reach safely without delay. The charterer additionally undertakes that the Vessel
will be able to depart safely from the Berth and without delay at any time before, during
or on completion of loading or discharging.

e) LAYTIME shall mean the period of time agreed between the parties during which the
owner will make and keep the Vessel available for loading or discharging without
payment additional to the freight.

f) PER HATCH PER DAY shall mean that the Laytime is to be calculated by dividing the
quantity of cargo by the result of multiplying the agreed daily rate per hatch by the
number of the Vessel’s hatches. Thus:

Quantity of cargo
Laytime = = Days
Daily rate x Number of hatches

Each pair of parallel twin hatches shall count as one hatch. Nevertheless, a hatch that is
capable of being worked by two gangs simultaneously shall be counted as two hatches.

181
g) PER WORKING HATCH PER DAY or PER WORKABLE HATCH PER DAY shall mean that the
Laytime is to be calculated by dividing the quantity of cargo in the hold with the largest
quantity by the result of multiplying the agreed daily rate per working or workable hatch
by the number of hatches serving that hold. Thus:

Largest quantity in one hold

Laytime = = Days
Daily rate per hatch x Number of hatches serving that hold

Each pair of parallel twin hatches shall count as one hatch. Nevertheless, a hatch that is
capable of being worked by two gangs simultaneously shall be counted as two hatches.

h) DAY shall mean a period of twenty-four (24) consecutive hours. Any part of a Day shall
be counted pro rata.

i) CALENDAR DAY shall mean a period of twenty-four (24) consecutive hours running from
0000 hours to 2400 hours. Any part of a Calendar Day shall be counted pro rata.

j) CONVENTIONAL DAY shall mean a period of twenty-four (24) consecutive hours running
from any identified time. Any part of a Conventional Day shall be counted pro rata.

k) WORKING DAY shall mean a Day when by local law or practice work is normally carried
out.

l) RUNNING DAYS or CONSECUTIVE DAYS shall mean Days which follow one immediately
after the other.

m) RUNNING HOURS or CONSECUTIVE HOURS shall mean hours which follow one
immediately after the other.

n) HOLIDAY shall mean a Day other than the normal weekly Day(s) of rest, or part thereof,
when by local law or practice work during what would otherwise be ordinary working
hours is not normally carried out.

o) WEATHER WORKING DAY shall mean a Working Day or part of a Working Day during
which it is or, if the Vessel is still waiting for her turn, it would be possible to
load/discharge the cargo without interruption due to the weather. If such interruption
occurs (or would have occurred if work had been in progress), there shall be excluded
from the Laytime a period calculated by reference to the ratio which the duration of the
interruption bears to the time which would have or could have been worked but for the
interruption.

p) WEATHER WORKING DAY OF 24 CONSECUTIVE HOURS shall mean a Working Day or

part of a Working Day of 24 consecutive hours during which it is or, if the vessel is still
waiting for her turn, it would be possible to load/discharge the cargo without
interruption due to the weather. If such interruption occurs (or would have occurred if
work had been in progress) there shall be excluded from the Laytime the period during
which the weather interrupted or would have interrupted work.
182
q) WEATHER WORKING DAY OF 24 HOURS shall mean a period of 24 hours made up of
one or more Working Days during which it is or, if the Vessel is still waiting for her turn,
it would be possible to load/discharge the cargo without interruption due to the
weather. If such interruption occurs (or would have occurred if work had been in
progress), there shall be excluded from Laytime the actual period of such interruption.

r) (WORKING DAY) WEATHER PERMITTING shall have the same meaning as WEATHER
WORKING DAY OF 24 CONSECUTIVE HOURS.

s) EXCEPTED or EXCLUDED shall mean that the Days specified do not count as Laytime
even if loading or discharging is carried out on them.

t) UNLESS SOONER COMMENCED shall mean that if turn-time has not expired but loading
or discharging is carried out, Laytime shall commence.

u) UNLESS SOONER COMMENCED, IN WHICH CASE ACTUAL TIME USED TO COUNT shall
mean that actual time used during turn-time shall count as Laytime.

v) UNLESS USED shall mean that if Laytime has commenced but loading or discharging is
carried out during excepted periods, actual time used shall count as Laytime.

w) TO AVERAGE LAYTIME shall mean that separate calculations are to be made for loading
and discharging and that any time saved in one operation is to be set off against any
excess time used in the other.

x) REVERSIBLE LAYTIME shall mean an option given to the charterer to add together the
time allowed for loading and discharging. Where the option is exercised the effect is the
same as a total time being specified to cover both operations.

y) NOTICE OF READINESS shall mean the notice to the charterer, shipper, receiver or other
person as required by the Charter Party that the Vessel has arrived at the Port or Berth,
as the case may be, and is ready to load or discharge.

z) TIME LOST WAITING FOR BERTH TO COUNT AS LOADING OR DISCHARGING TIME or AS

LAYTIME shall mean that if no loading or discharging Berth is available and the Vessel is
unable to tender Notice of Readiness at the waiting-place then any time lost to the
Vessel is counted as if Laytime were running, or as time on Demurrage if Laytime has
expired. Such time ceases to count once the Berth becomes available. When the Vessel
reaches a place where she is able to tender Notice of Readiness, Laytime or time on
Demurrage resumes after such tender and, in respect of Laytime, on expiry of any notice
time provided in the CharterParty.

aa) WHETHER IN BERTH OR NOT (WIBON) or BERTH OR NO BERTH shall mean that if the
designated loading or discharging Berth is not available on arrival, the Vessel on
reaching any usual waiting place at the Port, shall be entitled to tender Notice of
Readiness from it and Laytime shall commence in accordance with the Charter Party.

183
 bb) WHETHER IN PORT OR NOT (WIPON) shall mean that if the designated loading or
discharging Berth and the usual waiting place at the Port are not available on arrival, the
Vessel shall be entitled to tender Notice of Readiness from any recognized waiting place
off the Port and Laytime shall commence in accordance with the Charter Party.

cc) VESSEL BEING IN FREE PRATIQUE shall mean that the Vessel complies with port health
requirements.

dd) DEMURRAGE shall mean an agreed amount payable to the owner in respect of delay to
the Vessel once the Laytime has expired, for which the owner is not responsible.
Demurrage shall not be subject to exceptions which apply to Laytime unless specifically
stated in the Charter Party.

ee) DESPATCH MONEY or DESPATCH shall mean an agreed amount payable by the owner if
the Vessel completes loading or discharging before the Laytime has expired.

ff) DESPATCH ON ALL WORKING TIME SAVED or ON ALL LAYTIME SAVED shall mean that
Despatch Money shall be payable for the time from the completion of loading or
discharging until the expiry of the Laytime excluding any periods excepted from the
Laytime.

gg) DESPATCH ON ALL TIME SAVED shall mean that Despatch Money shall be payable for
the time from the completion of loading or discharging to the expiry of the Laytime
including periods excepted from the Laytime.

2.0 What is Laytime ?

2.1 It is the time allowed contractually under a voyage charter party, to the charterer for
completing loading and discharging operations of the vessel. Therefore it applies only to voyage
charter.

2.2 Under the voyage charter the shipowner has control of, and therefore is responsible for
the sea passage. However he has little control on the time in port as invariably the cargo
operations are carried out by the charterer. The Iaytime provision, in the charter party, thus allows
the shipowner to make reasonable assessment of the time the vessel will stay in port.

3.0 Demurrage:

3.1 Demurrage is the money payable to the owner for delays, for which the owner is not
responsible, in loading and/or discharging after the Iaytime has expired. In other words it is the
liquidated i.e. agreed damages for delay beyond the Iaytime.

4.0 Despatch:

4.1 If on the other hand the charterer completes loading or discharging in less than the
permitted Iaytime, he will usually be entitled, if the charter party so provides, to receive
despatch money from the shipowner. Though the demurrage is the charge for detention, the
despatch is more like an incentive to the chrterer to complete the cargo operations before the
expiry of the stipulated time and release the vessel earlier.
184
5.0 Types of laytime:

5.1 The laytime can be of following type:

a) Indefinite laytime — When the laytime is described in indefinite terms, i.e. vessel to be
loaded or discharged as "fast as can" (FAC) or as per the "Custom of the port" (COP) or
with " Customary quick despatch" (CQD) etc. Such terms can lead to difficulties, as they
are ambiguous as it becomes difficult to define "as fast as can". Though the charterer,
shipper or consignee must act reasonably while loading/discharging the cargo. In case
where the cargo is not available and the vessel has to wait, this may be considered
Unreasonable" and the charterer may become liable for damages for detention.

b) Definite laytime - The laytime may be expressed in definite terms e.g. 5 days for loading
and 8 days for discharging. Here, too, the day may be further elaborated as "weather
working days" (WWD), "days of consecutive hours", "SHEX", SHINC" etc. The time may
also be indicated as 6 days "all purpose" meaning that 6 days are agreed for both loading
and discharging. For oil tankers usually 72 hours are allowed laytime for both loading and
discharging.

c) Calculable laytime - At times the total laytime may have to be calculated as only the rates
for loading or discharging may be agreed.

Example - Vessel to load cargo @ 10,000 tons/days. Therefore if the cargo to be loaded
is 50,000 tons, the laytime of 5 days shall be allowed. However usually the cargo to be
loaded is expressed as 5% MOLOO (More Or Less Owner's Option). If this option is
utilized and the vessel loads 52,500 tons then the time allowed shall be 5.25 days i.e. 5
days and 6 hours.

Sometimes the rate may be described as tons/hatch/day and the required laytime is
calculated as under:

Hold no.1 - 2,500 tons Hold no. 2- 3,500 Hold no. 3 - 5,100 Hold no. 4- 2,800 Hold no.
5- 2,600 = Total cargo - 16,500 tons.

Laytime @ 300 tons/hatch/day = 16,500/(300*5 holds) =11 days

However it must be noted that Hold no. 3 having 5,100 tons of cargo will not be empty
after 11 days if the rate is 300 tons/hatch/day! The term used in such a situation is
'tons/workable hatch/day".

Therefore laytime @ 300 tons/workable hatch/day = 5,100/300 = 17 days.

6.0 Laytime Calculations:

6.1 The method of laytime calculation is also quite complex but still very systematic. It is based
on certain steps, which are explained below. These must be followed methodically and
systematically so that the objective of such calculation is met. Of course such objective really
means the assessment of whether demurrage or despatch is payable.

185
6.2 Following steps must be taken:

1. Read Relevant Clauses of the charter party.

2. Determine the Allowed Laytime.
3. Obtain Statement of Facts.
4. Establishment of the Commencement of Laytime.
5. Allow for the Interpretation.
6. Establish the Cessation of Laytime.
7. Final Calculation - Demurrage or Despatch.

These are now explained in detail.

6.2.1 Read Relevant Clauses of the Charter Party

The charter Party is the contract between the two performing parties i.e. shipowner and
the charterer. Before progressing any farther it is imperative that the clauses of the
charter party are studied in detail and all relevant clauses affecting the aspect of laytime
are identified.

The following information may be available:

a. Contractual place of cargo operation - port of Vizag or ore jetty at Vizag

b. Cargo quantity
c. Type of laytime - e.g. reversible, non-reversible in average. In the absence of this
information, it is presumed that the laytime shall be calculated on non-
reversibled. Rate of loading/discharging - 6000 tons/day, SHEX/SHINC
e. Laytime allowed - e.g. 3 WWD for loading
f. Notice of readiness - e.g. NOR to be rendered during working hours
g. Time to commence from - e.g. time to commence from 1300 hours if NOR is
tendered before noon and at 0800 Hours next working day if NOR is tendered
after noon.

h. If cargo operations commence before laytime starts - e.g. time not to count
Unless Used; not to count Even If Used; or to count at half rate
i. Exclusion/Interruption - e.g. what happens to time under bad weather; strikes;
lockout and fire etc. at terminal or port etc.
j. Demurrage rate - e.g. xx $/Day or prorata . Despatch rate - e.g. half the
demurrage rate
k. Time limit for submitting demurrage claims - usually the claims for demurrage is to
be submitted within 90 day.

6.2.2 Determine the Allowed laytime:

This information will have to be taken from the relevant charter party clause. It could be
a simple definite laytime e.g. 4 days for loading or it may have to be calculated e.g. vessel
to be loaded at the rate of 5,000 hours per day. Information regarding SHEX, SHINC etc.
will also have to be considered.

186
6.2.3 Obtain Statement of Facts:

Statement of Fact (SOF) is the main document, which provides all the necessary
information chronologically logged regarding all the relevant events during the cargo
operation.

The SOF lists all the events and their timings chronologically starting from the time vessel
arrived; NOR tendered; pilot boarded; berthed, cargo commenced; any interruption; cargo
completion; cargo quantity etc. This document is signed by all parties concerned,, namely,
agents; master of the vessel; representative of the charterer etc.

BIMCO along with FONASBA have developed a standard format of SOF. This is attached
along with these notes as Annex 2.

6.2.4 Establishment of the Commencement of laytime

Following aspects should be considered while arriving at the commencement to laytime or

what is commonly referred as the starting of the laytime clock.

A. The vessel must be an "ARRIVED SHIP".

B. Contractual commitment.

These are explained below in detail:

i. The vessel must be an "ARRIVED SHIP". A vessel is an "arrived ship" as soon as

following events occur:

ii. The vessel must reach the contractual place for the cargo operations as stipulated in
the charter party. This is called the "geographical arrival" of the vessel. Such
place could be a port or berth. In the case of berth it is very specific e.g. oil jetty
no. 2 of Rastanura. (such charter is also referred to as berth charter). However in
case of port it is usually meant as the commercial area of the port.
Term like WIBON (Weather In Berth Or Not) can also help in deciding that the vessel
has arrived in the contractual position.

iii. It must be noted here that although the time may commence when a vessel is waiting
in the anchorage, the time spend in shifting eventually to the first cargo berth
normally does not count as laytime.

The vessel must be ready in all respect to load or discharge the cargo or lie at the
disposal of the charterer. This is referred to as the "Actual Readiness".
This means that the holds, or tanks for oil tanker, must be suitably clean to the extent
that they are fit to carry the intended cargo. The required cargo handling equipment
should also be in readiness.

iv. Proper Notice Of Readiness (NOR) must have been given to the shipper/
consignee/ supplier/ receiver in the manner prescribed in charter party. This is
referred to the "Triggering off laytime". The relevant charter party clause may
specify all the details about this. E.g. notice may be required to be given 72, 48
or 24 hours before arriving at a port. The relevant fax/telex nos., name of the
person, addresses etc. also could be specified in the charter party.
187
 B. Contractual commitment - at times the charter party may specify that:

i. The vessel is cleared by customs or is in free pratique or is entered in custom house

etc.
ii. Some times the charter party may provide for certain turn time in ports where the ships
have to wait for their tern.
iii. The charter party usually contain a clause pertaining to the submission of NOR as
explained above. The clause may further indicate that the time will start after 6 hours
or next day at 0800 time. E.g. time to commence at 0800 hours on the day following
the tendering of NOR.

6.2.5. Allow for interruption :

The laytime clock, once it starts, continues till either the cargo operations come to an end
or the laytime itself expires, whichever is earlier. However there may be few
interruptions during the cargo operations. The charter party would normally include.
express clauses indicating interruption in laytime due to following:

a. Weekends and holidays

This is covered by using terms like Sundays and Holidays Excepted (SHEX) or in Muslim
countries by using Fridays and Holidays Excepted (FHEX), Sundays and Holidays Included
(SHINC) indicates that the time is to be counted on all days.

The charter party may include a clause specifying the time when the laytime clock will
stop before a holiday, e.g. "Time not to count from 1700 hours on the day preceding a
holiday". If such time is. not specified, the laytime usually stops from t midnight (2400
hours) on the day preceding a holiday.

Similarly the contract may include a clause specifying the resumption of laytime following a
holiday e.g. "time would restart at 0800 hours on the next working day after Sunday or
holiday".

Some other terms which may be used are 'Unless Used" or Even if Used" and these indicate
that the laytime during excepted period may be counted if used or not to be counted
even if it is used respectively.

b. Shifting between berths

If the charter party specify that the cargo is to be loaded or discharged at more than one
berth than the required shifting shall be at owner's expense and time. However if the
charterer desires that the vessel to be shifted then all expenses shall be borne by him
and of course the laytime shall continue.

c. Strike, lockouts, war etc.

Normally time lost due to strikes etc. is not to be counted as laytime. Usually a clause to
this effect shall be included in the charter party.

188
6.2.6 Establish the Cessation of laytime:

The laytime clock stops when either the laytime allowed has exhausted or the
loading/discharging operation has completed, whichever is earlier.

6.2.7 Final Calculations:

After completing the above referred steps, the final calculations are carried out to
establish if the vessel has been on demurrage or any despatch money is payable.

The calculations are made for every day by calculating the laytime used in that day. This
is done for every day till the vessel stays in port.

If the cargo operation does not complete and the laytime has exhausted, the vessel goes
on demurrage and all the time, till completion of cargo, is treated as demurrage. This is
also referred as "Once on demurrage always on demurrage".

There are three methods of calculating the final results and these are described below:

(i) Non-Reversible

According to this method both load and discharge port/s calculations are made
separately and therefore two separate results are arrived. E.g. the vessel may be on
demurrage at both load and discharge ports, or both despatch or one demurrage and
other despatch etc. These timings are then converted into money by using the agreed
rate of demurrage/despatch in the final summery. Finally one consolidated figure is
arrived at.

Such calculation can be made for the load port as soon as the relevant documents are
available. The discharge port calculation can be made after the documents arrive.

(ii) Reversible

Such calculation, or the reversible laytime as it is commonly referred to, is made by adding
the available laytime for both/all ports, loading and discharging, and then one long
calculation is made. The calculation starts with load port and is immediately followed by
the calculation regarding discharge port. The end result, therefore is only one which could
be demurrage or despatch and is then converted into money.

This type of calculation can only start once all the documents have been received, both
for load port and discharge ports.

The charter party may require the laytime to be reversible e.g. "8 days all purpose" or "9
total days". Alternatively the charter party may allow the charterer to opt for reversing
laytime if he so desires.

(iii) Average

This is like the non-reversible and the calculation is done in exactly similar way. However
the two results, for the load and discharge ports, now are averaged or adjusted and one
figure is arrived, which is then converted into monetary results.

189
 E.g. if at the load port demurrage of 4 days resulted and despatch of 4 days was
calculated at discharge port, the net result will be zero and no demurrage or despatch
need be paid. Under non-reversible, though, an amount still has to be paid by the
charterer as the demurrage rate is higher than the despatch rate.

The charter party will include a clause giving the charter option to average the laytime.
By averaging, thus, he can reduce his financial liabilities under circumstance if at one
port demurrage and at the other port despatch has resulted.

In the absence of any clear understanding by the charter party, the calculations are
carried out by non-reversible method.

All time saved/ Laytime saved

The despatch i.e. time saved can be calculated by the following two different methods:

1. All Time Saved (ATS) - In this method the time of exception e.g. Sundays and holidays
are included as the time saved and therefore a higher despatch has to be paid. The
calculation has to be continued till all the laytime has expired, though the cargo
operations must have completed earlier.

2. Working Time Saved (WTS) - Under this system the calculations are concluded as soon
as the cargo operations are completed and despatch time is arrived by deducting the
time used for the time available.

The ATS method favours the charterers as this will be higher than WTS due to the
inclusion of excepted time. The WTS, on the other hand, is favourable to the shipowner.

oooooo

SELF-EXAMINATION QUESTIONS

1. What are the seven stages to be taken into consideration when calculating laytime?
2. What events can interrupt laytime counting?
3. Does time continue to count if shore cranes break down?
4. What is (a) demurrage and (b) despatch?
5. What is meant by 'Reversible Laytime'?

Reference Books:

Shipbroking and Chartering Practice by Lars Gorton , Rolf Ihre, Patrick Hillenius, Arne
Sandevärn.

****************

190
 EXAMPLES OF LAYTIME

EXAMPLE 1

Charter-party Clause -

"Charterers to be allowed 4 WWD, SHEX for loading and 3 working days weather
permitting SHINC for discharging. Time to count from noon if notice of readiness is
tendered before noon, and at 0800 hours next working day if the notice is tendered in after
noon during working hours. Demurrage @ US$ 5,000 per day and prorata to be paid. The
despatch, if any, is to be at half demurrage rate for all working time saved."

Statement of Facts - - Load port

Sun. 28th Feb. 2000 hrs. THESEUS arrives and berths
Mon. 1st March 0900 NOR tendered
Tue. 2nd March 1300 Loading commenced
2000
0730 Cargo operations stopped for the day
Wed. 3rd March 1025 Loading stopped as cargo not available
1115 Loading re-commenced
2000 Loading re-started
0730
1200 Cargo operations stopped for the day
1415 Loading started
Statement of Facts - Discharge port
Loading completed
Mon. 22nd March 0330 hrs. THESEUS
Vessel arrives
sailed
0630 Vessel berthed
0915 NOR tendered
Sat. 27th March 1200 Discharge commenced
1200 Discharge completed
1530
Vessel sailed

191
Solution

Laytime allowed- Load port: 4 WWD SHEX

Discharge port: 2 WD SHINC

Commencement of Laytime

Load port: NOR tendered 0900 on Monday 1st March

Time starts at 1200 on Monday 1st March
Discharge port: NOR tendered 0915 on Monday 22nd March
Time starts at 1200 on Monday 22nt* March

Interruptions -Nil

Cessation of time - Completion of loading / discharging

Calculations-

NON-REVERSIBLE METHOD

LOAD PORT Laytime allowed - 4 WWD SHEX

Date Day Time Time used Remarks

Day-Hrs-Min
I Mar. Mon. 1200 - 2400 00-12-00 Laytime started at 1200
2 Mar. Tue. 0000 - 2400 01-00-00
3 Mar. Wed. 0000 - 1200 00-12-00 Loading Completed
TOTAL= 02-00-00

DISCHARGE PORT Laytime allowed - 2 WD SHINC

Date Day Time Time used Demurrage Remarks

Day-Hrs-Min Day-Hrs-Min
22 Mar Mon 1200 - 2400 00-12-00 ,_ LT started at 1200
23 Mar Tue 0000-2400 01-00-00
24 Mar Wed 0000 - 2400 01-00-00 00-12-00 LT over at 1200
25 Mar Thr 0000 - 2400 01-00-00 01-00-00
26 Mar Fri 0000 - 2400 01-00-00 01-00-00
27 Mar Sat 0000 - 1200 00-12-00 00-12-00
TOTAL = 05-00-00 03-00-00

192
Summary

Load Port Time used = 2 days Time allowed = 4 days

Despatch for 2 days @ $ 2.500/day = $ 5,000

Discharge port Time used = 5 days Time allowed - 2 days

Demurrage for 3 days ($ 5.000/day = $ 15.000 Net
Result Demurrage = $ 10.000

REVERSIBLE METHOD

LOAD PORT Laytime allowed - 4 WWD SHEX

DISCHARGE PORT Laytime allowed - 2 WD SHINC
Total laytime allowed - 6 days

Date Day Time Time used Demurrage Remarks

Day-Hrs-Min Day-Hrs-Min
L Mar. Mon 1200 - 2400 00-12-00 Laytime started at 1200
2 Mar. Tue 0000 - 2400 01-00-00
3 Mar. Wed 0000 - 1200 00-1-2-00 Loading Completed
22 Mar Mon 1200 - 2400 00-12-00 Laytime started at 1200
23Mar Tue 0000 - 2400 01-00-00
24 Mar Wed 0000 - 2400 01-00-00
25 Mar Thr 0000 - 2400 01-00-00
26 Mar Fri 0000 - 2400 01-00-00 00-12-00 LT over at 1200
27 Mar Sat 0000 - 1200 00-12-00 . 00-12-00 Discharge over at 1200
TOTAL= 07-00-00 01-00-00

Summary
Demurrage for 1 days ($ 5.000/dav = $ 5.000 Net
Result Demurrage = $ 5.000

AVERAGE METHOD
This method is exactly like the Non-Reversible method, except the results of load and
discharge ports are adjusted as follows:

Summary
Load Port Despatch for 2 days
Discharge port Demurrage for 3 days
Net Result Demurrage for ONE day = $ 5.000

193
EXAMPLE 2

Charterparty details

Cargo 26,000 metric tons to be loaded @ 3,000 metric tons per WWD

Laytime to commence at 1300 hrs. if NOR tendered before noon and at 0800 hrs. next
working day if NOR tendered after noon.

Time from 1700 hrs. on Friday and the day preceding a holiday to 0800 hrs. on Monday
or next day after a holiday not to count unless used or unless the vessel is on
demurrage.

Demurrage to be paid @ $ 4,000/day or prorata. Dispatch money payable at half the

demurrage rate on Working Time Saved.

STATEMENT OF FACTS

Date Day Time Details

10* August Fri. 0800 hrs. Vessel arrived
0900 NOR tendered and accepted
12th Sun. 1800 Pilot onboard
2100 All Fast
13th Mon. 0800 Loading started
15th Wed. Holiday
16th Thu. 1400 Work stopped - bad weather
1800 Loading re-started
21a Tue. 1530 Loading completed
1700 Vessel sailed

Calculations

Laytime allowed = 26,000/3,000 = 8 days 16 hours

194
Working Time Saved:

Date Day Time Time used Remarks

Day-Hrs-Min
10 Aug Fri. 1300-1700 00-04-00 Laytime started 1300
1700-2400 - Not to count
11th Sat. 0000 - 2400 -
12th Sun. 0000-2400 -
13th Mon. 0000 - 0800 -
0800-2400 00-16-00 LT starts at 0800
14th Tue. 0000 - 1700 00-17-00 Next day holiday
1700-2400 -
15th Wed. 0000 - 2400 - Holiday
16th Thu. 0000 - 0800 -
0800 - 2400 00-12-00 Bad weather for 4 hours
17th Fri. 0000 - 1700 00-17-00
1700 - 2400 -
18th Sat 0000 - 2400 -
19th Sun. 0000 - 2400 -
20th Mon. 0000 - 0800 -
0800 - 2400 00-16-00 LT starts at 0800
21s1 Tue. 0000 - 1530 00-15-30 Loading completed
TOTAL= 04-01-30

Laytime allowed = 8 days 16 hours

Working Time Saved = 4 Days 14 Hours 30 Minutes

Despatch @ $ 2,000/day = $ 9,208.33

195
 All Time Saved:

For calculating All Time Saved, the calculation is to be continued till all the allowed
laytime is exhausted.

Date Day Time Time used Despatch Remarks

Day-Hrs-Min Day-Hrs-Min
21st Tue. 1530-2400 00-08-30 00-08-30 Despatch started 1530
22* Wed 0000 - 2400 01-00-00 01-00-00
23rd Thu 0000 - 2400 01-00-00 01-00-00 -
24th Fri 0000 - 1700 00-17-00 00-17-00
1700-2400 Day-Hrs-Min
- 00-07-00 Time is not counting
25th Sat 0000-2400 Day-Hrs-Min
- 01-00-00 -do-
Day-Hrs-Min
26th Sun 0000 - 2400 - 01-00-00 -do-
27th Mbn 0000 - 0800 - 00-08-00 -do-
0800 - 2400 00-16-00 00-16-00
28m Tue 0000 - 2100 00-21-00 00-21-00 Allowed LT completes
TOTAL= 08-16-00 07-05-30 '

Laytime allowed - 8 days 16 hours

All Time Saved = 7 Days 5 Hours 30 Minutes

Despatch @ $ 2,000/day = $ 14,458.33

Note: All Time Saved is always higher than the Working Time Saved under the SHEX
terms. However under the SHINC terms both will be same as there are no excepted
periods.

196
EXAMPLE 3

M.V. “Aristocratic” loaded 65000 MTS of Fertiliser from Mundra and is fixed on following CP terms –

a) Load Rate: 13000 MT PWWD SHEX IUATC (If Used Actual Time
to Count) basis 5H/H
b) NOR to be tendered if vessel in free pratique
c) Turn time 12 hours unless sooner berthed
d) First shifting not to count
e) Demurrage : USD. 16000 PDPR
f) Despatch half the demurrage rate on working time saved
g) Running days of 24 consecutive hours is used

SOF at load port are as follows –

DATE DAY TIME (hrs)

23 Jan Mon 1200 Arrived
23 Jan Mon 1200 Anchored
23 Jan Mon 1250 Free Pratique
23 Jan Mon 1300 NOR
24 Jan Tue 1100 POB
24 Jan Tue 1400 Berthed
24 Jan Tue 1500 Commenced loading
30 Jan Mon 1400 Loading completed
30 Jan Mon 1530 Documents on board
30 Jan Mon 1600 POB
30 Jan Mon 1700 RFA / Sailed
Remarks:-
o 25 Jan, Wednesday there was bad-weather from 1000 hrs to 1200 hrs
o 26 Jan, Thursday being Public holiday (Republic day) vessel loaded cargo from 1300 hrs to 1800
hrs
o 28 Jan, Saturday there was stoppage of cargo operation due to high wind force from 0930 hrs to
1830 hrs
o 29 Jan, Sunday vessel loaded cargo from 0001 hrs to 1100 hrs

Calculate laytime used, Demurrage or Despatch ?

(NMIS Q.PAPER 2012)

THIS PROBLEM IS SOLVED IN A DIFFERENT FORMAT, HOWEVER, THE METHODOLGY AND CONCEPT
REMAINS UNCHANGED

A. LAYTIME ALLOWED -

MV ARISTOCRATIC TO LOAD 65,000 TONS OF WHEAT @ LOAD RATE 13,000 T/DAY PWWD,
SHEX IUATC I.E. 65,000 T / 13,000 = 5 DAYS

B. COMMENCEMENT OF LAYTIME –

NOR TENDERED - 23RD JAN, MON / 1300 HRS

NOR +TURN TIME - 24TH JAN,TUE / 0100 HRS
VESSEL BERTHED - 24TH JAN,TUE /1400 HRS
TH
TIME TO COMMENCE ON 24 JAN, TUE / 0100 HRS.

C. CESSATION OF LAYTIME -
COMPLETED LOADING 30TH JAN, MON / 1400 HRS.

197
D. LAYTIME CALCULATIONS

DATE DAY TIME TIME USED REMARKS

(HRS) DD-HH-MM
24 JAN TUE 0100- 1100 00-10-00 L/T STARTS AT 0100
1400-2400 00-10-00 FIRST SHIFTING NOT TO COUNT
25 JAN WED 0001-1000 00-10-00
WED 1200-2400 00-12-00 BAD WEATHER 1000 HRS TO 1200 HRS
26 JAN THU 1300-1800 00-05-00 Actual loading 1300-1800 hrs
27 JAN FRI 0001-2400 01-00-00
28 JAN SAT 0001-0930 00-09-30 High wind force from 0930-1830
1830 -2400 00-05-30
29 JAN SUN 0001-1100 00-11-00 Actual loading 0001-1100 hrs
30 JAN MON 0001-1400 00-14-00 CESSATION OF LAY TIME

TOTAL LAYTIME USED 01-87-00

LAYTIME TAKEN : 111 HRS 4.625DAYS

ASSUMPTION : THE TIME TAKEN TO PLACE DOCUMENTS ON BOARD IS ABOUT 1 HOURS 30 MIN AFTER
COMPLETION OG CARGO WHICH IS ASSUMED TO BE ON OWNERS ACCOUNT, HENCE LAYTIME NOT TO
COUNT.

FINAL CALCULATIONS
LAYTIME ALLOWED : 5DAYS
LAYTIME TAKEN : 4.625DAYS
LAYTIME SAVED : 0.375 DAY
DESPATCH RATE : USD. 16000/2
= USD. 8000/-
TOTAL DESPATCH AMOUNT : USD. 3000/-

ooooo

RECOMMENDED FOR FURTHER READING:

1. Laytime Calculating- W. V. Packard

2. Laytime Calculation - Capt D. Driver
3. Shipbroking and Chartering Practice - Gorton, Ihre.

***********************

198
PART – III : TANKER CHARTERING
CHARTERING FINAL YEAR

LESSON 13

CRUDE OIL / TYPE OF TANKER SHIPS AND CARGO HANDLING

1.0 INTRODUCTION:

1.1 Crude oil was first produced commercially in 1859 in Pennsylvania, USA. The first ship to
carry oil was the 'Elisabeth Watts' in 1861 in wooden barrels. Although the barrels themselves
have been replaced we still use the expression 'Barrel' as a common unit of measurement of oil;
it equals 42 US Gallons or 35 Imperial Gallons. One US Gallon is about 3.78 litres and one
Imperial Gallon about 4.5 litres. 1866 is considered to be the start of the tanker industry when
the German owned vessel 'Glaukauf was launched in Newcastle, England.

2.0 A shift in refinery ___location:

2.1 In 1939 oil refining was largely located in the major oil producing areas of the world.
Since 1951, however, there has been a shift in the refinery ___location from producing to
consuming locations. The reasons behind this shift were a mixture of economic, technical,
financial and political factors and can be enumerated as follows:

1) In the early days, there were a limited number of products to sell to a limited
number of markets, source located refineries economized on transportation costs
and permitted the concentration of investment. In post World War II scenario, in
Japan and Europe there was a greatly increased demand for all the crude oil based
petroleum products in the fast growing transportation, utilities, domestic and
commercial heating, heavy industry and petrochemical sectors.

2) Technical developments in refining have permitted a much greater degree of

flexibility in product output i.e. the output from a given crude can be varied, within
limits, to match the demand of the local market.

3) Given the increased demand for all products in the consuming region, it is much
cheaper to transport crude oil than numerous small parcels of petroleum products.
Students are required to refer to the concept of "Economies of Scale" from their
Economics lessons.

4) Finally, both governments and oil companies have appreciated the needs for
ensuring continuity of oil supplies in the face of various political uncertainties in the
producing areas of the world.

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3.0 CLASSIFICATION OF TANKERS :

TYPE TONNES (DWT)

1. Premium Range < 16500

2. General Purpose (G.P.) 16500 – 24999
3. Medium Range (M.R.) 25000 – 44999
4. Long Range I (L.R. I) 45000 – 79999
5. Long Range II (L.R. II) 80000 – 159999
6. Very Large Crude Carrier (VLCC) 160000 – 319999
7. Ultra Large Crude Carrier (ULCC) > 320000

3.1 Besides the above other size descriptions used in the tanker trade are:

i) AFRAMAX: This term has been accepted to mean a maximum of 79999 DWT or
the largest tanker size in the AFRA Freight Rate Assessment Scale as shown
above.

ii) PANAMAX: This term implies to the largest size of vessels, which can transit
through the Panama Canal in laden condition. Students are aware from their
Geography lessons that the Panama has a restriction of beam (106 feet) and
draft (about 39 feet).

iii) SUEZMAX: This term implies the largest size of vessels, which can transit through
the Suez Canal in laden condition. Due to technological developments in
shipbuilding and the continuous dredging of the canal, ships of 150000 DWT can
now transit the Suez Canal. With the continuous dredging programme, perhaps
the day is not far when ships of 250000 DWT would be able to transit through
the Suez Canal.

3.2 Depending upon the type of cargo a tanker is carrying, tankers are classified as:

a) Clean: Carrying Naphtha, Motor Spirit, High Speed Diesel, Kerosene, Aviation Fuel
etc.

b) Dirty: Carrying Crude Oil, Fuel Oil etc.

3.2.1 Product tankers are obviously smaller than the crude carriers for reasons of demand
and are traded in the Premium Range to the Medium Range category. However, in recent times
there has been some trading for High Speed Diesel and Naphtha in the LRI/LRII categories.
Crude oil carriers generally trade in the LRI - ULCC categories.

3.2.3 Dirty tankers are fitted with heating coils in the cargo tanks to maintain sufficient
temperature to keep the oil in a fluid state or with a lighter density for ease of discharge.

3.3 A tanker's cargo tanks are separated by a number of bulkheads to allow for segregated
transportation. Vessels have ballast tanks that are filled with seawater to maintain the
necessary draft during voyages when the vessels are unloaded. Other vessels could be
equipped with Segregated Ballast Tanks (SBT) which are meant exclusively for water and have a
separate piping and pumping system.

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3.4 Cargo carrying space in tankers is formed by subdividing the mid-ships section of the
ship by two longitudinal bulkheads to form port, starboard and centre cargo tanks. The two
longitudinal bulkheads are usually positioned so that the cubic capacity of the centre tank is
equivalent to the combined capacity of the two adjacent wing tanks.

3.5 For studying the Profile, Plan and Midship section of Tankers and Gas Carriers.

4.0 THIRTY YEARS OF UPHEAVAL FOR OWNERS:

4.1 For achieving economies of scale, as tanker sizes escalated in size, there was unease in
the industry about what environment calamity might result if one of these super tankers came
to grief. It took Torrey Canyon (1967) to give these fears substance and galvanize industry and
regulators into action. Segregated Ballast Tanks (exclusive pipeline and pumping system for
water) were introduced as one means of enhancing the pollution prevention capabilities of new
tankers and to compensate for the loss of cargo carrying capacity due to these dedicated ballast
spaces; naval architects increased the depth of such ships. This, in turn, boosted the
longitudinal strength of the hull and enabled a reduction in deck and bottom plating thickness
of about 20 %. i.e. from 25 to 20 mm on a VLCC.

4.2 Such a dramatic reduction was deemed acceptable as the introduction of a requirement
for inert gas (see below) added an element to the cargo tank environment, which discouraged
corrosion.

4.3 In December 1969, within the space of two weeks, three VLCC's of about 200000 DWT,
including two Shell ships suffered massive explosions during tank cleaning operations on ballast
voyages. The disasters prompted Shell to carry out a thorough investigation of tank cleaning
operations. It was found that the powerful water jets used to wash the tank walls created an
electrically charged mist and under certain circumstances, the electrical charge generated could
be enough to ignite the mixture of air and cargo vapors in the empty tanks. It was decided that
the optimum solution would be to fill the tanks with inert gas and the 1974 SOLAS Convention
introduced a requirement for Inert Gas Systems. Development of the Crude Oil Washing (COW)
technique at about the same time (see below) further minimized this explosion risk.

4.4 Tanker Owners think of the 1970s, usually with a cold shudder, as the OPEC decade. Oil
producers were unhappy with the very low oil prices they were getting and in October 1973,
following the Yom Kippur War when Egypt attacked Israel, they raised the price of a barrel of oil
from $ 2.90 to $ 13. Within two years the demand for tankers had dropped 20 % and only the
development of new fields in the Gulf of Mexico, North Sea and Alaska cut down the tanker
'tonne-mile' (refer to Economics notes) requirement.

4.5 Following the rigorous reappraisal of tanker safety in the wake of the Exxon Valdez
grounding in Alaska in March 1989, a two pronged attack, comprising a ship design and a ship
operations element, has been launched in an attempt to drive out the sub-standard tanker
once and for all.

4.6 Exxon Valdez also prompted the most important change to tanker design since the first
dedicated oil tanker was delivered; the requirement that all new vessels over 5000 DWT be
fitted with double - hulls. Structural stiffeners are placed in the double - hull water ballast
spaces and the resultant flush wall cargo tanks have facilitated tank cleaning operations and
enabled improved cargo outturns. Serious doubts, however, have been raised in some quarters.
These worries concern primarily corrosion in the ballast tanks, including the performance of
ballast tank coatings, and the fatigue strength of key structured members. However, to date the
experience has been good.
202
4.7 Tanker shipping has now completed passage through the most tumultuous three
decades in its 110 years history. It would not be out of place to mention that the major oil
pollution disasters have occurred as a result of human errors.

5.0 CRUDE OIL CARRIERS:

5.1 Crude oil cargoes are frequently homogenous, and different crudes are carried on the
same ship. However, this does not cause much concern about contamination because the
crudes will be refined before sale to a customer. The largest crude oil carrier is over 500000
DWT. These ships can usually carry one or two grades of cargo and have a relatively
straightforward pumping to pipeline system for loading and discharging. All modern tankers
have to be fitted in compliance with marine pollution (MARPOL) requirement. For a crude
carrier this means that the vessel must be fitted with a Crude Oil Washing (COW) and an Inert
Gas System (IGS).

6.0 CRUDE OIL WASHING:

6.1 The availability of fixed tank washing equipment was the break-through needed which
allowed cargo to be used for tank washing in crude oil carriers. The system works on the
principle that part of the cargo being discharged ashore is diverted through the fixed tank
washing machines' into the tank being emptied so that all exposed tank surfaces are being
washed by jets of crude oil.

6.2 When crude oil is discharged from a tank there is a certain amount of clingage i.e. some
oil sticks to the sides. At the bottom of the tank there will be residue such as sands or waxy
deposits, therefore there is a cargo loss through this retention. To reduce this loss a system of
tank cleaning guns, as explained above, is fitted within the tanks, during discharge some of the
cargo is re-circulated through the guns, which are rotating. As the jet hits the tank walls, the
clingage is run down. Once such tanks are empty", water ballast can be pumped in. When a
tanker is not loaded with cargo to proceed to sea in a safe condition she must have the
equivalent of about one third of her dead weight on board as ballast. Prior to loading she would
need to discharge such ballast and unless the tanks were cleaned prior to de-ballasting, this
would be 'dirty ballast' which must not be discharged in port or within 50 miles of land, thus
dirty ballast reception facilities would be required at load ports.

6.3 The advantages of COW are that it largely restricts pollution, increases the outturns/
reduces losses, reduces the tank cleaning time after discharge and likewise reduces the tank
cleaning time before proceeding to dry-dock.

6.4 The disadvantage is only commercial in nature — more berth time. Each Charter Party
will allow a certain time for COW, which is dependent upon the number of tanks to be Crude Oil
Washed. For instance, Shellvoy 5 allows 0.75 hrs per tank to be crude oil washed.

6.5 Preparation for COW must be made before the ship's arrival at the discharge port by
ensuring that all valves on the tank washing lines are closed. Once discharge of the cargo has
begun, the valves oh the appropriate washing machines can be opened and a modified washing
cycle carried out. When this is completed the machine should be stopped until further areas of
the tank structure are exposed. Possibly two further washing cycles would be required before
the whole tank has been cleaned, the actual number of washings dependent upon the tank
structure configuration. A wing tank would require more washing than a centre tank because of
its more complicated structure.

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7.0 INERT GAS SYSTEM:
7.1 Since crude oil is a volatile and gaseous cargo, the COW system causes a lot of
flammable vapors to be released. Due to this reason there have been a lot of disastrous
explosions on tankers and as a safety measure tankers operating COW must also inert the tank
spaces, i.e. to keep the oxygen content below combustion levels.

7.2 This keeps the tank under pressure with exhaust gases from the main engines and
auxiliaries. These gases are scrubbed and cooled before being injected into the tanks. As the
tank level declines the inert gas is pumped in; thereby preventing the cargoes' gases vaporizing.

7.3 Before a fire/explosion can occur three factors must be present - fuel, ignition and
oxygen. Hydrocarbons will hot burn in air unless they are mixed in the correct proportions (the
excepted limits are between 1 % and 10 % hydrocarbons in air). Hence the objective is to
operate within this hydrocarbon limit in air. As far as a tanker is concerned, fuel cannot be
removed; even the source of ignition is only avoidable. Hence, it is only oxygen, which can be
eliminated during operations by carrying out proper procedures. Air consists 21 % oxygen and
79 % nitrogen with traces of other gases. There must be a minimum of 11 % oxygen before
combustion takes place. Hence, IMO requirements are for a maximum of 8 % oxygen by volume
in the atmosphere of a ship's cargo tanks after they have been inerted.

7.4 The use of the IGS is a crucial part of the unloading procedure. If the oil is simply
pumped out, the vacuum created inside the tanks will eventually cause them to collapse
inwards. Regular air is not used to avoid explosions.

8.0 PRODUCT CARRIERS:

8.1 Product carriers could be clean or dirty. The clean product carriers require a great deal
of care, for the cleaning of the tanks between each of the cargoes. To facilitate the cleaning the
tanks are frequently coated with special paints, which also serve to reduce the chance of
corrosion within the tanks.

8.2 Clean product carriers will frequently be able to carry up to four separate grades of
cargo without the risk of contamination. Hence these tankers have a more complicated pump
to pipeline system and segregation as compared to their crude counterparts.

9.0 CHEMICAL CARRIERS IPARCEL TANKERS!

9.1 There are as many as 1000 chemicals being traded by sea today. Chemical tankers,
however, carry much more than chemicals. Chemical tankers carry app. 90 million tones of bulk
liquid products on short sea and deep-sea trades each year. This volume being made up of
organic chemicals (43 %), inorganics (16 %), vegetable and animal oils (22 %) and miscellaneous
products including lube oils and lube oil additives (19 %). The organic chemical sector is forecast
to achieve the maximum growth in the next 5 years. These comprise of 'commodities' and
'speciality products'. The seaborne transportation of commodity chemicals -primarily methanol,
styrene, ethylene glycol, benzene, methyl tertiary butyl ether (MTBE), paraxylene and ethylene
dichloride has increased rapidly during the 1990s, to the extent that commodity chemical
trades represent twice the volume of the speciality trades.

9.2 Movements of speciality chemicals, the intermediate and semi-finished organic

products are forecast to grow marginally more rapidly, at 6 % per annum.

204
9.3 Trades in inorganic chemicals, primarily acids and caustic soda, is expected to pick up
and reach annual growth rates of 5 % over the next 5 years primarily due to increased
movements of phosphoric acid. Shipments of vegetable oils are not expected to advance as
quickly.

9.4 Europe and USA are the largest exporters of speciality chemicals. The major commodity
export centres are the West Coast of Canada, the Middle East and Latin America, notably Chile
and the Caribbean/Central America area.

9.5 Asia is by far the most important destination. Chemical tankers carried more than 20 mt
of bulk liquids to the region inl996, or about 55 % of all the long haul, deep-sea trade in
chemicals.

9.6 Parcel tankers have upwards of 50 stainless steel cargo tanks, each able to carry a
separate grade of cargo in a completely segregated manner, while simple chemical tankers
typically have up to 25 coated cargo tanks and occasionally switch to the carriage of refined
products according to market circumstances.

9.7 There is a high entry price for admission into the select club of chemical tanker owners
and, as such, the fleet is controlled by a relatively small group of dedicated, independent
owners and operators. Four companies -Stolt - Nielsen, Storli (Odfjell Tankers), Jo Tankers and
Seachem -between them hold 60 % of the market share of chemical tanker over 10000 DWT.
New building price of $ 70 Million for a 35000 DWT parcel tanker, represents the first hurdle for
those seeking to participate in the trade. Further, owners enjoy close relationships with their
charterers, some of which have been elevated to the level of strategic alliances, and great
attention is paid to the quality of service as the cost of a stalled factory due to a contaminated
or delayed cargo can be substantial.

10.0 GAS CARRIERS:

10.1 Gas carriers are a highly specialized form of tankers. These are the most expensive cargo
ships requiring a high degree of sophistication, not only in the building and running but also
from the personnel employed ashore and afloat. The two types of gas carried are known as
liquefied natural gas (LNG) and liquid pressure gas (LPG).

10.2 LNG comprises of ethane and methane. It is the product of a dedicated gas field and is
carried in insulated tanks at minus 104° C (ethane) and minus 176° C (methane) at atmospheric
pressure to keep it liquid.

10.3 The sea-borne trade in LNG started in 1964 when Algeria began shipments to the UK
and France. There are currently 9 LNG producing countries in the world. Indonesia and Malaysia
account for 50 % of the exports. Australia, Brunei, Algeria, UAE arid Qatar are the other major
exporters. Japan is importing about 60 % of the total imports. Including S. Korea and Taiwan,
the Far East imports nearly 80 % of the total.

10.4 LNG is a clean fuel; it is environment friendly besides having high thermal efficiency.
With the focus on green house gas emission and urban air quality, LNG is becoming a popular
fuel, particularly in the growing economies of Asia, with their populous cities and declining air
quality.

10.5 LNG is regarded as a 'special cargo' which cannot be compared to any other form of
shipping. LNG is stated to be not a product but a transportation mode. LNG marine activities
are viewed as part of an integrated activity chain connecting producer, shipper and buyer. The
trade is characterized by only a few companies contracting on long term basis and huge capital

205
investment towards dedicated ships with equity participation of seller/buyer. Hence LNG
carriers are usually built for certain projects and are not ofjen seen in the chartering market.

10.6 Unlike the tanks in a LPG carrier the tanks in a LNG carrier are not free standing, but are
attached by special thick plating to the ring or skirt of a tank. To withstand the extremely low
temperature, the plating has to be of extra thickness. The tanks of a LNG carrier usually rise
above deck level and have therefore to be encased in a covering system, which must be strong
but lightweight.

10.7 LPG on the other hand comprises of propane and butane. It is the byproduct of the oil
producing process and is kept under high pressure, 10-12 BAR or it is cooled to minus 50° C to
keep it liquid. LPG carriers are also used in the carriage of chemical gas, ammonia etc. LPG is
primarily used domestically as a medium of cooking and in industrial houses for heating
purposes.

10.8 World consumption of LPG has reached 166 million tons (mt), out of which about 1/3 is
traded across international borders with 25 % carried by sea. Increases of 3.9% per annum are
predicted until 2005. Total seaborne trade is expected to reach 51 mt by 2000 and 61 mt by
2005.

10.9 The size of the LPG carrier has increased manifold during the past two decades - from
700 cubic metre to 70000 cubic metres. Cargo tanks in LPG carriers are normally cylindrical in
shape constructed from aluminium alloy and are self- supporting and free standing. Further,
they are insulated to keep the heat out by a coating of a suitable material such as polyurethane
foam. This insulation which is inserted between the inner hull and the tanks not only keeps the
gas cool but also prevents cracking which otherwise might occur due to the long exposure of
the metal to extremely low temperatures.

11.0 CARGO HANDLING SYSTEMS

11.1 Oil is loaded on the tanker through shore pumps and discharged by pumps installed on
the tanker. For loading and discharging ballast, the ship will again use her own pumps. Cargo
pumps are placed at the bottom of the ship, housed in special pump rooms. There is a danger
that gas can escape in a pump from the seals of the pumps so the pump room is kept separate
from the ship. There are various kinds of pumps as shown in the chart below. In the largest
ships the most common type of pump is the centrifugal type. These pumps have a smooth and
even flow along with a high discharge rate. The disadvantage with these pumps is that it is not
very good with highly viscous liquids and on its own is not able to drain the last metre of cargo
in a tank.

12.0 CLASSIFICATION OF PUMPS:

12.1 The Centrifugal pump is a contrivance to raise liquids from a lower to a higher level by
creating the required pressure with the help of centrifugal action.

12.2 Some tankers are fitted with reciprocating pumps. This pump consists primarily of a
piston or plunger reciprocating inside a close fitting cylinder, thus performing suction and
delivery strokes. This is not a very powerful pump but it can handle a wide range of products
and as long as liquid flows into the chambers it can be pumped. Also, this pump has a high
reliability but is not capable of a very high discharge rate.

12.3 Ships fitted with centrifugal pumps must also be fitted with stripping pumps. These are
small capacity reciprocating pumps used to drain the last metre of cargo from the tanks, which
the larger centrifugal pump is unable to handle.
206
12.4 SCREW PUMPS are used for chemical and vegetable oil tankers, a low capacity pump,
which uses the action of two gears in mesh to drive the liquid.

12.5 DEEP WELL PUMPS are found on chemical and gas tankers, situated in the bottom of the
tank, eliminating the need of a pump room. Useful for chemical cargoes where each tank has its
own pipeline connected to the ship's manifold. This is for ships where a high standard of
segregation is required.

13.0 EDUCTOR :
13.1 One of the most common uses of the eductor is for tank cleaning, and its capacity is
determined by the capacity of the tank washing machines. They are also used for stripping
duties. Eductors, not being harmed by abrasive particles and requiring no filters because they
are not easily choked, are considered to be ideal for stripping cargo tanks, especially as they can
draw air without loosing suction. An eductor has no moving parts and therefore has no
problems in relation to gland sealing and lubrication. Maintenance is minimal.

13.2 An eductor works on the principle that if a small portion of the liquid flows from one
point to another, and the change of position is effected without any waste of energy, then,
from the principle of conservation of energy, the total energy is not changed during
displacement. The above diagram shows how an eductor works. Liquid flows through pipe ACB
which, being constricted at C has a higher velocity at C than at A or B. The total energy of the
liquid is the sum of the pressure energy and kinetic energy and assuming there are no pipeline
losses, the total energy is the same at A, B or C. Since, however, velocity at C is greater than at
A or B, then the pressure energy at C must be less than at A or B. Same can be demonstrated by
opening the valve at D, liquid is sucked up into pipe ACB. In reality the valve D is the valve on
the stripping line and the liquid picked up is the water introduced to the tank by the tank
washing machines.

13.3 To strip efficiently, an eductor used for tank cleaning should have a capacity of about
twice the rate of cleaning water introduced into the tank to which it is connected.

14.0 CRUDE OIL - SOURCES, TRADE AND PROPERTIES:

14.1 Crude oil was first produced commercially in 1859 in Pennsylvania. Oil and gas is derived
from source rocks comprising remains of algae, bacteria and plant matter. This compression
usually forms underground in the pore spaces of sedimentary rock and is likely to be trapped
there if there is no way out. As these hydrocarbons are buried increasingly deeper, the
temperature of the source rocks increases under pressure and, at a given temperature, the
organic matter concerned transforms itself into oil and gas. Eventually, this oil and gas will
migrate to reservoir formations in various parts of the earth's crust. It is not necessary that oil
and gas are formed together in the same area.
207
14.2 There is no effort being made here to make the student an expert in oil production or
refining, but it is essential to have some basic knowledge of some products derived from the
refining of crude oil. Crude oil in its natural state is normally black or dark brown and is of very
little use till refined. Very basically, refining process consists of distilling the crude by heating it
and taking advantage of the fact that each component part, or fraction, has a different boiling
point. To carry out this process, the crude is passed through fractionating towers in which the
lighter fractions pass up the tower and condense out at different levels depending on their
individual boiling point. Obviously, the higher parts of the crude remain at lower levels but
they too would separate out by the same methods. Let us take a look at some of the most
common derivatives of crude oil:

a) Liquefied Petroleum Gas: A mixture of propane and butane primarily used as a

medium for cooking and heating in industrial houses.
b) Motor Spirit: A fuel for the motor car engine.
c) Naphtha: Primarily used as a feedstock for fertilizer plants.
d) Kerosene: Used for lamps and stoves and other heating purposes.
e) Aviation Turbine Fuel: A type of Kerosene used as fuel in modern aircrafts.
f) High Speed Diesel: A fuel for high speed diesel engines which appears in the
distillation process between Kerosene and other heavier Diesel range.
g) Light Diesel Oil: Also referred to as Marine Diesel Oil. More viscous than HSD it is
used in heavy oil engines such as power units of ocean going ships.
h) Fuel or Furnace Oil: A dark viscous grade burnt in industrial furnaces, ship's boilers,
power stations etc.
i) Bitumen or Asphalt: Used for road surfacing.
j) Lubricating Oils and Greases: Exist in as many grades as the type of engines in which
they are used for purpose of lubrication and to prevent corrosion.

Products listed (a) to (f) are termed as "Clean" and those listed thereafter along-with crude
are termed as "Dirty".

14.3 PRODUCTION :

14.3.1 There are about 70 countries producing oil. Virtually all producers will be consumers
and may not be exporters. The best source to look for figures is the BP Statistical Review.
Extracts of crude oil production and exporting countries are reproduced in the later part of
the chapter.

14.3.2 Few facts –

a) Saudi Arabia is the leading producer in.

b) Middle East accounts for 30 % of the total production and OPEC contributing a
handsome 41 %.
c) South and Central American countries has increased production substantially in
recent years.
d) Africa is a major contributor of world production.

14.3.3 As mentioned earlier, it is not necessary that a producing country would necessarily be
an exporter. Hence to understand oil movements (crude and products) in the world it is
necessary to examine the same.

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14.4 CRUDE OIL -- IMPORTANT CHARACTERISTICS:

14.4.1 No two crude oils are the same. Every crude oil has different characteristics and must
be handled accordingly. Let us take a look at some of the general characteristics.

14.4.2 The main element is carbon about 85%. The second largest component being hydrogen
making up most of the 15%, leaving a small percentage for sulfur (which could go to as high as
6%), oxygen and nitrogen. Sulfur and oxygen are important in the carriage because they
increase the risk of tank and line corrosion.

14.4.3 Also, crude contains components such as wax, asphalt, plus sand and water which cause
problems to ship-owners. With any sea passage crude oil is bound to be shaken around,
resulting in a loss of the lighter ends and leading to reduced outturns. Besides, there is bound
to be some escape at the time of loading and discharging.

14.4.4 All of us know that oil is lighter than water, and therefore, has a specific gravity of less
than 1.00. However, there are various scales for measuring S.G. and the table below gives a
number of equivalents between S.G. and the American Method of measurement called API
(American Petroleum Institute). The equivalent API number for a S.G. of 1.00 is 10. In other
words, the S.G. of water in the API method of measurement is 10. As the S.G. reduces below
the figure of 1.00, the API gravity rises. Some very heavy crude oils have an API gravity of very
close to 10, while those of a much lighter variety may well rise as high as the middle 70's.

14.4.5 API gravity is an expression of the density or weight of a unit volume of material:

141.5
Degrees API<= ========= = 131.5
S.G. at 60® F

14.4.6 The following conversions are selected to give you a general idea of the relationship
between the various methods of measuring oil cubics.

API S.G. AMERICAN 42 CUBIC CUBIC

GALL. BARREL METRES FEET
10 1.0000 6.404 1.018 35.954
15 0,9659 6.630 1.054 37.224
20 0.9340 6.857 1.090 38.497
25 0.9042. 7.084 1.126 39.770
30 0.8762 7.310 1.162 41.040
35 0.8498 7.537 1.198 42.315
40 0.8251 7.763 1.234 43.585
45 0,8017 7.990 1,270 44.861
50 0.7796 8.218 1.306 46.136
55 0.7587 8.444 1,342 47.407
60 0.7389 8.670 1.378 48.679

1US BARREL =42 US GALLONS / 5.6146 CU.FT./ 0.158984 CU.M.

1 US GALLON =3.78 LITRES
1 CU.M. =35.315 CU.FT. / 6.2898 BBLS
209
 14.4.7 From the above table it may be noted that as the API gravity increases, more
barrels are required for one ton of crude. Likewise, more cubic metres or cubic feet space are
required for loading one ton of oil as the API gravity increases.

14.4.8 Below is a list of some world crudes, with their API gravities, country of origin
and normal loading terminal.
TABLE OF WORLD CRUDES

Port Country Crude API

Gravity
PUERTO MIRANDA VENEZUELA BACHAQUERO 14.20
MENA SAUD N.ZONE EOCENE 16.50
VALDEZ USA ALASKA 26.40
RAS TANURA S. ARABIA HEAVY 27.90
FORCADOS NIGERIA FORCADOS BLEND 29.70
RAS TANURA S.ARABIA MEDIUM 30.80
MINA AL AHMADI KUWAIT KUWAIT 31.40
CABINDA ANGOLA CABINDA 31.70
LA SALINA VENEZUELA TIJUANA LIGHT 32.10
DAIREN CHINA TACHING 33.00
RAS LANUF LIBYA LIBYA 33.40
RAS TANURA S.ARABIA LIGHT 33.40
DUBAI DUBAI DUBAI EXPORT 33.50
KHARG ISLAND IRAN LIGHT 33.80
DUMAI INDONESIA SUMATRA LIGHT 34.50
BANIAS IRAQ IMEG 'B* 35.10
CEYHAN IRAN KIRKUK 35.10
ARDJUNA INDONESIA ARDJUNA 35.20
QUA IBOE NIGERIA QUA IBOE 35.80
BANIAS IRAQ IMEG 'A* 36.10
MENA AL FAHAL OMAN OMAN BLEND 36.30
HOUND POINT U.K. FORTIES 36.60
BONNY NIGERIA LIGHT 36.70
ES SIDER LIBYA ES SIDER 36.70
DAS ISLAND ABU DHABI UMM SHAIF 37.40
SULLOM VOE U.K. BRENT 38.00
BOMBAY INDIA BOMBAY HIGH 39.40
UMM SAID QATAR QATAR 41.80
BEJAIA ALGERIA HASSI MESSAOUD 43.00
ZUEITINA LIBYA ZUEITINA 43.00
ARZEW ALGERIA SAHARAN BLEND 45.50
LONG ISLAND AUSTRALIA GIPPSLAND 46.40
ARZEW ALGERIA CONDENSATE 65.20
210
14.4.9 The above table has been arranged in order of hierarchy of API gravity of the
important world crudes. Students may note the difference in API gravity for say, Eocene
crude of Mena Saud and Qatar crude at Umm Said « both being produced in the Arabian
Gulf.

14.4.10 Within S.Arabia itself there is a light, medium and heavy crude.

14.4.11 Hence, there is a huge variation in the API gravity of crude oil, although majority
come within the range of "27-37 API band.

14.5 VISCOSITY:

14.5.1 Viscosity is the ability of a liquid to resist flow. One that flows freely is said to have a
low viscosity whilst thick and sluggish oils have a high viscosity. Viscosity increases as the
temperature declines and vice = versa i.e. cooler the oil, the more it resists flowing. It is
measured by the speed with which the oil passes through a given length and diameter of
pipe at a standard temperature. The viscosity is measured in Centistokes or Redwood
seconds.

14.6 POUR POINT:

14.6.1 The lowest temperature at which an oil is observed to flow is its pour point, and it is
measured by reducing the oil temperature gradually until it ceases to flow. In general, pour
point will depend upon the wax content in the oil.

14.6.2 Let us now look at a sample data sheet:

CRUDE API POUR

POINT
ARABIAN LIGHT 33.4 -32C
ARDJUNA(INDONESIA) 35.2 +25C
BRASS(NIGERIA) 40.9 + 1C -
BRENT(NORTH SEA) 38.0 11C
BU-ATTIFEL(LIBYA) 43.6 +37C
CHINESE 24.2 +34C
GULF OF SUEZ(EGYPT) 31.9 + 13C
IRANIAN HEAVY 31.0 -12C

211
14.6.3 If we consider the API of the above, they range from 24.2 to 43.6. Since the API
affects the stowage factor, one can load a higher quantity of Chinese crude than Bu-Affitel
in a given space. Obviously this would affect the earnings of the vessel. The difference in
stowage of these two grades is app. 12 % = 7.05/7.93 (Chinese / B-A) bbls/ton. An average
tanker of say 630,000 bbls of 89000 tons could load a full cargo of Chinese crude, but would
be limited to.B-A crude to about 79450 tons,

14.6.4 You may observe that the most attractive crude with the lowest stowage factor,
Chinese, also has a relatively high pour point. Hence, more degrees of heat will be required
before the cargo can be pumped out. In this regard B=A is least attractive.

14.7.0 Having seen the major exporting and importing areas, let us now have a look at
where the crude oil is loaded. To start with the Middle East, and in particular Iraq, not
much is shipped out of this country. The Iraqi crudes are normally moved by pipeline to
Syria, Lebanon and Turkey from where they are loaded. It may be noted that these
pipelines open in the Mediterranean and cut transit by ships.

14.7.1 Closure of any of these lines would have a major impact on the demand for ships.

14.7.2 Iran exports from various ports - Lavan Island, Bushire etc. However, the most
important one is Kharg Island.

14.7.3 The main terminal for Kuwait is Mina-Al-Ahmadi and that for Saudi Arabia being Ras
Tanura and Juaymah. Another major supplier in the Middle East is Qatar whose main
loading port is Umm Said. Coming to the UAE, the major ports are Das Island, Jebel Dhanna,
Fateh and Jebel Ali. Min=Al=Fahal is the main port for Oman.

14.7.4 While the Middle East is no doubt the dominating area for the supply of world crude,
there are many other important countries which export oil. Africa comes next on the list.
Libya is an important transporter, exporting from Marsa El Brega, EsSider and Ras Lanuf.

14.7.5 Egypt, though a Mediterranean country, exports all its oil from ports in the Red Sea,
such as Ras Gharib, Ras Budran Ras Sukher and Ain Sukhna.

14.7.6 Next on the list is Algeria exporting through Arzew, Bejaia and Skikda.

14.7.7 Nigeria is the most important exporter in West Africa. Most important ports are
Bonny, Forcados, Pennington, Qua Iboe and Escravos. Another important port is Cabinda in
Angola.

14.7.8 As we go West, the most important proven reserves are in the Latin American
Continent. Venezuela is the most dominant player in this section along with Argentina
and Mexico. The most important ports in Venezuela are Puerto La Cruz, Puerto Miranda,
Puerto Ordaz and Punta Cardon. Mexico exports from Cayo Areas and Dos Bocas.

14.7.9 On the West Coast of South America exports come from Esmereldas in Ecuador
and Callao in Peru.

14.7.10 Australia does not offer much, however the loading ports are Barrow Island and
Botany Bay.

212
14.7.11 Further north is a very important area, the first one being Indonesia. Crude is
exported from Ardjuna, Cinta and Dumai. Malasia exports its crude from Labuan, Bintulu
and Miri. In Brunei oil is loaded at Seria.

14.7.12 Another major force in recent times has been the oil find at North Sea. The
reserves here are jointly owned by Norway and UK.

14.7.13 Lastly, there are some important loading ports in the Black Sea --Novorossisk,
Batum and Odessa to name a few.

14.8. Since tankers carry huge quantities, the ports are generally located close to the
sea to take advantage of deeper drafts. As on date there are large number offshore
loading and discharging facilities where tankers are made all fast to a Single Buoy
Mooring (SBM) or Single Point Mooring (SPM) which may be connected to an undersea
oil production facility or in some cases floating storage/production vessels. The first
SPMs came up in Brunei in 1959.

14.8.1 SBM: The buoy not only holds the pipelines but also is used to moor the
loading/discharging tanker. Loading/discharging takes place through submarine hoses. It
is the vessel's equipment which picks up the hoses. To malce the vessel all fast a large
chain will be secured to the top of the buoy while the ship's end will be hauled on board
and secured.

14.8.2 SPM: This mooring method of this facility is similar but is rigidly secured to the sea
bed and may have a storage facility included. It is possible that the SPM is connected to a
process storage tanker. A process storage tanker will receive oil from a small producing
field through a SPM facility.

14.8.3 Thereafter this vessel will undertake processing and then transfer the same to
another vessel for discharging elsewhere. The SPM facilities are used in Louisana, USA,
Malaysia, the Indonesian Archipelago, Mexico, North Sea, East and West Africa, Australia,
China and South Korea to name a few.

14.8.4 In India SBM facilities exist at Vadinar for discharge of crude oil where VLCCs can
be handled. SBM facilities has multiplied in India. Today there are around 26 SBM/SPM
facilities through out India.

Table: Total Oil Supply (Thousand Barrels Per Day)

2009 2010 2011 2012 2013

North America 15453.42 16104.86 16693.53 17902.02 19320.52

Bermuda 0 0 0 0 0
Canada 3318.829 3441.73 3597.333 3856.44 4096.63
Greenland 0 0 0 0 0
Mexico 3000.791 2978.599 2959.989 2936.009 2907.834
Saint Pierre and Miquelon 0 0 0 0 0
United States 9133.797 9684.532 10136.21 11109.57 12316.05
Central & South America 7525.382 7687.315 7857.205 7801.07 7943.588
Antarctica 0 0 0 0 0

213
Antigua and Barbuda 0 0 0 0 0
Argentina 801.6577 790.5085 763.6813 723.2029 707.9148
Aruba 2.81073 2.81073 2.81073 2.81073 2.81073
Bahamas, The 0 0 0 0 0
Barbados 0.766 1.001 1.001 1.001 1.001
Belize 3.9895 4.25168 4 3.23934 3
Bolivia 45.9594 47.87652 49.27474 56.56787 64.45909
Brazil 2561.713 2712.473 2685.154 2651.894 2712.031
Cayman Islands 0 0 0 0 0
Chile 12.97693 18.42176 18.36149 17.33709 15.56697
Colombia 690.2767 805.8898 938.5432 969.0549 1028.474
Costa Rica 1.22606 0.39068 0.29068 0.29068 0.29068
Cuba 46.34204 51.52764 53.72764 50.80414 48.72764
Dominica 0 0 0 0 0
Dominican Republic 0.03457 0.0611 0.0611 0.0611 0.0611
Ecuador 485.7069 487.308 500.6044 504.5084 527.0287
El Salvador 1.77155 -0.51666 -0.51366 -0.51366 -0.51366
Falkland Islands (Islas
Malvinas) 0 0 0 0 0
French Guiana 0 0 0 0 0
Grenada 0 0 0 0 0
Guadeloupe 0 0 0 0 0
Guatemala 16.54395 14.98025 14.97264 14.58179 14.00387
Guyana 0 0 0 0 0
Haiti 0 0 0 0 0
Honduras 0.02 0.02 0.02 0.02 0.02
Jamaica 5.97811 1.11961 2.11961 2.11961 2.11961
Martinique -0.24923 -0.24923 -0.24923 -0.24923 -0.24923
Montserrat 0 0 0 0 0
Netherlands Antilles -0.41157 1.49587 1.49587 1.49587 1.49587
Nicaragua 0.61124 -0.3535 -0.1535 -0.1535 -0.1535
Panama 0 0 0 0 0
Paraguay 2.2 2.3 2.2 2 2
Peru 148.8643 163.8048 159.7679 160.428 174.9616
Puerto Rico 0.53813 0 0.8536 0.6737 0.6737
Saint Kitts and Nevis 0 0 0 0 0
Saint Lucia 0 0 0 0 0
Saint Vincent/Grenadines 0 0 0 0 0
Suriname 15.41897 15.4416 15.4416 15.27493 14.4416
Trinidad and Tobago 153.3607 145.7934 138.4334 119.3146 118.1177
Turks and Caicos Islands 0 0 0 0 0
Uruguay 0.76474 1.08286 1.18286 1.18286 1.18286
Venezuela 2509.745 2404.996 2489.242 2489.242 2489.242
Virgin Islands, U.S. 16.76659 14.88036 14.88036 14.88036 14.88036
Virgin Islands, British 0 0 0 0 0
Europe 4982.974 4646.775 4268.95 3979.366 3798.785
Albania 5.39109 10.87307 15.54431 16.8653 17.03746

214
Austria 28.19153 28.71441 30.39195 29.48281 24.89058
Belgium 12.60347 12.70007 10.53035 10.53035 10.53035
Bosnia and Herzegovina -0.0936 -0.03195 -0.03195 -0.03195 -0.03195
Bulgaria 3.3409 3.58363 3.38363 3.38363 3.38363
Croatia 24.4447 23.82472 21.89321 20.07449 20.23842
Cyprus 0.2 0.1 0.1 0.00847 0
Czech Republic 10.38968 10.28301 13.01232 10.00915 10.85068
Denmark 264.3081 249.4648 226.2842 207.3841 180.539
Faroe Islands 0 0 0 0 0
Finland 9.54122 15.30335 14.2309 13.5309 10.0309
Former Czechoslovakia -- -- -- -- --
Former Serbia and
Montenegro -- -- -- -- --
Former Yugoslavia -- -- -- -- --
France 76.31161 76.5425 75.88213 72.30336 70.30952
Germany 133.0608 125.0016 141.0002 144.5077 144.7673
Germany (Offshore) 23.72877 20.88219 24.08767 25 25
Germany, East -- -- -- -- --
Germany, West -- -- -- -- --
Gibraltar 0 0 0 0 0
Greece 6.41675 8.47986 7.57805 7.49677 6.45477
Hungary 35.36659 34.45847 27.64039 27.9886 28.08423
Iceland 0 0 0 0 0
Ireland -0.2957 1.07504 0.72561 0.72561 0.72561
Italy 145.5256 156.1428 152.7214 154.5105 155.0639
Luxembourg 0 0 0 0 0
Macedonia -0.1457 0.03087 0.04087 0.04087 0.04087
Malta 0.02 0 0 0 0
Montenegro 0 0 0 0 0
Netherlands 37.83117 34.84203 40.98095 43.21114 41.05219
Netherlands (Offshore) 25.56438 20.30137 17.5863 16.99727 17.80548
Norway 2352.555 2134.621 2007.35 1902.084 1826.096
Poland 34.24601 28.65921 28.33946 27.68447 33.83809
Portugal 5.41664 5.57404 5.17594 5.24991 5.24991
Romania 112.6989 107.1448 105.3409 101.6478 103.8645
Serbia 19.99119 23.72507 21.30589 19.72234 21.22096
Slovakia 7.53781 7.68135 9.85793 9.27711 9.27711
Slovenia 0.145 0.405 0.305 0.305 0.305
Spain 29.48995 28.75125 28.45621 29.29182 33.62607
Sweden 11.19146 10.41947 11.26664 11.26664 11.26664
Switzerland 3.87793 3.60576 3.61281 3.61281 3.61281
Turkey 54.59644 57.75023 57.63345 56.65329 58.39509
United Kingdom 87.38141 87.13009 82.65457 86.17039 88.99273
United Kingdom (Offshore) 1422.145 1318.737 1084.068 922.3808 836.2675
Eurasia 12943.47 13255.6 13332.26 13415.32 13525.44
Armenia 0 0 0 0 0
Azerbaijan 1015.945 1044.862 993.2248 931.8823 883.3191

215
Belarus 32.06294 32.07834 32.06834 32.06834 32.06834
Estonia 9 10 11 11 13
Former U.S.S.R. -- -- -- -- --
Georgia 0.99321 1 1 1 1
Kazakhstan 1541.566 1608.692 1638.354 1605.879 1653.009
Kyrgyzstan 0.99983 -0.8424 -0.8424 -0.8424 -0.8424
Latvia 1.2 1.1 1 1 1
Lithuania 9.45376 9.71077 9.11077 9.11077 9.11077
Moldova -0.02464 -0.01731 -0.01731 -0.01731 -0.01731
Russia 9933.827 10156.91 10239.16 10396.97 10498.16
Tajikistan 0.2228 0.2198 0.2198 0.21855 0.2108
Turkmenistan 197.6438 201.8706 222.9191 244.0687 259.415
Ukraine 93.55939 83.26343 78.90186 80.40402 74.24809
Uzbekistan 107.0189 106.7521 106.1658 102.5827 101.7521
Middle East 24830.74 25975.7 27412.49 27671.18 27393.55
Bahrain 48.68543 47.15771 48.15771 55.15771 55.15771
Iran 4178.296 4243.073 4264.968 3589.386 3421.968
Iraq 2399.167 2402.876 2628.993 2986.641 3057.692
Israel 5.98119 5.839 6.129 6.129 6.129
Jordan 0.61429 0.16276 0.16076 0.16476 0.16476
Kuwait 2505.943 2460.293 2691.818 2796.788 2811.842
Lebanon 0 0 0 0 0
Oman 818.8882 869.8542 890.8871 923.7735 945.1275
Palestinian Territories 0 0 0 0 0
Qatar 1573.248 1787.899 1936.395 2032.611 2067.299
Saudi Arabia 9819.172 10642.33 11264.26 11725.68 11591.86
Syria 400.1077 420.571 373.6724 170.5266 75.11896
United Arab Emirates 2794.552 2813.244 3088.256 3213.194 3229.588
Yemen 286.0818 282.4034 218.7958 171.1336 131.5986
Africa 10461.35 10699.64 9326.88 9979.634 9430.684
Algeria 1909.815 1880.965 1862.965 1875.208 1846.916
Angola 1908.029 1947.756 1799.887 1831.643 1838.539
Benin 0 0 0 0 0
Botswana 0 0 0 0 0
Burkina Faso 0 0 0 0 0
Burundi 0 0 0 0 0
Cameroon 77.42024 65.52425 62.18452 63.52425 62.19
Cape Verde 0 0 0 0 0
Central African Republic 0 0 0 0 0
Chad 119.4712 122.5206 114.9644 104.4836 101.2438
Comoros 0 0 0 0 0
Congo (Brazzaville) 274.4865 311.9116 298.9116 291.9116 278.9116
Congo (Kinshasa) 22 21 20.16164 20 20
Cote dIvoire (IvoryCoast) 58.47994 44.47976 40.23593 38.56219 37.64689
Djibouti 0 0 0 0 0
Egypt 728.6207 717.3558 725.6791 720.0248 709.9092
Equatorial Guinea 346.0161 322.7104 298.888 310.4 290.7973

216
Eritrea 0 0 0 0 0
Ethiopia 0.1 0.1 0.1 0.1 0.1
Gabon 241.9275 245.5083 244.3549 241.9595 242.8344
Gambia, The 0 0 0 0 0
Ghana 6.88771 8.46391 77.78719 79.63006 97.48308
Guinea 0 0 0 0 0
Guinea-Bissau 0 0 0 0 0
Kenya -0.16742 -0.05809 -0.05809 -0.05809 -0.05809
Lesotho 0 0 0 0 0
Liberia 0 0 0 0 0
Libya 1790.109 1789.11 501.466 1483.044 1000.493
Madagascar 0 0 0 0 0
Malawi 0.2 0.2 0.2 0.2 0.2
Mali 0 0 0 0 0
Mauritania 11.24522 8.23223 7.73764 6.57708 6.87313
Mauritius 0 0 0 0 0
Morocco 4.75983 5.05691 5.05691 5.05691 5.05691
Mozambique 0.02 0.02 0.02 0.02 0.02
Namibia 0 0 0 0 0
Niger 0 0 6.71233 20 20
Nigeria 2212.18 2459.404 2554.488 2524.143 2373.184
Reunion 0 0 0 0 0
Rwanda 0.01 0.01 0.01 0.01 0.01
Saint Helena 0 0 0 0 0
Sao Tome and Principe 0 0 0 0 0
Senegal -0.03246 -0.03411 -0.03411 -0.03411 -0.03411
Seychelles 0 0 0 0 0
Sierra Leone 0 0 0.02539 0.02539 0.02539
Somalia 0 0 0 0 0
South Africa 182.6166 180.4643 181.0411 180.9537 180.6219
Sudan and South Sudan 485.9873 489.3674 456.1249 115.3127 250.8756
Swaziland 0 0 0 0 0
Tanzania 0.01 0.01 0.01 0.01 0.01
Togo 0 0 0 0 0
Tunisia 80.95503 79.26733 67.66594 66.63101 66.53987
Uganda 0 0 0 0 0
Western Sahara 0 0 0 0 0
Zambia 0.14156 0.17461 0.17461 0.17461 0.17461
Zimbabwe 0.06 0.12 0.12 0.12 0.12
Asia & Oceania 8751.974 9133.955 8994.035 9008.79 8920.165
Afghanistan 0 0 0 0 0
American Samoa 0 0 0 0 0
Australia 592.4863 604.1056 530.5067 519.065 446.6738
Bangladesh 5.68375 5.78511 5.78511 5.45178 4.78511
Bhutan 0 0 0 0 0
Brunei 150.8576 158.4046 169.432 158.9015 134.254
Burma (Myanmar) 18.77626 21.15598 20.82722 20.82722 20.82722

217
Cambodia 0.6 0.081 0.0005 0.0005 0.0005
China 4067.544 4362.658 4346.983 4372.446 4459.413
Cook Islands 0 0 0 0 0
Fiji 0 0.01 0.03 0.03 0.03
French Polynesia 0 0 0 0 0
Guam 0 0 0 0 0
Hawaiian Trade Zone -- -- -- -- --
Hong Kong 0 0.1 0.1 0.1 0.1
India 873.5938 965.3015 995.8053 990.1779 982.2031
Indonesia 1053.151 1038.711 1015.48 974.255 925.7065
Japan 137.6242 142.4722 136.257 135.5125 135.3529
Kiribati 0 0 0 0 0
Korea, North 0.09011 0.0872 0.0872 0.0872 0.0872
Korea, South 54.65003 58.47474 59.78946 61.04358 59.79768
Laos 0 0 0 0 0
Macau 0 0 0 0 0
Malaysia 693.8749 683.0706 625.9762 642.6613 630.4819
Maldives 0 0 0 0 0
Mongolia 5.123 5.976 6.9833 9.93451 14.0515
Nauru 0 0 0 0 0
Nepal 0 0 0 0 0
New Caledonia 0 0 0 0 0
New Zealand 61.02682 60.77085 52.17398 48.19111 41.70822
Niue 0 0 0 0 0
Pakistan 59.84647 67.32025 68.33415 67.74945 64.24374
Papua New Guinea 34.9878 30.51382 30.15766 27.48826 28.25081
Philippines 28.89836 38.59354 31.89218 25.24287 26.24834

Singapore 20.57914 20.16743 20.16743 20.16743 20.16743

Solomon Islands 0 0 0 0 0
Sri Lanka -0.61835 -0.54346 -0.54346 -0.54346 -0.54346
Taiwan 28.49159 20.73157 21.68157 21.68257 21.68257
Thailand 428.6794 430.2583 448.7896 465.2881 473.4027
Timor-Leste (East Timor) 96.26596 87.49863 83.74247 79.49454 79.25753
Tonga 0 0 0 0 0
U.S. Pacific Islands 0 0 0 0 0
Vanuatu 0 0 0 0 0
Vietnam 339.7608 332.2511 323.5963 363.5359 351.9826
World 84949.3 87503.84 87885.36 89757.38 90332.72

Source : US Energy Information Agency)

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14.9.0 Top World Oil Producers, Exporters, Consumers, and Importers, 2006

(millions of barrels per day)

Total oil Net oil Total oil Net oil

Producer production Exporters exports Consumer consumption Importers import
1. Saudi 10.72 1. Saudi 8.65 1. United 20.59 1. United 12.22
Arabia Arabia States States
2. Russia 9.67 2. Russia 6.57 2. China 7.27 2. Japan 5.10
3. United 8.37 3. Norway 2.54 3. Japan 5.22 3. China 3.44
States
4. Iran 4.12 4. Iran 2.52 4. Russia 3.10 4. 2.48
Germany
5. Mexico 3.71 5. United 2.52 5. 2.63 5. South 2.15
Arab Germany Korea
Emirates
6. China 3.84 6. 2.20 6. India 2.53 6. France 1.89
Venezuela
7. Canada 3.23 7. Kuwait 2.15 7. Canada 2.22 7. India 1.69
8. United 2.94 8. Nigeria 2.15 8. Brazil 2.12 8. Italy 1.56
Arab
Emirates

219
 Total oil Net oil Total oil Net oil
Producer production Exporters exports Consumer consumption Importers import
9. 2.81 9. Algeria 1.85 9. South 2.12 9. Spain 1.56
Venezuela Korea
10. 2.79 10. Mexico 1.68 10. Saudi 2.07 10. Taiwan 0.94
Norway Arabia
11. Kuwait 2.67 11. Libya 1.52 11. Mexico 2.03
12. 2.44 12. Iraq 1.43 12. France 1.97
Nigeria
13. Brazil 2.16 13. Angola 1.36 13. United 1.82
Kingdom
14. Iraq 2.01 14. 1.11 14. Italy 1.71
Kazakhsta
n
NOTE: OPEC members in italics.

1. Table includes all countries with total oil production exceeding 2 million barrels per day in
2006. Includes crude oil, natural gas liquids, condensate, refinery gain, and other liquids.
2. Includes all countries with net exports exceeding 1 million barrels per day in 2006.
3. Includes all countries that consumed more than 2 million barrels per day in 2006.
4. Includes all countries that imported more than 1 million barrels per day in 2006.
Source: Energy Information Administration (EIA). www.eia.doe.gov/emeu/cabs/ .

oooooo

SELF-EXAMINATION QUESTIONS

1. Why was there a shift in the refinery ___location from producing to consuming areas?
2. What are the different ways of classifying tankers (a) By sizes and (b) By types of cargoes.

3 What were some of the major tanker accidents in the last 31 years? What concerns did they
give rise to?
4 How do product carriers differ from crude oil carriers?
5 Discuss cargo handling methods used in tankers.
6 "Gas carriers are the most expensive and highly specialized form of tankers". Elaborate. How
many types are they and how do they differ from each other?
7 Explain the following terms:
(a) Segregated ballast tanks (b) Heating coils
(c) COW. (d) IGS
(e)Aframax (f) Suezmax
8 Write short notes on;
(i) Eductor (ii) Chemical carriers.

220
9. What are some of the common derivatives of crude oil? Which are termed "clean" and
which ones "dirty"?

10. Name some of the largest crude oil (a) producers and (b) consumers. Must an oil
producing country necessarily be an exporter?

11. Explain briefly the important characteristics of crude oil.

12. Name the major loading areas of crude oil and their loading ports.

13. Explain the terms;

(a) Single Buoy Mooring
(b) Viscosity
(c) API Gravity
(d) Single Point Mooring
(e) Pour Point.

*************

221
CHARTERING FINAL YEAR

LESSON 14

THE MARKET STRUCTURE & FACTORS AFFECTING

FREIGHT MARKETS
1.0 INTRODUCTION:

1.1 This Chapter sets out to explain the market structure of tanker market and who are the
practitioners. Then we look at the various trading methods that have evolved and, it is true to say, still
are evolving. We will look at the factors which have influenced freight market levels and consider
whether or not events and, perhaps more importantly, the effects were predictable. This could help us
look for the signs in the future.

1.2 It is important to remember that shipping is a derived demand, that is to say it is not the ships that
are in demand but rather the goods they carry. If consumers want oil, the method of transport is of very
little interest to them, just so long as the commodity is delivered.

1.3 Until the early seventies the greater part of the oil business was in the hands of the major oil
companies. Their involvement in the production process started with exploration carried on through
discovery, production, transportation, refining, marketing and retailing. They were able to control
production; distribution and price (in competition with each other), enabling them to make forward
predictions with some degree of accuracy and thereby- in an ideal situation - keep costs to a minimum
Within the tanker market, the oil companies planned their transportation requirements including
quantity, type of product, type of ship and managed the strategy of ships needed to fit their production and
refining programmes.

1.4 It is estimated that until the early seventies the oil companies owned about 40% of their tonnage
requirement, took about 45%/50% in on period time charter (say 3 up to 15 years) and the remainder was
chartered in from the independent owners on the 'spot market'.

1.5 You will appreciate that oil refineries will be called on to provide a differing proportion of
products throughout the year. For instance, in the USA more gasoline is required during the summer
months and more heating oil in the winter months. The same pattern applies in northern Europe but not to
such extremes, the reason being, in part, that the American demand for gasoline is driven (no pun intended)
by the greater use of cars over longer distances, which typically have high fuel consumptions whereas in
Europe the fuel consumption figure would be lower and the car smaller. This change of product mix
influences the choice of crude oil required for the American refineries at different times of the year.

1.6 The vertical integration meant that the oil companies were able to stabilize costs of transport and
balance their programmes according to the fluctuation in their requirements. The independent tanker
owner was the source of tonnage, time chartered in by the oil companies and operating on the spot market
enabling them to have a buffer to cover peak demand. It has been estimated in 1973 that 75% of the
independently owned tanker fleet was engaged on period time charter. It was this ongoing period demand
which enabled owners to finance and build new ships thereby keeping the average age of the fleet down.

1.7 As the market declined the oil companies gradually redelivered time charter tonnage. In some cases
selling their own tonnage thereby reducing their overall controlled fleet and releasing capital for
exploration and production. The reduction of demand for tankers in general and of time charter
employment in particular during the late 70s and early 80s caused serious financial problems for the
industry leading to a number of distressed sales of second-hand tonnage.

1.8 In the early 1970s the governments of the Organization of Petroleum Exporting Countries (OPEC)
nationalized their oil reserves and installations and therefore the oil companies could no longer control the
oil production and could only control the price of crude oil through alternative suppliers and the effect of
price on consumption. One of the effects was that a new player came into the market and that was the oil
trader.
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1.9 Traders could approach the producer direct and negotiate to buy oil at prices above or even below
those of the contract prices agreed by the oil majors with the producers. The majority of oil traders use the
spot market for the movements of their cargoes bought and sold 'one off'.

1.10 In times of volatile oil prices the trader's preference is to lift the crude cargoes in sizes of half a
million or one million barrels, say about 65,000 or 130,000 metric tonnes giving a flexibility in cargo sale.

1.11 Therefore, we can see that the multi-user tanker market operating hand to mouth inherently has
long term inefficiencies which could reduce the supply of tonnage. The factors affecting efficiency are
speed of the fleet, an irregular trade pattern and waiting times between spot fixtures. The former is
probably the only one over which an Owner may have any control for example, in times of high bunker
prices and a low market an owner would probably want to reduce speed (thus reducing the bunker costs
for the voyage).

1.12 When the market improves and rates rise, the owner would want to be available for employment again
as soon as possible. Therefore, increased demand in a rising market could be met in part by increasing the
operational speed of the fleet.

2.0 The three other influences on the structure of the tanker market are:

2.1 Ship Size: in simple terms, the further a cargo has to be carried, the larger the vessel that is
required to carry it economically. The result is that if commodities are produced a long distance from the
consuming area, then to compete with products from nearby the transport costs must be economical.
Thus, larger ships tend to facilitate the carrying of goods a longer distance within the physical restraints of
port restrictions i.e. draft, beam and length overall. You can see from the map of main oil movements how
important is the place of the Middle East for ships, meaning VLCCs and larger.

2.2 New Producing Areas: alter the structure of trade in a most fundamental way. Take, for example,
oil reserves found in the North Sea, Alaska, Indonesia or Australia. These fields may supply local consumers
reducing the need for imports or possibly that area could become an exporter. For instance the crude oil
produced in the North Sea is a light crude suitable for many refineries in the United States. This means that
although in the late 1980s and early 1990s Britain produced enough oil to be self-sufficient, importing into
the UK continued and the export of North Sea crude oil became a trade.

2.3 However, with finds in the state of Alaska, where the local market is virtually non-existent, the
production is transported to the rest of the United States. For those of us involved in chartering, the
Alaskan trades make very little difference to our business. When the cargo moves from Alaska the
majority must be refined in the USA and as such that is a domestic movement subject to the strict
Cabotage laws and the cargo can only be carried in American flag tankers.

2.4 Pipelines: particularly in the Middle East - have affected the structure of markets since the early
eighties and even historically, but political differences means that the routes used can be vulnerable.
Afactor often overlooked is the cost of pumping oil through pipelines, requiring both the pump stations and
energy used to run them.

2.5 The map on the following page shows that the pipelines give The Gulf producers an alternative to
transport oil by tanker, either through the Straits of Hormuz or the Suez Canal.

2.6 In the Far East, the port of Kozmino has been built to export Russian Siberian Crude oil, pumped
over 1,200 miles, for delivery by sea to their Pacific Ocean and South East Asian consumers.

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2.7 There are problems with pipelines including:

(a) Vulnerability to attack.

(b) Damage at one point will affect a whole line.
(c) Increased handling of oil, e.g. pumping en route.
(d) Low capacity.
(e) The fees charged for transit.
(f) As is predictable these points tend to increase the cost of transportation

3.0 We will now look at the market as seen from the commercial standpoint. The Shipbroker's job,
whether working for a Principal or Broker, or whether involved in management, chartering, agency or sale
and purchase, is at the forefront of the commercial sector of the industry. In tanker chartering we can
visualise three players, namely the Owners, the charterers and the Brokers. The Principals are the Owners
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and Charterers; in any organisation, be it a major oil company like Shell or an independent Ship Owner, you
may be a Charterer and an Owner. The easiest example of this would be the oil major, at first glance
apparently "the Charterer".

3.1 However, they may own vessels, have some in on period and charter tonnage in for spot
cargoes. It is quite usual for the company to re-let tonnage under its control, and thereby is in the
position of an Owner. Similarly an independent Owner may see an opportunity, to take tonnage in on time
charter for period. The Owner with a significant size fleet may well fix a contract of affreightment for a
given quantity over a certain period of time. Possibly when a lifting is due a ship will be fixed in to carry the
cargo. Thus the Owner is "the Charterer".

3.2 The third commercial entity in the market is the independent Broker. Success in any trading or
free market environment relies heavily on information: it has been said that the right information at the
right moment is essential to be successful. An Owner with a tanker open in the Mediterranean not only
needs to know what cargoes are available in that area, but must consider the possibility of ballasting the
ship to another loading area e.g. UK Continent, West Africa, Red Sea or The Gulf.

3.3 Thus the Owner needs to know the market rates and the tonnage that is likely to be in
competition in all possible loading areas. In addition the Owner will be considering the market levels in the
areas of discharge for those alternative cargoes. For an Owner or charterer with anything but the largest
fleet, the majority of such information comes from the broking network. In London, for example, with a
mixed fleet or cargo requirements for various trades, to gain a complete picture of a market may require
talking to upwards of a dozen brokers.

3.4 It is unusual for Charterers to talk directly to Owners when quoting or negotiating business.
Typically the oil majors will have a selected number of Brokers through whom they keep in contact with
the market, frequently referred to as their "Panel Brokers"

3.5 It would not pay an Owner or a Charterer to maintain a team of in house Brokers capable of
working world-wide 24 hours a day throughout the year. The information made available to a Principal
acting as a Broker, would be limited due to the blocking of such information by the competing companies.

4.0 The world is becoming conscious of "green issues" and the oil companies are in the forefront of
criticism when any incident occurs which results in pollution, the media attention given to incidents in
recent years has been a salutary lesson to all oil companies. Many of them keep their own data banks
with information on the vast number of tankers which they may need to charter at one time or another.
The object is to minimize, if not totally eliminate, the risk of incidents, which may give rise to a pollution
incident. The oil majors cannot afford to fix vessels that may be below standard and most have "vetting
procedures" to enable them to decide which ships are acceptable to them. This actually reduces the
number of vessels an oil company can physically fix, so the rates should, in theory, rise. Against this
many Owners will prefer to fix with an oil major thereby reducing the financial risk involved in dealing with
unknown Charterers. The Charterer will be most impressed with the fixture that runs so smoothly,
nothing is heard about the ship from fixing until discharge when the freight invoice is payable.

4.1 The Charterer's requirement is to fix a ship that can load all his cargo on the dates stipulated by
shipper and deliver it uncontaminated at a destination, possibly unknown at the time of fixing. To do this
he will first establish the readiness of his cargo - usually a two day spread - the 'window' and this will then
be the laydays/cancelling. Therefore in selecting a suitable ship the dates will be important.

4.2 Next the Charterer must be careful in making sure that the vessel can load his cargo and all his
grades can be loaded without contamination. This of course means that he may need to know the number
of pumps and pipeline system available as well as the number of tanks where appropriate. However if an
Owner has agreed to load a number of grades and after some discussion about the relative quantities that
the ship can handle, it is the Owner's responsibility to carry that cargo safely. The order in which grades are
loaded and discharged can also present problems with respect to strength, trim and ballasting.

4.3 Perhaps the cargo will need heating, either to be maintained at loading temperature or possibly
heated to a higher temperature en route. These physical factors will all influence the decision as to which is
the most suitable vessel for fixing.

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4.4 The Tanker Broker's role can perhaps be summarised as providing a means of communication, which
helps to achieve a free market. The Broker will need to collect and distribute information about the markets.
(Some Brokers may specialise in very small sectors of the market, others aim to provide a comprehensive
cover essentially as a service to a major Principal indirectly benefiting other clients, act as an intermediary
for a negotiation and provide the skill and expertise to deal with the post fixture administration which is
normally known as 'operations' within tanker chartering).

4.5 Working the market as an independent Tanker Broker means long hours to ensure proper cover of
the market. Taking a London based broker as an example he is geographically well placed between the
Far East and the United States. The Broker will need to be in the office shortly after 8 am to check what
has been going on in the east overnight (often with a colleague who will have been working with Tokyo or
Singapore from home since the early hours).

4.6 Then read all the overnight messages from their various contacts to establish a picture of what
has been going on in the other markets. As the reports are received, fixtures may be entered in a
computer database for all brokers to view at their desks, although an information board visible to everyone
has its use provided it is updated.

4.7 The individuals within the broking company will usually have a list of Owners with whom they will
keep in daily contact advising them of the various market information. This regular contact is important,
even when the Owner does not have a ship ready for fixing - it is not good broking practice only to talk to
a Principal only when there is something to say on their ship or cargo. Most individuals will also be talking to
certain Charterers, perhaps who are based in certain geographical areas, say Singapore/Italy/Norway etc.

4.8 By the time the Owners and Charterers have arrived in their office and sorted through their own
overnight messages, the Broker will be in a position to provide a synopsis of the markets. The Brokers need to
know their Principal and in particular whether a full breakdown is required, e.g. there is not much point in
giving an owner clean market information if there are only VLCC's in the fleet. Some owners just want the
fixtures and new orders, others possibly a full rundown of who has been working what.

4.9 The Charterers will be similarly updated and they will be looking at whether or not they should be
buying or selling cargoes and whether or not it is the right time to enter the market for a ship.

4.10 By lunch time the Broker will have updated the lists of tonnage and cargoes available and, to keep
the competitive edge, they will be keeping their Principals at home and overseas up to date hoping to be
seen to be doing the most business in his own area. At lunch time perhaps the Broker may have the chance
of meeting a Principal over lunch to establish or maintain more than just a telephone relationship.
Problems will often be smoothed out more easily if the people involved know each other.

4.11 By about 1400 hours in London the New York Brokers will be starting to call and the London Brokers
will be passing their information to their American colleagues and establishing what changes have
happened to the ships and cargoes on that side of the Atlantic. They need to be ready to quote American
orders to their London based Owners and wee versa.

4.12 By about 1800 hours in London the market is virtually closed and any individuals not on late duty
or involved in negotiating a ship can think about going home for the day.

4.13 With the development of modern communications efficient computerised, E-mail, Yahoo!
Messaging, direct dialing, and fax machines, the broking profession operates far more quickly and
consequently is far more fragmented than in the past.

5.0 Tanker chartering companies have been set up in the majority of the main maritime centres, so that
today we see tanker brokers in such places as Tokyo, Beijing, Shanghai, Hong Kong, Seoul, Singapore,
Australia, India, Middle East Gulf, Piraeus, Genoa, Paris, Hamburg, London, Connecticut, New York,
Houston, Los Angeles...etc. The ethical standards normally associated with the ship-broking community
have been subject to attack. We see Brokers trying to commit a principal to work with them for business
and the less scrupulous may use some basic ploys such as working out when a Charterer's next cargo is likely
to be and 'quote' it to an Owner with a vessel in position before the cargo is ready to work; using the name of
a Charterer, working ships and putting them on subjects without the Principal's authority. Some Charterers
have been known to put two ships on 'subject Charterer's management approval' for the same business,
without the other party knowing and then lifting the subjects on the cheapest ship.

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5.1 It is unlikely that we will return to the "pre 1973 days" such that when tonnage was scarce ship-
owners would not work business that had to be 'on subjects'. They would say 'when your business is ready
to work fully firm we will give you an offer'. Today many influences - not least terminal's confirmation of
their acceptability of the tanker - will be taken into account before fixing so "subjects" are here to stay.

5.2 The tanker market works quickly. Typically Charterers come into the market in the morning with
their requirements and are often fixed by the end of that day's business. The Owner's Broker must
therefore be ready to do his voyage calculation and possibly offer his ship for suitable business within the
hour.

5.3 Commissions in the tanker trade are usually 1.25% Address plus 1.25% Brokerage and rarely in
excess of 5%. Low commission levels encourage the development of independent competitive broking
houses. The vast majority of the tanker negotiation will be carried out on the telephone or via instant
messaging such as Yahoo! with a written confirmation, the 'recap', usually in the form of an e-mail or telex
being used only at the final stage of a fixture. A modern trend is that the 'recap' will form the written
contract and will contain all details of the ship, voyage as well as the charter party form. The original
charter will not then be drawn up and signed by both parties unless requested by one of the principals.

5.4 Widely used standard charterparty forms such as ASBATANKVOY usually consist of two parts. The
first, a series of blanks relating to the key terms of the fixture, must be agreed during negotiations, and
the second part contains the detailed terms and conditions which are largely left unaltered. The majority
of Charterers have their own special terms covering not only matters which are not fully specified in the
standard form but impose duties and obligations on the Shipowner which may owe more to the weak
bargaining position of Owners in a poor market than to the principles of a fair deal. On a stronger market
Owners may attempt to introduce their own "additional" clauses.

5.5 It is usual in the tanker markets that the cargo will be sold at least once but frequently more times
after loading and prior to discharge. The result is that the destination of the vessel will not be known until
long after she has sailed from the load port. Taking a simple case of a vessel discharging in north-west
Europe, the charterparty may allow the Charterer to choose any port between Bordeaux and Hamburg.
There are a large number of ports in that range all with different costs for the same ship, and to calculate
the required freight rate for all these ports would be a lengthy process and by no means quick enough.

5.6 As a result the tanker industry uses Worldscale which takes into account not only the different port costs
but different steaming times to each of the ports. For a given Worldscale rate the Owners know they will earn
approximately the same equivalent timecharter return whichever port of discharge is nominated in that
range at the applicable Worldscale rate per tonne of cargo.

5.7 To Summarize, very simply the tanker market comprises of three players - the owners, the
charterers and the brokers. Sometimes one entity could be a charterer at one time and an owner at
another. The best example of such an entity in tanker chartering could be of the oil majors, say Exxon,
who would, at times, charter-in ships and, at others, let-out the ones they own. In fact the activities of
'chartering in' and 'chartering out' is a continuous process and handled, perhaps for a number of ships
on a day to day basis by the oil majors. Hence, they may own vessels, have some vessels on time charter
with them and also charter tonnage on voyage charter basis. Side by side, the same company may also
re-let tonnage under its control; making him an owner.

5.8 In India, every OMC (Oil Marketing company) which comprises of PSU companies like Indianoil
Corporation, Hindustan Petroleum Corporation, Bharat Petroleum Corporation etc. and private
companies like Reliance and Essar import crude and petroleum products on their own and carry out
shipments mainly on FOB and rarely on CIF terms. These companies enter into term agreements with
Suppliers for sourcing of crude throughout the year. The next entity in the market is the broker. Tanker
brokers depend upon the charterers for their bread and butter. So, even the best and most evenhanded
tanker broker is always going to have a slight bias towards the charterer. But even the best broker
cannot live without owners and without the goodwill that comes from strong relationships with reliable
owners. Typically, the oil majors will have a selected number of brokers through whom they will keep in
contact with the market.

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5.9 The question that arises is, who is a broker? Simply, he is an individual or organization who is
capable of bringing two parties together for concluding a contract. The difference between the
shipbroker and other types of brokers is the geographical nature of the business.

6.0 What is required from a tanker broker:

6.1 The flow of information is the broker's lifeblood. The job of a tanker broker is to collect,
interpret, assimilate and translate information on the market at any given time to his principals i.e. the
owners and charterers. The source of this information would normally come from co-brokers situated
around the world.

6.2 Further, the information supply should be constant, even when there is no fixture in the offing.
Unfortunately, 70 % of fixtures never make it to the open market. A broker needs to know about these
deals. Hence, good brokers keep up the information through thick and thin, even if a deal goes
elsewhere. There are some brokers who are just too quick to register their disappointment and shut
down the information flow A good broker should be well staffed. The information flow in his office
should be shared in an efficient mariner. Possessing modern means of communication may not be
essential but is always an asset. Though cost of operations will always be vital, a broker should be able
to sustain gestation periods.

6.3 A broker should not only know his home market but also, have contacts in other markets too.
They should be able to understand and read the market situation to the advantage of their principals.
Historically, there were owners who operated VLCCs, and brokers who specialized in that market, and
owners who operated Aframaxes or Suezmaxes, and brokers who had carved out niches for themselves
at any given size level. Today, all trades are inter-related, and a VLCC can be used to mop up the
Suezmax market.

7.0 Changes in the structure:

7.1 Over the years, the tanker market has undergone a large change in its structure. This has been
as a result from the oil majors' retreat from ownership and control of a large segment of the tanker fleet
and their greatly increased reliance on the spot market to meet their shipping requirements.

7.2 Historically, the Middle East has been the predominant loading area and the US, Western
Europe and Japan the main discharging areas, especially for the VLCCs. The closure of the Suez Canal in
1967 gave added impetus to the demand for these vessels. Between 1971-73, tanker demand grew
manifold, by nearly 33%. This resulted in a boom for freight rates and the order book for new buildings
by the end of 1973 showed a figure of 95 % of the existing fleet. In 1973, the Arab-Israeli war triggered
the first oil crisis by 1974 and the price of a barrel of Middle East crude's triggered from about $ 2.5 to
about $ 11.0. The result was a collapse in the freight rates as the demand for the product declined. The
drop in the freight rates was so severe that many new building deliveries in 1975-76 went straight to lay-
up.

7.3 Till 1973, the oil majors owned or controlled by way of bare-boat or time charter approximately
88 % of the world fleet and drew up the remaining 12 % trading spot to meet seasonal variations in
demand. Freight represented a significant part of the landed cost of a barrel and controlling the same by
achieving economies of scale (using larger ships), by efficient planning and using long term charters (as
high as 20 years) were not uncommon.

7.4 With an increase in the price of crude, freight costs as a percentage of the landed cost of a
barrel was greatly reduced; by late seventies barely 1 %, and shipping costs were no longer as
strategically important to the oil major as before. Further, their investment in large fleet of tankers and
commitment to long term time charters was becoming an embarrassment. So, the majors started to

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 reduce their fleet and rely increasingly on the spot market to meet their requirements. This trend has
continued and today about 80 % of the world tanker fleet trades on the spot market compared with
under 20 % in the early seventies. Of course to minimize their risks, they do wish to control and manage
a certain amount of tonnage.

7.5 Another development which took place in the early 1970s was that the governments of the
Organization of Petroleum Exporting Countries (OPEC) nationalized their oil reserves and installations
and therefore the oil companies could no longer control the oil production and price of crude oil. The
effect was the birth of a new player, the oil Trader. A Trader could approach the producer direct and
negotiate to buy oil at prices above those of the contract prices agreed by the oil majors with the
producers. Majority of oil traders use the spot market for the movement of their cargoes; the objective
is to buy and sell at the right time and place to make maximum profits.

8.0 The market at work — concluding a fixture:

8.1 To put across to the student briefly, generally a-market quote would be received by the broker
by either email or telephone. The first reaction of the broker would be to check the tonnage list for all
suitable tonnage to fix the given requirement. Most brokers would have a good idea of what tonnage
will be around at the given load dates/range. Thereafter, he would contact the owners with suitable
tonnage and make sure they are aware of the cargo. It is then a question of ensuring that the owners
are kept abreast of any developments on the cargo, offers received, other fixtures being done on similar
positions and giving the owner an idea of what he feels the market level for the voyage in question will
be. After the owner has offered, hopefully competitive with other offers received, Charterers will then
give a Counter to the vessels that have offered. The order in which the ships are countered can depend
on many factors. Mostly, the charterers will look at the price, age, oil majors approval and previous
experience with the owner to name a few.

8.2 The above is followed by a round of counters from owners and charterers hopefully concluding
at a mutually acceptable rate level with the Charterparty and Main Terms (cargo size, load range,
discharge range, rate, laycan, and demurrage). At this point the charterers and owners will agree that
the vessel has been fixed 'on subjects'.

8.3 'On subjects' means that principally the owners and charterers have agreed a fixture. What then
happens is that the charterers propose the agreed vessel to the oil suppliers and the oil receivers in their
deal asking if they will accept the vessel to call and load or discharge at their Terminal. When the vessel
is fixed subject Suppliers or Receivers approval, the above is the reason. The vessel could also be fixed -
"Charterers Management Approval" which speaks for itself.

8.4 Further, "Subject Stem" is basically to confirm that the oil in question has actually been bought
by the charterers who wish to ship it.

oooooo

SELF-EXAMINATION QUESTIONS

1. (a) Name the important players in the tanker market. (b) What are the requirements of a good tanker
broker?
2. What are the major changes that have taken place in the tanker market since the 1970s and how have they
affected the market?
3. Enlist the steps involved in concluding a tanker fixture.

*************
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CHARTERING FINAL YEAR

LESSON 15

NEW WORLDWIDE TANKER NOMINAL FREIGHT SCALE

“WORLD SCALE”
1.0 Worldscale is a schedule of freight rates applying to tankers carrying oil in bulk. The
word 'nominal' means that the rates are intended solely as a standard of reference or a
guideline. Notwithstanding the same, majority of tanker contracts are arranged in
accordance with the terms and conditions set in the Worldscale.

1.1 The Worldscale Association, (London) Ltd. and Worldscale Association (NYC)
Incorporated, located at London and New York respectively, publish a book on a yearly basis
(1st January) which can be availed on subscription basis. The book currently lists about 70000
voyages with rates and distances. In case a particular voyage is not listed, subscribers can
write to the Association who would readily provide the rates for that voyage. The rates are
quoted in per metric ton basis.

2.0 ORIGIN OF FREIGHT RATES FOR TANKERS:

2.1 To trace the origins of tanker rate schedules one has to go back to World War II.
Before the war, tanker rates were negotiated in $.per ton basis (or any other currency), just
as they are done today for any other bulk cargo. Therefore, a rate had to be established for
every voyage envisaged under the charter.

2.2 During the war the British and US Governments requisitioned tankers and paid
owners on a time charter basis. When the Governments did not need the tankers, these
were re-let to the oil companies on a voyage charter basis. Since the oil companies had to
pay freight on these voyages the British Ministry of Transport (MoT) and the US Maritime
Commission (USMC) devised scheduling of freight rates. The principle behind these rates
was that irrespective of the voyage performed, the governments should receive the same
net return per day, which could be compared to a time charter hire rate.

2.3 After the war, between 1952 and 1962, a number of different schedules were issued
- Scales 1,2,3 and Intascale in London, and ATRS in New York. In 1969 a joint scale -
Worldscale was issued to replace the above schedules. The present method of calculation
was introduced in 1989 and was known as New Worldscale.

3.0 HOW THE RATE IS EXPRESSED :

3.1 The rate is expressed in $/metric ton using a "standard vessel" and other
assumptions. The rate for a voyage expressed in the schedule is known as the 'flat rate' or
at Worldscale 100 (W 100). W 300 would mean 300 % of the published rate and W 50 would
mean 50 % of the published rate.

3.2 Advantages of the schedule:

1) It simplifies the negotiation of tanker charters. A simple reference to the charter is

sufficient to cover all the voyages that are possible within the designated trading
areas of that charter.

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 2) Worldscale also publishes what are known as Trans-shipment areas. These are
places, often many miles at sea, where large ships discharge all or part of their cargo
to smaller vessels. Worldscale indicates rates for these areas also.

3) The schedule includes a number of standard conditions, including which items of cost
are to be borne by the owners and which by the charterers. It is customary to
incorporate these conditions, including the specified laytime, into a charter by a
simple reference to World scale hours, time and conditions (WSHTC) in the fixture.
The tanker market works very quickly. Fixtures may be concluded within a matter of
minutes. More important, it is usual in the tanker markets that the cargo will be sold
several times prior to discharge. The result is that the destination of the vessel will
not be known until long after she has sailed from load-port. Taking a simple example
a vessel may be loading at Singapore and discharging at any one port in East Coast of
India. In such a situation, the charterer has the option to take the vessel to Chennai,
Vizag, Paradeep or any other port on the East Coast of India; assuming for the time
being that there are no other factors to be considered. Therefore, there could be a
large number of ports within one range, all with different costs. Worldscale,
overcomes this problem, as, for the same ship the owner knows that he would
receive the same Time Charter return whichever port he discharges in that range.
This results in a great saving of time.

4) Worldscale is an easy reference point of market figures. One can easily see from a
glance at the market reports whether the market is rising or falling. For example,
VLCCs fixing AG/East at WS 70 in one week and WS 75 in the next, would indicate
that the market has risen. It is not important to find out what dollar rate this equates
to. The only issue here is to compare like with like.

4.0 Basis of Calculation:

4.1 The rates are based on 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 ports using
the under-mentioned factors.

a) Standard Vessel :

Total Capacity 75000 Tonnes

Average Service Speed 14.5 Knots
Bunker Consumption.
Steaming 55 Tonnes per day
Purposes other than steaming 100 Tonnes per round voyage
In port 5 Tonnes for each port involved in the voyage

Grade of Fuel oil 380 est

b) Port Time 4 days for a voyage from one loading port to

one discharging port; an additional 12 hours
being allowed for each extra port involved on a
voyage.

c) Fixed Hire Element USD 12000 per day

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d) Bunker Price USD 108.75 per tonee
(pertaining to the schedule effective 1.1.98)

This price represents the average worldwide bunker price for fuel oil (380 est) during
the period 1st October 1996 to 30th September 1997 as assessed by Cockett Marine
Oil Limited (of London).

e) Port Costs

Port costs used are those assessed by the Associations in the light of information
available to them to the end of September 1997.

f) 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.

5.0 Usage of Worldscale

5.1 Before learning to use the Worldscale, students are advised to go through the
Preamble. All examples listed hereinafter pertain to the printed schedule effective 1 st
January 1998.

5.2 The ports of the world are listed alphabetically in the Worldcale schedule. To find
out the flat rate for a voyage one has to look at the discharge port. Below the discharge
port, which is listed in bold and capital letters, are listed various load ports. Next to the rates
you would often find the symbols S, C or CS. These mean via Suez Canal in laden and in
ballast, via Cape of Good Hope laden and in ballast and via Cape of Good Hope laden and
Suez in ballast respectively.

5.3 For example, from Annexure 1 (a) and (b) we can find out the flat rate for a voyage
from Singapore to Madras.

Singapore/Madras = $ 3.87 pmt 3172 miles

With the help of Annexure 1 now you try and enter the flat rates and distances for
the following voyages:

a) Dumai/Madras
b) Labuan/Madras
c) Min al Fahal/Madras
d) Botas (Ceyhan)/Madras via Cape
e) Botas (Ceyhan)/Madras via Suez

Do you remember as to where the above loading ports are?

Note the above rates are in metric per metric ton basis and the distance is round
trip. When we work out flat rates it means that these pertain to Worldsale 100. For
Singapore / Madras if the rate negotiated is at WS 250 or at WS 80, then the final
figure would be calculated as follows:

For WS 250= $3.87x2.50 = $ 9.675 pmt

For WS80 = $3.87x0.80 = $ 3.096 pmt

232
5.4 Having understood the above, we can proceed to the next step, i.e. to calculate a
rate for a voyage from a port in the Middle East, say loading Min Al Ahmadi and discharging
Kandla. You may refer to Annexure 2 for referring to Kandla as the discharge port. While
going through the list of load ports you would observe that Min Al Ahmadi is not listed. The
reason for this is that there are 39 ports listed in the Middle East. Thus for each discharge
port it would be required to list an additional 39 rates for each port in the Middle East. To
calculate the required rate the following procedure is followed:

(a) Quoin Island/Kandla $ 2.33 1610 miles

(b) Mina Al Ahmadi/Quoin $ 1.02 996 miles (Refer Annexure 3)
Therefore WS flat rate: $ 3.35 2606 miles

Do find out where Quoin Island is and why the above procedure is followed?
Using Annexure 2 and 3, find out the flat rate for,
1) Mina Abdulla/Kandla
2) Ruwais/Kandla
It may be noted that rates to ports to and from the Black Sea and Lake Maracaibo
are treated in the same way. For Black Sea one has to look for Uskudar and Lake
Maracaibo for San Carlos Island.

In case there are two discharge ports, Worldscale lists out the rates for them
separately. With a reference to Annexure 1 (b), under the heading Madras and
Calcutta we can easily find out that the flat rate for loading Singapore and
discharging Madras and Calcutta is $ 5.11. Note that difference in discharging single
port basis, i.e. only Madras and discharging two port basis, i.e. Madras and Calcutta;
$ 5.11 minus $ 3.87 or $ 1.24 on flat rate basis.

5.5 If the above is clear to you, we can now proceed to the next section.

6.0 Variable Differential

6.1 The application of the variable differential can best be understood with the help of
an example. We would refer to Annexure 4 and Annexure 5 for this purpose. Annexure 4
lists out Visakhapatnam as the discharge port. Let us one again take Singapore as the loading
port. The flat rate is:

Singapore / Visakhapatnam $3.92 pmt 3146 miles

Variable differential (Less) $ 0.34 pmt
WS 100 $ 3.58 pmt
Therefore WS 180 $ 6.444 pmt
6.2 Above example assumes that the cargo was discharged at the New Oil Moorings in
Visakhapatnam.

6.3 It may be noted that because there is a variable differential the total is multiplied by
the WS rate fixed.

6.4 The necessity of having a Variable Differential is when the port charges on a given
ship will be assessed differently. This depends on what she is carrying - product or crude, or
whether she is loading or discharging, or simply when there is a difference in the rate on a
particular berth as in the case above.
233
7.0 Fixed Differentials:

7.1 One again the concept can be best understood with an example. For the same we
would be using Annexure 1 (b) and Annexure 6. The voyage in question is from Rabigh to
Madras. A reference to the flat rate in Annexure 1 (b) suggests that Page D-4 of the schedule
must be seen (same has been reproduced at Annexure 6). We would assume that the ship
is carrying 80000 tons and is fixed at WS 90.

Rabigh/Madras flat rate $ 6.37 pmt 6836 miles

Freight = $6.37x0.90 = $5,733
$ 5.733 x 80000 = $ 458640
plus $0.27x80000 = $21600
Therefore total freight = $ 480240

7.2 As you may have observed from the above, fixed differentials apply where the port
costs vary due to some levies or dues which are calculated irrespective of the amount of
cargo loaded. Canal rate differentials are also fixed differentials.

7.3 Now we will calculate the freight for a voyage from Dumai to Rotterdam via the Suez.
Loading 80000 MT of crude oil the vessel has a Suez Canal Net Registered Tonnage (SCNRT)
of 50000. Rate is WS 85. For this purpose you may refer to Annexure 7, 8 and 9.

Dumai/Rotterdam = $ 13.36
Rotterdam Differential = $ 0.87
Worldscale Flat = $ 14.23
WS 85 = $ 12.0955
Freight payable = 12.0955 x 80000 = $ 967640
Suez Differential = 50000 x 3.81 = $ 190500
Plus lump sum increase = $ 147750
(draft being less than 47 ft and sdw less than 130000)
Total payable = $ 1305890

7.4 It is once again worthwhile reminding you that the Worldscale calculations are based
on the 'standard ship'. Hence, if the ship in question is of different size, speed or
consumption or if the bunker prices have changed dramatically, the returns can be affected
in a major way. Hence, before quoting a rate it is extremely important to know the ship in
question.

234
 USO/MT Miles USD/MT Miles
imtLTON & TAUHANGA - contd. MACKAY & PORT ALMA
•Men Bay.............................................. 13.31 P 14998 Brisbane . .......................................... 3.04 1066
ll Palno & Bullen Bay ..... 14.40 P 15211 MACKAY & TOWNSVILLE
EiPaiuo ft Emmastad Terminal . . 14.51 P 15211 Botany Say ....................................... 4.24 2296
{^rusted Terminal............................... 13.42 P 14998 Brisbane ................................. . . .- 3.48 1422
Wong ................................................ 5.15 3848 Melbourne . . . ...................... 5.73 3410
I *nana................................................ 7.05 6866 PortStanvac ........................................... 5.27 4151
Putno La Cruz .................................. 13.85 P 15560 MADANG
. Own Island (See page 11 .... 13.23 16374 Batangas Bay ........................................ 4.20 3886
ftningarei .............................................3.78 1463 Port Moresby ......................................... 2.82 2272
Vwibu (See page D-4}............................14.52 18074 Quoin Island (See page 1) . . . . 9.68 12280
imELTON & TIMARU Singapore ............................................... 5.23 5632
Ouoin Island (See page 1) .... 12.61 15504 MADANG & BOUGAINVILLE ISLAND
Vvhangarei............................................. 3.90 1624 Singapore ............................................... 6.37 6843
imELTON & WELLINGTON MADANG & LAE (New Guinea)
B*wngas Bay......................................... 8.80 9665 Quoin Island (See page 1) . ;. . . 70.23 12705
Bwangas Bay & Singapore .... 70.34 11328 Singapore............................................... 5.82 6057
BotanyBay............................................ 4.17 2785 MADANG & RA8AUL
Butane & Botany Bay ......................... 5.24 3522 Singapore .............................................. 6.02 6344
HuFenBay............................................. 12.94 P 14605 MADRAS
Errnastad Terminal .............................. 13.05 P 14605 Aden ...................................................... 5.38 5300
Gw'ong .............................. 4.60 3192 Agloi Theodoroi (See page D-6) . . 8.72 S 9122
Ksslmgs ................................................ 4.77 3070 Algiers [See page D-6) ..........................77.72C 20640
HonnUu (See page D-5) .... 7.83 8524 Algiers (See page D-6)...........................70.62 S 10906
iwuna ................................................. 6.50 6208 Amsterdam ............................................ 18.09 C 22014
Melbourne ............................................. 4.56 3182 Amsterdam . ..................................... 73.76 S 14504
M-Hiourne & Adelaide ... .5.77 4069 Ancona .................................................. 10.3 7 S 10286
Pou Sianvac & Melbourne .... 5.48 4044 Antwerp .................................................. 18.25 C 21968
O^n island (See page 1) .... 12.67 15716 Antwerp ................................................. 13.32 S 14458
Singapore.............................................. 9.20 10512 Antwerp & Milford Haven .... 79.37 C 22244
Sydney (N.S.W.)....................................4.76 2793 Antwerp & Milford Haven .... 14.43 S 14734
Wtiangaiei .............................................3.69 - 1456 Arzew (See page D-6) ...........................11.26 S 11258
Tsnbu (See page D-4) ........................... 13.95 17416 Augusta ....................................... . . 9.55 S 9750
'okohama............................................. 9.63 10369 Balikpapan .............................................. 5.27 5274
*m...................................................... 9.70 10989 Banias .................................................... 8.00 S 8494
Toiu& Batangas Bay ........................... 10.77 11713 Batangas Bay ......................................... 5.95 5852
Beaumont (See page D-5) .... 79.26 C 24538
Beaumont {See page D-5) .... 77.32 S 21176
Bejaia (See page D-6) ..... 70.48 S 10716
WCA5SAR Bombay ................................................. 3.47 2916
Batajn................................................... 3.24 2534 Bonny (See page D-4) ........................... 72.24 C 14448
S-gapore .............................................. 2.78 2204 Botany Bay ....................................... 9.72 10846
WACEIO Botas (Ceyhan) Terminal .... 79.37 C 23856
B-JTOS Aires ......................................... 5.23 4134 Botas (Ceyhan) Terminal .... 8.86 S 8662
BjfenBay ............................................. 5.38 5216 Brisbane ................................................. 9.73 10846
Canpiio................................................. 4.85 4540 Bullen Bay .............................................. 76.68 C 21078
Comodoro Rivadavia............................. 5.64 5474 Bullen Bay .............................................. 75.80S 19148
Covtnas................................................ 6.32 6248 Cagliari ................................................... 77.28 C 21264
n Pablo ................................................. 5.86 5114 Cagliari ....................................................9.95 S 10390
fmmaslad Terminal............................... 5.49 5216 Calcutta .............................................2.49 1550
inflate .......................................... 5.57 4522 Chiba ......................................................8.70 8978
Vmonal ............................................... 6.13 6114 Chittagong ..............................................3.00 1782
Puerto La Cruz ................................... 5.18 4736 Cilacap ................................................... 4.62 4356
Puma Cardon......................................... 5.80 5440 Cochin .................................................... 2.58 1752
Sin Carlos Island (See page 191 . . 5.35 5578 Colombo (See page D-5) .... 2.38 1180
Ttrntfod ................................................ 4.80 4372 Dalian {See page D-6) ............................ 7.84 8402
Uskudar (See page 17) ......................... 9.15 10080 Dumai..................................................... 3.69 3024
MACKAY Durban ................................................... 7.43 . 6176
Adelaide ................................................4.69 3798 Emmastad Terminal .............................. 16.80 C 21078
Aden.....................................................7 7.62 13742 EmmastadTerminal ............................... 75.87 S 19148
BaiiVpapan ............................................. 5.48 5218 EsSider ...................................................S.87S 9468
Bombay................................................. 70.43 11392 Gamba (Gabon)...................................... 11.38C 13508
Botany Bay............................................ 3.42 1898 Genoa .....................................................77.68 0 21510
Brisbane ................................................ 2.66 1024 Genoa . / .......................................... 70.46 S 10738
Dumai................................................... 6.80 7096 Geraldton ............................................... 6.80 6408
Gtetong ................................................ 4.34 3024 Ghent ..................................................... 73.74S 14418
Gladstone (Queensland) ........................ .2.31 494 Guayaquil ............................................... 79.54 24656
r*inana ........................................... '•*. 6.33 6150 Hastings ...................................... . 9.46 9920
Melbourne................................... .' . 4.30 3004 Houston (See page D-5)........................ 79.27 C 24624
1M ....................................................... 6.78 6296 Houston (See page D-5)........................ 77.33 S 21262
M|u .....................................................6.36 6474 Inchon .................................................... 7.53 8268
Port Sianvac.......................................... 4.38 3752 Kandla ................................................... 3.94 3648
OHMI Inland (See page 1) . . . . 70.94 13178 Kaohsiung......................................... .6.18 6406
S"«inporC.............................................. 6.67 6712 Karachi ........................ ." .... 4.76 3820
Sungei Palming...................................... 6.78 7066 Kerteh (See page D-7) ...... 4.35 3634
Sidney (N.S.W.) ................................... 3.39 1886 Klaipeda (See page D-6) ........................ 79.99 C 23798
MACKAY Si BUNDABERG Klaipeda {See page D-6) ........................ 75.03 S 16288
Brisbane................................................ 3.15 1089 Kwinana ................................................. 6.77 6796
MACKAY & CAIRNS La Plata ............................................ 74.37 C 16936
B-sbane................................................. 3.72 1719 Labuan ................................................... 4.78 4634
MACKAY & GLADSTONE Lavera (See page D-6) .......................... 77.48 C 21186
(Queensland) Lavera (See page D-6) ........................... 70.64 S 10944
Hkine .................................................. 3.21 1078 Los Angeles (See page D-5) . . . 74.90 18502
'.*-" -i-irne . ...................................... 4.85 3047 Malta ..................................................... 17.13 C 217R'1

235
 USD/MT Miles
MADRAS -contd.
Malta .......................................................8.99 S. 9774
Manila .....................................................5.73 5846
Milazzo ...................................................17'.97 C 21812
Milazzo ................................................... 9.83 S 9820
Milford Haven ......................................... 12.57 S 13944
MinaalFahat . . ................................. 4.60 4338
Miri ......................................................... 4.64 4446
Mombasa ............................................... 5.96 6094
Montreal & Quebec ............................... 15.79 S 18086
Morehead City [See page D-5) . . . 18.25 C 23114
Morehead City (See page D-5) . . . 15.51 S 18634
Nakhodka (See page D-6) .... 9.10 9126
Naples ................................................... 9.91 S 10116
Offshore Fujairah (TSA) ......................... 4.64 4620
Offshore Khor Fakkan (TSA) . . . 4.66 4620
Offshore Terminal.Bonny . . . . 11.83 C 14448
Peradip ................................................... 2.35 1156
Philadelphia (See page D-5) .... 18.54 C 23360 Philadelphia
(See page D-5) .... 15S6S 18420
Pladju ..................................................... 4.16 3696
Port Dickson ■ ...................................... 3.50 2860
Port Harcourt (See page D-4) . . . 12.28 C 14504
Portland (Ore.) (See page D-5) . . . 14.24 17400
Puerto Las Minas . ................................ 17.61 C 22448
Puerto Las Minas ................................... 16.61 S 20366
Puerto Ordaz .......................................... 16.25 C 20276
Puerto Ordaz.......................................... 15.74 S 18866
PuntaCardon ......... 17.11 C 21306
PunteCardon ......................................... 16.18 S 19316
Quoin Island (Sea page 1) .... 4.69 4702
Rabign (See page D-4) ........................... 6.37 6836
Ras Lanuf (See page D-8) . . . . 9.18 S 9466
Ras Shukheir (See page D-6) . . . 6.90 7668
Rotterdam (See page D-7) .... 72.48 S 14448
San Carlos Island (See page 19) . . 16.66 C 21444
San Carlos Island (See page 19) . . 15.73 S 19450
San Francisco (See page D-5) . . . 14.45 17876
Shanghai (See page D-6) .... 7.32 7638
Sidon ...................................................... 7.92 S 8308
Singapore .............................................. 3.57 3172
Sriracha . . . ; ............................ 4.90 4742
Sue: (See page D-6).............................. 7.41 7900
SullomVoe ....................................... 18.70 C 22622
SullomVoe ............................................. 13.82 S 15178
Sungei Pakning...................................... 3.67 2994
TandjungUban ....... 3.89 3216
Tokuyama .............................................. 8.13 8330
Trincomalee (See page D-5) . 1.96 573
Trinidad ............................................ 16.08 C 20238
Trinidad ............................................ 15.37 S 18548
Tripoli (Lebanon) . . . . . . . 8.01 S 8430
Tuxpah ................................................ 19.23 C 24552
Tuxpan .................................................. 17.46 S 21422
Uskudar (See page 17) ..........................18.72 C 23416
Uskudar (See page 17} .......................... 9.17S 9472
Ventspils [See page D-6) .... 20.00 C 23871
Ventspils (Sea page D-6) .... 15.05 S 16361
Visakhapatnam (See page D-8) . . 1.37 656
Wadi Feiran (See page D-6) . . . 6.96 7748
Whangarei ............................................. 11.75 12908
Yanbu (See page D-4) ........................... 6.36 6988
Yokkaichi ............................................... 8.22 8732
Yokohama^ ........................................... 8.47 8948
Yosu P: ............................................ 7.49 P07B
MADRAS & BOMBAY
Augusta ................................................. 10.65 S 10217
Cochin . . . ........................... 3.83 2919
Pladju & Singapore ................................ 6.93 6042
Pladju & Tandjung Uban . . . '; . 6.91 6033
Quoin Island (See page 1) . . , . 5.54 4829
Uskudar (See page 17) ......................... 20.39 C 24638
Uskudar (See page 17) ......................... 10.27 S 9939
Visakhapatnam (See page D-8} . . 4.30 3508
Yokohama . ...................................10.89 11255
MADRAS & CALCUTTA
Aden ................................ 7.04 6729
Agio! Theodoroi (See page D-6) . . 10.40 S 10551
Ancona . . . . . . . . . . 11.99$ 11715
Anew (See page D-6} . . . . . 12.94 S 12687
Anew 81 Santa Panagia Bay
(See page D-6} ................................14.01 S 12731
Augusta . . . ................................ 11.23 S 11179
Bangkok ................................................. 6.45 5665

236
 USD/MT . " H
MADRAS & CALCUTTA ■ contd.
Bataan .......... 7.22 «*'
Beaumont (See page D-5) .... 20.98 C Kf
Beaumont (See page D-5) .... 19.03 S W
Bombay ........................................... 4.89 W:
Bonny (See page 0-4}........................... 13.92 C <5T
Botany Bay . .......................... 11.15 J*j
BulienBay ............................................. 15-59 C fflB
BullenBay ............................................. 17.50 S m
■ Chittagong .................................. . . 3.83 tE
Coarzacoalcos ................................. 20.80 C J9f
Coatzacoalcos ................................. 19.04 S 1W
Cochin ................................................... 3.99 »!
Dalian (See page D-6) ..... 9.09 W
Emmastad Terminal .............................. 18.50 C MS
Emmastad Terminal .............................. 17.615 lfl£
Geetong & Hastings .............................. 11.76 114
Ghent . .................................... 14.835 W\
Hamburg & Swansea ...................... 21.24 C HV,
Hastings ................................................ 10.89 m
Houston (See page D-5) . . . 20.99 C M
Houston (See page D-5) ........................ 19.04 S UK
Kanmon .......................... 9.33 ttj
Kaohsiung ........................................ 7.43 W
Karachi . . . .............................. 6.42 Ut;
Koper .................................................... fl,50S W
Kwinana .......................................... 8.18 M--
U Plata ...........................................16.07 C Itt
Milford Haven ........................................14.26 S IWj
Montreal & Quebec ............................... 17.49 S !»!■
Nakhodka (See page D-6) .... 10.36 Sft Offshore
Termlnat.Bonny .... 13.52 C IK, Philadelphia (See page D-5) ....
20.26 C Ut Philadelphia (See page D-5) . . . . 17.16 S
U*
Pladju & Singapore .....................5.78 Qi
Pladju & Tandjung Uban ........................5.76 «Q
PuntaCardon ......................................... 16.82C BUj
PuntaCardon ........................................ 17.86 S Mfc
Quoin Island (See page 1) .... 6.34 W" Pas Lanuf (See page
D-8) .... 19.77 C IJ8 Ras Lanuf (See page D-8) ..... 10.85
S KM;
Ravenna. .............................................. 11.80S \M\
Rotterdam (See page D-7) . . . . 19.11C IXt Rotterdam (See
page D-7) . . . . 14.11S IMS-San Carlos Island (See page 19)
. . 18.37 C WV San Carlos Island (See page. 19) . . 17.43
S Xlt
Santa Panagia Bay ................................ 19.65 C MB:
Santa Panagia Bay ...... 11.385 UH|
Shanghai (See page D-6) .... 8.57 W
Singapore.............................................. 5.11 Wf-
Sriracha ........................................... 6.14 DT
TandjungUban.......................................5.13 48
Teneriffe ................................................ J3.52S W»j
Tokuyama ............................................. 9.38 14
Trieste ................................................... 11.845 IWi
Trin6omalee (See page D-5) . . . 3.63 KV:
Trinidad ................................................. 17.76C IW
Trinidad ........................................... 17.075 WT
Tuxpan .................................................. 20.95 C 25*
Tuxpan........................................ , . 19.175 2»:
Uskudar (See page 17) ..........................20.43 C 2« ■
Uskudar (See page 17} .........................10.84 S UM-:
Venice.................................................... 11.96$ It*;
Visakhapatnam (See page D-8) . . 2.90 841 Yanbu
(See page D-4) ...... 8.02 W
Yosu - . -. - ...................................... 8.74 W
MADRAS 81 CHITTAGONG 'H
Aden................................................... 6.95 t*
Augusta ................................................ 1U4S 11«
Bejaia (See page D-6) ..... 12.07 S \W
Bombay ................................................ 5.04 4X1
Karachi . . . ........................................ 6.33 MO
LaSkhirra ............................................... 11.005 llW
MarsaelBrega........................................ 10.50 S Ittft
Pladju 81 Singapore ................................ 5.57 «fl
Pladju 81 Tandjung Uban ....................... 5.55 4M
Quoin Island (See page 1) . . . . 6.28 SM
Sidon .......... 9.50 S m
Uskudar (See page 17) . . . 10.76S l«
MADRAS & HALDIA
Aden ........................................... . . 6.9S 8H
Agioi Theodoroi (See page D-6) . . J9.70C W8
Agioi Theodoroi (See page D-6} . . 10.31 S ",J"
,n
Augusta "■'

237
 Yanbu (See page D-4).......................... 4.55 -
4826

KAMb'AR - contd. Rotterdam (See page D-7) . . . .

5.53 • 5906
Santa Panagia Bay................................. 6.04 5808
Trinidad ........................................... 5.26 5B18 ..
KAMSAR & ABIDJAN
Agioi Theodoroi (See page D-6) . . 7.85 8375
KAMSAR 8> CONAKRY (See page D-3)
Ghent .................................................... 7.55 6051 .'
Lavera (See page D-6) ........................... 6.96 5289
Milaizo ................................................... 7.45 5915
Pon Gentil (See page D-8) .... 5.16 3327
Trinidad ........................................... 6.62 5791
KAMSAR & LAS PALMAS
Trinidad ........................................... 6.70 6842
KANDLA
Aden ..................................................... 3.67 3134
Agioi Theodoroi (See page D-6) . . 7.00 S 6960
Ancona ..................................................8.58 S 8124
Aqaba ....................................................5.42 5818
Arzew (See page D-6)........................... 9.63 S 9096
Augusta .......................................... 7.83 S 7588
Balikpapan ......... 6.77 7658
Beaumont (Sea page D-5) .... 18.89 C 24288
Beaumont (See page D-5) .... 75.56 S 19014
Bejaia (See page D-6) ........................... 8.75 S 8554
Bombay ........................................ 2.04 830
BullenBay ..............................................16.31 C 20828
BullenBay .............................................. 14.04 S 16986
Cagliari ................................................... 8.23 S 8228
Calcutta ........................................... 4.90 4956
Chittagong............................................. 5.10 5052
Coatzacoalcos ................................ 18.71 C 24122
Coatzacoalcos ............................... 15.56 S 19098
Cochin ................................................... 2.71 1906
Colombo (See page D-5) .... 3.12 2510
Emmnstnri Terminal ............................. 16.42 C 20828
Emmastad Terminal .............................. 14.15 S 16986
EsSider ........................................... 7.14 S 7306
Genoa .................................................... 17.3 fC -21260
Genoa .................................................... 8.73 S 8576
Iskenderun ............................................ 19.06 C 23610
Iskenderun ............................................ 7.25 S 6490
Kanokawa ............................................. 9.72 10784
Karachi .................................................. 2.27 522
Kerteh (See page D-7) .......................... 5.87 6064
Koper .....................................................8.10 S 8318
Madras ..................................................3.94 3648
Miri ......................................................... 6.17 6884
Mombasa .............................................. 4.90 4854
Mormugao ............................................. 2.21 1204
Nakhodka (See page D-6) .... 10.65 11556
Offshore Khor Fakkan (TSA) . . . 2.35 1590
Offshore Singapore No. 1 (TSA) . . 5.10 5554
Philadelphia (See page D-5) . . . . 18.17 C 23110
Philadelphia (See page D-5) .... 13.71 S 16258
Pladju .....................................................5.68 6126
PuntaCardon .........................................75.32 C 19105
Quoin Island (See page 1) .... 2.33 1610
Rangoon .}$'■....................................... 4.89 4966
Ras Lanuf (See page D-8) . . . . 17.68 C 22246
Ras Lanuf (See page D-8) .... 7.45 S 7304
Rotterdam (See page D-7) .... 77.03 C 21708
Rotterdam (See page D-7) .... 10.74 S ■ 12286
San Francisco (See page D-5) . . . 16.02 20306
Santos ................................................... 13.45 C 16134
Sidon .................................................... 6.20 S 6146
Singapore ............................................. 5.39 5602
Sriracha ............................................ 6.42 7172
Suez (See page D-6) .............................. 5.53 5738
Tandjung Uban...................................... 5.41 5648
Tees River (See page D-8) .... 18.08C 21994 Tees River
(See page D-8) .... 7 7.78 S 12572
Teneriffe .............................. -. . . . 74.37 C 18282
Teneriffe ............................................... 70.09 S 11004
Tokuyama ............................................. 9.67 10760
Trincomalee (See page D-5) . . . 3.54 3108
Trinidad ...........................................75.77 C 19988
Trinidad ...........................................73.52 S 16386
Uskudar (See page 17} ......................... 78.34 C 23166
Uskudar (See page 17) ......................... 7.44 S 7310
Ventspils (See page D-6) .... 19.63 C 23621
Ventspils (See page D-6) .... 13.30 S 14199
Visakhapatnam (See page D-8] . . 4.36 4176

238
 Quoin Island (See page 1) . . . . 5.30 <&
Uskudar (See page 17) ......................... JO. MS I0JI
KANDLA - contd. * .;*,?: KANDLA & MORMUGAO •: $
Yokkaichi............................................... 9.74 lit Augusta .......................................... 8.74S !)4
Yokohama ............................................. 70.00 -'M Bombay ................................................ 2.68 lH
KANDLA & BOMBAY .%t Koper..................................................... 9.07 S W
Aden ..................................................... 4.79 » Offshore Khor Fakkan (TSA) . , . 3.40 St Quoin Island
Augusta ................................................ 8.95 S tt (See page \) .... 3.41 H8 Rotterdam (See page D-7) . .
Cochin ................................................... 3.18 Jffi , . 77.71 C Utf Rotterdam (See page D-7) . . , .
Karachi .................................................. 3.48 Itft 11.6$ S 1X9
Koper ................................................. 9.225 t& Uskudar (See page 17) ......................... 19.03 C 2ttt
Mlzushima .................................. '. .10.70 >UQ Uskudar (See page 17)......................... 8.35 S W2
Quoin Island (Seepage 1) .... 3.64 . -M KANDLA & NEW MANGALORE -^
Ravenna ............................................ 9.52S i#V$ London ................................................. 78.23 C JSS
Tokuyama ............................................. 10.47 London ................................................. 72.25 S tl«
Uskudar (Seepage 17) ......................... 19.34C Quoin Island (See page 1) .... 3.66 3tt
Uskudar (See page 17) ......................... 8.57$ Uskudar (Seepage 17) .........................19.15C 2tt:
KANDLA & CALCUTTA Uskudar (See page 17) ........................ 8.56 S l»
Aden ..................................................... ?.2$ Yanbu (See page D-4) ..........................5.76 Uf
Augusta .......................................... 11.48$ (H8 KANDLA & PORT OKHA ......................... J|
Bombay ........................................... 5.38 ;&$ Augusta ............................................... 8.09 S ..W.
Quoin Island (Sea page 1) .... 6.27 .< t!& Bombay ................................................. 2.33 W
Santos ................................................... «.47C-.-.t«f Cochin ................................................... 3.00 »f
Teneriffe ................................................ 17.84C 2I@ Madras'. ................................................ 4.23 M»
Teneriffe................................................ 13.77$ Wt Quoin Island (See page 1) .... 2.60 Ittf-
Uskudar (See page 17)......................... 21.40 C Bd Uskudar (Seepage 17) ......................... 78.67 C 2tV
Uskudar (See page 17) ........................ 11.10$ llffi Uskudar (See page 17) .........................7.77 S 7$
KANDLA 8i CHITTAGONG ,'•?: Visakhapatnam (See page D-8) . . 4.65 4!ft
BullenBay ........................................... 19.22C IM KANDLA &.TUTICORIN Quoin Island (See page 1} .
BullsnBay .............................................. ',7.63 S 11$ . . . 4.37 MS
Emmastad Terminal .............................. 19.33 C !tlft Uskudar (See page 17} ......................... 9.185 813.
Emmastad Terminal .............................. 17.745 lli& KANDLA 8t VISAKHAPATNAM
Quoin Island (See page \) .... 6.13 SK KANDLA & COCHIN (See page D-8)
Quoin Island (See page 1) . . . . 4.00 , BJ* Quoin Island (See page 1) ...................... 5.73 &l
Uskudar (See page 17) ......................... 8.84 S Stf Uskudar (See page 17) ........................ 70.56 S KM
KANDLA & HALDIA --^ KANMON
Aden ..................................................... 7.20 IIS Aden ..................................................... 10.65 UH
Augusta ........................................... 20.38 C il$ Augusta - .......................................... 14.88 S 1«K
Augusta ........................................... J 7.39 S It® Balikpapan ............................................ 5.35 <SS
Quoin Island (Seepage 1) .... 6,18 ill Balaan ................................................... 4.76 M
Uskudar (See page 17) ......................... 27.31 C KH Bintulu Terminal .................................... 4.95 4WI
Uskudar (See page 17) ......................... 7 7.0(5 1IQ Bombay ........................................... 9.44 £8
KANDLA & MADRAS '
218 ALWAYS REMEMBER TO CONSULT PREAMBLE Revlswf 1 .^'»B■■'

239
 ARABIAN GULF RATES

The only printed rates throughout the Schedule applicable to vessels loading in the Arabian Gutf are from Quoin Island.
The Worldscale rates from the various loading terminals, or combinations of loading terminals, in the Aiabian Gulf to
any destination outside the Arabian Gulf are ascertained by making the undemoted additions to the rales quoted from
Quoin Island, the gross figure thus being subject to the percentage variation which the contracting parties have
agreed to apply to the Worldscale rates. The undemoted additions must not be used if x -any of the load ports on the
voyage are outside the Arabian Gutf.

USO/MT Mites
ABU AL BU KHOOSH ......................................................................................................0.47 408
ALSHAHEEN TERMINAL ........................................................ . . . . ' . . 075 496,
ARZANNAH ISLAND ........................................................ .................................... 0.88 476
BAHRAIN.......................................................................................................................... 0.79 .. 666
BAHREGANSAR {See page D-3) . ............................................................................... 1.28 918
BANDAR ABBAS ISee page D-3) .................................................................................. 1.18 84
BANDAR BUSHIRE {See page D-3) ................................................................................ 1.73 786
BANDAR IMAM KHOMEINI (See page D-3) .................................................................. 1.93 1068
BANDAR MAHSHAHR. {See page D-3).......................................................................... 2.52 1080
DAS ISLAND . ......................................................................................................0.65 426
FATEH TERMINAL ........................................................................................................... 0.21 252
HALAT AL MUBARRAS .................................................................................................. 0.55 430
HALUL ISLAND . ............................................................................................... 0.62 458
HAMRIYAH ...................................................................................................................... 0.15 174
HULAYLAH TERMINAL .................................................................................................. 0.32 112
JEBEL ALI (See page D-3) .............................................................................................. 0.37 242
JEBELDHANNA .............................................................................................................. 0.73 534
JUAYMAH ....................................................................................................................... 0.71" 738
JUBAIL (See page D-4) ................................................................................................... 0.61 772
KHARG ISLAND (See page D-3)..................................................................................... 1.09. 816
LAVAN ISLAND (See page D-3) .................................................................................... 0.87 356
MESAIEED........................................................................................................................ 0.78 606
MINAABDULLA .............................................................................................................. 1.01 992
MINA AL AHMAOI .......................................................................................................... 1.02 996
MINA KHAUD .................................................................................................................. 0.23 188
MINASAQR ...................................................................... . . . ; . . . 0.14 94
MINASAUD .................................................................................................................... 1.08 960
. MINAZAYED ................................................................................................................... 0.48 352
MUBAREK .................................................................. ...........................................0.15 166
* OFFSHORE MESAIEED (TSA) ......................................................................................... 0.39 536
PORTRASCHID ............................................................................................................... 0.34 204
RASALKHAFJI ............................................................................................................... 0.83" 896
RASLAFFAN ................................................................................................................... 1.19 548
RASTANURA ................................................................................................................. 0.68^ 748
RUWAIS .............................................................. .................................... ". . 0.58 534
SHUAIBA................................... . 1.02 996
SIRRI ISLAND (See page D-3) ......................................................................................... 0.79 232
UMMALNAR ...................................... ...........................................0.31 370
ZIRKU ISLAND ................................................................................................................. 0.66 432

ABU AL BU KHOOSH & ARZANNAH ISLAND .............................................................. 1.18 531

ABU ALBU KHOOSH & DAS ISLAND ........................................................................... 0.91 440
ABU AL BU KHOOSH & FATEH TERMINAL ................................................................. 0.57 403
ABU ALBU KHOOSH & HALUL ISLAND ................................ ............................. 0.89 473
ABU ALBU KHOOSH & JEBELDHANNA ...................................................................... 1.02 . 569
ABU ALBU KHOOSH 8t JUAYMAH............................................................................... 1.00" 779
ABU ALBU KHOOSH & KHARG ISLAND (See page D-3) ............................................ 1.39 882
ABU ALBU KHOOSH & LAVAN ISLAND (See page D-3) ............................................ 1.20 462
ABU ALBU KHOOSH & MESAIEED . ■ ..................................................................... 1.04 619
ABU AL BU KHOOSH & MINA AL AHMADI ................................................................. 1.32 1058
ABU ALBU KHOOSH & RASALKHAFJI ......................................................................1.13" 952
ABU AL BU KHOOSH & RAS TANURA .........................................................................0.96" 788
ABU AL BU KHOOSH & ZIRKU ISLAND ......................................................................... 0.93 450

ARZANNAH ISLAND & ABU AL BU KHOOSH .............................................................. 1.18 531

ARZANNAH1SLAND & DAS ISLAND . ............................................................... 1.32 501
ARZANNAH ISLANDS FATEH TERMINAL - . . . . . " ■ 1-01 504
ARZANNAH ISLAND & JEBELDHANNA .......................................................................1-36 546
ARZANNAH ISLANDS JUAYMAH................................................................................ 1.41". 845
ARZANNAH ISLAND .& RAS TANURA .......................................................................... .1.37" 855
ARZANNAH ISLAND St ZIRKU ISLAND .................................................................. -.1.34. 509

240
VENICE & 1RIESIE - contd.
Botas (Ceyhan) Terminal .... 5.27 2838
Es Sider ........................................... 4.16 2050
Gala ........................................................ 3.75 1548 T
Piraeus................................................... 4.10 1760 VIGO & HUELVA -contd.
Ravenna ................................................. 2.85 219 Emmastad Terminal ...... 7.92 7717
Rijeka ................................ . . . , 3.52 305 Punta Cardon .........................................8.18 7885
Uskudar(See page 17) .......................... 4.69 2387 Quoin Island (See page 1) . . . . 16.44 C 20150
Zawia ..................................................... 4.25 1948 Quoin Island (See page 1) . . . . 9.87 S 10309
VENTSPILS Trinidad .......................................... 7.43 7176
Casablanca ...................................... 6.32 4685 VIGO & US PALMAS
Hamburg................................................ 4.53 1829 Rotterdam & Antwerp
Houston (See page D-5) ........................10.69 11445 (See page D-7} ............................... 6.03 3685
London ...................................................4.69 2167 VISAKHAPATNAM (Sea page D-8)
Ornskoidsvik .......................................... 3.38 744 Aden ..................................................... 5.82 5828
Rotterdam (See page D-7| . . . . 4.11 2027 Agloi Theodorbi (See page D-6j . . 9.17 S 9650
Santander .............................................. 5.37 3409 Amsterdam . ................................ ., 18.55 C 22542
Uskudar (See page 17) ......................... 8.73 8235 Amsterdam ............................................ 13.61 S 15032
VERA CRUZ Augusta ........................................... 9.99 S 10278
New York (See page D-5) .... 4.25 3916 Balikpapan ............................................. 5.33 5256
Uskudar (See page 17} ..........................11.05 13238 Banias .................................................... 8.44 S 9022
VESTERAS. Barrow Island ........................................ 6.05 5918
Antwerp .................................................4.64 2360 Beaumont (See page D-5) . . . . 19.72 C 25066
Genoa .................................................... 7.31 6470 Beaumont (See page D-5) .... 17.78 S 21704
Gothenburg ........................................... 3.35 1253 Bejaia (See page D-6) ............................10.92 S 11244
Gulfhavn................................................. 3.1/ 1030 Bombay ................................................. 3.88 3444
Botany Bay ............................................ 9.97 11112
Hamburg ................................................ 4.11 1970
Botas (Ceyhan) Terminal . . . .19.77 C 24384
Havre (See page D-6) ............................ 4.41 2548
Botas (Ceyhan) Terminal .... 9.30 S 9190
Huelva ................................................... 5.82 4630 BullenBay ............................................. 17.14 C 21606
Klaipeda (See page D-6) ....................... 3.39 540 BullenBay ............................................. 16.25 S 19676
London .................................................. 4.27 2308 Calcutta ........................................... 2.07 884
Milford Haven ........................................ 4.80 3110 Certagena (Spain) ............................10.99 S 11820
Mongstsd ............................................... 4.12 1926 Chittagong .............................................2.63 1156
Nynashamn ............................................ 2.44 180 Cochin.................................................... 2.99 2280
Porvoo (See page D-6).......................... 2.64 692 Colombo (See page D-5) .... 2.83 1732
Rostock ......... 3.26 918 Dumai .................................................... 3.74 2998
Rotterdam (See page D-7) . . . . 3.69 2168 Eleusis (See page D-6) .......................... 9.29 S 9630
Rouen .................................................... 5.22 2688 Emmastad Terminal .............................. 77.25C 21606
Stockholm ................................................ 2.44 316 Emmastad Terminal .............................. 16.36 S 19676
Tees River (See page D-8) .... 4.49 2136 Es Sider................................................. 9.31 S 9996
Ventspils (See page D-6) .... 3.24 368 Genoa ................................................... 18.13 C 22038
ViGO Genoa.................................................... 10.90 S 11266
Aden ......................................................14.68 C 18542 Ghent .................................................... 18.52 C 22456
Aden ...................................................... 7.27 S 7474 Ghent ..................................................... 13.59 S 14946
Augusta ................................................. 4.21 3108 Houston (See page D-5) ..... 19.73 C 25152
Banias .................................................... 4.93 5068 Houston (See page D-5) ........................ 17.79 S 21790
Bejaia (See page D-6) ........................... 3.71 2060 Karachi................................................... 5.20 4348
BullenBay .............................................. 6.61 7232 La Plata ............................................ 14.82 C 17464
Caripito .................................................. 6.32 6898 Los Angeles (See page D-5) . . . 74.35 18476
Corunna ■ ■ ,# < ........................... 2.30 244 Madras . . ' ........................................ 1.87 656
Emmastad Terminal' ..............................6.72 7232 Miri ........................................................ 4.69 4428
Hamburg ................................................3.87 2246 Nakhodka (See page D-6) . . . . 9.15 . 9100
Houston (See page D-5) ........................ 7.93 9106 Paradip .................................................. 1.96 532
LaSkhirra ............................................... 3.76 3094 Philadelphia (See page D-5) .... 19.00 C 23888
Lavera (See page D-6)........................... 3.91 2404 Philadelphia (See page D-5) . . . . 15.91 S 18948
Livorno................................................... 4.13 2760 Pladju .....................................................'4.21 3674
Loire River (See page D-6) .... 2.59 940 Punta Cardon ......................................... 17.56 C 21834
Mamonal ............................................... 7.23 7960 PuntaCardon ......................................... 16.63S 19844
Naples ................................................... 4.19 2992 Quoin Island (See page 1) .... 5.12 5230
Puerto La Cruz ................................. 6.59 7014 Ras Shukheir [See page D-6) . . . 7.34 8196
PuntaCardon ......................................... 6.98 7396 San Carlos Island (See page 19] . . 17.12 C 21972
Quoin Island (See page 1) .... 15.41 C 19928 San Carlos Island (See page 19) . . 16.18 S 19978
Ouoin Island (See page 1) .... 8.98 S 10264 San Francisco (See page 0-5) . . . 14.50 17858
Rotterdam (See pBge D-7) .... 2.82 1740 Santa Panagia Bay .................................10.15 S 10278
San Carlos Island (Seepage 19) . . 6.S4 7544 Sidon .................................................... 8.36 S 8836
Sidon ..................................................... 4.95 5026 Singapore ..............................................3.92 3146
Suez (See page D-6) ............................. 5.62 S 4860 Sorong................................................... 6.47 6890
Trinidad ........................................... 6.26 6730 Sriracha ............................................ 4.95 4716
Tripoli (Lebanon) ....... 4.98 5070 Suez [See page D-6) ............................. 7.85 8428
Uskudar (See page 17) ..........................S.09 4634 Sungei Pakning ....... 3.72 2968
VIGO & BILBAO TandjungUban ...................................... 3.94 3190
BullenBay....................................... 7.89 7879 Trincomalee (See page D-5) . . . 2.42 1142
Emmastad Terminal .............................. 8.00 7879 Trinidad ........................................... 16.53 C 20766
PuntaCardon ......................................... 8.25 8038 Trinidad ........................................... 15.82 S 19076
Quoin Island (See page 1) . . . . 16.75 C 20630 Quoin island Tripoli (Lebanon) ................................... 8.45 S 8958
(See page 1) .... 10.31 S 10978 Tuxpan ................................................. 19.69 C 25080
Trinidad ........................................... 7.54 7380 Tuxpan .................................................. 17.92 S 21950
VIGO & G1JON Uskudar (See page 17) ......................... 19.17 C 23944
Loire River (See page D-6) .... 3.40 997 Uskudar (See page 17) ......................... 9.61 S 10000
Quoin Island (See page 1) . . . . 16.53 C 20384 Wadi Feiran (See page D-6) . . . 7.40 8276
Quoin Island (See page 1) .... 10.09 S 10732 Whangarei............................................. 12.00 13162
Uskudar (See page 17) ......................... 6.19 5102 Yanbu (See page D-4) ..... 6.80 7516
VIGO & HUELVA Yosu ..................................................... 7.54 6052
BullenBay .............................................. 7.81 7717 VISAKHAPATNAM 8t BOMBAY
498 (See page D-8)
Quoin Island (See page 1) .... 5.98 5357
Uskudar (See page 17) ........................ 20.85C 25166

241
ALWAYS REMEMBER TO CONSULT PREAMBLE
Rnvir."'* t .bmirirv ln<1fl

242
243
VARIABLE RATE DIFFERENTIALS (Cont.)
5. MALACCA (Malaysia) (The published rates are based upon the Petronas Sungal Udang Terminal).
When cargo is loaded or discharged at the Tanjong Bruas jetty a deduction of USD 0.41 must be made to the
Malacca rate applicable to the voyage in question.
6. MAP TA PHUT (Thailand) (The current rates are based upon berths other than the SPM Terminal).
When cargo is discharged at the SPM Terminal a deduction of USD 0.17 must be made, to the MAP TA
PHUT rate applicable to the voyage in question. . . ..
7. Nil GAT A (Japan) (The published rates are based upon East Dolphin No. 3 for Nllgata Stockpiling Co.).
When cargo is discharged at the Showa Shell SBM, a deduction of USD 0.50 must be made from the
Niigata rate applicable to the voyage in question.
8. PORT GENTIL (Gabon) (The published rates are based upon Cap Lopez).
When cargo is loaded or discharged at the SOGARA Berth, Port Gentil, a deduction of USD 0.30 must be
made from the Port Gentil rate applicable to the voyage in question.

9. RAS LANUF (Libya) (The published rates are based upon the RASCO Terminal).
When cargo is loaded or discharged at the Crude Oil Terminal, a deduction of USD 0.24 must be made
from the Ras Lanuf rate applicable to the voyage in question.

10. RIO DE JANEIRO (Brazil) (The published rates are based upon the SBM at Rio de Janeiro).
When cargo is loaded or discharged at the Petrobras Principal Pier 1 or 2 (PPS1/2) facility, an addition of
USD 0.48 must be made to the Rio de Janeiro rate applicable to the voyage in question.
11. TARRAGONA (Spain) (The published rates are based upon berths other than the Repsol "Sea Buoy").
When cargo is loaded or discharged at the Repsol "Sea Buoy", an addition of USD 0.20 must be made to
the Tarragona rate applicable to the voyage in question. ' ' ' r!
12. TEES RIVER (United Kingdom) (The published rates are based upon the downriver Phillips North Sea
Petroleum Berths Nos. 1 to 8).
When cargo is loaded or discharged at any other jetty or place, an addition of USD 0.29 must be made to
the Tees River rate applicable to the voyage in question.
13. VISAKHAPATNAM (India) (The published rates are based upon the Outer Harbour Mooring Berths).
(1) When cargo is loaded or discharged at the New Oil Mooring a deduction must be made from the
Visakhapatnam rate applicable to the voyage in question as follows:
(A) of USD 0.34 when any other port on the voyage is outside India;
(B) of USD 0.04 when the voyage involves only Indian ports.
(2) When cargo is loaded or discharged at the Normal Oil Berths (OR-1/OR-2), no deduction should be
made from the Visakhapatnam rate applicable to the voyage in question.

244
FIXED RATE DIFFERENTIALS (Cont.)

14. NIGERIA (In respect of Conservancy Dues which are assessed by reference to vessel's GRT).
For the purposes of applying the Nigerian Fixed Rate Differentials the words "Assessed Tonnage* mean:
(i) GRT plus 20 per cent for those vessels for which an Alternate Tonnage applies in accordance with the Nigerian
Port Tariff i.e. vessels operating under the flags of Antigua, Barbados, Bahamas, Bermuda, Cayman Islands,
Cyprus, Gibraltar, Honduras, Lebanon, Liberia*'Malta, Marshall Islands, Netherland Antilles, Panama, St.
Vincent, Sri Lanka, Vanuatu; others not known to the Associations.
OR
(ii) GRT in the case of those vessels for which an Alternate Tonnage does-not apply.
Irrespective of the amount of cargo involved on the voyage or handled at each port,,the total amount payable is
the same.
Vessels loading for or discharging from ports outside Nigeria.
(1) Vessels loading or discharging at Bonny [Inshore Bonny and/or Bonny Anchorage) USD
0.44 per ton of assessed tonnage
(2) Vessels loading or discharging at Lagos USD
0.40 per ton of assessed tonnage
(3) Vessels loading or discharging at Port Harcourt
USD 0.40 per ton of assessed tonnage
(4) Vessels loading or discharging at Warri USD
0.40 per ton of assessed tonnage

NB CO If a vessel loads or discharges at more than one of the ports mentioned, i.e. Bonny, Lagos, Port
Harcourt, and Warri, the fixed rate differential applicable to each port is payable in full, e.g. if a vessel
loads at Bonny and Port Harcourt, two fixed rate differentials apply, namely USD 0.44 (Bonny) and USD
0.40 (Port Harcourt).

NB (2) If a vessel loads or discharges at more than one terminal in a port, the applicable fixed rate
differential for that port is payable only once.
See Section 3 of Part B of the Preamble.
Okrlka is a terminal within Port Harcourt; Apapa and Atlas Cove are terminals within Lagos!
The floating storage unit TUMA" (or its replacement) is designated as part of Bonny Anchorage.
Inshore Bonny and Bonny Anchorage are regarded as terminals within Bonny. .

NB (3) No fixed rate differentia! in respect of Nigerian Conservancy Dues is payable in respect of vessels
handling cargo at the following Offshore Terminals.
Antan Terminal Odudu Terminal
Brass Terminal Offshore Terminal, Bonny
Escravos Pennington
Forcados Qua lboe
IMA Terminal Ukpokiti Terminal (

NB (4) In establishing these fixed rate differentials, no attempt has been made to take into account any additions that
the local authorities may make to the vessel's GRT in respect of deck cargo,, cargo in spaces not forming
part of the registered tonnage and bunkers in double bottom tanks.

15. OGUENDJO TERMINAL (Gabon) (In respect of Terminal Charges assessed on the quantity of crude oil
loaded).
USD 0.62 per tonne of crude oil loaded at Oguendjo Terminal,

16. PORT LOUIS (Mauritius) (In respect of Quay Dues (or Quay Fees) levied when loading or discharging
alongside a quay or berth or Pipeline Dues levied when loading or discharging from ths pipeline, both type
of dues being assessed on the quantity of cargo loaded or discharged).
USD 0.75 per tonne of cargo loaded or discharged at Port Louis.

17. SAUDI ARABIA (in respect of Cargo Handling Fees assessed on the quantity of cargo loaded or
discharged at the Saudi Arabian Ports of Jubail and/or Rabigh and/or Yanbu).
USD 0.27 per tonne of the cargo loaded or discharged at Jubail and/or Rabigh and/or Yanbu.

245
iy I ibllUAM (See page D-7) - contd. , .. (vlilu:. t
fifass Terminal & Bonny ROTTERDAM (See page D-7) - contd.
(See page D-4) ................................ 8.37 8772 Conakry (See page D-3) ........................ 6.54 6030
Brass Terminal & Forcados .... 7.90 8685 Convent (See page D-5)......................... 8.67 9810
Brass Terminal & Offshore Convent & Beaumont (See page D-5) ■. 9.40 10378
Terminal.Bonny ............................... 7.96 8772 Copenhagen ....,.;.. 2.87 1216
Bravo Zone (TSA) .................................. 10.06 12508 Copenhagen & Antwerp .... 4.31 1461
Bremen ................................................... 2.89 580 Corpus Christ! (See page D-5) . . . 8.63 10222
Brent Field .............................................. 1.96 1150 Corpus Christ! & Baton Rouge
Brest ...................................... 3.03 954 (See page D-5) ................................ 9.60 10748
Brindisi.................................................... 6.03 5286 Corpu3 Christ! St Beaumont
Brisbane . ...................................20.72 C 26490 (See page D-5)................................ 9.07 10382
Brofjorden ...............................................2.89 976 Corpus Christ! & Houston
Brownsville (See page D-5) .... 8.61 10198
(SeB page D-5) ...... 9.02 10391
Brownsville & Punta Cardon
Corpus Christ! 8t Pascagoula
(See page D-5)................................. 9.95 11185
(See page D-5) ...... 9.10 10430
Brunsbuttel ....................................... . 2.42 538
Corpus Christi & St. Eustatius Island
Buchan Field ........................................... 1.72 800
(See page D-5) ............................... 9.63 10853
Buenaventura.......................................... 9.42 P 10310
Corunna ................................................. 3.11 1542
Buenos Aires .......................................... 11.00 12682
Cotonou & Banana (See page D-3) . 9.20 9922
Sullen Bay............................................... 7.41 8494
Covenes.................................................. 8.19 9298
Bullen Bay & Bonaire ............................. 7.85 8508
Cristobal ................................................ 8.12 9602
Rultan Bay & Freoport (Bahamas) . . 8.52 9431
Dakar ......................................................5.44 5164
Bullcn Day & Guayanilla
Dalian (See page D-6) ............................ 22.12 C 28446
(See page D-5) ................................. 7.98 8573
Dalian (See page D-6) ............................ 17.63 S 21632
Rutlan Bay & Houston (See page D-5) 9.66 11136
Dalian & Batangas Bay
Bullen Bay 8t Puerto la Cruz . . . 8.08 8723
(Seepage D-6) ................................ 22.85 C 28673
Bullcn Bay & Puerto Miranda . . . 8.35 8862
Dalian Si Batangas Bay
Bullen Bay 8* Punta Cardon . . . . .8.18 8689
(See page D-6) ...... 20.59 CS 25266
Bullen Bay & Trinidad .... it >7.97 8747
Dalian & Batangas Bay
Cabinda .........................................' - 8.23 9648
(See page D-6)................................ 18.44 S 21974
Cabinda & Quinfuquena ......................... 3.6*0 9724
Cagliari.................................................... 4.81 4170 Dalian & Nonoc Island (See page D-6) 23.26 C 28941
Dalian St Nonoc Island (Sea page D-6) 21.00 CS 25534
Cagliari & Algiers ................................... 5.93 4184
Dalian & Nonoc Island (See page D-6) 18.85 S 22249
Cagliari & Augusta ................................. 5.86 4852
Dampier . ..........................................18.04 C 22658
Cagliari & Genoa .................................... 5.88 4642
Dampier ..................................................15.59 S 18580
Cagliari & Lavera.................................... 6.12 4501
Dar-es-Salaam (See page D-5) , . . T4.05 C 17026
Cagliari & Lisbon.................................... 5:26 4194
Par-es-Salaam (See page D-5) ... 11.40 S 12632
Cagliari & Milazzo .................................. 6.02 4741
Delaware City (See page D-5) . . . 6.61 7004
Cagliari & Porto Torres ..........................5.48 4379
Djakarta ............................................ J 7.55 C 22652
Cagliari 6 Skikda ....................................6.04 4222
Djakarta .................................................. 15.72 CS 19787
Calcutta .............................................. 18.41 C 23266
Djakarta ............................................ 13.90 S 16922
Calcutta ..............................................13.47 S 15756
Djeno................................................. 8.52 9594
Callao...................................................... 11.02? 12282
Cape Town............................................. 10.13 12326 Djeno & Kole Terminal .......................... 9.50 9878
Djeno 8* Port Gantil (See page D-8) . 9.23 9666
Caripito................................................... 7.20 8270
Djibouti .................................................. 15.84 C 20424
Caripilo & Punta Cardon ........................ 8.43 9125
Djibouti .................................................. 8.24 S 9128
Cartagena (Spain) ............................. 4.07 3196
Dos Bocas ............................................. 8.57 9966
Cartagena (Spain) & Tarragona
Douala..................................................... 8.37 9112
(See page D-8) ................................5.08 • 3689
Dublin ..................................................... 2.96 1256
Casablanca ........ 3.80 2772
Dumai ..................................................... 18.01 C 23362
Castellon................................................. 4.21 3542
Dumai ..................................................... 13.36 S 16254
Cayo Areas............................................. 8.24 9750
. Dunkirk (See page D-6).......................... 2.24 282
Coule...................................................... 3.54 2730
Dunkirk & Amsterdam
Champ Moudi......................................... 8.11 8920
(See page D-6) ............................... 3.38 378
Champ Moudi & Quinfuquena . - . 9.26 10008
Dunkirk Si Antwerp (See page D-6) . 3.61 436
Chinwangtao (See page D-6) ... 22.28 C 28658
Durban ....................................................TT.26C 13888
Chinwangtao (See page D-6) . . . 77.79 S 21844
Durban .................................................... 12.92 S 15486
Chittagong . . .................................... 18.19 C 23362
Durban & Beira ....... 12.66 C 15282
Chittagong-............................................ 13.25 S 15852
El Palito ............................................. 8.01 8562
Chittagong & Colombo
El Palito & Bullen Bay ....................... 8,44 8641
(See page D-5) ................................ 78.53 C 23479
El Palito & Emmastad Terminal . . 8.65 8641
Chittagong & Colombo
El Palito 8t Puerto Us Minas . . . 9.23 9863
(See page D-5) ................................ 13.53 S 15886
Elausis (See page D-6) ...........................5.70 5700
Chinagong & Singapore ........................ J4.90S 17644
Emden ....................................................2.83 404
Crtacap . . . .................................... 17.67 C 22898
Emmastad Terminal ............................... 7.52 8494
Uaup .................................................... 15.87 CS 20077
Emmastad Terminal & Bonaire . . . 7.97 8508
Uacap ...................................................M.08S 17256
Emmastad Terminal & Freeport
Cnta ...................................................... 17.45 C 22596
(Bahamas) . . . . . . . 8.63 9431.
Cma...................................................... 15.62 CS 19731
Emmastad Terminal & Guayanilla
Cnu ..................................................... 13.80 S 16866
(See page D-5) ............................... 8.09 8573
Cmtn & Diimai........................................ 18.49 C 23639
Emmastad Terminal Si Houston
Cmta&Dumai........................................ 14.34 S -'17220
(SeepageD-5) ................................. 9.77 11136
Cmtavecchia ...;,... 5.00 4486
Emmastad Terminal 8t Puerto U Cruz 8.19 8723
Coauacoalcos ................................... 8.54 10104
Emmastad Terminal & Puerto. . •
Coauacoalcos & Bonaire .... 9.61 ■ 10934
Miranda ........................................... 8.46 8862
Coauacoalcos 5 Cayo Areas . . . 8.87 10113 ■Emmastad Terminal Si Punta Cardon . 8.29 8689
Coauacoalcos St Freeport (Bahamas) . 9.02 10143 Emmastad Terminal & Trinidad . . 8.08 8747
Cochin................................................... J6.63C 21012 Erawan ................................................... 18.90 C 24552
Cochin...................................... . H.25S 12848 Erawan....................................................14.29 S 17502
Colombo (See page D-5) .... T6.27C 21012 Es Sider .................................................. 5.23 5378
Colombo (See page D-5) . . . . 11.24 S 13336 Es Sider 8i Arzew .................................. 6.75 5400
Cone By Chance........................................ 4.91 4S36 Es Sider & Benies ............................ 6.61 7020
f.Afinfioro Rivadavia .............................. 11.41 14010 Es Sider St Bejaia ................................... 6.35 53B5
■! 1 .l-iiuuiiy 1998
Es Sider & La Skhirra . . . . . 5.79 5560

246
ALWAYS REMEMBER TO CONSULT PREAMBLE
39
3

247
 VARIABLE RATE DIFFERENTIALS
Dilfofontlota to bo added to or deducted from, as hereinafter specified, the applicable rate of freight or. In the case of 1. (2)
(ROTTERDAM), added as a separate element of the freight payment. Such variable rate differentials are subject to the
percentage variation which the contracting parties have agreed to apply to Worldscale rates.

1- ROTTERDAM (Netherlands)
(1) When Rotterdam is the only loading or discharging port, an addition (in respect of Harbour Dues) must be
made to the Rotterdam rate applicable to the voyage in question in accordance with the following table.
(A) Loading Crude
USD 0.32 per tonne of the cargo quantity to which the rate of freight is applied.
(B) Loading Products or Crude and Products
USD 0.52 per tonne of the cargo quantity to which the rate of freight Is applied.
(C) Discharging Crude or Crude and Products
USD 0.87 per tonne of the cargo quantity to which the rate of freight is applied.
(D) Discharging Products
USD 0.52 per tonne of the cargo quantity to which the rate of freight is applied.
(2) When Rotterdam is combined with other loading or discharging ports, a differential (in respect of Harbour Dues)
must be added, as a separate element of the freight payment, in accordance with the following table.
(A) Loading Crude
USD 0.32 per tonne of the cargo quantity to which the rate of freight is applied,
(B) Loading Products or Crude and Products
USD 0.52 per tonne of cargo loaded at Rotterdam.
(C) Discharging Crude or Crude and Products.
USD 0.87 per tonne of cargo discharged at Rotterdam.
(D) Discharging Products
USD 0.52 per tonne of cargo discharged at Rotterdam.

2. BARBERS POINT (Hawaiian Islands (U.S.A.) (The published rates are based upon the Chevron Mooring
and Barbers Point Harbor).
When cargo is loaded or discharged at the BHPPAR (HIRI) SBM, an addition of USD 0.15 must be made to the
Barbers Point rate applicable to the voyage in question.

3. FUNAKAWA (Japan) (The published rates are based upon Akita Power Station).
When cargo is loaded or discharged at the Funakawa Stockpiling Terminal, an addition of USD 0.86 must be made to
the Funakawa rate applicable to the voyage in question.

4. KERTEH (Malaysia) (The published rates are based upon Trengganu Crude Oil Terminal).
When cargo is loaded or discharged at the Petronas Refinery SBM, a deduction of USD 0.17 must be made from the
Kerteh rate applicable to the voyage in question.

NB If a voyage involves both the Petronas Refinery SBM and the Trengganu Crude Oil Terminal, no
deduction should be made, the costs at the Petronas Refinery SBM being regarded as part of shifting
expenses, irrespective of the order in which the vessel calls at the terminals.

248
FIXED RATE DIFFERENTIALS (Cont.)

2. SUEZ CANAL (In respect of Transit Tolls and Expenses).

NB (1) The total amount payable, as calculated in accordance with the following provisions, Is the same,
irrespective of the amount of cargo carried, unless it is otherwise specifically agreed.
NB (2) Please note that in calculating the following figures a rate of exchange of.1 SDR « USD 1.37 was
used, the average applicable during September 1997.
NB (3) SCNT means Suez Canal Net Tonnage as assessed by the Canal Authority for the transit In
question.

VESSELS LADEN 8 BALLAST BALLAST TRANSIT

SCNT CARGO TRANSITS (Indicated ONLY. (Indicated by
by letter S) letters CS)
USD 9.44 per ton of USD 4.35 per ton of
11) 5,000/J$;U0Q Crude SCNT plus a lump SCNT plus a lump
sum of USD 44,350 sum of USD 20,700
USD 9.65 per ton USD 4,35 per ton of
of SCNT plus a1 SCNT plus a lump
Products lump sum of " sum of USD 20,700
USD 45,100 USD 3.93 per ton of
USD 8.51 per ton of SCNT plus a, lump
SCNT plus a.t lump sum of USD 25,000
(2) 10,001/20,000 Crude sum of USD 53,750 USD 3.93 per ton of
USD 8.76 per ton of SCNT plus a lump
SCNT plus a lump sum of USD 25,000
sum of USD 54,000 USD 1.76 per ton of
Products USD 3.81 per ton of SCNT plus a tump
SCNT plusvajT' sum of USD 68,250
lump sum of USD USD 1.76 per ton of
147,750* SCNT plus a lump
(3) 20,001/70,000 Crude USD 4.53 per ton of sum of USD 68,250
SCNT plus a lump USD 1.54 per ton ..,
sum of USD of SCNT plus a lump
138,250*
sum of USD 84,500**
Products USD 3.33 per ton USD 1.54 per ton of
of SCNT plus a SCNT plus a lump
lump sum of USD sum of USD 84,500**
183,000* USD 4.31
(4) over 70,000 Crude per ton of SCNT
plus a lump sum of
■ USD 155,500* .

Products.

NOTES
(A) *lf the sdw. of the vessel concerned Is under 130,000 tonnes, and the voyage involves a northboui-laden
transit on a draft of more than 47 feet, the lump sum should be increased by USD .9,050.

(B) *lf the sdw. of the vessel concerned is 130,000 tonnes or over, and the voyage involves a laden an-a
ballast transit (S), the lump sum should be increased as follows:

130,000/170,000 tonnes sdw. USD 9,050

170,001/250,000 tonnes sdw. USD 18,100
over 250,000 tonnes sdw. USD 27,150

(C) **lf the sdw. of thevessel concerned is over 250,000 tonnes, and the voyage involves a ballast transit
only (CS), the lump sum should be increased by USD 9,050.

249
D-2 Revised 1 January

250
8.0 Average Freight Rate Assessments (AFRA)
8.1 AFRA, initially devised by Shell and latterly by BP, is now compiled by the London Tanker Brokers'
Panel (LTBP). It represents the cost of all chartered tonnage actually operating during the calculation
period, irrespective of the fixture date. Thus, unless a vessel is actually operating under the period of
review will not be considered even if a fixture was concluded for the review period. On the other hand a
fixture could have been made long back, would be considered if the vessel was operating during the
review period.

8.2 AFRA is accepted by various taxation authorities as a basis for assessing transportation costs for
inter company movements of oil. The AFRA rate is available only to subscribers.

8.3 Calculations are made over a monthly period ranging from 16th of one month to 15th of the
following month. Assessments made represent the historical weighted average cost of commercially
chartered tonnage operating internationally during the calculation period. Vessels owned by governments
(except those operating on commercial charter), those operating on specialized trades like petrochemicals
and bitumen and those engaged in protected coastal trades are excluded.

8.4 The results are provided for six different groups:

General Purpose 16500 - 24999 dwt

Medium Range 25000 - 44999 dwt
Large Range 1 45000 - 79999 dwt
Large Range 2 80000- 159999 dwt
VLCC 160000 - 319999 dwt
ULCC 320000 - 549999 dwt

8.5 In each size group the tonnage is divided into categories depending on the nature/duration of the
charter. The carrying capacity of each vessel in each category is calculated on the basis of a standard
voyage taking into account the characteristics of the vessel. Thereafter, the weighted average rate per
ton is determined for each category. The results obtained are converted to a Worldscale equivalent, which
is the published result.

9.0 VOYAGE ESTIMATING (TANKERS):

Voyage charter fixtures in the case of tankers are normally done on Worldscale terms, which are
standardized. Fixtures sometimes, though very rarely, are also done on the basis of lumpsum freight.

9.1 The Worldscale Association publishes a book giving freight rates between various ports based on
the voyage being performed by a standard ship carrying MT of cargo. The freight rates given are for WS
100. The rates are revised annually to take care of changes in the port and bunker cost and canal dues.
Worldscale is based on the principle that at a given Worldscale rate a tanker will earn the same on a daily
basis for any combination of load/discharge ports.

9.2 Information required to make a tanker voyage estimate.

a) Vessel's particulars: DWT, cargo cubic, GRT, NET, Suez Canal and Panama Canal tonnage, speed
and bunker consumption during sea passage (laden/ballast) during loading, discharging, idling
and also for cargo heating.

b) Bunker prices.

c) Distances from load port to discharge port (to be taken from Worldscale book).
251
 d) Port cost which includes pilotage, tug hire, berth hire, lighthouse dues and agency fees.

e) Canal dues (if sailing through a Canal)

9.3 Operating expenses of a ship can he divided into two parts :

9.3.1 Direct Operating Expenses and (ii) Indirect Operating Expenses. While making a voyage estimate,
we are only concerned with the direct operating expenses which are incurred during the period of voyage,
such as, cost of hunkers, port charges, Canal dues and fresh water.

9.3.2 Gross operating profit is the profit which is worked out after deducting the brokerage,
commission, freight tax and direct operating expenses from the gross freight. And the yield per day (daily
operating profit) is calculated by dividing the gross operating profit by the number of voyage days.

9.4 Use of Worldscale book in voyage estimation:

9.4.1 Worldscale gives the freight rate per metric tonne at a flat base rate of 100 between various ports.
It also gives the rate of demurrage payable. In the Worldscale book distances are always mentioned for a
round voyage; from loadport back to load port. Therefore, this should be kept in mind if the voyage
estimate is to be made for return to a port other than the original loadport.

Quoin Island: It is an island at the entrance to West Asia Gulf. Since West Asia Gulf is a very important
loading area, the Worldseale book gives all distances and rates in two parts, i.e. from the loading ports in
West Asia Gulf to Quoin Island and Quoin Island to the discharge ports.

Example : Worldscale Rate between Rastanura and New Mangalore:

Rastanura -- Quoin Island Rate: US$ 0.68

Quoin Island - New Mangalore Rate: US$ 3.07
Therefore, the rate between Rastanura -- New Mangalore- is US$ 3.75 per metric tonne at
Worldscale 100.

9.5 The main differences between Tanker Voyage estimate and Dry Cargo Voyage Estimate are as
under :-

a) In tanker voyage estimate, as per the Worldscale lay-time allowed at load and discharge ports is 96
hours plus 12 hours for each additional port. There is no such fixed lay-time in dry cargo voyage
estimate.

b) The pumping capacity of modern tankers is designed to discharge the entire cargo in 24 hours.
Therefore, a tanker should normally be able to complete the loading and discharging operation within
the allowed lay-time. However, in case any time is saved, no 'despatch' is paid unlike in the case of
dry cargo voyage fixtures.

c) Certain liquid cargoes require to be heated, therefore provision has to be made in the voyage estimate
for consumption of bunkers for cargo heating. There is no such bunker consumption in dry-cargo
voyages.

d) In a tanker, the vessel's cargo pumps are used to discharge cargo and bunkers are consumed on this
account also.
252
e) A tankers cargo capacity is referred to as its cubic capacity of liquid whereas in the case of dry-cargo,
the vessel's cargo capacity is referred to as its grain or bale space.

ooooooo

SELF-EXAMINATION QUESTIONS

1. Trace the origin of freight rates for tankers leading to the Worldscale.
2. If Worldscale is so useful for the tanker market why not have a similar schedule for the dry cargo
market? In your opinion will it be as successful there?

3. How is a "standard vessel" defined in the Worldscale?

4. Explain:
a. Fixed differential.
b. Variable differential.
c. AFRA.

253
NOTE: STUDENTS MAY NOTE THAT BUNKER RATES CONSIDERED FOR ALL THE PROBLEMS
ARE SMALLER VALUES FOR EASY ARITHMETIC CALCULATIONS. STUDENTS MAY REFER TO
APPENDOX NO.1 TO GET THE LATEST BUNKER RATES PREVAILING IN DIFFERENT BUNKERING
PORTS.

5. Voyage Estimate of Tanker

1. MT BEAUTY is a Suezmax tanker on time charter with your company at 19,500 $/day. She is getting
free after discharge at Singapore on 1st June. The next cargo is scheduled to be loaded at Bonny
terminal, Nigeria, with Laycan as 29th Juiy/2nd August. Meanwhile the chartering department has
received two offers, details of which are given below. You are required to critically examine these and
advise your management with your comments.
Details of MT BEAUTY: 140,000 DWT; 81,000 GT; Speed 15 k ballast, 14 k laden at 55 t/day HO and 2
t/d DO: Discharging 80 t/d; Cargo heating 25 t/d and canal 40 tons; Bunker price 80/150 $/T.

OPTION 1:
125,000 tons Dubai crude from Fateh Terminal to Antwerp at WS 87 (WS 100 = 9.21 $/t). Com. 2.5%
OPTION 2:
120,000 tons Sumatran crude from Dumai, Indonesia to US Gulf at a total freight of $ 1.65 million.
Com. 2.5%. This cargo is to be heated daily till discharge.

Distances:
Singapore/Fateh 3595

Singapore/Dumai 197
Fateh/Antwerp 6243
Dumai/US Gulf 12811 (via Cape)
Antwerp/Bonny 4386
US Gulf/Bonny 5968
Port Charges:

Fateh terminal 29,000

Dumai 20,000
Antwerp 95,000
US Gulf 65,000
Suez (laden) 220,000
Note: Extra insurance is required for USA ports for oil tankers. Charges are 0.23 $/GT. All
calculations should be till Bonny.

*************

254
CHARTERING FINAL YEAR

LESSON 16

TANKER FIXTURES

1.0 All of you are well aware by now that the process of chartering starts from an Order
being quoted to the finalization of a Fixture. These fixtures can be obtained from brokers and
are quoted in their daily/weekly reports. Besides these could also be found in shipping dailies
like the Lloyds List.

1.1 Tanker fixtures are generally quoted in three broad headings. The first comprises of
voyage charters in the Dirty trades followed by voyage charters in the Clean trades. Finally,
there is a separate list for fixtures made for time charters.

1.2 Besides, the reported fixtures are ideally broken down loading area wise. For instance,
there will be broad headings for loading taking place in AG/Red Sea, West Africa, North Sea,
Mediterranean and the Caribbean. Below each of these broad headings could be placed the
various discharge areas along with other details.

1.3 Those interested, would take a look at these fixtures on a daily basis. These fixtures not
only provide an idea of the rates for various destinations but would also give the students an
idea of the trading areas and the major loading and discharging areas/ports.

2.0 Following is a list of some fixtures and their interpretation:

2.1 OCEANTRADER 27500 CPP PG/WCI 2 DEC WS 205.

MT Ocean Trader fixed for loading 27500 Tons of a clean petroleum product (Motor
Spirit/ High Speed Diesel/Naptha/Kerosene) on 2nd Dec. The loading will be in the
Persian Gulf area and the discharge would be in West Coast of India. The freight for the
voyage has been fixed at World Scale 205.

2.2 WORLD HARMONY 245000 RASTANURA/TABANGAO DIRTY 18 FEB WS 64.

MT World Harmony operating on Dirty Petroleum circuit fixed for loading 245000 Tons.
Loading expected on 18th February. The loading will be in Rastanura (Kuwait) and the
discharge will be at Tabangao (Philippines). The freight rate for the voyage has been
agreed at World Scale 64.

2.3 GITTA KOSAN 4415 CBM 2500 MT LPG TEES/PEMBROKE END NOV USD 35 PMT VITOL

MT Gitta Kosan having a cubic metre capacity of 4415 fixed to load 2500 MT LPG from
Tees (UK) and discharge at Pembroke (Milford Haven, Wales). The loading is scheduled
for end November and the rate agreed is USD 35 per metric ton. The charterer is VITOL.

2.4 KARAM SINGH: 40000 5PCT MOLOO CPP WAG/INDIA EARLY FEB WS 231 (IOC).
MT Karam Singh fixed for a voyage from West Arabian Gulf to any port in India. The
vessel has to load 40000 Tons, plus or minus 5 % in Owners Option. The loading has to
take place in Early February and the rate agreed for the voyage is World Scale 231. The
255
 charterer is IOC.

2.5 BERGE FROST: 85662 CBM - 50000 MT NAPTHA AG OR R. SEA/ SEA - 1-5 JAN RNR
(VITOL)

MT Berge Frost having a cubic metre capacity of 85662 fixed to load a cargo of 50000
Tons of Naptha from the Arabian Gulf or the Red Sea and discharge the same in South
East Asia. The laycan for the fixture is 1-5 January. The rate has not been reported. The
charterer is VITOL.

2.6 HELENE MAERSK: 20682 CBM - P/C 3500 MT BTD - PUERTO MADERO / US GULF
MID NOV - US $ 140 PMT (MITSUI).

MT Helene Maersk having a cubic metre capacity of 20682 loading a Part Cargo of 3500
Tons of Butadiene. The loading is to be undertaken at Puerto Madero (Mexico) and
discharge in the US GULF. The laycan is Mid Nov and the rate has been agreed to as US $
140 per metric ton. The charterer is MITSUI.

2.7 SUNDA: 130 KT CRUDE 8/01 WAFR/USAC WS 85 (BP)

MT Sunda fixed for loading 130000 Tons of crude oil from West Africa and discharge the
same at US Atlantic Coast. The laycan is 8th January and the freight has been fixed as WS
85. The charterer is British Petroleum.

2.8 GAS ARIES: 78452 CBM -6 MONTHS TC FROM 20 NOVEMBER WW TRADING DELIVERY
YANBU ABT USD 840000 PCM (NAFTOMAR)

MT Gas Aries having a cubic metre capacity of 78452 fixed for a 6 months Time Charter
from 20th November. There are no trading exclusions as the agreement is for worldwide
trading. The delivery has to be made at Yanbu (Red Sea port of Saudi Arabia). The
Charter Hire rate has been fixed at US $ 840000 per calender month. The charterer is
Naftomar.

2.9 38000 GAS OIL 1-10 JAN AG - SINGAPORE USD 800 K LUMPSUM (SHELL)

Fixture made for loading 38000 Tons of Gas Oil between 1-10 January (laycan). The
loading has to be done in the Arabian Gulf and the discharge in Singapore. The freight
has been fixed on a lumpsum basis to the tune of US $ 800000. SHELL is the charterer.

2.10 OLIVIA MAERSK 40000 5 PCT MOLOO CPP WAG/S'PORE 2/4 FEB WS 275 (MOBIL)

MT Olivia Maersk to load a parcel of 40000 Tons, plus or minus 5 % More or less in
Owners' option. The cargo to be loaded is a Clean Petroleum Product. The loading is to
be done in the West Arabian Gulf and discharge in Singapore. The laycan for the fixture is
2-4 February and the freight rate has been fixed at World Scale 275. The Charterer is
MOBIL.

2.11 TIMER SEA 140 KT CRUDE S. KERIR / UKCON/USAC EARLY FEB WS 95 / WS 90 (B. P.)

MT Timer Sea fixed for loading 140000 Tons of crude oil from Sidi Kerir (Egypt) and
discharging the same in UK Continent at a freight rate of World Scale 95. An Option is
available to discharge in the US Atlantic Coast at a freight rate of World Scale 90. The
laycan is Early February. The charterer is British Petroleum.
256
2.12 MAHARISHI VYAS 31100 CBM - 12 MONTHS T/C DELY/REDELY PASSING QUOIN 4/10 FEB
ATDN SHINC USD 525000 PCM (BERGENSON)

MT Maharishi Vyas, gas carrier, having a cubic metre capacity of 31100 has been fixed
for a 12 months time charter. The laycan is 4-10 February and delivery would take place
passing Quoin Island, Any Time Day or Night, Sundays and Holidays Included. The
redelivery would also take place, passing Quoin. The charter hire rate has been fixed as
US $ 525000 Per Calender Month. The charterer is Bergenson

2.13 EXMAR 140000 DWT DIRTY EARLY JAN 3 YEARS $ 21000 2ND YEAR $ 22500 3RD YEAR $
24600

MT Exmar having a Dead Weight capacity of 140000 Tons operating on Dirty Petroleum
has been fixed on a Time Charter for 3 years. The Charter Hire rate is $ 21000 for the first
year, $ 22500 for the second year and $ 24600 for the third year.

2.14 ASPILOS 80000 TONS DIRTY 13 NOV ZUETINA TO SARROCH WS 117.50

MT Aspilos, operating on Dirty Petroleum has been fixed for loading 80000 Tons from
Zuetina (Libya) and discharging the same in Sarroch (Italy). The loading is expected on
13th November. The freight rate has been fixed as World Scale 117.50.

2.15 NISSOS AMORGOS CROSS MED ARZEW/AUGUSTA 80 K 17/11 W127.5 EXXON

MT Nissos Amorgos fixed for a cross Mediterranean voyage from Arzew (Algeria) to
Augusta (Italy). The vessel to load 80000 Tons, loading date being 17th November. The
fixture has been finalised at a freight of Worldscale 127.5. The charterer is Exxon.

3.0 Having read and understood the above fixtures, interpret the following:

3.1 SHELL L 310 K 17/11 RAS TAN/ECCAN W 57.5 (VELA).

3.2 BRAHAMS (FO) 45000 10/11 BANIAS/FRANCE W 190 (BP).

3.3 KENTUCKY 70000 TONS DIRTY 23**> NOV MONGSTAD TO USAC W 135 0PTUSGW 132.50

3.4 PERSIAN GULF TO EAST ASTRO BELA, 260000 T, W 56, OPT UKC W51, DEC 27 (STASCO).

3.5 NIGERIA TO ABIDJAN - CHEVRON ATLANTIC, 130000 T, $ 300000 LS, DEC 22 (MOBIL).

3.6 HAVFRU 29388 CBM, 12 MONTHS T/C EXT OF PRESENT COST PRICE APRIL 1999, ABT $
425000 PCM (GEOGAS).

3.7 CLEAN - SUEZ AND YANBU TO JAPAN - PACIFIC QUEEN, 55000 T, W 155, DEC 17
(TRAFIGURA).

3.8 PG TO WCI - CIELO DE PARMA, 45000 T, W 190 - OPT ECI W 185, DEC 4 (IOC).

3.9 DIRTY - PERIOD- 60 DAYS STORAGE- MACEDONIA I- 169000 T, $ 6500 PER DAY, DEC 15.

3.10 SITALENE-CLEAN, UNL- 55000 AG/JAPAN 8/1 W 167.5 (BP).

257
3.11 APSHERON, SKO - 27000 BAHRAIN / WCI W 170 23/12 (BANOCO).

3.12 DIRTY - CROWN UNITY, 260000 4/1 WAFR/INDIA USD 1.05 MIO (VITOL).

3.13 PACIFIC PLUTO DWT 9499 T/C DEC 3-6 MTHS USD 14500 PD (CHEVRON).

3.14 LPG/C GAS KING BLT 1984, DWT 38705, COA 2.1 LAC MT LPG (BUTANE + PROPANE) 7
PARCELS OF 30000 MT 5 % MOLOO EACH (22000 MT 5 % MOLOO BUTANE + 8000 MT 5
% PROPANE). % SB EACH Va SAFE PORTS EACH WAG EXCL I/I CHOPTION / % SB EACH
WCI. 100 HRS. SHINC. USD 20 PMT.

3.15 CLEAN, BLACK SEA TO UKC, MED - WHITE STAR, 28500 T, WS

165, PROMPT (LAGUNA).

3.16 DIRTY, PG AND RSEA TO EASTERN DESTINATIONS - NEW VANGUARD, 250000 T,

W 59.5 DEC 27, (PTT).

3.17 DIRTY, KERTEH TO SRIRACHA - OLYMPIC SERENITY, 80000 T, $ 290000 LS, DEC 25 (STB).

3.18 DIRTY, NOVORISSISK TO OPTIONAL DESTINATIONS - HISTRIA PRESTIGE, 135000 T, W 85,

DEC 31 (EXXON).

3.19 DIRTY, WC NORWAY TO EC CANADA - NEW WORLD, 135000 T, W 92.5, DEC 26 (IRVING).

3.20 DIRTY, LIBYA TO EMED- AMBER, 80000 T, W 97.5, DEC 27, (ELF).

3.21 DIRTY, GYOKO 76, ME GULG/SING 96550 TDW AUG 20 USD

16500 PD 25-30 DAYS TRADING.

3.22 HEKABE, 54000 CBM, 40/60 DAYS T/C, DELY/REDELY GIBRALTER DEC 15-20, HIRE NOT
REPORTED.

3.23 KILGAS GOVERNER - 3535 CBM, TWO VOYAGES OF 1800 TONNES PROPANE, MILFORD
HAVEN/BREST, DEC 10-12, MID $20s PER TONNE (PETREDEC).

3.24 SUNNY CLIPPER- 5600 CBM, 3200 TONNES LPG, GRANGEMOUTH/IMMINGHAM, DEC 15-
17, HIGH $ 10s PER TONNE.

3.25 BEN FLOR- 8000 CBM, P/C 2500 TONNES PROPYLENE ARATU/CARTAGENA DEC 20-25
RNR (ENICHEM).

3.26 SPIC DIAMOND - 22000 CBM, 14000 TONNES, NH3, ARABIAN GULF/KANDLA JAN 4-6,
REPORTED $ 15 PER TONNE.

3.27 HEBRIS - 24000 CBM, 10000 TONNES NH3, VENTSPILS/SAFI AND DAKAR DEC 10-15, LOW
$30s PER TONNE.

4.0 TANKER TIME CHARTERPARTY :

4.1 SHELLTIME 4 1984 : Students are now well aware that a time charterparty contains the
terms and conditions mutually agreed between ship-owners who have let and charterers who have

258
hired a vessel for a stated period. The period could vary from a single voyage on time charter terms (trip
time charter) or could extend to as long as five or ten years against payment of hire calculated on a daily
or monthly basis. The time charterer pays for bunkers, port and most other trading expenses. The owner
pays overheads, including capital items, insurance and cost for the crew.

4.1.1 In tanker trades, oil companies may charter-in vessels to procure a variable addition to their
owned fleets. Others would like to have a dedicated fleet to meet the supply demand balance within
their country or for their coastal trade as done in India by the oil companies.

4.1.2 As of date there are quite a few tanker time charter parties existing, the oil majors have
formulated most of which. Shelltime 4, Beepeetime 3, STB Time, Mobiltime, Velatime, Asbatanktime
are the ones widely used in the trade. However, Shelltime 4 remains to be the most popular one. A
copy of this C/P has been provided at the end of this lesson, which you would have to use throughout
this chapter. Students are advised to go through all the clauses. A discussion on the important ones is
appended below:

4.2 Clause 1: Description and condition of the vessel

4.2.1 The extent of detail required under this clause would depend upon the intended trade the
vessel would be subject to. Notwithstanding the same, students should note that Clause 1, Clause 2(a]
and 3 (i) are primarily to define the owners' duties with regard to sea-worthiness of the vessel in terms
of its structure and manning. Shelltime 4 covers these quite comprehensively and students should
endeavor to relate the above mentioned clauses.

4.2.2 The concept of due diligence to make the ship sea-worthy before the beginning of each voyage
and to maintain and restore sea-worthiness when necessary has in substance the same effect in a
voyage as in a time charter.

4.2.3 You may notice in Clause 1 (c) that the formulators of this C/P could not keep away from the
age old tested words - tight, staunch, strong ... these words apply to the machinery as well as the hull.

4.2.4 Clause 1 (e) does not provide the specifications of fuel to be used, as this would vary from
vessel to vessel.

4.2.5 Form B mentioned in Clause 1 (h) is a comprehensive list of the particulars of the tanker and
such description forms part of the C/P.

4.2.6 If the vessel is delivered without full compliance of Clause 1 and 2 (a), it could not only
postpone the commencement of payment of hire, but also could affect the application of a cancelling
provision. If the vessel is not delivered as stated in the C/P, the charterer has a right to cancel the
contract.

4.3 Clause 2: Shipboard Personnel and their Duties:

4.3.1 Notice how well Clause 2 (i), (ii), and (iii) provide responsibility for seaworthiness for the owners
in terms of number, efficiency, flag state requirements and international conventions like the STCW.
Clause 2 (iv) becomes necessary when vessels are required to be traded on an international basis.
Without such a clause the charterers would be able to do little with an inefficient crew.

4.3.2 With the help of Clause 2 (b) the ship-owner provides an express obligation that his vessel will
prosecute all voyages with utmost despatch, however, the exceptions clause may be sufficiently widely
drawn to protect the ship-owner from the consequences of a breach of such an obligation.

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4.4 Clause 3: Duty to maintain:

4.4.1 Clause 3 (i) places responsibility on the owners for exercising due diligence to keep the vessel
sea-worthy. This clause is directly related to Clause 1 and 2(a). More important is its relation to clause
27 -Exceptions. It may be noted that the Duty to Maintain remains unaffected for loss or damage or
delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners, or
other servants of owners in the navigation or management of the vessel; fire unless caused by the
actual privity of the owners; collision or stranding; dangers and accidents of the sea; explosion;
bursting of boilers; breakage of shafts or any latent defect in hull, equipment or machinery. Clause
3(ii) is what brings about strictness to this C/P from owners' point of view. It imposes penalty on the
owners if they fail to comply with the requirements stated in Clause 1 and 2(a) above. Further, the C/P
makes it very clear that any reduction in hire which results in a loss of time for not meeting the
requirements of Clause 1 and 2(a) is independent of the time lost in assessing performance of the
vessel under Clause 24 (Performance).

4.4.2 To bring further bite to the C/P the charters have a right to terminate the charter if owners fail
to demonstrate due diligence as required in the maintenance of the vessel. This right of termination
by charterers is over and above the rights they can exercise under the Off-hire clauses as placed under
Clause 21.

4.5 Clause 4: Period Trading Limits

4.5.1 The clause lays down the following important aspects:

a) Period of trading
b) Carriage of lawful merchandise
c) Due Diligence on the part of charterers to employ the vessel between and at safe ports
d) Ship to ship (STS) transfer operations as per ICS/OCIMF guidelines
e) Place of delivery and re-delivery

4.5.2 The period of trading is generally expressed in a fixed number of months or years. Since it is
difficult, especially in long term charters to determine exactly when the ship will be re-delivered, it is
best to have some leverage such as, '30 days more or less in charterers option* or even use the words
'about'. The clause requires special care, as there might exist a huge difference in the market rate and
C/P rate around the period of redelivery.

4.5.3 Under this clause the owners would restrict the areas where the vessel may be asked to go. The
reasons could be political or simply there may be certain areas where the vessel may not like to trade,
for instance where the ITF is strong and the vessel does not possess a 'Blue Certificate'.

4.5.4 It is again the owners' responsibility to exclude any cargoes he is unwilling to carry on the
vessel. For instance, a white oil carrier may exclude the carriage of 'Persistent oils'.

4.5.5 The clause contains a limited obligation for the charterer to exercise due diligence to order the
vessel to safe ports. It is arguable whether the chatterer's obligation of diligence is limited to the
vessel's ability to lie afloat. The definition of what constitutes a safe port is much wider than that.
Whether a port is a safe port or not is in each case a question of fact and degree and must be
determined with reference to the particular ship concerned. As a broad statement of the law a port will
not be safe unless in the relevant period of time, the particular ship can reach it, use it, and return from
it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be
avoided by good navigation and seamanship. In the case of 'The Timma' (1970), a ship under time
charter was ordered to Hamburg. At the time of the order and during the voyage the weather was
exceptionally cold and a great deal of ice formed in the Elbe. The ship was damaged on the way to and
from Hamburg. Held, the port was not safe and the charterers were in breach of the time charter.
260
4.6 Clause 9: Payment of Hire:

4.6.1 The clause requires hire payment to be made on per calendar month basis, but the hire is
expressed as a rate per day. Further, in order to arrange accurate payment of hire on the "clue date,
the amount of any deduction must be calculated in advance. As hire is paid in advance, any recoveries
that may become due can only be made by deduction from a subsequent month's hire payment.
However, hire must always be paid in full. Anticipated off-hire cannot be withheld. Shelltime 4 and any
other commercially negotiated charters require hire payment in advance and can only recover hire in
respect of idle time if it can be shown that time was lost against one of the clauses specified in an off-
hire clause. Most off-hire clauses have a threshold of 3 - 6 hours. When the time lost exceeds the
threshold, the vessel will be off-hire from the commencement of the delay. If the time lost is less than
the threshold, there will be no off-hire. It may be noted that under period of off-hire the bunkers
consumed would be on owner's account.

4.6.2 Find out the threshold time in Shelltime 4 (Clause 21, Off-hire) and try and provide for a
comprehensive list of circumstances when the vessel can be off-hired.
Why do you think such a threshold is necessary?

4.6.3 Payment of hire must be made in immediately available funds, i.e. money must be available to
the owner's free for their use. The C/P should specify as to where and in which currency the payments
have to be made. In the absence of an express agreement hire is payable during detention for breach
of blockade, by embargo, bad weather and other similar incidences.

4.6.4 Payment of hire forms the crux of the agreement. If charterers are in default of payment,
owners have a right to cancel the agreement by withdrawing the vessel. If the due date falls on a
holiday, payment must be made on the preceding day. An owner can by his conduct loose his right to
withdraw the vessel by accepting regular late payments. Shelltime 4 provides for a grace period of 7
days to make good the payment after receiving notice from owners. However, under the following
circumstances the owner looses his right to withdraw:

a) He may waive his right if he behaves in such a way after the failure to pay has accrued that
he leads the charterer to believe that the charterer can continue.
b) He may accept a late payment.
c) He may fail to act reasonably quickly after the default has occurred but on this point owners
must be allowed reasonable time to take legal advice and this may involve communicating
with lawyers in another country.
d) When and if there has been a history of late payments. Only if he gives clear advance notice
before the due payment that payment is expected on time would he be likely to be allowed
to take withdrawal action.

4.6.5 As an owner, the following should be followed:

i) Decide quickly whether or not to exercise the right to withdraw.

ii) Instruct the bank to refuse the payment.
iii) Inform charterers immediately of your decision.
iv) Inform Master.
v) If payment is consistently late, give notice that in future, payments must be made on time.

4.7 Clause 15: Bunkers at Delivery and Redelivery:

4.7.1 The clause provides for payment of bunkers on board at current market prices at port of
delivery/redelivery. In case no such price is available, prices at the nearest port would be applicable.
Further, provision is also made for payment of bunkers when delivery takes place at sea.

261
4.7.2 However, the clause does not state the min/max quantities to be made available at the time
of delivery/redelivery. This could lead to a possibility of speculation. For example, redelivery with a
large amount of bunkers, acquired cheaply at a previous port, is good fort the time charterer, when
the bunker price is high at the port of redelivery.

4.8 Clause 19: Final Voyage

4.8.1 Students should read the clause carefully; especially lines 194-197 and then study the case
appended below:

4.8.2 BACKGROUND:

a) A vessel was delivered to the charterer on 6th August 1992 ± 30 days charterers' option i.e.
latest re-delivery would have been 8th March 1993. It was common ground between the
parties that this was the last date.

b) The C/P had another clause that called the charterer to give the owner 45,30,14 and 7 days
notice of redelivery. The charterer gave its 45-day notice on 15th January for 1st March and
its 30-day notice on 29th January for 28th February. Nothing turned up on the other re-
delivery notices.

c) On 28th January the owner fixed the vessel with 10th March as canceling.

d) On 16th February 1993 the Owner informed the charterer that the latest re-delivery date was
8th March 1993, and it would not permit it to be overlapped.

e) The Charterer expressed disagreement on the same date and on 18th February informed the
owner that he could contract for a cargo from A to B with a contemplated re-delivery date of
14th March.

f) The Owner re-stated his position that the 8th March deadline could not be exceeded and
hence refused to undertake the voyage.

g) The vessel was ultimately fixed for a voyage from Al to Bl and redelivered on 6th March.

4.8.3 PERSPECTIVE:

The dispute submitted to the Panel revolved round the Final Voyage
before re-delivery, the owner having refused to perform the charterer's prospective voyage
because its duration would have exceeded the maximum by some six days. The Charterer
disagreed it could not be permitted to make that voyage, but in the face of the owners refusal
was obliged to charter vessel on shorter and less lucrative employment. This caused the
charterer to incur a loss of profit of US $ 64835.19, which formed the charterers claim against
the owner.

4.8.4 JUDGEMENT:

a) A redelivery notice in a time charter is an extremely important provision, as an owner is

entitled to rely on it when chartering out the vessel on its next employment.

b) As per Clause 19 of Shelltime 4, the vessel needs to be either in ballast or laden proceeding
towards its port of re-delivery at the time such voyage, paying the owner the charter party rate
262
 for any excess. That element is absent in this case. The vessel was not proceeding to her re-
delivery port either laden or in ballast on 8th March, the last redelivery date. In fact she was re-
delivered prior to that date. Clause 19 is not to legitimize an illegitimate last voyage, but to
recover what happens due to an unforeseen delay once a last voyage has begun.

c) There was nothing unreasonable in the owners fixing the vessels next employment with a 10th
March canceling having previously been given re-delivery notice for 1st March.

d) The Charters claim thus failed and dismissed. As a consequence, the panel did not have to
consider the quantum of the claim. The Panel also assessed that the charterer pays a sum of US
$ 10000.00 to the owner for attorney's fees. The charterer had to bear its own attorney's fees.

9.0 Clause 24: Detailed Description and Performance:

9.1 The clause lists the speed and consumption of the vessel when laden and in ballast. The clause
also spills out the penalty and bonus in case the vessel falls below or exceeds the guaranteed
performance for speed and bunker consumption. These calculations are to be made for yearly periods;
no doubt the same has to be reduced in case the vessel is chartered for a shorter duration. The Owners
would not be penalised during adverse weather periods, when wind exceeds force 8 on the Beaufort
scale for more than 12 hours.

9.2 Nowadays some charterers use the word "about" when qualifying the performance of the
vessel. This would imply a speed ± 0.5 knots of the guaranteed. Others would have only penalty
clauses with no bonus being paid for better performance. There are some charters which would even
include pumping performance and other aspects of operations like time for tank cleaning and gas
freeing etc., though speed and bunker consumption remain the most important.

9.3 The most comprehensive method of calculation for speed and bunker consumption is to
compare the total mileage steamed and the total bunkers consumed at sea during the period in
question, with the time the vessel would have taken and the bunkers the vessel would have consumed
over the same distance at the C/P speed and consumption. Any excess time and any extra bunkers
consumed are then respectively valued at the time charter rate and at the average price paid for the
bunkers during the performance period. The recovery is made by deducting from the hire, but some
charters also provide for a reduction in the hire rate to correspond to the under performance.

9.4 An owner may wish to argue in defending a claim for breach of speed warranty that the vessel
has consumed less than the warranted quantity of fuel, although she was somewhat short on speed.
You may agree that this appears to be a sound defence. Hence, it is essential to bring about clarity in
the C/P itself. In clauses that provide for a penalty only and do not pay for a bonus for better
performance, some look at speed and bunker consumption together, and allow offset against one
another. Others look at the two separately and no credit is given at that aspect of the performance
which turns out to be better than that warranted.

9.5 Another issue of concern is whether owners should be allowed to have the benefit of one or
two "abouts". The preferred solution is to permit only one variable in any calculation of performance,
e.g. 15 knots on about 30 tons or about 15 knots on 30 tons. The warranty can then be approached by
asking whether a speed or a consumption claim has to be made.

10.0 Clause 26: Lien :

10.1 Rights of withdrawal for non-payment may be of limited value to the owner. If the charter is at a
favourable rate he may not wish to withdraw. Even if owner is entitled to damages it might turnout to
be nightmare dealing with an assetless debtor.
263
10.2 The lien on the cargo can be useful when the same belongs to the time charterer, though this
might seldom be the case. Therefore, the clause also provides for lien on sub-freights. This can be
valuable provided the sub-freight has not already been paid. Of course it is important to assess who
the freight payers are. If the ship-owner knows that the sub-freights are unpaid, and by whom, he can
give the sub-charterer notice of his lien and tell him to pay the owner, adding that if the sub-charterer
should now pay to the head-charterer, he may become liable for a second payment. Though the clause
has its importance, it is not very clear whether it includes ‘sub-sub-freight1.

10.3 The lien clause goes on by granting the time charterer a lien on the vessel for hire paid and
not earned. Under Shelltime 4 the lien is for almost any claim. It may sound pleasant for charterers
but has no real importance. The ship is not in the charterer's possession so he cannot physically
detain her, except by a court arrest for his claims. That remedy in any case is available without the
clause so providing.

NOTE: STUDENTS MAY PLEASE REFER TO APPENDIX NO. 18 WHEREIN THE PRINTED CHARTER PARTY
FORM SHELLTIME 4 IS PROVIDED.

*************

264
CHARTERING FINAL YEAR

LESSON 17

LAY TIME CALCULATIONS IN OIL TANKERS

1.0 The concept, application and the calculation of laytime are similar and equally important in tanker
voyage charter as in dry bulk charter. However due to the peculiarity of the trade certain differences and
specialties are found in the tanker voyage charter party. These are enumerated below:

2.0 Laytime allowed:

2.1 The allowed laytime usually is 72 hours to cover both loading and discharging. The applicable term
is SHING i.e. it is 72 hours (3 days) clear. This is based on loading and discharging at one port each. In case of
an additional port extra 12 hours are added.

3.0 Despatch:

3.1 Traditionally no despatch money is payable to the charterer if a vessel completes the cargo
operations in lesser time than stipulated with charter party.

4.0 Commencement of laytime:

4.1 The laytime usually starts six hours after tendering of Notice of Readiness (NOR) or from the time
when the tanker is tied at the cargo terminal/SBM etc., called ALL FAST, whichever occurs first. E.g. if the
tanker has to wait at the anchorage for berth and the NOR is tendered, the laytime would start 6 hours after
the tendering of NOR If the tanker, on the other hand, proceeds directly to the jetty, than the laytime shall
commence from the time tanker is completely tied up. This is termed as ALL FAST.

5.0 Cessation of laytime:

5.1 The laytime clock work continuously, including the interruptions, till the hoses are disconnected.

6.0 Interruptions

6.1 The interruption/delays during the cargo operations could be divided under following
categories:

a. Which are under the control of the chaterers. e.g. non availability of berth, cargo,
mother vessel etc. Such interruption/delays are considered to be within the time
allocated and thus part of laytime. some of these examples are given below:

• Vessel arrives within the range of lay-days and is delayed awaiting berth, cargo, ullage etc.
• Delays after the vessel is all-fast and ready to load/ discharge.
• Time used in loading/ discharging, including stoppages for line changing etc. requested by
terminal.
• Time spent in shifting between berths at terminal request.
• Delays between termination of cargo and disconnection of hoses.

b. Which are under the control of the ship owner e.g. breakdown of machinery, pumps,
IG system etc.; non-availability of a mandatory certificate. Obviously the time for
such delays are not treated as laytime.

265
 • Vessel arrives at first loading port prior 1st day of lay-day range and is delayed.
• Vessel moving between port entrance (seabuoy) and berth.
• Vessel discharging tank washings or ballast to shore.
• Delays due to stoppages at vessel request.
• Time used in ballasting after discharging.

c. Which are beyond the control of both shipowner and the charterer. This could include weather
disturbance, bad sea conditions, swells etc.; strike, lockout in terminal; fire, explosion in terminal
etc. The relevant charter party clauses must be referred for these delays. At times such delays are
also shared between the shipowner and charterer (Sharing of miseries).

• Vessel delayed, unable to move onto berth due bad weather, fog, etc.
• Delays due non-availability tugs, pilot.
• Delays due restraint of labour, strikes etc. by ship's crew, tugs, pilots,

7.0 Excess Pumping Time

7.1 The tanker voyage charter parties, along with the standard clause indicating 72 hours as laytime,
also contain the following clause: -

"Owners warrant that vessel can discharge the entire cargo within 24 hours or maintain 100 p.s.i.
at ship's rail, provided shore facilities permit".

7.2 Therefore if the time for discharge is more than 24 hours and there is no evidence of required
pressure being maintained or letter of protest regarding the incapability of shore facilities for receiving such
rates, the owner will be penalized for taking more time for pumping.

8.0 Crude Oil Washing (COW):

8.1 This technique is now a requirement for pollution control in crude oil tankers of greater than
20,000 DWT. The time taken for discharge may increase if extensive COW is carried out. The charter party
may include a clause indicating the treatment of this extra time.

9.0 Calculations:

9.1 Laytime being on SHINC terms the calculation are much simpler for tankers than dry bulk. There is
one major difference between these two calculations. Whereas in dry bulk laytime used is computed on daily
basis after adjusting for interruptions, the method used for tanker is different. Here the tptal laytime used
is calculated from the commencement of laytime till the time hoses are disconnected and from this various
delays/interruptions are deleted. As mentioned earlier no despatch is usually payable in tanker voyage
charters.

oooooooo

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 SELF-EXAMINATION QUESTIONS

1. When does the time starts?

2. List THREE instances when the time will continue to count due to delays within the
control of the charterer.

3. Calculate the demurrage, if any, from the following information:

Laytime allowed 84 hours Demurrage rate-Rs. 3,15,000/day PR

Load port – Rastanura

NOR tendered - 7th Dec. 0415
All Fast-7th Dec. 0600
Hoses disconnected - 7th Dec. 2235

1st Discharge port - Madras

NOR tendered - 16th Dec. 2100

Left anchorage - 19th Dec. 0800
All Fast-1ST Dec. 1000
Hoses disconnected - 20th Dec. 1200

2nd Discharge port - Haldia ,

NOR tendered-22nd Dec. 1418

Left anchorage - 25th Dec. 0400
All Fast -25* Dec. 1300
Hoses disconnected - 26th Dec. 0725

**********************

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 EXAMPLES OF LAYTIME CALCULATIONS IN OIL TANKERS
Example 1

M.T. LORD NEPTUNE

Statement of Facts - Load port - Rastanura

-
Vessel anchored - 5th March 0600 hrs.
NOR tendered - 5th March 0600
Pilot boarded - 5th March 1400
All Fast - 5th March 1815
Hose connected - 5th March 1900
Cargo commenced - 5th march 2000
Loading completed - 7th March 1410
Hoses Disconnected -7th March 1656
Vessel sailed - 7th March 1805

Statement of Facts - Discharge Dort - Bangkok

Vessel anchored - 19th March 1000 hrs.

NOR tendered - 19th March 1000

Pilot boarded - 22nd March 1300
All Fast - 22nd March 1526
Hose connected - 22nd March 1725
Cargo commenced - 22nd March 1800
Loading completed - 25th March 0100
Hoses Disconnected -25th March 0345
Vessel sailed - 25th March 0530

Out of the above time in discharge port the actual pumping time in the port was only
45 hours and 30 minutes and the rest was used in other activities e.g.
documentation, ullaging, sampling etc.

Relevant charter party information:

Time to start 6 hours after tendering notice of readiness or All Fast, whichever is earlier.

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Vessel to discharge complete cargo in 24 hours.

Total time allowed for crude oil washing - 12 hours, if COW carried out in all tanks.

Laytime allowed - 72 hours for loading and discharging.

Demurrage @ US$ 9,500 per day or prorata.

CALCULATIONS

Load port

6 hours after NOR tendering - 5th March - 1200 hrs.

All Fast- 5th March-1815

Therefore time starts on 5th March at 120Q hrs.

Time continues till hoses disconnection
on 7th March at 1656 hrs.

Time used: 52 hours 56 minutes

Less time utilized for shifting to berth from anchorage: 04 " 15 "
(from 1400 hrs. to 1615 hrs.)

Total time used in load port: 48 hours 41 minutes

Discharge port

6 hours after NOR tendering - 19th March -1600 hrs.

All Fast - 22nd March - 1526

Therefore time starts on 19th March at 1600 hrs.

Time continues till hoses disconnection
on 25th March at 0345 hrs.

Time used: 131 hours 45 minutes

Less time utilized for shifting to berth from anchorage:

(from 1300 hrs. to 1526 hrs.) 2 hours 26 minutes

Therefore time used in discharge port 129 hours 19 minutes

Pumping calculation:

Excess time taken for pumping 21 hours 30 minutes

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(Actual pumping time - 45 hrs. 30 min.
less time allowed for pumping - 24 hrs.)

Less extra time for COW 12 hours

Excess time for pumping & COW 9 hours 30 minutes

Summary

Total time used in load port: 48 hours 41 minutes

Time used in discharge port: 129 hours 19 minutes

TOTAL TIME USED: 178 hours 00 minutes

LAYTIME ALLOWED: 72 hours 106 hours

Excess time taken: 9 hours 30 minutes

Less extra time for pumping & COW: 96 hours 30 minutes

DEMURRAGE

@ US$9,500 per day - US$38,197.92

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Example 2

M.T. SEA VENTURE

Statement of Facts - Load port - Labuan

Vessel anchored - 2nd May 1200 hrs.
NOR tendered - 2nd May 1200
Heavy winds - from 5th May 0130 to 1800 and
7th May 0140 to 0327
Pilot boarded -All 7th May 0327
Fast -Hose 7th May 0441
connected -Cargo 7th May 0505
commenced -Loading 7th May 0535
completed -. Hoses 7th May 2017
Disconnected -Vessel 7th May 2121
sailed - 7th May 2230

Statement of Facts - Discharge port - Chiba

NOR tendered -Pilot 14th May 0900

boarded -All Fast-Hose 14th May 0915
connected -Discharging 14th May 1000
commenced -Discharging 14th May 1022
completed -Hoses 14th May 1051
Disconnected -Vessel 15th May 1252
sailed - 15th May 1400
15th May 1510

Relevant charter party information:

Time to start 6 hours after tendering notice of readiness or All Fast, whichever is earlier.

Laytime allowed - 72 hours for loading and discharging.

Demurrage @ US$ 7,000 per day or prorata.

Conoco Weather Clause - Delays in berthing for loading or discharging and any other
delays after berthing which are due to weather conditions shall count as one half laytime
or, if on demurrage, at one half demurrage

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CALCULATIONS

Load port

6 hours after NOR tendering - 2nd May - 1800 hrs.

All Fast- 7th May- 0441

Therefore time starts on 2nd May at 1800 hrs.

The Conoco weather clause specifies -

1. Bad weather time to be considered as half of the actual, and
2. If the tanker is on demurrage only half the rate should be applied.

Thus it becomes necessary not only to calculate the delay due to bad weather, but
also to check is the tanker is on demurrage so that half rate can be applied. Accordingly
complete time sheet has to be made as follows:

Date &Time Activity Time Remarks

2nd May 1800 to 5th May 0130 Waiting 55 hrs 30 min
5th May. 0130 to 5m May 1800 " & bad weather 08hrsl5min Half time taken
5wMay 1800 toe"1 May 0215 Waiting 08 hrs 15 min 72 hrs LT completes
6mMay 021510 7" May 0140 Waiting 23 hrs 25 min On Demurrage - #
7th May 0140 to 7th May 0327 " & bad weather 01 hrs 47 min* Demurrage at Vz rate
7th May 0327 to 7th May 0441 Shifting - LT not to count
7mMay 0441 to T May 2121 Loading 16 hrs 40 min On Demurrage - #

Complete available laytime of 72 hours used at load port.

Demurrage at load port: at full rate = 40 hours 05 minutes (marked #)

at half rate = 01 hours 47 minutes (marked *>

Discharge port

6 hours after NOR tendering- 14th May- 1500 hrs.

All Fast- 14th May-1000

Therefore time starts on 14th May at 1000 hrs.

Time continues till hoses disconnection
on 15* May at 1400 hrs.

272
SEA VENTURE has already exhausted the allowed laytime and therefore all time used is on
demurrage.

Demurrage at discharge port: at full rate =28 hours 00 minutes

Summary

Demurrage at load port: at fall rate = 40 hours 05 minutes (marked #}

at half rate - 01 hours 47 minutes (marked *)

Demurrage at discharge port: at fall rate - 28 hours 00 minutes

Total demurrage at full rate of $ 7,000 per day = 68 hours 05 minutes

= $19,857.64

Total demurrage at half rate of $ 3,500 per day - 01 hours 47 minutes

= $260.07

TOTAL = $20,117.71

*************

273
1. Agents STANDARD STATEMENTS OF FACTS (SHORT FORM)
RECOMMENDED BY
THE BALTIC AND INTERNATIONAL MARITIME CONFERENCE (BIMCO)
AND THE FEDERATION OF NATIONAL ASSOCIATIONS
OF SHIP BROKERS AND AGENTS (FONASBA)

2. Vessel's name 3. Port

4. Owners/Disponent Owners 5. Vessel berthed

6. Loading commenced 7. Loading completed

8. Cargo 9. Discharging commenced 10. Discharging completed

11. Cargo documents on board 12. Vessel sailed

13. Charter Party* 14. Working hours/meal hours of the port*

15. Bill of Lading weight/quantity 16. Outturn weight/quantity

17. Vessel arrived on roads 18.

19. Notice of readiness tendered 20.

21. Next tide available 22.

DETAILS OF DAILY WORKING*

Hours worked Hours stopped

Date Day No. of gangs Quantity Remarks*
load./disch.
From to From to

General remarks*

Place and date Name and signature (Master)*

Name and signature (Agents)* Name and signature (for the Charterers/Shippers/Receivers)*

* See Explanatory Notes overleaf for filling in the boxes

274
INSTRUCTIONS FOR FILLING IN THE BOXES

General
It is recommended to fill in the boxes with a short text. When it is a matter
of figures to be inserted as is the case in most of the boxes, this should
be done as follows:

6. Loading commenced

1975-03-15-0800

the figures being mentioned in the following order: year-month-date-time.

Boxes Calling for Special Attention

Charter Party*:
Insert name and date of charter, for instance, "Gencon" dated 1975-03-01.

Working hours/meal hours of the port*:

Indicate normal working hours/meal hours of the port and not the actual hours
worked on board the vessel which may be longer or shorter than the hours
normally worked in the port. Such day-by-day figures should be indicated
in the box provided for under "Details of Daily Working".

Some empty boxes are made available in which other relevant information
applying to the particular port or vessel could be inserted, such as, time of
granting free pratique, if applicable, etc.

Details of Daily Working*:

Insert day-by-day figures and indicate in the vertical column marked "Re-
marks * " all relevant details as to reasons for stoppages such as bad weather,
strikes, breakdown of winches/cranes, shortage of cargo, etc.

General Remarks*:
This box should be used for insertion of such general observations which are
not covered in any of the boxes provided for in the first main group of boxes,
for instance, reasons for berthing delay or other general observations.

Signatures*:
It is of importance that the boxes provided for signatures are duly signed
by the parties concerned.

275
 APPEX- ……..

CHARTERING FINAL YEAR

DRY CARGO FIXTURES

1.0 INTRODUCTION

1.1 A student of chartering must know how to interpret market fixture reports in simple
language. Below, we have given several dry cargo worked-out examples of fixture reports of
voyage, time-charter (period) and time-charter trips of dry cargo vessels along with a long list
of fixtures for practice.

1.2 It is advisable that the student should read and study the lesson on "Chartering Terms"
before he/she attempts to answer the self-examination questions.

1.3 The fixture reports of tankers are dealt with in a separate lesson under the section of
"Tanker Chartering".

2.0 FIXTURES & THEIR INTERPRETATION:

I. SOLDROTT 28000 TONS WHEAT USG/WCI DEC 24/31 $42.50 GROSS LOAD/
1500 PER DAY FREE DISCHARGE (BUNGE).
The vessel M.V. "Soldrott" is contracted to load 28000 tonnes of wheat from any port in the US
Gulf to discharge in any port on the West Coast of India on or between laydays commencing
24th December and the cancelling date of 31st December, at a freight rate of USD 42.50 per
tonne. Loading is on gross terms, i.e., all expenses and time is on shipowners' account; whereas
discharge is on free-out basis, i.e., all expenses for discharge are on charterers' account.
Discharge is allowed at the rate of 1500 tonnes a day, the charterers' being M/s Bunge. (Voyage
fixture).

2. IAPETOS 100,000 TONS COAL HAMPTON ROADS TO DUNKIRK JAN 1/6 S7.75 FIO SIX
DAYS SHINC (BOCJMAR).
The vessel M. V. "lapetos" is fixed to load 100,000. tonnes of coal from Hampton Roads to
Dunkirk on or between laydays commencing 1st January and the cancelling date of 6th January,
■ at a freight rate of USD 7.75 per tonne, on free-in-and-out basis i.e. all expenses of loading
and discharge are on the charterers' account The time period of 6 days (all purposes)
including Sundays and holidays, is allowed for loading and discharge, the charterer's being
M/s Bocimar. (Voyage charter).

3. ATTICOS(:976) 29165 DWT DELIVERY USG PROMPT TRIP REDELIVERY GH RGE S7250PD
PLUS $ 180,000 BB (ARMADA).
The vessel MV. "Atticos" built 1976, with a summer deadweight of 29165 tonnes, is
contracted immediately for delivery on time charter at US Gulf for a timecharter trip with
redelivery to owners at a range of ports between and including Gibraltor and Hamburg at a hire
rate of USD 7250 per day plus a ballast bonus of USD 180,000, the charterers being Armada.

276
4. RIDER (B1982) 14900 DWT 19570 CBM BALE 412 TEU DEL SKAW END DEC SIX OPT
SIXMOS TC $5500 PD (EMPREMAR).
The vessel M. V. "Rider", built 1982, with a summer deadweight of 14900 tonnes, bale capacity
of 19570 cubic metres or 412 — 20' containers is fixed to be delivered at the Skaw (tip of
Denmark at the north end, in the North Sea) in the last week of December for a timecharter
period of 6 months, with an option to extend for further 6 months at a daily hire of USD 5500,
the charterers being Empremar.

5. VANCOUVER TO CASABLANCA . TRADE VISION 35000 TONS SULPHUR PROMPT $ 17.50

FIO 10,000 PER DAY LOAD SHINC / 3000 PD DISCH SHEX (PRISM).
The vessel M.V. "Trade Vision" is fixed to load immediately 35000 tonnes of sulphur from
Vancouer to Casablanca, on a voyage charter at the freight of USD 17.50 per tonne, on free
in and out basis, i.e., all expenses for loading and discharge are on charterers' account, at the
load rate of 10000 tonnes a day, Sundays and holidays included, and the discharge rate of
3000 tonnes per day, Sundays and holidays excluded, the charterers being M/s. Prism.

6. TRISTAR QUEEN 36000 DWT STBC 13K ON 26 TONS DEL WCI MID JAN TCT 45 DAYS
WOG VIA S AFRICA RED FE (SAMSUNG).
The self-trimming, bulk carrier vessel M.V. Tristar Queen, deadweight tonnage 36000, moving
at a speed of 13 knots on 26 tonnes fuel oil, has been contracted to be delivered to any port
in the West Coast of India during mid-Jan for a time charter trip of 45 days, without
guarantee, to proceed via South Africa and to be redelivered in the Far East, the charterers
being M/s Samsung.

7. TBN 26500 HSS USG/CALDERA 2UAN7 3FEB USD 1800 5 DAYS/5500 FIO (DREYFUS).
A to-be-nominated vessel has been contracted to load on a voyage charter 26,500 tons of
heavy grains, soyabean and sorghums from the United States Gulf to Caldera. The vessel
has to present herself to load on or between the dates of 21d Jan and 3rd Feb. The rate is USD
18.00 per ton of cargo loaded. The vessel is to load in 5 days and to discharge at the rate of
5500 tons per day on free-in and-out basis, i.e., the charterers have to pay for loading and
discharging. The charterers are M/s Dreyfus.

8. 12,750 DWT 812 TEU GLESSVSL 3 MOS TC USD 7.100 PDPR USAC/ NWE TRADE.
A gearless vessel of 12,750 tons summer deadweight of carrying capacity 812 twenty-foot
containers has been fixed on a time-charter trip of 3 months with a per day pro-rata rate
of USD 7100, to be engaged between the US Atlantic Coast and North West European
trade.

9. PARI 100000/10 MOL COAL HROADS/YMUIDEN 12/27 DEC 6 DAYS SHEXUSS5.25.

The vessel M. V. Pari has been contracted on a voyage charter to carry 100,000 tonnes, 10
per cent more or less, coal fronvHampton Roads to Ymuiden. The vessel has to present
herself for loading between the 12ai and 27th of December. The total time allowed for
loading plus discharging is 6 days, Sundays and holidays excluded. The fixture has been
concluded at the rate of USD 5.25 per metric tonne of cargo loaded.

277
10. SEABONI 45000/5 MOLOO HSS ECUS/ITALY - ADRIATIC PPT 14 DAYS US $ 16.50 (D'MAMTO).
The motor vessel "Seaboni" has been contracted to carry on a voyage charter 45000 tonnes
immediately, 5 per cent more or less (owners option) heavy grains, sorghum and
soyabeans from any part in the East Coast of USA to any port in the Italy-Adriatic range, 14
days time allowed for loading and discharging. The fixture was concluded at USD 16.50 per
tonne, the charterers being D'Mamto.

11.RICHARDS BAY TO TAIWAN VESSEL TBN 55.000 TONS COAL NOVEMBER 16/30 $9.55 SC
LOAD/20,000 PER DAY DISCHARGE SHTNC (TPP).
Vessel to-be-nominated has been fixed to load 55,000 tons of coal, on scale load, laytime
commencing 16th November, and ending on 30th November at a freight rate of US $9.55
per ton. Discharging rate is 20,000 tons per day Sundays and Holidays included. The vessel
is to engage in trade between Richards Bay and Taiwan (all ports), the charterers being TPP.

12. 572 TEU 8489 DWT GLESS $5,950 PER DAY FOR 6 MOS TC CONTINENT / ISRAEL TRADE.
A gearless vessel with 572 twenty-foot containers capacity having a deadweight of 8489
tonnes has been fixed at the rate of US Dollars 5950 per day for six months time-charter
for the Continent-Israel trade.

13. WISCONSIN-GLASGOW SUGAR RAY 15.000 HSS 3-14 SEPT $28.00 OPT BELFAST/LEITH
$28.50 3DAYS/3000 (PICKWICK).
M.V. Sugar Ray is fixed for loading at Wisconsin and for discharging at Glasgow on a voyage
charter. Cargo is 15000 tons heavy grains, sorghums or soyabeans at a freight rate of US
$28 per tonne, with the charterers' option to discharge instead at Belfast or Leith at the
freight rate of US$28.50. Three days are allowed for loading and 3000 tons rate per day is
allowed for discharging. Vessel is to present herself ready to load between laydays 3rd
September and the cancelling date of 14th September, charterers being M/s.Peewick.
ooooo

SELF-EXAMINATION QUESTIONS

Please rewrite the following fixture reports in simple English:

1. FATHOM 45090 84 DELPSGCANAKK PPT VTA BSEA REDEL JPN 10500 DL (PAN OCEAN).
2. CRUSADER VENTURG 61883 82 DEL SKOR SPOT NOPAC R/V REDEL FEAST 9000 DLY (PAN
OCEAN).
3. ELENT 73040 96 DEL FRENCH BAY SPOT 2LL TNCLECSA REDEL SKAW - PASSERO 8000
DL (NAVTX).
4. TBN 27196 ALUMINA GLADSTONE/CHINA 25 AUG - 08 SEP 13.00 FIO 1 DAY/CQD
(COMALCO).
5. CASANNA - 64,221 DWT PAN 89 TCT QUEENSLAND/SOUTH KOREA DEC 10-20
6,500 USD DLY + 60,000 BB (PAN OCEAN).
6. HALO CYGNUS - 73,397DWT PAN98 14.2K ON33.5 TFO TCT DAMPTER/CHTNA MID
DEC USD 7,200 DAILY + USD 70,000 BB (COSCO).
7. TRFON 160000/10 COAL RBCT/RDAM MID FEB SCALE/40000 SHINC USD 5.95 (SK
SHIPPING).

278
8. EUTERPIA 150000/10 BOLIVAR/HARDERA 20-30 JANUARY USD 7.35 40000
SHINC/20000 SHEX (CETRAGPA).
9. KOREA LINE TBN 150000/10 COAL HRDS+RB/S.KOREA 16FEB/2MAR USD 11.60 FI0 2-1
7C (POSCO).
10. AN ANGEL SPLENDOUR 150000/10 ORE C.LAMBERT/REDCAROR REDCAR + THAM END
JAN 6DAYS USD 7.15 1-1 USD 7.80 1-2 (BSC).
11. GRAND CLIPPER 150000/10 ORE TUBARAO/DUNKIRK 5-20 FEB 6 USD 6.70 (CETRAGPA).
12. CATLLEYA STAR 150000/10 ORE UBU/RD AM 5-15 FEB USD 6.50 - RSH.
13. MERCHANT PRESTIGE (HMMRELET) 150000/10 ORE UBU/ KWANGYANG END JAN/BEG
FEB USD 11.90 8 DYS SHTNC - POSCO.
14.WATERFORD 140000/10 PORT HEDLAND/DUNKIRK WEST AND EAST 1-10 FEB USD 7.55
80000C/25000C - BHP.
15. VAKIST 130000/10 ORE NOUDHIBOU/RDAM 15-30 JAN 6 D SHINC HIGH USD 3
(COBAM).
16. CAPE OCEANIA 120000/10 TUBARAO/KAOHSIUNG MID FEB 40000 SHINC/38000 SHTNC
USD 10.90 (CSC).
17. CAPTCOSTAS 110000/10 ORE WEST AUSTRALIA/QINGDAO PPT SCALE/10000 C LOW
USD 5 (JINDALEE).
18. CHINAGATE 90 65656 DELUS.GULF MID JAN TRIP REDEL FAR EAST USD 10250+140000
BB (PANOCEAN).
19.PROPONTIS B80 61632 WHEAT DEL USG15-23 JAN TCT REDEL
EGYPTIAN MED USD 8250+13 5000BB (AWB).
20. ARCHANGELOS B76 60250 DELPTCARTIER EARLY JAN TRIP CONTI USD7750+100000BB
(DRYFUS).
21.SEORA’87 55,000 MOP VENTSPILS /CHINA 10-16 JAN USD 10.50 10 DAPS (M&M).

************

279
 ANNEX- ……..
CHARTERING FINAL YEAR
EXPLANATORY NOTE

TANKER VOYAGE CHARTER PARTY - ASBATANKVOY

1.0 Students are now well aware that a voyage charter is entered into by oil traders and.oil
companies to meet their spot requirements. Special cases of voyage charters are the
contracts of affreightment (COA) and consecutive voyages^ In a voyage charter the charterer
bears the cargo handling expenses, all other expenses, viz. voyage related (fuel, port
disbursements, canal tolls etc.), operating expenses (crewing, stores, spares, repairs,
insurance etc.) and. capital costs (Interest, insurance etc.) are borne by the owner. Therefore,
in a voyage C/P, the voyage charterer does not have the same range of liabilities as a time
charterer has.

1.1 As of date there are quite a few tanker voyage charter parties existing, the oil majors
have formulated most of which. ASBA II, ASBATANKVOY, SHELLVOY5, BEEPEEVOY 3,
EXXONVOY 90 and INTERTANKVOY 76 are the ones widely used in the trade. However,
ASBATANKVOY formed by the Association of Shipbrokers and agents remains to be a popular
one. A copy of this C/P has been provided at the end of this lesson, which you would have to
use throughout this chapter. Students are advised to go through all the clauses. A discussion
on the important ones is appended below:

2.0 PART - I:

2.1 This section consists of the general items like Description and Position of the vessel,
Laydays/Cancelling, Loading and Discharging ports, Cargo, Description of. cargo, Freight Rate,
Laytime and Demurrage.

2.2 The above are common to all contracts and form the basis of the C/P. For instance,
laydays/cancelling would provide the spread of dates during which the vessel has to present
herself at the first or sole load port. The Cargo is specified as a minimum or with a margin,
say 30000 ± 10 % charterer's option. The Description would include the number of grades to
be carried with special qualifications like heating if required.

2.3 The Rate is expressed in Worldscale terms, as a lumpsum or simply in dollars per ton
basis. Generally all tanker charter parties provide for a laytime of 72 hours, though of course,
same can be amended as per agreement between the parties.

3.0 PART - II

3.1 Clause 1: Warranty

3.1.1 Under this clause the owner provides a warranty for sea-worthiness of the vessel
and an assurance that she would proceed with utmost despatch. The clause also places onus
on the charterer that the vessel lies always afloat.

280
3.2 Clause 2: Freight:

3.2.1 The clause provides for payment of freight on the 'intake quantity'. This in effect
means the Bill of Lading quantity. Sometimes for crude oil two sets of figures are calculated,
gross, what has been actually loaded and net, which is the gross figure less the quantity of
water and sediment in the oil. The gross quantity is used for freight calculation because it is
the total weight carried which is of importance to the owner. Also, the freight will be paid on
what has been loaded and it is quite irrelevant as to what has been discharged. The quantity
is to be determined by utilising the services of an independent Inspector who is paid by the
charterer.

3.2.2 The implication of this clause is that if part of the cargo loaded is lost, the ship owner
is entitled to only freight pro-rata on the quantity delivered, unless the contract is for a lump-
sum freight. The freight payment provision of ASBATANKVOY is in effect for lump-sum freight
only. Note that freight has to be paid on. delivery 'of cargo' and not 'the cargo'. Which means
that freight has to be paid on delivery of any amount of cargo. Lump-sum freights are always
payable in full and not paid only if no cargo is delivered. Pro-rata is only paid when the vessel
is unable to load the agreed cargo quantity.

3.2.3 The clause also makes it clear that no deductions are permitted from freight except
for disbursements made. However, charterers now add certain clauses for deductions from
freight. These could comprise of additional insurance on the cargo due to vessels age or
class or the value of any reachable and measurable cargo remaining on board which the
vessel is unable to. Pump

3.3 Clause 3: Deadweight :

3.3.1 Deadfreight is payable if the agreed quantity of cargo is not supplied. In other words,
whether full cargo is supplied or not freight is payable in .
full.

3.3.2 The important aspect is to establish the quantum of deadfreight. The issue is further
complicated when more than one grade is shipped. In such a situation the tank sizes and
segregations for each grade have to be considered. If there is a tolerance of ± 10 % in owners
option, the measure of deadfreight will be based on the maximum parcel size, i.e. 110 %,-
provided ship can accept.

3.3.3 To determine the exact quantity of deadfreight, first of all the maximum possible
loading as per draft and loadline restriction has to be determined. From this figure is deducted
the bunkers, water, lube and stores on board. If the quantity obtained is more than the
quantity loaded, the difference is the deadfreight. This figure can be cross-checked by
comparing the mean draft on sailing with the applicable mean draft of the voyage. The
difference between the two mean drafts, multiplied by the appropriate TPI will correspond to
the deadfreight calculation.

3.3.4 Another factor that has to be considered while calculating deadfreight is the specific
gravity of the cargo. The SG would establish how much of cubic capacity of the cargo tanks
was needed to load the cargo and how much remained unused. The lesser of the deadweight
calculations and the cubic calculations will be the deadfreight.

281
3.4 Clause 6: Notice of Readiness:

3.4.1 Students should read the clause and understand the following case study:

3.4.2 The vessel Petr Schmidt was chartered on ASBATANKYOY form and besides the printed
Clause 6 there was an additional typewritten clause which read as follows-

'Vessel not to tender notice of readiness at loading port prior to laydays-unless

charterers give their consent to do so. Notice of readiness at loading and discharging
port is to be tendered within 0600 and 1700 hours local time'

3.4.3 The dispute was regarding commencement of laytime when NOR is tendered outside
office hours stipulated in the C/P but the vessel is ready to load or discharge cargo at times
notice given.

BACKGROUND:

Load Port

Arrived 0800 - 6th Aug 1994. Tendered NOR at 0001 - 9th Aug 1994 Berthed 0040 -
10th Aug 1994

Loading commenced 0200 - 10th Aug 1994

First Discharge port

Arrived and NOR tendered 1800 - 16th Aug 1994

Berthed 0750 - 17th Aug 1994
Discharge commenced 1345 - 17th Aug 1994

Second Discharge Port

Arrived and NOR tendered 1800 - 18th Aug 1994

Berthed 1150 - 19th August 1994
Discharge commenced 1740 - 19th Aug 1994

The owners contended that the laytime commenced as follows:

a) At 1200 on 9th Aug at the loading port, that is six hours after the first moment when
NOR was permitted to be given according to the additional clause.
b) At 0750 on 17th Aug at the first discharge port, that is at the time of berthing which
occurred before the expiration of six hours after the first moment when notice of
readiness was contractually permitted.
c) At 1200 on 19th Aug at the second disport that is six hours after the first moment
when notice of readiness was contractually permitted.

3.4.4 The arbitrators decided that the Notices of Readiness, although they were not given
during the hours stipulated by the charter, were not legal nullities and took effect so as to
commence laytime, in accordance with Clause 6, six hours after 0600 in the morning of the
day they were given.

282
3.4.5 The charterers appealed and submitted that NOR given outside specified hours was
invalid and a nullity. They argued that giving of a timely NOR was a condition precedent to
running of laytime.

3.4.6 Held, the clause did not say in terms that a NOR given outside the contractual hours
would not merely prevent laytime from starting but was to be regarded as a nullity so that a
second notice of readiness would be required.

3.4.7 The charterers in the present case had fastened that any notice which did not confirm
to the contract was an invalid notice and that any invalid notice was a nullity and thus of no
effect. The Court did not think that they were. The ship was ready when the notices were
given. They were notices which stated the truth, namely that the vessel was ready to load or
discharge as the case might be. The only thing wrong about them was the time they were
tendered, which was outside the contractual hours as specified in the contract. To say that
such notices were invalid and must therefore be nullities begged the question. They were
accurate but noncontractual in the sense that they were outside the contractual hours. That
did not make them invalid in the sense of being nullities. Timing provisions had nothing to do
with whether notices were nullities. It was only if a notice was untrue that it made sense to
say that it was invalid in the sense of being a nullity. The appeal was dismissed.

3.5 Clause 9 - Safe Berthing – Shifting:

3.5.1 This is an extremely important clause of the C/P. It may be noted that the clause clearly
states that the berth where the vessel has to load or discharge shall be "reachable" on arrival
besides the same has to be "designated and procured" by the charterer.

3.5.2 Therefore, if the vessel cannot get to berth for some reason related to the charterer's
inefficiency or weakness, there is no doubt that the time so lost would be on charterers
account. However, at times the vessel could be delayed for reasons over which the charterers
have no control. Such instances are a major cause of disputes. One of the leading cases in this
context is of Laura Prima (1982). The gist of the case is provided below:

" The vessel arrived at Loadport on 27th November 1978 but could not proceed to
berth as they were occupied. There was nine days delay as she had finally berthed on
6th December. It was a fact that the charterers were not responsible for congestion at
the load berth, nor was it in any way within their control. The dispute was whether
Clause 6 or Clause 9 should apply. As per Clause 6, laytime is to commence 6 hours
after tendering of NOR, berth or no berth. However, where delay is caused to vessel
getting into berth after giving NOR for any reason over which charterer has no control,
such delays shall riot count as laytime.

The case went to arbitration and the umpire decided that the charterers had
protection under clause 6. The case then went to appeal and the decision was
reversed. The judge stated that the last sentence of clause 6 only applied and
prevented laytime from running if the charterers had complied with their obligation
of designating a berth reachable on arrival as per clause 9. The charterers could only
be protected if the berth so designated become un-reachable, due to some
intervening event, at a later stage i.e. after being designated.

283
 The charterers further appealed and it was Held that, clause 6 was a general exception
in favour of the charterers which applied to any delay provided it was beyond the
charterers control. Later the House of Lorcls reinstated the judge's decision and the
judgement stated- the word 'berth' in the penultimate line of clause 6 meant a berth
which has already been designated and procured by the charterer's in accordance with
their obligation under clause 9. Therefore the charterers were responsible for the
delay".

3.5.3 It is quite common now to add the Conoco Weather Clause to C/Ps, which reads as
follows:

'Delays in berthing for loading or discharging and any delays after berthing which are
due to weather conditions shall count as one half laytime, or, if on demurrage, at one
half demurrage rate’.

3.5.4 The owner's argument is that this clause should be narrowly construed to apply to
only to delays in getting into a berth which has already been designated by the charterer in
accordance with the charterer's obligations under clause 9 of Asbatankvoy. Furthermore,
owner argue that the clause does not apply where the charterer has not as yet met its
overriding obligation to procure a cargo for the vessel as well as its duty of procuring a berth
reachable on arrival.

3.5.5 In the case of the Alaska, the fist delay occurred from 23^ December to 27th December
1994 before the vessel's turn to berth had arrived, and before the berth had been designated
and procured by the charterer. The intended berth was occupied when the NOR was tendered
and the Alaska was third in queue. Here the charterer could not be excused for delays getting
into berth and the Conoco Weather Clause does not go far enough to change the rule as
provided in clause 9, i.e. to procure and designate a berth, Therefore the demurrage need not
be reduced to one half of the rate.

3.5.6 The second delay from 1st January to 16th January was in a different category. The
berth had become available, but its use had been lost for reasons other than bad weather.
The burden of proof that the delay was on account of bad weather lay on the charterer.
Actually there was a serious problem in furnishing the cargo, the product of the tank which
had been sampled was found to be off spec. Though adverse weather did prevail during this
period and a berth was available, there was no cargo to load. An adverse weather clause does
not provide protection to a charterer in such a situation.

3.6 Clause 8 – Demurrage :

3.6.1 The clause lists out the circumstances when demurrage would payable at half the rate.
This-should not be construed to mean that only 50 % of the time would count for demurrage
payment. Actually the full time counts but is charged at 50 % of the full demurrage rate.

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3.6.2 Students are now well aware of the expression - 'Once on demurrage, always on
demurrage'. The only exception to this strict rule is that if the parties have agreed that periods
excepted from laytime should also be excepted from the demurrage period.

NOTE: STUDENTS MAY PLEASE REFER TO APPENDIX NO. ……. WHEREIN THE PRINTED
CHARTER PARTY FORM OF ASBATANVOY IS PROVIDED.

*******************

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 ANNEX- …….
CHARTERING FINAL YEAR

WORLD TRADES : CARGO AND COMMODITIES

& TRADING RESTRICTIONS
1.0 INTRODUCTION:

1.1 It is essential that those engaged in dry cargo chartering have a good working knowledge
of relevant world trades and the maritime environment in which they operate.
1.2 This chapter aims to set out essentials, although daily working efficiency in this important
commercial shipping activity will be greatly enhanced by the use of:
(a) A Maritime Atlas {such as "Lloyd's Maritime Atlas" or 'The Ship's Atlas").
(b) A set of Maritime Distance Tables (such as "Reed's").
(c) A book on Maritime Geography.
(d) A Load-line Map (sometimes contained in Maritime Atlases).
(e) An Institute Navigational Limits Map (published by Wither by Seamanship
International Ltd. ISBN 1 85609 316 6).
(f) A book on Port Information (Fairplay and Lloyd's each publish such a book, whilst
there is also a similar publication by "Shipping Guides", the publishers of "The
Ship's Atlas").
(g) A good Shipping Dictionary of Shipping International Business Trade Terms and
Abbreviations, published by Wither by Seamanship International Ltd.
(h) Shipping magazines and newspapers, also your daily newspaper. Have an
enquiring mind and seek out the ___location and activities of a strange port, the use of
an unfamiliar commodity, its carriage requirements, etc.

2.0 THE DRY CARGO TRAMP TRADES:

2.1 There are many dry-cargo tramp trades, some international, some local. Because of the
diversity of the background of this book (where, for example local trades affecting those in the
Eastern Mediterranean will not particularly affect or interest those involved in local trades around
Japan and Korea and vice versa) the intention of the following pages is to concentrate on
internationally important trades routes and commodities. This will be tackled in two stages. First
from the aspect of a commodity (perhaps of most interest to a charterer or trader in that
commodity), and secondly from the aspect of type/size of vessel (i.e. from the Shipowner's, Ship
Operator's viewpoint).
2.2 You should set yourself the task of reading fixture and market reports that appear in shipping
publications and, from these, you will learn of some of the major ports involved in the shipment and
delivery of any particular commodity, as well as the speed of cargo handling at ports involved and
the preferred size of vessel.

3.0 CARGOES FOR SHIPS:

3.1 The three major seaborne trade dry-cargo commodities (in terms of volume) are iron ore,
coal and grains, in that order. You will have learned about the ships that carry such cargoes earlier
in this book. It is now necessary to complete that data with consideration of the actual trades
arranged around these three major commodities.
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3.2 The information that follows is largely historic and will be affected from time to time by
political and natural events. China's membership of the WTO (World Trade Organization) together
with a simultaneous relaxation of its internal political system, saw it become an aggressive
importer of raw materials and exporter of manufactured goods.
3.3 There was a surge in world demand for steel products that saw steel prices double in the
period 2004/2005. Consequently demand for coal and iron ore also increased. In many cases
demand from one country could not be satisfied by its nearby trading partners, and new
suppliers were sought from further abroad.
3.4 This led to a need for more ships because the longer voyages involved means that each ship
makes fewer voyages in a year and so overall carries less cargo than used to be the case. An increase
in tonne/miles is the driving force behind the rising freight rates that were witnessed since 2003
and before the recent slump.
4.0 Iron Ore: Ore in its various forms comes mainly from developing nations, such as Brazil,
Venezuela, West and South-east Africa and India, also from advanced nations such as Australia
and Canada and, to a lesser extent, from Scandinavia. The receiving end of such voyages is almost
always one of the major industrialised countries, such as in Europe, the United States of America,
China or Japan.
4.1 However, raw, unrefined ores are frequently partly processed into commodities such as
sinter, pig iron, pellets or concentrates, often at processing plants in developing nations, before
being carried onwards in other ships to their eventual destinations.
4.2 The advantages of this first processing stage taking place in the country of origin are therefore
threefold. The exporting country earns vital foreign exchange as a result of the added value, the
importing country saves the cost of this processing stage and the iron content of the cargo is
considerably increased saving freighting costs.
4.3 In the modern port of shipment for iron ore, cargoes are loaded at great speed, usually by
a chute fed by conveyors, with the ore dropped from a great height. Trimming is rarely required in
modern bulk carriers as installations are usually flexible enough to distribute the cargo fairly
evenly in cargo holds during loading. You will often find the stipulation in chartering negotiations
that the cargo has to be 'spout-trimmed' at loading port. Because of the speed at which large
bulkers are loaded, they require the facility to change trim rapidly to preserve their safety, and high
capacity ballast pumps are usually fitted for this purpose. Also frequent draft checks may be
required as the vessel nears full cargo, and allowance should ideally be made for the time taken on
such surveys in the charter party laytime clauses.
4.4 Discharge of iron ore in all except the smallest ports is handled by sophisticated equipment,
although the one common element is the grab. Having said that, it is not possible to describe the
many systems available, which vary from the common slewing crane to highly specialized
transporters. To some extent, the method used will depend on the type of inland transport being
used, but the appetite of the steel industry is voracious, and speed of turn-around is essential.
Consequently, it is not unusual for cargoes in excess of 200,000 tonnes of iron ore to be loaded and
discharged within a few days, perhaps at rates approaching 50,000 tonnes daily.
4.5 The system utilized for weighing cargo during discharge is equally variable, although a large
proportion goes through hoppers where it can be weighed in transit.

4.6 Major sources of iron ore exports are:

Brazil: Ponta do Ubu, Tubarao, Sebetiba Bay
Venezuela: Orinoco ports
Mauretania: Nouadhibou
Liberia: Monrovia

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 South Africa : Saldanha Bay New Mangalore,
India: Mormugoa Datmpier, Cape Lambert
Australia: Seven Islands
Canada:
Sweden: Lulea
Norway: Narvik
4.7 It is difficult to predict future development in the iron ore trades, because a number of
nations possess very large reserves that have yet to be exploited. This is largely due to the cost
and the inaccessibility of the deposits but, as the more easily tapped resources decline, the incentive
will increase to develop new supplies. Much will then depend on the political will of the countries
concerned as to whether they wish to take advantage of the high technology available
internationally.
5.0 Coal: Coal is not one simple substance but arises with many different chemical and physical
properties which, in turn, make the different types and grades suitable for a wide variation of uses.
5.1 The two most important consumers of coal from the chartering aspect are those intending
to use it as a primary fuel and the electricity industry is naturally the biggest in this group. The other
is the steel industry which converts the coal into coke for use in blast furnaces.
5.2 Coal is found in varying quantities on all continents and in many countries. The areas which
produce an exportable surplus, however, are led by the United States of America, Australia, South
Africa, Canada, Russia and China. Exports from the United Kingdom (once a major exporter) have
dwindled almost to extinction, and Polish exports are far less than a decade ago. However, new
sources are being exploited, with Venezuela, Colombia and Indonesia seeming set to become
major players in this market arena.
5.3 The patterns of shipment are dictated by the consumption of the main industrial centres
of the world, with Japan and the EU nations predominant in this respect. However, the volume of
imports does not necessarily bear any relation to the overall consumption of coal because, in
Western Europe, for example, a large portion of requirements is obtained from indigenous sources.
Japan is far less fortunate in this respect, needing to import much coal and iron ore to serve its
industrial requirements.
5.4 Geographical and economic factors also play their part, with the result that Europe receives
its major imports from the United States, with Japan and the Far East relying more on sources in
Australia, Western Canada, China and Eastern Russia and, to a certain extent, South Africa.
5.5 When considering the demand for coking coal and iron ore, it will become obvious how
the health of the tramp market depends on the success or failures of the steel industry. In theory,
therefore, a recession in steel making would automatically have a knock-on effect on the demand
for bulk carrier space. But, as always, the situation is not necessarily so simple. Often at such
times, it is found that a counterbalance is provided by, say, an increase in demand for grain.
5.6 The main ports of loading for coal in the United States are in the area known as Hampton
Roads, particularly the ports of Norfolk and Newport News, as well as nearby Baltimore and
Philadelphia. Significant quantities also originate in the huge Mississippi River basin, being exported
via New Orleans and Mobile, in the United States Gulf, also via Long Beach and Los Angeles from the
United States West Coast.

5.7 The traditional Australian coal exporting ports are in New South Wales, comprising
Newcastle, Port Kembla and Gladstone. However, during the past decade huge deposits have
been exploited in Queensland, and ports such as Hay Point and Abbots Point have been
established, trading to and from these ports being facilitated by the discovery of deep-water
navigation channels (e.g. Hydrographers Passage) through the Great Barrier Reef.
5.8 South Africa has greatly enhanced its exportation potential by the opening of the specialised
Richards Bay terminal near Durban, whilst Canada now has the Port of Robertsbank, near
Vancouver.

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5.9 Russia exports from the Black Sea but importantly, as part of an expanding trade, via the Far
Eastern port of Vostochny {near Vladivostock), handily placed to meet the demands of Japan and
Korea. China is also developing its coal exports, mainly from northern Chinese ports, such as
Qinghauangdao (Chinwangtao), but coal exports are set to become increasingly important from
Asian nations with Indonesia gearing up its production and export facilities and coal is occasionally
exported also from Vietnam.
5.10 India, once an important exporter through its eastern port of Calcutta, now requires
internally all the coal it can produce and is an important customer for Australian coal, which is
usually transported to India in ships fitted with self-discharging capabilities to overcome
inadequate port facilities on the sub-continent.
5.11 The future of coal is reasonably bright despite its main disadvantage when compared with
oil as a primary fuel in that the transportation of coal from source to consumer is more complex. To
this must be added the need for more sophisticated appliances for burning it (many power stations
have to grind coal to fine dust before putting it into the furnace) and then there is an ash disposal
problem. Nevertheless, coal is obtainable from so many different areas that it cannot be used as a
political weapon as we have seen happen with oil.
5.12 Coal is usually brought to the loading port in rail wagons then loaded via a chute or conveyor.
Discharging is normally by shore cranes equipped with grabs. Much thought is devoted to
speeding up the handling process and self-unloading carriers may be one answer but they are, by
their very nature, of higher capital value and thus we are back again to cost. It may well be that
experiments with transportation in slurry form, or other methods of liquifying coal may be
successful and permit tankers to carry coal, although there are many problems to be overcome
before this will be commonplace, if ever.
5.13 It is not possible to generalize on methods of inland transportation of coal either prior to
shipment or after delivery although, in view of the large quantities handled, probably rail or canal
transport will be utilized. Like so many bulk commodities, one major problem is that of storage
space and, since land in industrial areas tends to be expensive, it is usually vital that such space is
kept to a minimum. This necessitates an efficient system of co-operation between the mines,
inland transport, loading facilities and the Ship-owner, perhaps being more vital in respect of coal
industry than any other. It is, in fact, generally supposed that the expression "subject stem"
originates from the coal trade, when it became necessary first to secure a ship on this "subject"
before finalizing the whole operation to provide that vessel with her cargo.
6.0 Petroleum Coke tends to be considered as part of the coal 'market' but, as the name implies,
it is in fact a by-product of oil refining. It is exported from those areas where major refineries exist
in particular from both coasts of the USA including the US Gulf; Europe and Japan are the major
importers.
6.1 It is produced in various grades depending upon the design of the refinery and is not the most
popular of cargoes with owners. Some types are granular (up to about 5mm) and are rather oily
whilst others are very fine and cause a dust problem.
6.2 It has several uses because it is a source of almost pure carbon and one of its principal
applications is in the manufacture of electrodes for use in the refining of aluminum.
7.0 Grain. As it applies to ocean transport, grain includes wheat, rye, corn, sorghums, barley,
oats, rice and oil seeds (the latter although not technically 'grain' is considered such from a
chartering point of view).
7.1 A pattern of grain trading has emerged during the 20th century, main producers being China,
Russia, India, The United States, Canada, France and Argentina. Much of this production is
needed close to home, however, and major exporters are the United States, Canada, Australia,
Argentina and France. Major importers at present are Japan, China, the EU, North African countries
and the Middle East, Brazil and, above all, Russia, in addition, there are specific emergency trades
developed to areas of the world where local famines and disasters occur, often organized by the
World Food Agency, part of the United Nations.

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7.2 The largest phenomenon of the post-war decades, however, has been an ever-growing trend
in former developing nations, as their prosperity has increased, to refuse to be content with eating
bread, rice or maize as a staple diet and to seek instead meat, or meat products, poultry and eggs.
This evolution, translated into transportation and grain logistics, has created fundamental changes
in trade.
7.3 Cattle and poultry feeds are mainly supplied by corn, sorghum, barley and other coarse
grains, in addition to soya beans and other oil seeds, and a combination of them all by way of
derivatives such as meals, expellers and oil cakes. The main exporters of these products are the
United States, Argentina, Brazil and Thailand. Among the heaviest importers: Russia, the EU, Japan,
China and Taiwan.
7.4 In the main grain loading ports of the world, the cargo is brought to seaboard terminals by
rail, road or barge. The sophisticated and developed nations have an internal network of country
elevators, which are in effect collecting points for local harvesting centres. These are linked to the
seaboard with an intensive bulk grain transport infrastructure, rail sidings, specialized grain hopper
railcars, bulk grain road transport or special grain barges where river transport is appropriate.
7.5 Where storage is inadequate, surplus stocks are held in a variety of alternative facilities,
temporarily modified and pressed into service e.g. redundant factories.
7.6 Terminals at sea ports are mostly modern and use high-speed elevators, equipped to unload
inland transport and transfer the commodity into ships.
7.7 Any port congestion, which seems a recurring problem in grain, is due to greater demands being
placed on the internal and seaboard elevator capacities than can possibly be accommodated, due
often to commercial pressures or to grain price structures. When you realize that an average
loading rate in North American ports, for example, is between 10,000 and 20,000 daily, it can be
seen that the major cause for congestion is not within the capacity of the shore equipment.
7.8 As far as discharging is concerned, methods vary considerably. In locations such as the EU
and Japan, discharge may be performed by static or travelling suction unlades. Some, however,
may be bucket elevator type. Conveyor belts are used to transship the grain from ocean-going
vessel coasters or to inland transport to store in associated grain silos.
7.9 In Venezuela and parts of South Korea, discharge of grain may be effected by the use of
portable Bulkers (SKT machines) held vertically into the vessel's holds by the ship's gear, and
discharged direct to road transport.
7.10 The usual method that is employed by many countries is that of discharging by crane and
clamshell grabs into hoppers on the decks, feeding direct to road transport, or from hoppers to
sacking machines, with the bags being stacked in adjoining warehouses. There are also portable
suckers (Vacuvator type), small pneumatic vacuum cleaner type machines on wheels, lifted onto a
vessel by shore cranes or ship's gear, and moved on deck from hold to hold. In some ports using
this method, the grain can either be bagged by hand on the dock side and stacked in a warehouse
or stored there in bulk. Vacuvators are powered either by internal combustion engines or
electricity.
7.11 In some of the more primitive ports, grabs are fitted to ship's gear and grain discharged in
bulk, as already described when using shore cranes. There are still some ports where grain is sacked
in the holds and discharged by sling {either by shore cranes or ship's gear), as is often the case with
aid cargoes to famine-affected areas.

7.12 Ports through which grain is exported include:

United States: Mississippi River delta, Houston, Baltimore, Norfolk, Seattle, Portland
(Oregon).
Canada: Thunder Bay (Great Lakes), Churchill (Hudson Bay) Montreal, Quebec Sorei (Upper
St Lawrence River), Seven Islands, Baie Comeau (Lower St. Lawrence River).
Australia: Fremantle, Bunbury, Esperance, Adelaide, Portland, Geelong.

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 Argentina: Rosario, Buenos Aires, Bahia Blanca.
Brazil: Santos, Rio Grando do Sul.
France: Rouen, Le Havre.
7.13 Where nations with poor inland facilities are involved, and this is usually the case with
aid cargoes, bags are frequently the only practicable method of moving grain about. Consequently, the
grain may be loaded in bulk and bagged later at the destination port, or bagged at the start of
the journey, in the loading port itself. These bags are usually of the size that can be conveniently
moved by manpower alone, e.g. 50 kiios each.
7.14 Charter parties will often include a clause that extra bags are to be carried (usually free of
charge) in case of damage or splitting of bags when they are moved, as well as in some cases, the
carriage of needles and twine, so that bags can be filled and fastened, to prevent spillage of their
contents.
7.15 It is unusual these days for more than one grade of grain to be carried in the same cargo
compartment but, where this is required, separations will have to be employed, usually
tarpaulins, or some similar material, great care being taken to avoid a mixture of separate
commodities. Responsibility for the risk and cost of this exercise (cost of labour as well as cost of
material) should be considered, negotiated, and entered in the contract.

8.0 Agricultural Products:

8.1 These are many and varied but from a volume point of view the most important is probably
sugar.
9.0 Sugar is carried in sea-going vessels in either its raw bulk state, usually cane sugar but very
occasionally beet sugar, from an area of production to a refining site (e.g. Tate & Lyle cane sugar
from Mauritius or Fiji to the Silvertown Refinery on the River Thames, London); or refined, usually
bagged sugar, from a refinery to a consuming nation. Many exporting nations of bulk raw sugar
employ mechanical installations where the product is carried on a moving band before dropping
through a spout into a vessel's holds. Sometimes spreaders are used to distribute the sugar in those
holds, thereby improving the trimming and obtaining a better stow.
9.1 Discharge of bulk raw sugar is effected by grabs, the contents being dropped into hoppers
that empty onto a moving band via a weigh tower into the refinery, storage area, or onward
transportation vehicle.
9.2 Many tropical areas produce and export bulk sugar, e.g. from the Caribbean and the North
Coast of the South American Continent (e.g. Barbados and Georgetown, Guyana); from the islands
of the Indian Ocean {Mauritius and Reunion); from Southern Africa (e.g. Swaziland) via ports such
as Durban; from Bangkok, Thailand; from Fiji; from the Philippines; from Queensland (Australia);
and from Brazil (e.g. Santos or Recife). Major importers include the United Kingdom, France and
the United States of America.
10.0 Cassava (tapioca) is another prolific tropical plant, although for seaborne purposes, by far
the largest exporter is Thailand; exports being through the port of Bangkok (to 26 feet fresh depth
of water) or, more frequently given the size of vessels engaged in this trade, via Kohsichang,
downriver of Bangkok, where large ships can load. Thailand ranks only seventh in terms of world
production but, from an exporting point of view, has 80 percent of the market, much of its exports
destined for EU animal feed purposes. With constant world-wide pressure to reduce or eliminate
altogether grants and subsidies to farmers, this trade may change dramatically, but whilst the EU
is geared to maintaining grain prices at high levels to protect domestic producers, it will remain
economically attractive for European animal feed compounders to substitute cheap imports of
protein and energy feedstock suchas cassava for eventual food . for pigs and cattle, rather than
use the more expensive locally grown grain.
10.1 Whereas large vessels, commonly panamax or capesize bulk carriers, are used for the
transportation of cassava from Thailand to the EU, other nations in the area, eg. Malaysia and
Indonesia, commonly use handy-sized bulk carriers of around 20/40,000 dwt. to carry a variety of
291
agricultural products in each shipment (usually separated "naturally" hold by hold) for such as
copra derivatives, cassava, etc;) the reasons being twofold. First, the shore-based industry is not
so mechanised as in Thailand and, secondly, the ports are not so deep-drafted and well-equipped
with loading equipment as is Kohsichang. In fact, a vessel engaged in the carriage of "agri-prods"
from Indonesia may need to load at several ports to obtain a full cargo.

11.0 Forest Products:

11.1 This is the name given generally to any wood derived product. Just like the other trades, forest
products can be divided into those appertaining to raw materials and processed goods.
11.2 Raw Materials: In trading terms, raw forest products can be sub-divided between
roundwood (logs); sawn timber, pulpwood, and woodchips. The main receivers of these diverse
materials are Europe, the Far East and North America, with around half the world's requirements
being met from North American and Scandinavian origins; although there is a thriving log trade from
the West Coast of South America, where Chile is a major exporter.
11.3 Those areas supply principally softwood and we have to turn to tropical and sub-tropical areas,
such as Central America, Guyana, Brazil, West Africa, India, Burma, Malaysia and Indonesia for
hardwood sources. There is no set pattern for hardwoods as, unlike softwoods which are fast
growing and so can be produced as a crop in readily accessible areas, hardwood trees are dotted
around various forests, are more difficult to locate, having to be individually felled and transported
to an exporting ___location. Consequently, hardwoods tend to be shipped as liner parcels, although
there are full cargoes in this commodity, principally from West Africa and from the River Amazon
basin.
11.4 Softwoods are frequently sawn before shipment and an increasing amount moves in sawn
condition direct to a convenient distribution place in an importing area, rather than to sawmills
located in those receiving regions.
11.5 Nothing is wasted and the sawdust and general remains from sawmills, termed "woodchips",
are also in demand for various wood products, eg. paper, chipboard, linerboard, etc. and a major
trade exists in this commodity from the West Coast of North America to Japan.
11.6 Incidentally, the expressions 'hardwood' and 'softwood' relate more to the type of tree
rather than strictly to the actual hardness or otherwise of the wood. For example, Balsa wood which
is the softest and lightest of all woods is technically a 'hardwood'. Conversely, Columbian pine
which is a favorite material for the part of a quay that has to take the shock of a ship coming
alongside is actually a 'softwood'.
11.7 The future of the hardwood trade is not clear because there is enormous pressure from
conservationists to reduce its use. Most hardwoods take many decades to grow to maturity so
that much of such timber being exploited is, to all intents and purposes, a non-renewable resource
and such trees are a vital element in reducing the 'greenhouse' effect.
11.8 On the other hand, softwoods, which are the firs, larches and pines, tend to be 'farmed'
under strictly controlled conditions so that in most producing areas the total amount is being
increased rather than the reverse.
11.9 There is a considerable trade in illegal hardwoods in most areas where they grow. In some
instances illegal goods from one country are often shipped from a neighboring state and
described as originating from there. Once this trade was 'overlooked' by officials but there has
been a noticeable trend to crack down on this practice in parts of Asia. As a result, intended
cargoes from some of the more suspect exporters might not actually materialize when shipment
is due and so some care should be exercised in ascertaining the legality of cargoes before
committing ships to carry them.
12.0 Processed Material: Here there is a very wide variety, ranging from plywood through to
newsprint.
12.1 This latter product is especially valuable and susceptible to mishandling damage and so
much of the trade is conducted in specially designed vessels engaged in long-term contracts. The
main exporting areas are Canada {both East and West) and Finland. Naturally, winter conditions
can cause disruption, particularly when ice affects the St. Lawrence River and the Gulf of
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Bothnia. As a result, those vessel's engaged in this trade need to be ice-strengthened.
12.2 Although unaffected by the ice difficulty, Western Canadian exporting terminals are
frequently beset by heavy rainfall and newsprint has to be kept dry at all costs.
13.0 Linerboard: A product in heavy demand for the packaging and carton manufacturing
industries is supplied mainly from North America, especially the US Gulf and the West Coast, also
from Scandinavia.
14.0 Fertilizers:
14.1 There can be little doubt of the importance of the various raw materials and finished
products covered under this heading when you realize that twenty-five years ago India, with its massive
population, was heavily reliant on the outside world for supplies of grain. It is now quite rare to see
grains being imported into that nation, a circumstance brought about almost solely by the use of
fertilizers. Similar improvements in agriculture through the use of fertilizers may be found in most
developing countries.
14.2 The three main chemicals required for plant growth are nitrogen, phosphate and potash.
All three occur naturally, but nitrogen is usually manufactured today as a by-process of the oil and
chemical industries. Chile is the main source of nitrates and this natural commodity is still in demand
because of its other constituents, such as iodine.
15.0 Sulphate of Ammonia and Ammonium Nitrate are examples of manufactured nitrates,
and a valuable agent in their production is sulphuric acid, a product which also finds a use in a
large number of other manufacturing processes. Although there are specialised molten-sulphur
carriers and tankers capable of transporting sulphuric acid, by far the majority of sulphur is moved
in dry-bulk state and converted into sulphuric acid "on-site".
16.0 Sulphur is obtained naturally in many parts of the world, particularly from Sicily (Gela)
and from Western France (Bayonne), whilst the US Gulf was once a major exporter. Now,
however, much sulphur is obtained as a by-product of the oil and gas industries and forms a major
export from Western Canada, from Poland and Northern Germany, from Libya and Syria in the
Mediterranean, and from the nations of the Arabian Gulf.
16.1 Some importers use it to up-grade their own products. For example, Morocco enhances
the quality of its exploitation of vast natural phosphate deposits by using imported sulphur to
manufacture stronger and more valuable Di-Ammonium (DAP) and TriDle-Super Phosphate (TSP).
17.0 Phosphate is found all around the African coastal nations from Togo in West Africa
northwards via Senegal (Dakar) and Morocco (Casablanca, Jorf Lasfar, Safi), to Tunisia (Sfax and
Gabes), the latter national also being engaged in the manufacture and export of Ammonium
Nitrate.
17.1 Other prolific exporters of phosphate and its derivatives are Jordan (via Aqaba) and Egypt
(El Hamrawein), certain of the Pacific Islands (eg. Christmas Island) and also the South Eastern
United States (from the port of Tampa) which also exports upgraded material such as DAP and TSP.
The USSR is also an exporter, via Murmansk (where it may be called apatite) and overland through
Finland (where Russian mono-ammonium phosphate (MAP) may be exported via the port of
Kokkola).
18.0 Potash can be shipped naturally (especially from Israel, Jordan and from Canada), or as
manufactured potassium chloride.
18.1 All these fertilisers, whether natural or manufactured, need care in handling, although most
can be carried in safety whether bagged or in bulk, giving rise to the oft-encountered expression
"BHF" - "Bulk Harmless Fertilizers".
18.2 Part of the reassurance of the word 'harmless' dates back to the early days of transporting
ammonium nitrate in bulk before such processes as 'calcining' this material had been perfected.
Without this treatment, a large quantity of ammonium nitrate in bulk can, under certain
conditions, become spontaneously explosive which was tragically proved when a US Gulf port was
almost destroyed many years ago.
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18.3 This problem is now so well understood that very many fertilizers are completely 'harmless'
from the "dangerous cargo point 6f view. However, the IMD'G' Code should always be referred to
especially if more than one type is to be loaded because some otherwise harmless fertilizers are
incompatible one with another.
18.4 Of course, Ship-owners need to be aware of the non-dangerous harm that certain
fertilizers can do. Some can have a damaging effect on the paintwork in the holds whilst others
can cause severe corrosion to unprotected steel.

19.0 Steels:

19.1 Under this heading is a considerable variety of cargoes, ranging from material such as bars,
rods and beams, through to plate, coils and pipes.
19.2 As may seem obvious, steel products emanate mainly from the major industrialized
nations both for cross-trading to others and for the developing nations. However, there is a major
trade around semi-processed materials such as pig-iron, concentrates, direct-reduced iron, etc.
wherein developing nations (e.g. Brazil, Chile and Peru) have a role to play.
19.3 From the other end of manufacturing processes come scrap metals which also form an
important seaborne commodity, the scrap being recycled in the steel industry and form
relatively inexpensive ready material around which some steel industries have been developed.
19.4 The main scrap trade used to be concentrated on the US, Japan, Korea and Taiwan routes
where electric furnaces for steel making were fed with scrap rather than ore. However the world
demand for steel is such that in recent years many more countries are buying scrap steel for
recycling.
19.5 The trade is not restricted to any particular vessel size and ships used range from small
coasters to handy and handymax size vessels.

20.0 Minerals:
20.1 Other than iron-ore and natural fertilizers, there are very many other minerals carried
at sea, some forming an important volume trade. One such is bauxite, the staple constituent of
the aluminium industry, the raw materials being exported in large quantities from West Africa
(Guinea) and from Brazil in particular, to various aluminum smelters world-wide, eg. in Canada,
Venezuela and the UK/Eire.

21.0 SHIPS FOR CARGOES: Dry-cargo vessels can be divided into various size and type
categories, of which those of major importance are:
21.1 Capesize: These vessels (of around 100,000/200,000 tonnes dwt) are, of course, limited very
much by port restrictions and they concentrate on cargoes of iron-ore or coal on long-haul runs,
operating principally from loading areas in Australia, South Africa, Brazil, West Africa and the United
States and Canada, discharging mainly in the Far East and Europe.
21.1.1 Not all vessels operating in this size category are pure dry-cargo vessels; many
combination carriers, principally "VLOOs" (Very Large Ore-Oilers) transferring into the oil trades
when the opportunity arises or out of the oil trade when freight levels are uninviting.
21.2 Panamax: These ships of around 60,000/80,000 dwt are arguably the new "workhorses" of
the dry-cargo trades and many port facilities have been upgraded in recent years to accommodate
ships of these dimensions.
21.2.1 This process is continuing (eg. Iraq's deepening of the channels to and from the ports of
Khor Al Zubair and Umm Qasr to around 12 metres) and as it develops, so the range of commodities
these vessels regularly engage in carrying can widen still further. Most Panamaxes are pure bulk
carriers, although they have to compete with OBOs in the Atlantic when economic circumstances
dictate, and the availability or otherwise of these "invaders" from the oil industry can have a
profound effect upon the state of the dry-cargo market.

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21.2.2 The main trades for Panamaxes are the "big three" of bulk coal, iron ore and grain,
although Panamaxes may be found carrying other commodities, notably bulk phosphate, cassava
from Thailand (along with capesize vessels), and bauxite. Thus these vessels will be found world-
wide, although their market divides into various regions:
(a) The Atlantic Basin
(b) The Pacific/Indian Ocean Basin
(c) From Atlantic to Pacific/Indian
(d) From Pacific/Indian to Atlantic.
21.2.3 Of these it is usual to find the highest returns being paid for cargoes from the Atlantic to
the Pacific/Indian Oceans with the lowest in the reverse direction, this imbalance created by
normally higher freight levels for trans-Atlantic trades over trans-Pacific trades.

21.2.4 A major trade route comprises that of grain from the US Gulf to Japan and this rate is a
major contributor to the freight futures market operated by BIFFEX (The Baltic International
Freight Futures Exchange) and a ready barometer of the health of the dry-cargo market. In
recent years freight rates have fluctuated from as low as US$10.00 up to US$73.00 per ton for
this particular trade and this alone serves as a ready indicator of the volatility of the dry-cargo
freight market, and for Panamax rates in particular.
21.3 Handy-Size: These are really two categories of "handy-sized" bulk carriers, those around
20/30,000 dwt and those between 30/55,000 dwt. The larger category emulates the trading pattern
of Panamax bulkers, but adds to its fist of carriage able commodities the major trade of steels and
scrap, and forest products. As a result, many of these vessels are relatively sophisticated, with a
variety of deck gear of up to around 25 tonne cranes, etc. The smaller vessels have an even wider
range of commodities and are in especial demand for regions of the world with restricted
dimensions, eg. the Great Lakes. There is no regular pattern for these smaller bulk carriers as can be
identified for their larger competitors, and they tend to be found in all parts of the world engaged
in the carriage of any number of commodities.
21.3.1 Around handy-sized bulk carriers what is termed "parcelling" has developed, and
frequently operators will hire ships of this type and size to load various commodities in adjacent
holds from a variety of nearby ports to another, general destination, eg. Australian minerals to
Europe.
21.4 Tweendeckers: Most modern deep-sea tweendeckers range in size around 20,000
deadweight, although there are still very many vessels in this market of around 12/18,000 tonnes dwt.
This latter fleet is generally ageing, however, and their modern counterparts are frequently better
described as "multi-purpose" having the ability to fold tweendecks to convert to and compete with
smaller bulk carriers. The modern versions of this category are in demand for liner traffic from the
Far East and for the more sophisticated trades ex Europe, whilst the older versions are the true
"tramps" of today's dry-cargo market, scouring the world's oceans for whatever profitable cargo is
around, frequently engaged in the carriage of bagged fertilisers, grains and agricultural products and
occasional bulk commodities, eg. sugar.
21.4.1 However, just as tweendeckers compete for the cargoes that might otherwise be the
exclusive ___domain of smaller bulk carriers, so those buikcarriers can be used for what were once
considered exclusive tweendeck "liner" trades, as more and more of the liner trades that remain
after the deprivations associated with containerization develop more of a "parceling" attitude to
the services they advertise, for which bulk carriers are perfectly suitable.
21.5 Short Sea: Enterprising modern short sea owners are not necessarily restricting
themselves to coastal trades, and it is not uncommon to find small vessels of. Less than 10,000 tones
trading far afield from their normal operating area. In fact they provide a valuable alternative
shipment means to parceling for those shippers and traders seeking a more personal involvement
in the carriage of their commodities. This process has been aided by a general move to ship smaller
commodity parcels and by the removal of crewing restrictions by various governments. There is
no reason why it should not become more common in the years ahead for smaller vessels to be
found around the world in a purely "tramp" capacity, having been enticed away from their normal
waters by an attractive freight.

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22.0 TRADING RESTRICTIONS

22.1 Quite apart from the commercial aspects of marrying ship and cargo, those engaged in the
dry cargo chartering market must bear in mind certain other factors which affect trade, namely:
(a) Navigational
(b) Political
(c) Labor
(d) Ports

22.2 Navigational Restrictions: Obviously, climatic influences affect trade and a clear example is
that ice will interrupt voyages at certain times and seasons of the year. Thus seaborne trading to and
from the Great Lakes of North America is not possible between January and March. Trading to the
Northern Baltic is at the very least difficult during that period and voyages to and from the Hudson
Bay are possible only between July and October each year.
22.3 There are many other hazards to be borne in mind, however, e.g. Monsoons in certain areas
at certain times, Hurricanes or Typhoons at others.
22.4 Close attention must also be paid to the route between loading and discharging port(s). Does
it entail the crossing of load-line zones? Will these affect cargo intake? Does it entail expensive
pilotage? Passing round an obstacle such as the Magellan Straits or Cape Horn, or navigating via a
Canal? Has the cost and risk of this element in the voyage been calculated?

22.5 Major canals and waterways affecting dry cargo trades will be found to be:
Suez Canal
Panama Canal
St Lawrence Seaway/Great Lakes System
Magellan Straits/Cape Horn
Cape of Good Hope
Malacca/Lorn bok/Sunda Straits
Straits of Hormuz
Red Sea/Gulf of Aqaba-Eilat
Torres Straits/Great Barrier Reef
Kiel Canal/Skaw
Pentland Firth
Dover Straits/Engiish Channel
Straits of Gibraltar
Dardanelles/Bosphorous
22.6 Consult your maritime atlas to familiarize yourself with the ___location of these places.
22.7 At the same time, locate the following landmarks used in dry cargo trading, particularly as
delivery/redelivery positions in time charters:
22.8 Cape Passero (Sicily) Cape Finisterre (N.W. Spain) Ushant (France) Dakar/Douala (West
Africa) Baton Rouge (River Mississippi) Rosario, Santa Fe (Argentine) Muscat (The Gulf) Dondra
Head (Sri Lanka)
22.9 Reference to the Port Information books will provide details of canal and waterway size
restrictions also the equipment that needs to be fitted on a vessel before transit. Certainly vessels
time chartered for either trip or period charters involving any of these canals or waterways should
include clauses in which the Shipowners/operators confirm that the vessels.
22.10 Panama and Suez Canal, include the Canal Gross and Nett Registered Tonnages which
differ from the usual NRT and GRT and upon which transit tolls are based.
23.0 Political Restrictions: Most shipping people tend to have an "international" and a "commercial"
view of the world and its events rather than a political one. Nevertheless, the ports of certain nations
are not popular calling places, because of future repercussions affecting vessels and their
owners/operators as a result of trading there. It is, therefore, common practice to list certain
political exclusions in time charter parties and those engaged in voyage trading should also be
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especially careful in fixing cargoes to or from those nations.

23.1 Examples of areas that have been sensitive in recent years are:

1) Israel: Because of likely black-listing by Arab nations for future trading. As a result it is
common practice for time charterers and for those engaged in voyage business involving Arab
nations, to negotiate and to insert in charter parties an "Arab boycott clause", under which
the Shipowner confirms that his vessel is not boycotted (blacklisted) by Arab nations as a
result of previous visits to Israel.
2) Libya: Under Libyan law, all documents appertaining to ships and or cargoes must be
translated into Arabic. Trading with Libya involves heavy extra costs for translations.
Additionally, Libyan customs are likely to search vessels for any sign of goods or
equipment involving nations (e.g. Israel) of which they disapprove and, if such are
discovered, impose heavy fines against the vessel. Consequently, Libya is not a popular
calling place.
3) Cyprus ports under Turkish control: Greek flag ships have been prohibited by their
Government from trading to those ports since the Turkish invasion of Cyprus some years ago.
Similarly, the Greek Government is not willing to permit other nations' vessels to call at
Greek ports after trading to Turkish-controlled Cyprus. As a direct consequence, Greek-flag
ships are not always welcome to trade to Turkey itself and, although little official ruling is
declared over this by the Turkish Government, it will be found that some Turkish-bound
cargoes are not fixable in Greek tonnage. However, with Cyprus now a member of the EU
and Turkey invited to enter negotiations for membership, it might be expected that this
situation will soon change.
4) Cuba: The USA has relaxed its ban on vessels trading to Cuba, although Cuba is still
mentioned in some charter parties as an exclusion "for vessels that have traded to Cuba since
1962....". The restriction is gradually being lifted since it is a relic of a bygone age, but it can
still cause occasional problems.
5) North Korea: There are few signs remaining of countries actually boycotting North Korea
but some owners are still reluctant to have their ships ordered there.
6) There are other ports where local problems of a political nature occur. In certain cases
it may not be wise to have on board crew members of particular nationalities. Even the
nationality of the eventual owners of a vessel may create problems despite the actual flag
the vessel flies being acceptable. For example, Liberian flag ships and vessels owned by
Liberian corporations are not welcome in Syria.
7) It is vital that those engaged in international trading keep abreast of the news and especially
international news. There is little that is read about in daily newspapers that will not
have at least an indirect effect on international shipping. This is especially so in political
and in economic matters.
8) Also try to avoid being inadvertently impolite. If a nation renames a port, for example,
it would be good manners to address communications to the new name. Hence "Saigon" is
now known as "Ho Chi Minn City". Polish people prefer "Swinoujscie" to be so-named rather
than the Germanic "Swinemunde". "Hamburg" and "Rostock" are now part of "Germany" not
"West Germany" or "East Germany". Iranian people prefer the Gulf to be called the
"Persian Gulf rather than the "Arabian Gulf, whilst citizens of Bahrain would prefer the
latter.

24.0 Labour restrictions: Also contained in the "trading exclusions clause" will be nations entered
because of labour rather than political restrictive factors. Prominent among these are Australia and
New Zealand (usually collectively termed as "Australasia") and "Scandinavia". (Be careful with this
latter expression as some people consider that the term "Scandinavia" includes "Finland" and
others (especially Finns) do not.
24.1 The reason for these exclusions is that the nations involved in these two areas (including
Finland) are strongholds of the International Transport Workers' Federation, known as the "ITF".
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This is an international organization set up to assist seamen to maintain wages and conditions
at certain levels. The ITF demands that Shipowners internationally should comply with these
restrictions but, in general, the ITF is concerned mainly with vessels flying so-called "flags of
convenience" (eg. Panamanian or Liberian), as they allege that the conditions of the crews
aboard such vessels is frequently below those standards set by the ITF.
24.2 In those nations listed above, the ITF {supported by local unions) may have the power to hold
vessels until the wages and conditions are brought up to their requirements, including backpay to
which the crew may become entitled. For vessels flying some flags of convenience, Australasia,
Scandinavia and Finland may be excluded.
24.3 Another stringent union requirement in Australasia and Finland, and in certain parts of
Scandinavia, is that dry cargo vessels must be fitted with hold-ladders conforming to a certain style
and dimensions, as defined by the Waterside Workers' Federation. These require that, for every
six-metre drop in the ladder, a resting platform must be constructed. It is not always necessary
providing that cargo compartments are completely clean and when loading bulk cargoes that can
be "poured" into those compartments, for vessels to have ladders of that design.
24.4 However, if there is any problem with cargo holds and the workers are required to descend
into the compartments, they will do so only if the ladders conform to the established design.
25.0 Port Restrictions: Once again reference to Port Information books is essential to gauge
just what is involved in a prospective voyage. Many ports have "hidden" restrictions that are
only discovered by appropriate reference. Douala (Cameroon) for example, is what is termed a
"neap port", where tidal levels change dramatically every week or so, meaning that at certain times
a vessel may be prevented from berthing for some days due to insufficient water. Safi (Morocco)
has a harbour bar which, at times when Atlantic Ocean roller waves are predominant, means
extreme difficulty for ships of certain drafts in entering the port. Particular berths in Genoa (Italy)
have an air-draft restriction, not a physical restriction, but one nonetheless rigorously imposed by
the port authorities because of the danger to aircraft overflying the port area to and from Genoa
airport. Many ports on the west coast of South America are badly affected from time to time by
steep waves causing wide ranging damage to ship and/or berth. In Butterworth (Malaysia) berthing
priority is given to gas tankers, so much so that a partly discharged or loaded vessel may have to
leave the berth to the gas tanker, returning only after the tanker has completed its cargo
operations.
25.1 Port restrictions are not necessarily only dimensional. The hours that ships are "worked"
by port labour, holidays, etc. all need consideration. BIMCO (The Baltic and International
Maritime Council) publish an annual "Holiday Calendar" listing world-wide national and local
holidays and port working hours, a valuable tool in any shipping office.
25.2 Port costs also vary widely. The charges in some ports are subsidised in order to attract
business, whilst others have to be self-supporting and profitable. The costs vary enormously, often
not only between adjacent countries, but between ports in the same country.
25.3 Let us take as an example a Panamax bulk carrier that might trade to various European
countries and the approximate port charges that might be imposed assuming, or course, that
exactly the same ship, flag and crew is involved:

US$
Rotterdam 60,000
Hamburg 65,000
Bordeaux 80,000
Helsinki 170,000
Liverpool 160,000
Southampton 160,000
Port Talbot 65,000
Lisbon 15,000
Genoa 35,000

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25.4 As can be seen there is quite a disparity. The secret, of course, of avoiding unpleasant
surprises is to check before fixing. One means is from reference books, such as produced by
BIMCO and others. Alternatively, and the means favoured by many in the industry, via a local port
agent.
25.5 Apart from port costs, another charge that might be encountered is that of freight taxes.
These can be extremely high, Syria imposes something like 13% of freight, Turkey not far behind
at over 10%. These are imposed on the recipient of the freight, not the organization paying,
although it may be deducted at source by local law. To complicate matters, there are bilateral
agreements between nations over the imposition of freight taxes so that not all Shipowners/
operators are required to pay, or need to pay only a part of the total cost to the ships of "non-
approved nations".
25.6 Most freight taxes are imposed against the vessel's flag, but some against the nation of the
recipient of the freight, ie. perhaps a disponent owner in the case of a time chartered vessel.
25.7 As for port costs, forewarned is forearmed and allowance for this deduction can be included
in the costing of the exercise when considering the business, BIMCO again publish a useful aid, an
annual book on world-wide freight taxes and exemptions. Otherwise it is another message to the
local port agent.
26.0 TIME:
26.1 Time is vital to the work of a dry cargo shipbroker, whether working under time-constraints
when negotiating charters; maintaining contact with, for example, principals, brokers or ship's
Masters; calculating time charter duration; or establishing estimated dates of arrival of ships.
26.2 However, it is important to understand how time is "calculated".
26.3 On a global basis, 'Time" can be said to start at the Greenwich Meridian, which passes
close to central London and which is taken to be zero degrees or 0°. From this starting point,
imaginary lines of longitude are drawn, westwards and eastwards, for 180° each making a total of
360° for a complete circumference of the globe. Therefore, if three hundred and sixty meridians (or
lines of longitude) are drawn from pole to pole at equal intervals, they will be 1 ° of longitude apart.
Starting from the Greenwich Meridian and travelling eastwards {towards India), time "advances" one
hour for every 15° of longitude. A complete circle of the Earth coming back to the starting point of the
Greenwich Meridian, will take 24 hours (i.e. 360 -f 15) and time will have "advanced" by 24 hours, or
by one day. Westwards from Greenwich (towards the United States) will have the reverse effect. One
hour will be lost for every 15° and upon returning to the Greenwich Meridian, one day will have
been "lost".
26.4 Where those tracing eastwards and westwards passages meet "half way round" at the
180° meridian (in the central Pacific Ocean) is located the imaginary International Date Line (or
"IDL") for short, which is not completely straight, taking minor deviations so as not to bisect small
islands or affect land masses.

26.5 By travelling eastwards across the "eastern hemisphere" from the Greenwich Meridian,
local time advances hour by hour until 180° East or the "IDL" is reached, at which stage one is 12
hours ahead of "Greenwich Mean Time" (GMT for short). Moving in the opposite direction from the
Greenwich Meridian across the "western hemisphere", one "loses" 12 hours in reaching 180°
west.
26.6 Consequently, the date is one day earlier to the east of the "IDL" than to the west and
this, of course, affects vessels trading trans-Pacific. A ship proceeding eastwards from Japan
towards the North American Continent will therefore "gain" one day upon crossing the IDL. A
ship transmitting in the opposite direction will "lose" one day. It is important to take this into
consideration when calculating estimated dates or arrival and cancelling dates involving voyages
across the Pacific Ocean.
26.7 But wherever ships are in the world, if travelling generally eastwards or westwards, small
time differences are eliminated by adjusting clocks and watches by one hour, either forwards or
backwards, when passing from one time "zone" to another, these time zones being identified in the
world map of any good atlas.
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26.8 Most meridians are straight, but some, like the IDL are "bent" here and there so as to make
all one country (or state in the USA) in the same zone.

26.9 So exactly how is dry cargo chartering affected by "time"?

26.10 Perhaps most importantly during chartering negotiations. Ignoring daylight saving
schemes (such as the UK's "summer time", when time is advanced by one hour from GMT)
when it is 1200 hours in London it is 0700 hours in New York and 2100 hours in Tokyo. In any
of these centers a dry-cargo executive is in the middle of the working day when one of his
counterparts is between breakfast and the office and another is thinking of going to bed.
26.11 There is, therefore, little point in making firm offers with reply times where there is little
chance of principals being contactable. Cases of emergency are another matter and all shipping
people tend to be prepared to sacrifice sleep and convenience at one time or another.
26.12 It is, of course, vital to state in firm offers not only what the offer expiry time is, but in
whose time it is to be expressed. "Reply 1200 hours" could be misinterpreted. "Reply 1200 hours
London time" is clear.
26.13 More easily overlooked can be the time factor affecting time charter deliveries and
redeliveries. Let us assume that a vessel delivers on time charter in London for a trip to Bombay,
where she will redeliver. Let us also assume that the voyage will take exactly 30 days (720 hours)
and the daily hire rate of the vessel is US$9,000.
26.14 If the time charter party stipulates that delivery and redelivery are to be calculated in
'local' time, the effect would be that the vessel will remain 'on hire' for some five hours in excess of
the actual time taken and this can be of benefit to a vessel's owners, who will undoubtedly claim
extra hire of US$1,875 for those five hours. On the other hand, a vessel proceeding on the same
terms in the reverse direction will 'lose' five hours of hire, an advantage, therefore, to her time
charterers.
26.15 Those interested in equity will doubtless ask why a time charterer should pay more hire
than for the period a ship actually spends on time charter, or a Shipowner receive less than the
time a ship is hired out. In this they would echo current English Law on the subject, which has
established the principle of "elapsed time" perhaps more easily understood by most of us as "stop-
watch time".
26.16 To understand elapsed time, it has to be assumed that a stop-watch is started the
moment a ship delivers and time runs continuously (less any off-hire periods) until it is halted
upon redelivery. The time that has accumulated is the 'elapsed time' and is the legal period on hire,
unless the parties have specifically agreed in their contract to be bound by local times for delivery
and/or re-delivery.
26.17 Another way of achieving a time charter period based on elapsed or stop-watch time is
to apply a 'standard' to delivery and re-delivery, such as GMT. The important thing is to specify in
a time charter party whether local time or GMT is to apply to delivery and redelivery times. If the
charter party remains silent on this aspect, in the event of a legal dispute the result depends on
the legal code which applies to the contract, and there can be varying results. A recent American
arbitrator, for example, found that in the event of silence in the charter party, local time would be
deemed to apply. English Law, as explained above, would specify actual 'elapsed' time, or time
established by a common standard such as GMT at both ends of a time charter.
27.0 SALINITY:
27.1 Shipping executives should be able to understand how salinity calculations are performed
as they may expect to encounter ports where the cargo intake needs to be calculated, and where
the prevailing water may be salt, fresh or brackish (a mixture of both). As you know, a vessel in
fresh water will be deeper drafted than if she were in more buoyant salt water. Salinity affects
many trades, for example the Panama Canal is a freshwater canal, and the available draft so
expressed.

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27.2 Fortunately, the calculation is relatively simple, given the "freshwater allowance" (FWA) of
a vessel, usually shown on the ship's capacity plan and the density of the prevailing water in the port
or canal (obtainable from port information books or from the local port agent).
27.3 Assuming, for example, that the vessel's FWA is 200 mm and the brackish water density
is 1015 kg/m3, the application of the following formula provides:

FWA x (Density of Sea Water - Density of Brackish Water)

Density of Sea Water - Density of Fresh Water
200 mm x (1025-1015)
Therefore: increased Draft-------- — ----------------------
1025-1000
200 mm x 10
Therefore: Increased Draft = ----------------- --------
-
25
2000
Therefore: Increased Draft = -------
25
=80 mm
oooo
SELF-ASSESSMENT AND TEST QUESTIONS
Attempt the following and check your answers from the text:

1. Using your atlas, locate:

i) Cape Passero,
ii) Skaw,
iii) Torres Straits,
iv) Dardanelles

2. The following ports all have certain restrictions which should be taken into account when
contemplating fixing vessels to them. What are they?
Buenaventura
Toledo
Calcutta
Bangkok
Churchill
3. The m.v. "Whimbrel", a Lakes fitted, geared bulk carrier, performs the following
loaded voyages:
HOLLAND - GREAT LAKES
GREAT LAKES - VENEZUELA
U.S. GULF - W.C. MEXICO
U.S. WEST COAST - JAPAN
JAPAN - GERMANY
State the number of days the vessel would reasonably take to perform each laden voyage and
ballast leg; give the name of one loading and one discharging port in each area; state a probable
cargo and cargo size, (each cargo must be different) that the vessel could load on each voyage and
suggest suitable bunkering ports.
*********************
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 ANNEX- ……..
CHARTERING FINAL YEAR

BASIC GLOSSARY OF TANKER SHIPPING

Aframax A tanker ship with a cargo size of 79,000 - 120,000 DWT.

Agent Provides in-port services to the vessel, keeps Owners and Charterers updated on
vessels' movements in port and deals with local administrative matters.

Ballast Weight added to a vessel to increase draught and maintain the vessel in a safe
condition of stability when there is no cargo onboard. Water is usually used and
on tankers this is pumped into dedicated ballast tanks usually positioned in
compartments at the bottom of the vessel, or on the sides.

Bareboat Where a vessel is chartered for a period of time and where the hire payment
excludes crew and maintenance costs.

Bill of Lading A Bill of Lading (BOL) has three functions:

 a document signed by the Master of a vessel confirming receipt of a specific
amount of cargo.
 a contract of carriage where the parties are the Master and the Consignees.
 a document of title, the holder of which has legal title to the cargo stated in
the document. In many circumstances the BOL will be a negotiable
document that can be traded.

Brent Crude A type of crude oil sourced from the North Sea.

Brokers They bring business to ship owners and provide information about the market.

Bulk Cargo Unpacked homogeneous cargo poured loose or pumped into a vessel that can
be either dry or liquid e.g. oil and grain.

Bunkers The fuel used by ships.

Charter Party The contract between a ship owner and the charterer.

Charterer The ship owner's customer will be given the use of the whole carrying capacity
of the ship for a specified time (time charter or bareboat charter) or to carry a
specific cargo from certain port(s) to another port(s) (voyage charter).

CIF Cost, Insurance and Freight. Transportation term in which the price quoted by
the exporter includes the cost of ocean transportation to the port of destination
and insurance.

COA Contract Of Affreightment.

Consignee Company to whom cargo is consigned as stated in the Bill of Lading.

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Consignor Company named in the Bill of Lading as the one to whom the goods have been
received for shipment.

Contract Of An agreement by a shipowner to provide cargo space on a vessel at a specified

Affreightment time and for a specified price.

Crude A by-product of gas exploitation mainly used in chemical industry.

condensate
Crude Oil Oil in its natural state before refining.

Deadweight The weight a vessel can carry including cargo, bunkers, fresh water and stores.

Demurrage Liquidated damages paid by charterers to compensate Owners for exceeding

the time allowed under a charter party for load and discharge (see laytime).

Discharge The process of pumping the oil from the vessel to the receiving terminal.

Double Hull The hull has two layers to minimise the risk of spills especially in low impact
collisions/groundings.

Dry-dock Waterless dock allowing access to hull/propulsion mechanism when repairs or

servicing are required. Vessels are usually taken into drydock at 3-5 yearly
intervals.

DWT Deadweight Tonnes

FOB Free on Board. An export term. The price quoted by the exporter does not
include the cost of ocean transportation, but does include loading cargo onto
the vessel.

FPSO Floating Production Storage & Offloading. FPSO vessels are floating
production platforms which can store crude oil as it is extracted from the
bottom of the sea before delivering to export tankers.

Freight The money a ship owner is paid in return for carrying a cargo.

Full Summer The maximum weight a vessel can carry in the summer loadline zone.
Deadweight
Handy size Crude or product tanker with cargo size of up to 45,000 DWT

Hull The body of a vessel. Can either be single, double, double sided or double
bottomed.

Idle Days Time during which the vessel is unemployed.

IMO International Maritime Organization

IMO number A vessel's unique identification number issued by the IMO which remains with
the vessel throughout its life.

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Keel Longitudinal girder that forms the "backbone" of a ship.

Laden When a vessel is carrying cargo.

Laycan The dates between which the vessel must present herself at the first loadport.

Laytime The amount of time the charterer is allowed to use for loading and discharging.

Market Quote The initial quote of business received from a broker. Usually in the form of
Charterer name / Minimum Quantity / Route / Laycan.

Nautical mile 1 Nautical mile = 1.84 kilometres = 1 minute of latitude.

No-heat fuel Residual oil which does not require heating in transit.
oil

Off-Hire Time during which repairs are carried out on the vessel. This time is charged
to the owner's account.

OPEC Organization of Petroleum Exporting Countries. Includes Algeria, Indonesia,

Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela.

Orimulsion The name is the registered tradename of Petroleos de Venezuela SA (PDVSA)

for a mixture of 70% bitumen and 30% water.

Overage The amount of cargo carried by the vessel over and above the minimum
quantity stated in the charter party.

P & I Club Protection & Indemnity Club

Panamax The largest type of vessel that when fully laden can pass through the Panama
Canal with a cargo size of up to approx 80,000 DWT.

Product When oil is refined it is broken down into its chemical components which are
referred to as "products".

Single Hull The hull has only a single layer.

Small tankers Up to approximately 10,000 DWT, mainly used for product transportation.

Spot Fixture When a vessel is chartered for a single voyage i.e. voyage charter.

Statute mile 1 statute mile = 1.61 kilometres

Suezmax The largest type of tanker that when fully laden can pass through the Suez
Canal with a cargo size of between 120,000 DWT and 200,000 DWT.

TCE Time Charter Equivalent

TCW Time Charter Warranty

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Time Charter When a vessel is hired for a specified period of time. Hire payments include
compensation for crew and maintenance whichis provided by Owners.

Time Charter The amount of money earned in US$ per day on a particular voyage, net of
Equivalent commercial operation costs.

Time Charter Information provided by the owner of a ship giving a warranty on the
Warranty performance of a vessel including maximum speeds and fuel consumption.

Tonne Miles Tonnes of cargo multiplied by the distance transported. A measure of shipping
capacity or demand.

ULCC Ultra Large Crude Carrier, more than 320,000 DWT.

VLCC Very Large Crude Carrier, 200,000 - 320,000 DWT.

V-Plus Four vessels traded in the Tankers International Pool, built in 2002 and 2003
and each exceeding 441,000 dwt.

VPQ Vessel’s Particular Questionnaire. Provides detailed information about a

vessel.

West Texas A type of crude oil which is normally referenced in Western reports on oil
Intermediate prices

World Scale A universal basic freight scale used by ship owners to price their services
which changes with demand and supply.

WTI West Texas Intermediate

*****************

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 ANNEX-…….

CHARTERING FINAL YEAR

PRACTICAL GUIDELINES FOR CHARTERING

(DRY BULK CARGOES)
1.0 THE MAIN STAGES OF CHARTERING ARE AS UNDER: -
I. INVESTIGATION STAGE
II. NEGOTIATION STAGE
III. POST-FIXING FOLLOW-UP STAGE
2.0 THE BOUNDARIES FOR EACH STAGE ARE AS UNDER: --
I. INVESTIGATION STAGE - FIRM ORDER. CIRCULAR
II. NEGOTIATION STAGE - FIRM ORDER. COUNTER. CLEAN FIXTURE
III FOLLOW UP STAGE - DRAWING UP CHARTERPARTY- FINAL
SETTLEMENT OF ACCOUNT.
.
THESE STAGES ARE COMMON FOR BOTH VOYAGE AND TIME CHARTER.
3.0 THE DETAILS UNDER EACH STAGE ARE EXPLAINED AS UNDER: -

3.1 INVESTIGATION STAGE

A) BUSINESS IS FIRM - BEFORE MOVING A SINGLE STEP IN CHARTERING.
PRECAUTIONARY MEASURES SHOULD BE TAKEN TO MAKE SURE THAT
BUSINESS IS FIRM. I.E.. LETTERS OF CREDIT OPENED, DEAL BETWEEN
SELLER AND BUYER IS CONCLUDED. UNDERSTANDING OF THE TERMS
FOR SALE CONTRACT IS LINED UP I.E.. C&F. FOB. ETC.
B) FORMING THE ORDER FOR VOYAGE CHARTER - IT SHOULD INCLUDE
THE. FOLLOWING: ~
 NAME OF THE CHARTERERS (FCC. AL. DIRECT, ETC.)
 LOADING/DISCHARGING PORTS PLUS PORT LIMITATIONS IF ANY
 QUANTITY TO BE LOADED. STOWAGE FACTOR
 LOAD/DISCHARGE RATES
 LOAD/DISCHARGE TERMS (FHEX. SHEX. EIU,
UU. ETC.) LAYDAYS
 ANY RESTRICTIONS REGARDING TYPE/AGE OF THE
VESSEL (BULK CARRIER/TWEEN DECKER .... 15 YRS AGE)
 CHARTERPARTY PERFORMANCE (NYPE. GENCON. ETC.)
 TOTAL COMMISSION
 SHIPPING TERMS (FIOS. FILO. L1FO. FIFO).
C) FORMING THE ORDER FOR TIME CHATER
 NAME OF THE CHARTERER
 TYPE/AGE OF THE VESSEL
 LAYCAN
 INTENDED TRADE
 REQUIRED TIME CHARTER PERIOD
 PLACES OF DELIVERY/REDEL1VERY
 COMMISSION
 CHARTERPARTY

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 D) CIRCULATION OF ORDER - THIS DEPENDS ON MANAGEMENT'S
POLICY WITH FOLLOWING APPROACHES - EXCLUSIVE BROKER IN ONE
MARKET OR VARIOUS INTERNATIONAL CHARTERING MARKETS LIKE
LONDON- OSLO. HAMBURG. NEW YORK. HONGKONG, CLC. CONTACTING
OWNERS DIRECTLY. ADVISING FIRM ORDER TO A COMPETENT BROKER
HAVING SPECIAL EXPERTISE ON A PARTICULAR TYPE OF BUSINESS OR
A COMBINATION OF THE ABOVE.

3.2 NEGOTIATIONS - THIS IS NORMALLY DONE IN TWO STEPS

 FINALISATION OF THE MAIN TERMS

 FINALISATION OF DETAILS

3.3 NEGOTIATIONS ARE FOLLOWED BASICALLY IN FOUR STAGES

A) FIRM OFFER - THE STARTING OFFER NAMELY COVERS THE MAIN
TERMS AND OWNERS TEND TO OFFER HIGH FREIGHT RATES OR
CHARTER HIRE AND TOUGH TERMS TO GET CHARTERERS RESPONSE.
HOWEVER. ULTIMATELY THE OUTCOME DEPENDS ON THE
NEGOTIATION POWER OF THE PARTY BUYERS OR SELLERS MARKET.
B) COUNTER OFFER OR COUNTER -- COUNTER OFFER IS THE
CHARTERER'S FIRM AUTHORITY TO OWNERS. CHARTERERS
NORMALLY START WITH THE FOLLOWING WORDING.
"THANKS OWNERS FIRM OFFER WHICH CILXRTERERS DECLINE AND RE-
OFFER AS FOLLOWS"
BUT IF CHARTERERS DECIDE THAT OWNERS OFFER IS REALISTIC THEY
COUNTER BY USING THE FOLLOWING WORDINGS:
"CHARTERERS ACCEPT - EXCEPT AS FOLLOWS"
IN THE MIDDLE OF NEGOTIATIONS OWNERS OR CHARTERERS
MAY USE THE FOLLOWING WORDINGS:
•'REPEAT'LAST'- EXCEPT"
C) RECAP -- RECAP IS A FULL MESSAGE REPRESENTING THE MAIN TERMS
SO FAR AGREED AND SOMETIMES IT COVERS C/P DETAILS. RECAP WITH
THE SUBJECTS MEANS FIXTURE IS NOT FULLY CONCLUDED DUE TO ONE
OF THE FOLLOWING SUBJECTS:
- SUBJECT OWNER'S APROVAL OF CHARTERERS
- SUBJECTS CHARTERER'S APPROVAL OF OWNERS
- SUBJECT C/P DETAILS
- SUBJECT RECEIVERS APPROVAL
- SUBJECT PORT AUTHORITY APPROVAL
- SUBJECT STEM (A VAIUB1UTY OF CARGO)
- SUBJECT BOARD OF DIRECTOR APPROVAL.
IN ANY CASE A CAUTION SHOULD BE MADE TO ENSURE THAT
SUBJECTS ARE NOT "MISUSED".
D) DETAILS - NORMALLY THIS IS NOT REGARDED AS A REGULAR
NEGOTIATION WITH OFFER / COUNTER OFFER BUT RATHER AS A
DISCUSSION. NORMALLY NO TIME LIMITS ARE USED AND
PARTIES INSTEAD USES PHRASES LIKE -
"CHARTERERSSUGGEST THE FOLLOWING AMENDMENTS TO" AND
DISCUSSION GOES ON TILL FULL ACCORD IS ACHIEVED. THERE ARE
DIFFERENT LAWS GOVERNING DETAILS. AS PER ENGLISH LAW
UNTIL THE DETAILS ARE FINALISED THE FLXTURE IS NOT DEEMED

307
 FINAL. HOWEVER. AS PER AMERICAL LAW ONCE THE MAIN
TERMS ARE AGREED THE FIXTURE IS DEEMED FINAL AND EITHER
PARTY CANNOT UNILATERALLY WITHDRAW FROM THE FIXTURE.
E) CLEAN FIXTURE - FIXTURE WILL BE CONCLUDED FULLY ONCE
CHATERERS / OWNERS LIFT ALL THE SUBJECTS.

4.0 POST FIXING STATE -- THIS COVERS FOLLOWING POINTS/ FUNCTIONS:

A) CHARTERERS OR BROKERS TO DRAW C/P AND DISTRIBUTE IT TO
THE CONCERNED PARTIES.
B) TAKING THE NECESSARY ARRANGEMENT TO PAY FREIGHT AS PER
C/P FREIGHT PAYMENT CLAUSE OR CHARTER HIRE.
C) ARRANGING FOR FINAL SETTLEMENT OF ACCOUNT AFTER
COMING TO AN AGREEMENT WITH REGARD TO LAYTIME
CALCULATION ELC IN CASE OF VOYAGE CHARTER AND DELIVERY
/ REDELIVERY TIME / ROB BUNKERS / OFFHIRES ETC. NORMALLY
OWNERS DISPATCH THEIR FINAL FREIGHT ACCOUNT TO
CHARTERERS FOR THEIR APPROVAL FOR COMMENTS. SIMILARLY A
STATEMENT OF ACCOUNT IS SENT IN CASE OF TIME-CHARTER.

4.1 CHARTERING ACTIVITY

TIPS

- NEVER SAY YES TO WHAT YOU CAN'T DEFINITELY PERFORM

- NEVER SAY YES TO WHAT YOU DON'T FULLY UNDERSTAND
- NEVER MISS ON TIME LIMITS WHILE NEGOTIATION IS ON AND WHEN
LIFTING SUBJECTS
- BE EXTREME CAUTIOUS ON PRESENTATION CLAUSE
- NEVER OVER-DESCRIBE THE SHIP IN CASE OF TIME CHARTER
- EVALUATE EVERY ADDITIONAL CLAUSE CAREFULLY FOR COST AND
CONSEQUENCES
- TRY AND USE A CHARTER PARTY WHICH IS THE PRACTICE OF THE
TRADE
- FULLY INVOLVE YOURSELF (AS OWNER) IN CALCULATING THE NETT
TIME CHARTER YIELD AND DON'T BE CONTENT WITH FREIGHT RATE
ALONE.

5.0 POINTS TO BE REMEMBERED IN CHARTERING

1. DESCRIBE DESCRIPTIONS CLEARLY

2. COVER THE MARKET THOROUGHLY
3. STUDY MARKET TRENDS
4. BE CAREFUL ABOUT LOAD/DISCHARGE RATE
5. BE SURE ABOUT DEMURRAGE/DESPATCH
6. BE ACCURATE IN VESSEL PRESENTATION CLAUSE
7. UNDERSTAND ADDITIONAL TERMS IN C/P AND OTHER CONSEQUENCES
8. UNDERSTAND ALL ABBREVIATIONS
9. PREPARE VOYAGE COSTING

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 10. ARRANGE FOR FUNDS
11. ARRANGE NECESSARY DG SHIPPING/RBI APPROVALS
12. ENSURE PORT OF DELIVERY AND REDELIVERY IS WELL UNDERSTOOD

6.0 FORECAST OF CHARTER RATES

HIGHLY VOLATILE MARKETS, OFTEN TRIGGERED BY

SUDDEN EVENTS IN SOCIAL, POLITICAL, ECONOMICAL AND
AGRICULTURAL SCENARIOS. EVEN THE BEST OF THE
CHARTER RATE FORECASTS TURN OUT LIKE WEATHER
FORECASTS. THE BEST WAY IS TO KEEP REVISING FIGURES
AND KEEP SEEKING FINE TUNING-ON VARIABLES. SOME OF
THE IMPORTANT VARIABLES TO BE WATCHED ARE:
- OPEC DECISIONS
- POLITICAL STABILITY IN WEST ASIA GULF (WAG)
- SEVERITY OF WINTER IN EUROPE
- CROP CONDITIONS IN CHINA/LNDIA/CIS
- CANAL CLOSURES
- NEW BUILDING PRICES
- NEW MARITIME REGULATIONS (E.G. OPA ETC.)
- CLOSURE OF MAJOR PLANTS/REFMERIES/OILFIELDS/MINES
- ECONOMIC ACTIVITY AND POLICIES OF VARIOUS GOVERNMENTS
- SUPPLY/DEMAND BALANCE OF SPECIALIZED CARGOES

7.0 HINTS FOR CHARTERING MANAGER

DO THE FOLLOWING AVOID THE FOLLLOWING

SET A TARGET DATE PRIOR DON'T GET GREEDY
TO MARKET ENTRY
VOYAGE COSTING MUST DON'T AVERAGE OUTPORT COSTS.
CAREFULLY INCLUDE ALL VESSELS CALLING AT IRAN,
COSTS - PREFERABLY TURKEY OR JNPT MAY HAVE
HAVE PRE-DESIGNED
KEEP OPTIONS FOR SURPRISES
DON'T FORECLOSE ANY OPTION FOR SAKE OF
PROFORMAS
COPING WITH CONVENIENCE
STUDY THE CURRENT
UNEXPECTED DON'T BELIEVE RUMOURS REGARDING
MARKET RATES
VARIATIONS MARKET CONDITIONS WITHOUT. CROSS-
THOROUGHLY FROM
KEEP SUFFICIENT TIME CHECKING
DON'T EVER LIFT SUBJECTS IN ANTICIPATION.
VARIOUS SOURCES
FOR LIFTING SUBJECTS SURPRISES ARE COMMON AND COSTLY
DEPENDING ON COMPANY
POLICY

8.0 WHAT MAKES CHARTERING A SPECIAL ACTIVITY?

- CHARTERING IS CORE COMMERCIAL ACTIVITY FOR MERCHANT
SHIPPING
- TRULY INTERNATIONAL ACTIVITY WITH VERY FAST FLOWING
INFORMATION NETWORK
- RAPIDLY NEGOTIATED CONTRACTS WITH NO FORMAL MEETINGS
- HIGHLY STANDARDISED PROCEDURES WHICH ELIMINATE THE ERRORS
OF UNDERSTANDING BETWEEN OWNERS AND CHARTERERS FROM
DIFFERENT PARTS OF THE WORLD

309
9.0 CHARTERING PRACTICES INCLUDE

- ABBREVIATIONS
- TYPES OF STANDARD CHARTER PARTIES
- CHARTERER AND SHIPOWNER ~ SYMBIOSIS IN BUSINESS
- MARKET ENTRY
- NEGOTIATIONS
- FREIGHT V. LUMP-SUM RATES V. TIMECHARTER
- IMPORTANCE OF LAYCAN
- FIXTURE NOTE
- POST FIXTURE ACTION — HIRE, DEMURRAGE, VOYAGE INSTRUCTIONS
- IMPORTANT TIPS -- CHECKLIST OF DOS & DON'TS

10.0 PROBLEMS

VERY HIGH STAKES

FAST CHANGING MARKETS — EXAMPLE : OIL AND GRAIN

WORKING ODD HOURS

RESISTANCE FROM SENIORS FOR LIFTING SUBJECTS AT SHORT NOTICE

RISK IN LONG TERM FIXTURES

11.0 ADVANTAGES

THRILL OF GLOBAL SEARCH

TEST OF SKILL AND INTEGRITY

CONDITIONING TO WORK IN EMERGENCY CONDITIONS

REPUTATION REACHES THE TOP VERY FAST

ooooo

SELF-EXAMINATION QUESTIONS

1. WHAT STEPS ARE INVOLVED IN THE INVESTIGATION STAGE?

2. WHAT ARE THE STEPS AND STAGES INVOLVED IN NEGOTIATIONS?

3. WHAT ARE THE DIFFERENT TYPES OF "SUBJECTS" DUE TO WHICH A FIXTURE

MAY NOT BE FULLY CONCLUDED?

4. LIST SOME OF THE POINTS THAT YOU MUST REMEMBER AS A

TRAINEE IN THE CHARTERING DEPARTMENT.

5. WHY ARE CHARTER MARKETS SO VOLATILE?

**********************

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 ANNEX- ……..

CHARTERING FINAL YEAR

DRY CARGO SHIP TONNAGE, LOADLINES,

DIMENSIONS AND CARGOES

1.0 Tonnages and Loadlines :

1.1 When describing a ship it is quite common to hear people state that she is 'of so many tons', and
leave it at that. In fact, in shipping, the word 'ton' has many different meanings and ship tonnage can be
based on either 'weight' or on 'volume'.

2.0 Ship Tonnage Based on Weight:

2.1 The actual weight of the ship plus the weight of ail it is carrying is termed its 'load displacement tonnage'
or, simply 'displacement tonnage'. It is used to describe the size of certain ship types not built for cargo carrying
(e.g. icebreakers or naval vessels) but has little practical value in the dry cargo market.

2.2 The weight of an empty ship, its 'light displacement tonnage' or 'Idt' for short, is equally of
little value to dry cargo chartering personnel, although it is of particular interest to those engaged in the
sale and purchase of ships, for the ship demolition prices are based on this tonnage, which is used to
establish a ship's steel weight.

2.3 The two tonnage descriptions of particular value to the dry cargo market sector are a ship's
'deadweight' ('dwt'), which not only happens to be the difference between a ship's loaded and light
displacement tonnages but, more importantly, represents the total weight a ship can carry. This total
weight will include, of course, not only cargo, but bunkers, fresh water, stores, spare parts, etc. Those
engaged in chartering activities sometimes describe this tonnage as 'dwat', short for 'deadweight all told',
to distinguish it from 'dwcc', short for 'deadweight cargo capacity', which is found after deducting the
amalgamated weights of bunkers, freshwater, stores, spare parts, etc. from the vessel's 'deadweight all told',
dwcc therefore represents the quantity of cargo a vessel should be able to load.

2.4 It is usual to base references to deadweight on what can be carried when loaded to 'summer marks',
a vessel's 'summer deadweight' (occasionally expressed as 'summer freeboard') all of which expressions
can be found under the heading of 'Loadlines'. It is important to understand that when a dwcc is quoted
this is usually also based on summer marks and a full quantity of bunkers etc. In practice the dwcc is infinitely
variable depending on the weight of bunkers and spares and fresh water onboard. Consideration also has to
be given to any waste oil and water the ship is carrying since in most parts of the world these can no longer
be dumped at sea with impunity.

2.5 Loadlines may be referred to as 'Plimsoll marks' or 'Plimsoll Lines', after the British politician Samuel
Plimsoll who, in the late nineteenth century campaigned against Shipowners who loaded their ships to a
depth which endangered seamen's lives. Eventually, in 1890, a system of calculating and marking a safe
'freeboard' (the distance from the water line to the weatherdeck) was devised and adopted in the United
Kingdom, although it was not until 1930 that this finally became international law.

2.6 A drawing of the actual 'marks' is shown below and it will be seen that there are, in fact, six 'load
lines'. This is because account is taken of the world's geography and weather conditions in assessing the hazards
of any particular voyage, as well as whether a ship is transiting a salt or, technically safer, fresh water area. The
initials on the loadlines represent:

TF-Tropical Fresh
F-Fresh
T-Tropical
S-Summer

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 W-Winter
WNA-Winter North Atlantic

2.7 The actual loadline mark (the disc with a line through it) lines up with the summer load line
referred to earlier. On this mark you will see the letters 'A' and 'B'. These relate to the Classification Society
which surveyed the ship to determine the positioning of her marks and thereafter arranged for them to be
'cut-in' and painted on the side of the hull on behalf of the nation in which a ship is registered. In this case
the 'AB' stands for 'American Bureau', but there are many Classification Societies in the world and, from
these, common letters that might be seen could be LR (for Lloyd's Register), BV (Bureau Veritas), DNV-GL
AS (Det Norske Veritas-Germanischer Lloyd), and so on.

2.8 Loadline Certificates are issued based on the surveyor's calculations which must follow the rules laid
down in the Loadline Convention and without such a document a ship cannot trade legitimately. Most
Shipowners prefer the marks to allow the ship to load as deep as possible but there are occasions when an
Owner will opt for a "surplus freeboard" and put the mark slightly lower down on the hull. This might be
because the ship will trade to ports where charges are based on summer loadline draughts but the type of
cargo envisaged will mean that the ship will never load that deep. Reducing the draught thereby reduces
the port costs to be incurred.

(Lumber carriers referred to in Chapter One, are granted a second set of loadlines when carrying a deck
load of lumber, lumber loadlines', and can sail with reduced freeboard when so laden).

2.9 By international agreement, the oceans and waterways of the world are divided into 'loadline zones',
either permanent summer, winter or tropical, or seasonal summer, winter or tropical, depending upon the
prevailing weather conditions likely to be experienced at different times of the year. These zones are shown
on a special

2.10 Loadline Chart (published in the United Kingdom, for example, by the Hydrographic Office).

2.11 A ship passing through a summer loadline zone can load down to but no further than the top of
the summer loadline. The same arrangements apply for trading in winter or in tropical zones, but extra
allowance can be made when trading in what are assumed to be safer
freshwater conditions. Ships with an overall length of 100 metres or less, are further restricted when trading
in the North Atlantic Ocean in winter.
2.12 Great care must be taken when planning a voyage to think ahead and to avoid transitng a loadline
zone when too deeply laden to be able to comply with these international regulations.

3.0 Ship Tonnage Based on Volume:

3.1 IMO International Tonnage Convention: In 1982 a new international system of measurement for ships
came into force, under an IMO (The International Maritime Organization, part of the United Nations)
resolution. This applied immediately to all newbuildings, and from 1994 all existing vessels had to
conform to its provisions.

312
3.2 The resolution defines how a ship's internal volume should be measured in accordance with
standard international rules, resulting in 'gross tonnage' (GT) and 'nett tonnage' (NT). GT is roughly the
volume of all enclosed spaces, and NT is calculated after certain deductions for non-revenue earning spaces (e.g.
allowances for the bridge, engine room, crew accommodation, etc) have been taken from the gross figure.

3.3 As a result, GT is a measure of how large in volume a ship really is, and most safety regulations are
therefore based on this figure.

3.4 NT is more a measure of a ship's cargo spaces, and hence her earning capacity. Harbor and canal dues
and similar expenses are usually assessed against one or other of the tonnage figures.

3.5 Registered Tonnage: These (also known as 'national tonnages') applied to vessels built before
1982 and remained in use until 1994 when replaced by the new ITC system. This system also referred to
gross and nett tonnages commonly abbreviated to GRT and NRT do be aware that many people still confuse
these two measurements with GT and NT and it is important to clarify exactly which figure is being
referred to.

3.6 Canal Tonnage: Both the Suez and Panama Canal Authorities have their- own rules for the
measurement of gross and nett tonnage, upon which their fees for canal transits are based. There has been
talk of these authorities adopting the IMO tonnage but so far no definite decision has been taken.

3.7 Cubic Capacity: As we have already considered in Chapter One, when calculating cargo intake, not
only does a voyage estimator or ship's Officer have to consider deadweight and loadline zones, as well as
requirements for bunkers, etc. it is necessary to calculate how much cargo the hold spaces will
accommodate.

3.8 To do this, two measurements will be provided by shipbuilders for dry cargo vessels. These are the
grain and bale capacities which are used for measuring cargo space availability for bulk or for general (non
bulk) cargo. The measurements can be expressed in either cubic feet or in cubic metres; reference books such
as ships' registers (e.g. Lloyd's Register) frequently nowadays use the metric system. However, a large
proportion of dry cargo market practitioners still utilize cubic feet when describing the stowage properties of
cargo, and so it is important for all involved in this aspect of the industry to know that: 1 cubic metre = 35.3158
cubic feet, as conversion calculations from one measurement system to the other will frequently be required.

3.9 Grain Capacity is the capacity of cargo spaces measured laterally to the outside of frames, and
vertically from the tank tops to the top of the under weatherdeck beams, including the area contained
within a vessel's hatchway coamings. Grain capacity is therefore an indication of space available for any bulk
cargo, not just for bulk grain.

3.10 Bale Capacity is the capacity of cargo spaces measured laterally to the inside of frames or of cargo
battens (where fitted), and vertically from the tank tops to the underside (or bottom) of the under
weatherdeck beams, but again including the area contained within a vessel's hatchway coamings. Bale
capacity is therefore an indication of space available for other than a bulk commodity e.g. bagged or baled
goods.

3.11 The grain capacity will usually be greater than a ship's bale capacity although the short sea vessel
described in Chapter One, and built with one, box shaped smooth sided cargo hold, for example, will have one
common cubic measurement, identical for grain and for bale capacity.

3.12 In trading, dry cargo ships are frequently described in different ways. RO/RO tonnage might be referred
to in terms of available 'lane-metres', for example, or a containership by the number of "teu's" or 'feu's" it is
capable of handling. Depending upon the cargo, however, general cargo ships and bulk carriers might be
described in terms of summer deadweight or grain capacity or, more probably in the case of general cargo
ships, in terms of bale capacity,

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3.13 Table 2.1 - Comparison of Tonnage Measurements
Tonnage General Cargo Bulk Carrier Container

Nett 5,000 25,000 8,000

Gross 7,000 36,000 15,600
Deadweight 12,500 54,000 17,000
Load
Displacement 18,000 72,000 23,000

4.0 Paragraph Ships:

4.1 Many shipping regulations are based on gross or on deadweight tonnage. Shipowners therefore
construct vessels to take advantage of regulations that place differing requirements on vessels above or below
certain sizes, hence ships of 499 or of 1599 gross tons, for example, are popular. Such ships are known as
'paragraph ships' because they take advantage of a 'paragraph' of the regulations. The latest example of
this is the Common Structural Rules developed by IACS and applying to bulk carriers and tankers exceeding
150m in length.

5.0 Plans:

5.1 A merchant ship is likely to be equipped with no less than 200 plans. Usually a full set will be kept
onboard, and a further set in the Owner's office. Shipbrokers will need to familiarize themselves with two
plans containing much important data, since it may be necessary to obtain data from these particular
plans in order to conclude fixtures and/or to prosecute voyages. These plans are known as:

a) the General Arrangement Plan AND

b) the Capacity Plan (including Deadweight Scale)

5.2 The former plan shows the design of the vessel, the layout of her equipment, cargo spaces, etc. and
her dimensions. It should show a profile, a plan and a midship section. It should also state the scale to which
it has been drawn, and this enables distances between parts of the vessel to be measured and calculated
from the plan's data. Most ship plans are drawn on the scale of 1/200 (that is that one centimetre on the plan
equates to 200 centimetres on the ship). But this is not always the case. Smaller ships will have plans drawn,
perhaps, 1/150, and large, 'capesize' vessels 1/300. It is therefore essential that the scale is always checked
prior to performing measurement calculations as an error at this stage can cause serious practical
difficulties.

5.3 The Capacity Plan provides details of capacities of cargo compartments, bunker and water tanks,
etc. The plan will include a Deadweight Scale (see alongside) which enable drafts and displacements to be
calculated by relating one to another. Draft* can, therefore, be used as an indication of the weight of cargo,
stores, bunkers, etc. that the ship has loaded or discharged. The draft of the ship itself can be established by
checking the level of the water against the figures painted on the ship's bows and stern.
(*NB You may encounter the spelling as 'draught').

5.4 For some bulk cargoes, this is the method used to quantify or check the amount of cargo loaded.
When this is the case, it is usually carried out by an independent surveyor and called a 'draft survey'.

6.0 Dimensions:

6.1 We have already encountered some important dimensions in this and the previous Chapter. To
recap:

6.2 LOA (Length Overall): The extreme length of a ship, from fore to aft.

6.3 Beam: The width of a ship. It is important to establish the 'extreme' length and breadth of a vessel,
to ensure that passages in confined waterways are possible and that it is physically feasible for a vessel
to enter certain ports.

314
6.4 Draft: The depth of a ship in the water. (A floating ship will be deeper in freshwater than in salt. The
difference is shown on the Deadweight Scale as that vessel's 'freshwater allowance'.

6.5 Air Draft: Can mean either:

i) the distance from a vessel's surrounding waterline to the highest fixed point on the ship.
(Obviously this can be substantially adjusted by specialist ships such as 'low profile' vessels - see
Chapter One).

OR

ii) the distance from a vessel's surrounding waterline to the top of her hatch coamings - an
indication of whether a particular vessel can maneuver under shore cargo handling equipment.

6.6 In both cases these measurements can be varied by ballasting or de-ballasting various tanks, but it
must not be overlooked that a dry cargo vessel's ballast tonnage capacity will almost certainly be far less
than her deadweight capacity. So, a fully ballasted vessel will be higher out of the water than if she was
loaded and where height restrictions are severe, calculations should be carried out on the basis of a vessel
being fully ballasted, not loaded.

7.0 Other important dimensions include:

7.1 Hatchways: The length and breadth of hatchways and, for general cargo ships both weatherdeck
and tweendeck hatchway sizes. It is occasionally the case, usually with bulk carriers maneuvering beneath
shore cargo handling equipment, that it is necessary to know distances from a ship's rail to the inside edge
of her hatch coamings and to the far side of the hatchway, as well as the length overall from forward of the
foremost hatchway to aft of the aftermost hatchway.

7.2 Tank Tops and Decks: The square floor area/dimensions of a vessel's hold bottoms and decks, also
the height of holds and tweendecks. Strength in tonnes per square metre must also be known for any part of
the ship where cargo will be loaded.

8.0 PROPULSION:

8.1 Although a few of the larger and older vessels (e.g. ore/oilers) are equipped with steam
turbines, the majority of dry cargo vessels are today powered by either slow speed or medium speed diesel
engines. Particular attention is paid in modern ships to the fuel preparation equipment, thereby enabling
vessels to burn low cost residual Intermediate Fuel Oils ('IFO') efficiently and without harm to the engines.
Increasingly engine makers are modifying new engines to burn even heavier oils which are cheaper to
buy.

8.2 Although a few very modern types (referred to frequently as 'eco-types', 'eco' being short for
'economical') use IFO in both their main and auxiliary engines, many vessels consume Marine Diesel Oil for their
auxiliary equipment (e.g. generators), and all vessels carry some MDO on board for possible use when a
vessel is entering or leaving port and/or whilst navigating in confined waters.

8.3 This is because the response of a main engine to a change of throttle position is very slow when
burning IFO. As this could affect the safety of the ship when an instantaneous response by the main engine is
required, the fuel will be switched to MDO for an almost instantaneous response. With the diesel electric ship
becoming more accepted, the configuration of engine types and propulsion systems will undoubtedly
change. In the case described a better way of achieving a more instantaneous response will be done by
putting more engines on or off line using electric switchgear just as power stations ashore adapt to changes
in electricity demand. Most modern vessels will be 'fully automated', which is to say that the main engine
can be directly controlled from the navigating bridge.

8.4 When negotiating a vessel for timecharter employment, it is usual to describe the daily
consumption at sea against each of a particular range of speeds at which the timecharterers may instruct the
Master to operate. It is also necessary to include the vessel's port consumption when 'idle' - when the main

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engine is immobilized and the vessel is using auxiliary engines to provide heat, light and power but cargo
gear is not being used. Port consumption 'working' allows for extra consumption needed to power a vessel's
cargo equipment e.g. her cranes and it is usual to additionally describe 'working' consumption against,
say, every '8 hours working' or 'per 24 hours, all gear working'.

8.5 Fuel oils are graded according to quality. Heavy fuel oil is usually described around 380 c/s
(centistokes) but many modern ships are capable of burning 500-700 c/s fuels. Many Panamax and small vessels
burn IFO (Intermediate Fuel Oil) 180 c/s in their main engine or even better quality, say, IFO 150 c/s. Certain
operators also opt for higher quality gas oil rather than diesel oil in auxiliaries, and with smaller, short sea
craft, it is common to run both main and auxiliary plant on marine diesel or gas oil.

8.6 Finally, it is frequently the case that time charterers need to know the capacity of a vessel's bunker
tanks, so they can accurately estimate maximum times between replenishment of bunkers and plan
voyage strategy.

8.7 Because of the likelihood of damage to a main engine caused by burning the wrong fuel type,
most charter parties will stipulate a grade in accordance with the internationally accepted standard for
marine fuels ISO 8217. Some Owners may go beyond this demand and require any fuel to be tested free
of contaminants. This is the result of unscrupulous bunker suppliers using marine fuels as a method of
disposing of waste chemicals. In 2001 Singapore suffered a spate of incidents caused by suppliers adding
dry-cleaning chemicals to fuel resulting in several cases of severe engine damage as oil seals in the engine
disintegrated.

8.8 Environmental considerations have led to a major debate over the polluting effect of ship
operations and in particular emissions from ships burning fuels high in sulphur. There is an
internationally agreed limit laid down in MARPOL and international recognition of Emission Control
Areas (ECAs) in the same regulations but despite this some nations and groups of nations (the EU for
example) have introduced their own more restrictive regulations. As a result some ships will have to
carry different grades of fuel oil to be able to comply with the regulations and this in turn can affect
operating costs, charter rates and even charter parties.

9.0 CARGOES:

9.1 The variety of commodities carried at sea is greater now than it has ever been and the list is
continually increasing. The volume of the various seaborne commodities alters year by year, of course, but
dry cargo goods can nevertheless be classified into the following categories: *

 Grains and agricultural products

 Coals and cokes
 Ferrous ores
 Minerals
 Timber
 Metals
 Cements
 Chemicals
 Refrigerated goods
 Unitised goods
 Wheeled and heavy units
 Livestock and animal products

9.2 Those concerned with dry cargo chartering should aim to have a complete knowledge of the
physical characteristics, carriage requirements and trade routes of those commodities with which they are
closely involved, as well as a good, working acquaintance with other dry goods.

9.3 It is important too, to keep up-to-date with events in the real world. As countries try to make more
of their natural resources some trade patterns may well change. As an example, rather than transporting coal
and iron ore to Europe for steel manufacture and exporting the finished product around the world there is a
valid political and economic argument for- transferring steel production nearer to the sources of coal and
iron ore and only transporting what steel is required for European consumption long distances.

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9.4 Cargo Measurement: This is an all important area as much of the structure of commercial ship
trading depends on the amount of cargo a vessel can carry, and the 'freight' a carrier will receive or a shipper
pay for the transportation of that cargo.

9.5 Gradually the international shipping market has moved away from traditional methods of cargo
measurement based heavily on 'imperial* or local' units, towards the all-embracing metric system. Thus
nowadays it is more usual to encounter 'metric tonnes' rather than 'long tons' or 'short tons' to describe the
weight of a bulk commodity, or measurement in 'metres' rather than in 'feet'.

9.6 The one exception to this drift towards metrication is that of 'stowage factors', which is the amount
of space occupied by a given quantity of any dry commodity whatever its mode of carriage, whether it be
'loose' (e.g. 'in bulk') or 'contained' (e.g. in bags or on pallets). It is usual nowadays to describe the stowage
factor of a commodity as 'per metric tonne' rather than as 'per long ton', but the stowage factor itself is
usually described in terms of 'cubic feet per tonne' instead of 'cubic metres per tonne', mainly because it
is so much easier for practitioners to remember stowage factors of particular commodities in terms of
cubic feet rather than in terms of cubic metres.

9.7 Consequently, it remains essential to be able to readily and fluently convert imperial into metric
units and vice versa, particularly so for the following:

9.8 Long tons to metric tonnes Feet to metres Cubic feet to cubic metres Inches to centimeters Some
cargoes (like iron ore) stow heavily and others (like coke) stow lightly. In fact, reference to the CD 'Cargoes of
Importance' will reveal that iron ore will stow around 13 cubic feet per tonne, whilst coke requires around
80 cubic feet per tonne. That means that a given space can contain around six times more tonnes of iron
ore than of coke. In terms of ships, imagine you are operating a bulk carrier of 55,000 tonnes deadweight
cargo capacity (dwcc), with a cubic capacity in her cargo holds of two million cubic feet. If asked to estimate
approximate intake of either coke or of iron ore, you would calculate as follows:
2,000,000 - 13 = 153,846 tonnes iron ore
AND
2,000,000 -r 80 = 25,000 tonnes coke

9.9 It should be immediately obvious that the ship is limited by her deadweight to a maximum cargo
of iron ore of 55,000 tonnes, which will fill only approximately a third of available hold space, whereas all
hold spaces will be full if loading coke, but only about half of the available deadweight will have been used.
This is a fairly extreme example to illustrate the relationship of cargo stowage factor versus ship cubic capacity
and deadweight that a dry cargo chartering person must constantly bear in mind. Nevertheless, the freight rate
per tonne for 25,000 tonnes of coke must be around double that for 55,000 tonnes iron ore to provide the same
approximate return to the Shipowner.

9.10 With certain ship types, the amount of bulk cargo that can be loaded will be greater or lesser than
for a different ship type with an equivalent cubic capacity. For example, tweendeckers might suffer from a
restricted tonnage intake compared with a self trimming bulk carrier, because the 'overhang' created by
fixed tweendecks will interfere with the stowing of cargo in the lower holds, creating unusable, wasted
space.

9.11 But not all cargo, of course, is carried in bulk. Much cargo is carried in 'packages' of one kind or
another, from traditional bags through to modern pallets. Whereas many bulk commodities will 'flow' into
the sides and corners of a ship's cargo compartments, bagged or palletised goods must be stowed and
often cannot fit between hold frames and, indeed, may be intentionally kept clear of hold sides by devices
such as 'cargo-battens', in order to encourage cargo ventilation. As explained earlier dry cargo ships have two
cubic capacities, 'grain* (for measurement of bulk commodities), and 'bale' for 'non-bulk' goods.
Finally, it should be emphasized that while stowage reference books will provide comprehensive guidance there
are several ways in which the stowage factors of some cargoes can change significantly. For example,
roundwood floated down river and therefore very wet, the density of pressed bales etc. It is always worth
investigating the experience of others in a trade when new cargoes/commodities or sources are being
worked.

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10.0 General Cargo:

10.1 Before containerization the conventional ('break-bulk') method of moving general cargo in ships
around the world's oceans and waterways was by means of a variety of packages, in bags, bales, chests,
barrels, casks, baskets, or simply by lashing goods together. Given today's widespread usage of the
ubiquitous 'box', much of the skill (time and tedium) of loading general cargo vessels has been transferred to
packing ('stuffing') containers at container terminals, factories and such like.

10.2 It is now rare for a general cargo vessel to be employed for the carriage of such a variety of general cargo,
most of today's 'liner1 trades that are not totally 'containerized' depend on 'parcels'. These will usually comprise
larger lots of cargo, (parcels) that are not suitable for containerization, and in particular cargo for infrastructure
projects such as new power stations or chemical plants where much structural steel or indivisible large pieces are
included. Basic steel movements of beams, billets, tinplate coils, etc often provide the regular base cargo for such
parcel liner services.

10.3 However, it is still likely for a general cargo vessel to carry a full cargo of bagged goods, e.g. bagged
rice or bagged fertilisers, which require knowledge of the importance of ventilation, and methods of
securing, manifesting and tallying bagged cargo.

11.0 Bulk Cargoes:

11.1 Most modern bulk carriers are described by their owners as 'self-trimmers'. However, this
expression must not be taken too literally as meaning that no extra trimming of bulk cargo by shore appliances
is required. Firstly, not all bulk cargo flows easily. For example, bulk scrap metal will need careful stowage
and, because of handling difficulty, it is important to divide a vessel's bale cubic capacity by the stowage factor
of scrap metal in order to arrive at a more realistic estimate of cargo intake quantity for this commodity.

11.2 Secondly, the expression 'self-trimming' applies normally only to lateral trimming across a ship's
cargo compartments, and rarely to self-trimming in either end, fore and aft, of a cargo compartment. The
expression applies also to full holds. It follows that for a commodity which only partly fills a cargo hold beneath
the angled, self-trimming upper hold sides, that shore trimming might still be essential to spread the cargo
across the compartment to render it safe for seaborne transportation. The expression must not be taken
literally, although it is reasonable to assume that a fully laden bulk carrier described as a 'self-trimmer' should
be capable of loading a cargo without shore trimming assistance.

11.3 Nevertheless, if the term 'self-trimmer' is used too freely for all commodities and without bearing
in mind the full particulars of loading methods, it is possible to create an expensive dispute. As a result, some
operators of bulk carriers prefer to use the term 'easy-trimmer1, which it is considered conveys a more
realistic appraisal of a bulk carrier's capacity when loading bulk commodities.

12.0 Dangerous Goods:

12.1 Most Shipowners are naturally eager to exclude the carriage of dangerous goods and the 'cargo
exclusions clause' can form one of the most contentious parts of a negotiation leading to a dry cargo
timecharter fixture. The Shipowner will seek as many exclusions as possible, whilst the Charterer will aim to
have as few restrictions on vessel employment as it is possible to negotiate.

12.2 There are, of course, specialised vessels and Shipowners willing to carry (at a premium rate!) most
commodities, dangerous or not, but analysis of cargoes commonly excluded by most Shipowners will usually
reveal four categories of 'dangerous' goods:

1. Those likely to imperil a ship - e.g: explosives,

2. Those likely to harm it in some other way - e.g: sulphur,
3. Those of danger to a vessel's crew or stevedores - e.g: ferro-silicon, and
4. Those goods liable to damage others - e.g: copra.

12.3 A 'new' commodity, toxic waste, should be added to the list of undesirables, not only of danger
to those coming into contact with it, but a cargo likely to be rejected by the country of destination, thereby

318
creating enormous problems for Shipowners forced to carry it from port to port seeking a means of
removal.

12.4 Certain Shipowners/operators are extremely strict on what cargoes can or cannot be carried in
their vessel(s), the list expanding item by item on the basis of experience. By comparison, other
Shipowners specialize in handling dangerous cargo in compliance with the IMO rules.

12.5 However, the intention of a timecharterer expressed in a time charter party to carry a particular
commodity does not remove the risk or the need to include a comprehensive list of excluded cargoes in the
contract. An 'intention' may be changed to a choice of a 'dangerous', unexcluded cargo.

12.6 Also, following arbitral precedent in New York, the exclusion of 'petroleum and/or its products' does
not exclude 'petroleum coke' nor, it is believed, would the exclusion of 'cement' naturally exclude 'cement
clinker'.

13.7 International rules for the packing, labelling and carriage of dangerous cargo are set out in the IMO
Dangerous Goods Code.

14.0 SHIPS' DOCUMENTS AND CLASSIFICATION;

14.1 There are a number of documents that a ship is obliged to carry if it is to trade legitimately. The
documents are issued by a number of bodies often on behalf of the ship's Flag State.
Each time the ship calls to a port it will be necessary for the Master, via the ship's Agent, to show the
documents to appropriate authorities and if any of them are not in order the ship may be prevented from
working.

15.0 Documents issued by or on behalf of the Flag State include the following:

15.1 `Ships' Certificate of Registry - confirming that the ship is entitled to fly under the flag of the State
which issued it. Usually a ship can only have one Flag State but some nations allow ships on bareboat
charters to be put on a bareboat registry for the period of the charter.

15.2 Loadline Certificate - this certificate and its purpose have already been covered.

15.3 Safety Construction Certificate - confirms that the ship has been constructed in accordance with the
relevant sections of the SOLAS conventions.

15.4 Safety Equipment Certificate - confirms that the ship's safety equipment (which includes
navigational charts and publications) are in accordance with SOLAS requirements

15.5 Safety Radio Certificate - again a SOLAS certificate confirming that the ship's communications
equipment is in accordance with relevant conventions. This certificate may well be of interest to
potential charterers since it shows if the ship is allowed to sail world-wide or is restricted to certain areas
because of the limitations of its communications equipment.

15.6 There are four categories of equipment A1, A2, A3 and A4. A1 would allow the ship to trade only in
certain coastal waters, A4 is world-wide and A3 world-wide except arctic waters. A2 covers all other areas.
If a ship has to voyage through a higher rated area than stated on its certificate to reach its destination, then it
may not be suitable forthe contract under consideration. Sometimes though the Flag State will allow the voyage
providing it receives sufficient notice.

15.7 Safety Management Certificate (SMC) - this certificate is issued to ships when they have proved
compliance with the International Safety Management (ISM) code. It should be noted that this certificate
is issued to the operating company rather than the ship and if the ship has changed hands or management
it immediately becomes void. However, all ships must have valid SMC onboard or they will not be
permitted to work by Port State control authorities.

15.8 ISPS Certification - the ISPS code, or to give it its full name, the International Ship and Port Facilities
Security Code, is a part of the SOLAS convention devised by the IMO as a response to concerns over security
and terrorism.

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15.9 The ISPS code came through the committee process very quickly as a result of the terrorist attacks
on New York in September 2001 but it does include elements of two other problems, piracy and stowaways
that have been of concern for many years.

15.10 As the full name suggests the ISPS code works on two levels, ships (but only those over 500GT)
and ports. Governments and maritime administrations must appoint Recognised Security Organisations
(RSOs) to certify the security arrangements that have been made in ports, on ships and in the shore
offices of shipping companies. Exactly what sort of organisation can become an RSO is entirely at the
discretion of national Governments. Within the UK, only the Maritime and Coastguard Agency (MCA) has
the power to vet ships but many Flag States have delegated the work to Classification Societies.

15.11 To comply with the code, ships and ports have to be subjected to a risk assessment after which a
security plan is drawn up. The plan is then reviewed by the RSO and after a successful inspection and audit of the
port or ship, a certificate is issued Port States are able to deny entry to any ship which does not have a
certificate, as well as ships coming from ports which have not been certified as complying with the code.
What happens in practice varies so much, but the US has fully implemented every aspect of the code from
the coming into force date, a threat that the Owners of ships trading to the US on a regular basis have taken
seriously.

15.12 On a practical level both ports and ships operate on a three stage security alert with the
precautions taken dependant on the security threat assessed. This means that, for the most part both
operate at the lowest level until some intelligence received makes a higher level desirable.

15.13 A ship that does not have a certificate will be limited in the number of states and ports it can operate
to and so the presence of a certificate needs to be established early on in charier negotiations.

15.14 Because of the attitude taken by some states to ships which have visited ports with no approved
security system, Shipowners may be wise to insist on a clause in any charter party affecting the ship,
excluding calls to such ports.

15.15 Oil Pollution Prevention Certificate - either an International or domestic certificate (depending
on ship's trading areas) issued to ships over 400 GT and confirming compliance with MARPOL convention
73/78 relating to pollution prevention measures.

15.16 Minimum Safe Manning Certificate - details the minimum number of crew and their ranks which
the ship must carry.

15.17 Most of the certificates are issued .for. a period of-four to five years subject to an annual
inspection. If any of these are invalid the ship will be considered as not fulfilling the requirements of charter parties
in relation to seaworthiness and could result in a timechartered vessel being considered off hire.

16.0 CLASSIFICATION:

16.1 Classification is not a legal requirement for ships in every country, although it can affect the Owners'
ability to arrange insurance or even attract cargoes.

16.2 The earliest Classification Society was Lloyd's Register founded in 1760. Its original purpose was to
provide details of ships1 condition which would allow insurers and cargo interests to consider the likely risk
of shipping goods on any particular ship.

16.3 From initially providing an assessment of condition, Lloyd's Register went on to overseeing
construction of ships from the earliest stages. The result is a class notation which is assigned to the ship and
which requires regular re-inspection to be retained. Each five years a ship has to undergo a Special Survey which
requires the vessel to be dry-docked (something which is always mentioned and allowed for in timecharter
parties).

16.4 Lloyd's Register's example was adopted in many countries and there are now many classification
societies, most are good but a few have dubious reputations. The largest have formed The International
Association of Classification Societies (IACS), details of which can be found at www.iacs.org.uk

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16.5 It is normal for all charter parties to include details of a ship's classification society and its class notation.
Attention should be paid to notations because they are becoming very complicated. From an initial simple
grading of overall condition, the notation has come to include much more information about machinery
type, degrees of automation, specialist ratings, ice class and acceptable light loaded conditions. The
Classification Societies will answer any questions about their notations and it is good practice to clarify any
uncertainty before concluding a fixture since important information can often be overlooked.

ooooo

SELF-ASSESSMENT AND TEST QUESTIONS

Attempt the following and check your answers from the text and/or other sources available to you.

1. Define and explain the following terms:-

1) DWAT 6) Grain capacity

2) DWCC 7) Bale capacity

3) Summer marks 8) Paragraph ship

4) Gross tonnage 9) Air-draft

5) Nett tonnage 10) Centistoke

2. Draw a plan, profile and midship section of a bulk carrier. Provide a description including deadweight,
draft, grain and bale cubic capacity, loa, beam and air drafts.

3. Define and explain the following terms:

1) Stowage factor 6) Break-bulk
2) Cargo battens 7) Tallying

3) Angle of repose 8) Hydroscopic

4) Self-trimmer 9) Cargo manifest

5) Easy-trimmer 10) Stowage plan

4. Give the stowage factor, method of packing (if any), and any special precautions required during
loading and carriage for:
1) Jute 6) Cement
2
> Petroleum coke 7) Manganese ore

3). Barley 8) Wet hides

4) Woodchips 9) Salt

5) Sulphur 10) Drummed asphalt

Having completed Chapter Two attempt the following and submit your essay to your Tutor.

Under your control is "Gannet" a multi-purpose vessel of 20,000 mt dwcc, with folding tweendecks and a

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capacity of 1,000,000 cubic feet grain and 950,000 bale. Allowance has been made for draft, bunkers and
constant weights.

For each of the following commodities, advise what special fittings the vessel might require, what precautions
might be necessary, and estimate the quantity of cargo the vessel could be expected to lift, commenting
where appropriate on the reason for the cargo quantity:
1) Bagged fishmeal 4) Packaged lumber

2) Bulk wheat 5) Bulk foundry coke

3) Steel products 6) Ferro-silicon

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 ANNEX-……….

CHARTERING FINAL YEAR

DRY CARGO SHIPS - CARGO HANDLING EQUIPMENT

AND SPECIALIZED VESSELS

1.0 The cargo is handled ashore while loading on the ship and again while discharging at
the destination. The loading/discharging operations could be with the assistance of shore or
ship's-equipment. Within port too, the cargo is handled and moved between ship, warehouse
and other modes of transportation.

1.1 For better understanding of various equipment used, both onboard and ashore, different
types of ships are discussed below:

2.0 General Cargo Ships:

2.1 Onboard Ship -

2.1.1 Derricks - These are also called "booms". Two systems are in use. Firstly where two
derricks are used in 'union purchase' mechanism with one derrick over the ship's side above the
jetty and the other derrick above the ship's hatch. Both are connected by a wire to the hook
through which the cargo is lifted from the hold and slowly moved across to the jetty and lowered.
The other system uses only one derrick which itself, after the cargo is lifted from the hold, slowly
turns towards the jetty and cargo is lowered. The maximum safe working load (SWL) of the derricks
are about 5 tons. The wires are connected to the derricks and move, lift, and lower the cargo. These
are operated by winches, which are electrically driven. In the modern ships, cranes have replaced
the derricks.

2.1.2 Cranes - Cranes, hydraulically or electrically operated, are fitted on the ships. These are
faster and more efficient. Further the derrick system takes time to rig-up before commencing
the cargo operations. The SWL of the cranes is quite high and in some ships heavy lift equipment
are also fitted.

2.2 Ashore -

2.2.1 Shore cranes of different capacities are used. Fork lifts are used to move the cargo
between the pier to the warehouse within the port.

3.0 Container Ships:

3.1 Onboard Ship -

3.1.1 Normally gantry cranes are fitted on ships. These are capable of moving throughout the
length of the cargo carrying area of the ship. It can lift the container from the hold and move it
across the vessel to the jetty. Some of the cellular container vessels are gearless thereby relying
on shore facilities for loading/discharging of containers. The containers are lifted by fitting a
spreader on top of container. These spreaders can be manual or automatic.

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3.2 Ashore -

3.2.1 Gantry Cranes - These are used for lifting containers to and from the ship. Their
capacities can vary depending on the size. These move on the rails tracks running over the length
of the pier. Smaller tire mounted gantry cranes are also used in container yard.

3.2.2 Straddle Carriers - These are used for moving the containers within the port.

3.2.3 Fork Lifts - These are used for stuffing/de-stuffing the cargo in the container.

3.2.4 Fork Lift Spreaders - For lifting and moving containers by telescopically lifting them.

4.0 Bulk Carriers:

4.1 Onboard Ship -

4.1.1 The dry bulk cargo is a homogenous cargo and smaller ships may have cranes on board
for loading/discharging the cargo. Some vessels may carry grabs that can be connected to the
cranes. These grabs are of 10 - 20 tons capacity. The larger bulk carriers, though, are mostly
gearless and have to rely on shore facilities.

4.2 Ashore -

4.2.1 The loading of dry bulk cargoes is, almost always, by a conveyor belt system where the
cargo moves on the belt and is dropped in the hold. Usually one or two holds are loaded
simultaneously.

4.3 While discharging following methods may be used:

4.3.1 Grabs - The cargo is lifted up from the holds by a grab connected to a crane. The crane
may be of gantry type. The grab then dumps the cargo into a compartment from where the
cargo is carried to the storage site by the conveyor belt.

4.3.2 Evacuators - Grain can be discharged by this means where it is sucked and then moved to
the storage area.

4.3.3 Screw Conveyors - This simple system works on the principle of screw moving in a
cylindrical body. The equipment is lowered into the hold and cargo is lift up the rotating screw.
Once the cargo is lifted up, it is moved by a conveyor belt system. This system is good for grains,
fertilizers and chemicals.

5.0 SPECIALIZED VESSELS : In this section we shall deal with some of the more popular specialized
vessels.

5.1 This is not intended to be a sole reference text but just to provide an introduction as well
as an idea of how to find out about the specialized vessels we come across in our working lives.

5.2 Before we discuss about the specialized vessels let us have a quick review of the common
types of general cargo vessels.

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6.0 TWEEN DECKERS :

6.1 They have 2 decks, an upper/main deck protecting the hold spaces from weather and
having hatches in it for access to the upper holds. The other deck is the tween deck, a transverse
partition 2/3td way between the tank tops (floor of the hold) and the maindeck. The tween deck
has large hatches and is flush with the floor of the hold to allow free access for cargo working
and stowage.

6.2 Usually, heavy cargoes are stowed in the lower hold space between the tanktops and the
tweendeck and light weight, high volume cargoes- are stowed in the tweendeck space between
the tweendeck and the main deck.

7.0 SHELTER DECK VESSELS:

7.1 Resembles the tweendeck vessels in having two decks. The lower/tweendeck is the main
weight-bearing deck and the upper deck is a protective covering deck. This design came into
existence to exploit the tonnage regulations and maximize cargo capacity, while minimizing
tonnage-based liability.

SPECIALIZED VESSELS

8.0 REFRIGERATED SHIPS:

8.1 Used to carry perishable cargoes which are cooled, super-cooled or frozen by using air
cooled to the desired temperature.

8.2 Presence of many insulated tweendecks allow for carriage of multiple commodities and
parcels segregated in different temperature, zones. The decks may be strengthened to allow
forklifts. Large hatches are provided for easy access though this means it is difficult to maintain
steady temperature Reefer vessels may have decks and ramps for forklift access. In addition, they
may have conveyors or cranes to lift pallets and forklift respectively.

9.0 BULK CARRIERS:

9.1 They are single decker vessels capable of carrying cargo underdeck protected from
weather and used for carrying large quantities of bulk commodities. These ships have
unobstructed, large holds and hatches and are usually gearless

9.2 Handysize bulkers are usually equipped with cargo gear, whereas Suezmax and Capesize
vessels are gearless.

9.3 Some bulkers are Handysize, Suezmax, Panamax and Capesize vessels, some of the
dedicated bulk carriers are:

10.0 LAKERS:

10.1 They are grain carrying bulkers having self-trimming facilities usually geared, that is,
having derricks, cranes or grabs. The holds have multiple hatches and bleeding wing-tanks
which are suitable for carriage of cargoes, ballast and help in self-trimming. The holds have
"hoppered " lower comers to prevent shifting and allow for the carriage of ballast.

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11.0 ORE CARRIERS:

11.1 They are used for carriage of bulk ores, minerals and slag and cargoes having stowage
factors less than 25. These, vessels are self-trimmers with compact strengthened tank tops, large
double-bottom tanks and compact holds. Ore carriers are usually gearless.

12.0 LOGGERS:

12.1 Loggers are used to carry ores, logs, cement and allied heavy cargoes on and underdeck,
depending upon the securing arrangements. The vessels are strengthened and geared and logs are
loaded horizontally so as. not to obstruct cargo gear. These vessels have squarish and
unobstructed holds.

13.0 CEMENT CARRIERS:

13.1 They are bulkers capable of carrying bulk cement or cement clinkers. The air pollution
problem is solved by making holes in the hatch covers to pump cement in through one hole
and air and dust out through another hole.

14.0 LUMBER AND PAPER PRODUCT CARRIERS:

14.1 Built to maximize volume utilization, having large, unobstructed rectangular holds.
These vessels are open-hatched geared vessels with gantries of 25 tonnes capacity. The
vessels compartments are water-tight and the ship is built light, but strong enough to
withstand the stresses of the voyage.

15.0 THE CONTAINERSHIP FAMILY

15.1 Container carriers are vessels either built or re-designed to carry full loads of 20740*
and other ISO sized containers.

15.2 There are basically 2 types of container carrying vessels.

(A) CONTAINER ORIENTED VESSELS ~ In this type general purpose (GP) vessels have been
fully-fitted with 'shoes' and brackets and other container securing devices for carriage of
containers under deck as well as on deck. Twist-locks and lashings are used for securing on-
deck containers. These vessels may be geared and the crane capacity may be as much as 30
metric tonnes or even more. Spreaders are generally used for loading and discharge of units.

(B) CELLULAR CONTAINER VESSELS -- They are built with cell-guides which criss-cross to
form cells -- rectangular spaces into which the TEUs and FEUs can be used for carriage, rather
like ice-cubes in an ice-tray.

The containers are carried in tier upon tier of such cells, both under-deck (60%) as well
as on-deck (40%) using twist-lock system and cell guides. The entire hold of such cells
constitute a "bay*.
(Bay-Row-Tier are co-ordinates within a cellular container vessel. A bay is the athwartship section
of the ship, one container in length. A row is the longitudinal section of the ship, one container
wide. A tier is the vertical section of the ship, one container deep. Thus the position of the
container within the ship is shown as 14-04-10, i.e. bay 14, row4 and tier 10.)

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15.3 Container carriers are also fitted with reefer plugs to carry refrigerated containers-for
the carriage of perishable cargoes in controlled temperature and atmosphere.

15.4 Container ships are classified by their size into one of the various generations, as
below:

Is1 generation vessels less than 1000 TEUs

2nd generation vessels 2000-3000 TEUs
3rd generation, vessels 3000-4000 TEUs
4th generation- vessels 4000-5000 TEUs
5th generation, vessels 5000-6000 TEUs
6th generation vessels Over 6000 TEUs

15.5 The biggest container carriers would be the Post-Panamax vessels of 6,500 TEUs and
above. These and other large container ships are deployed on the deepsea container trunk routes
around the world. They call at a few suitable ports world-wide where the ports have drafts,
cargo-volumes and infrastructure to handle such gearless giants.

15.6 The smaller container carriers are deployed on feeder routes — short-sea routes carrying
a few hundred containers from a range of hub / transhipment ports to various destinations or vice
versa.

16.0 BARGE CARRYING VESSELS:

16.1 They are similar to container carriers in function. The units they carry are called barges.
They allow for carriage of large volume cargoes, either unitised or bulk. The barge units may be
dumb-barge (with no motive power) or may be self-propelled.

16.2 The vessels are usually geared and/or have other methods of loading/discharging by
themselves.

16.3 LASH stands for Lighter Aboard Ship, A LASH vessel can carry 80 barges, carrying 400 tons
of cargo each and is geared, having one. 510-ton gantry crane situated astern the vessel to lift
on/lift off the barges.

16.4 SEEBEE carries 38 barges of 1000 tons each which can be handled in pairs by elevators
located at the stern of the vessel.

16.5 BACO — Barge and container carrier which is typically a ship of about 20,000 DWT,
capable of carrying a dozen barges. The barges are loaded by being floated in through the doors
in the bows and then the doors are closed and the water pumped out leaving the barge in to be
lifted on board. The procedure, is reversed to discharge the barges. In addition, the vessel can
accommodate approximately 500 TEUs.

16.6 LO/LO VESSELS Lift on/lift off vessels, are. heavy lift vessels to lift cargoes which are too heavy
to be handled by the regular shore gear. These vessels generally handle indivisible loads greater
than 50 tonnes.

16.6.1 The vessels have cranes of 150 to 1000 tonnes SWL to lift on board the heavy loads. The
other strategy is for the vessel to. submerge and. position itself below the heavy lift and then
deballast and rise up with the load, such vessels being called semi-submersibles.

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17.0 RO/RO:

17.1 These vessels are Roll on-Roll off vessels. The freight units are roHed/driven on and off
board and the vessels have multiple decks connected, by ramps and lanes. The ramp platform
which bridges the vessel's deck/entrance with the shore/quay may be situated on the side of the
vessel or it may be located astern or at the bow.

17.2 The ramp may be a slewing ramp in which case it would rotate through an arc allowing a
smoother docking with the quay.

17.3 The vessels may be deployed in short ferry routes where the freight may be passengers,
vehicles, palletized /containerized as well as general cargoes.

17.4 There are specialized ro/ro vessels for carriage of vehicles only such as the PURE CAR CARRIERS
(PCCS) and the PURE CAR AND TRUCK CARRIERS CPCTCS). They may carry as many as 6000 cars which may be
just driven on board at the required deck parked and lashed for the voyage and unlashed and
driven off at the destination.

18.0 COMBINATION CARRIERS (OBOs & O/Os):

18.1 These vessels carry liquids well as solid bulk cargoes. Both have general features of the
typical self-trimming bulk carriers and were built on two popular concepts.

18.2 OBOs (ore/bulk/oil carriers) carry ore,, dry bulk commodities as well as oil and the o/os
(ore/oilers) carry ore and oil. PROBO is a modification of the OBO carrying only products (oils), dry
bulk commodities and ores.

18.3 The characteristics of OBOs are strengthened tank tops, floodable cofferdams, presence of
hoppered holds and wing tanks as well as presence of double skin. The hatches have oil and gas
tight, side rolling, steel hatch covers. There is lot of space to carry ballast and the same big
compartments are used to carry ore/oil or dry bulk on different voyages.

18.4 O/Os have small central holds for ore/dense cargoes. Oil can be carried in any of the
compartments including the central one. But in. keeping with the International Rules oil and ore
cannot be simultaneously carried.

18.5 The disadvantage of combi-carriers is that they are difficult and expensive as well as time
consuming to clean and switch.

19.0 EDIBLE OIL CARRIERS:

19.1 Edible oil carriers are usually small to medium size tankers (parcel tankers). They have
their tank-walls coated with, suitable chemicals to prevent corrosion and. contamination. Also the
coatings make it possible for the tank surfaces to be cleaned properly between cargoes.

19.2 These tankers often carry 'parcels' of different types of oils. Hence they require to have at
times separate pumps and pipe line systems for each block of tanks carrying the same
cargo.

ooooo

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 SELF-EXAMINATION QUESTIONS

1. What cargo handling methods are used in a general cargo vessel?

2. What all equipment are used in a port for handling the containers?
3. How is grain loaded and discharged?
4. What is the significance of hoppered holds and wing tanks?
5. What is the use of double bottoms?
6. What factors would restrict the entry of a 5th generation cellular container vessel into port?
7. What is the purpose of

a) cell guides
b) twist locks
c) shoes

5. Why is a slewing ramp preferred over an ordinary bow/stern/side ramp?

6. Write short notes on
a) Lakers b) Cement carrier c) Loggers
d) Edible carriers e) PCCs f) Reefer
7. What is the container carrying capacity of different generation vessels?
8. Name and briefly describe different types of barge carrying vessels.
9. What are the specialities of LOLO and RORO vessels?
10. Describe the two popular types of combination carriers.
11. What cargo handling methods are used in a general cargo vessel?
12. What all equipment are used in a port for handling the containers9
13. How is grain loaded and discharged?

RECOMMENDED FOR FURTHER READING

1. Shipping Practice--E .F Stevens, 11th Ed., 1981,

2. BesT Shipping & Chartering Terms -- N. J. Lopez, 11th Ed., 1992.
3. Sea Trading - Vol. I (The Ships) - W. V. Packard, 1st Ed., 1984.
4. Sea Transport - P. M. Alderton, 4th Ed., 1995.
5. Elements of Shipping - A. E. Branch, 7th Ed., 1996.

********************

329
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING

Three Model Test Papers have been kept

below for each subject.

Every Correspondence Student is to

compulsorily answer two Test Papers on
each subject and send them back to the
Institute before 31st December, 2019 in
order to be eligible to take up March - 2020
Examination.

********

330
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING
FINAL YEAR

CHARTERING
THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND IN NO
WAY REFLECTS THE PATTERN OF THE ANNUAL EXAMINA TION QUESTION PAPERS

TEST PAPER 1

1. Describe the salient features of the NYPE Inter Club Agreement.

2. Expand and explain the following terms: SHEX, WIBON, OCIMF, BIMCO, COA, ADCOM, AAAA,
COP, MOLOO and LOF.

3. Explain and interpret following

(i) 12700 DWT 812 TEU GLESS VSL 3 ROUTES TC USD 7,100 PDPR USAC/NEW TRADE (ANDRE)

(ii) VENTURE 105000 T COALRBAY/JPN JAN 28/31 $10.25 FIO 8D SHEX (NKK)

(iii) GRAZIA 87 USG / MOMBASA 3000-5% AUG 28/6 SEP 71 PMT -- CATH RELIEF -- . BERTH
TERMS

(iv) "HANDY RIVER" B 84 30898 DWT DLY SPORE MID JAN TCT VIAAUST REDLY SPORE - JPN
R USD 4500 (SK)

(v) "SHUN KIM" 90 148000 DWT HK PPT TRIP VIA GOA REDLY CONTI USD 10000 DLY + 50000

BB (GRANT)

4. What is Worldscale? What are its advantages?

5. Name a charter party form for coal, sugar, oil, and fertilizer.

6. What is DWT? Explain by giving an example.

331
7. Define demurrage and despatch.

8. Prepare a voyage estimate for the following voyage and calculate the break even freight rate and
the TC yield:
Cargo - 70,300 Speed 14k @ HO 25 t/d and DO 2 t/d
Mangalore/Antwerp Freight 5.2 $/t Commission 6.25% total
Allow 9 days for loading and discharging
Bunker prices ~ HO = 90$/t, DO = 140 $/t
Port charges - Mangalore - 8,000 $ Antwerp
- 12,000 $ Suez Canal-30,000$ Vessel
presently at Cochin Distances -
Cochin/Mangalore = 230
Mangalore/Antwerp = 6,200

9. What are the routes taken into account for calculating the BFI?

10. What are the DOs and DONTs of a chartering manager working in an owner's office on a time
charter.

11. What are Stowage Factors? Why are they important for charterers and shipowners?

12. Discuss factors which influence bunker planning.

13. How do product carriers differ from crude oil carriers?

14. Write notes on

(a) Chemical carriers (b) Classification of pumps
(c) SBTs (d) Major tanker accidents

15. Name some of the large crude oil (a) producers and (b) consumers. Is it necessary for a
producing country to be an exporter?

332
 FINAL YEAR 422
CHARTERING 3

NAROTTAM MQRAKJii SWST1TUTI OF SHIPPING

THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND IN
NO WAY REFLECTS THE PATTERN OF THE ANNUAL EXAMINATION QUESTION PAPER

TEST PAPER 2
1. Write and discuss THREE clauses of a voyage charter party.

2. What is the importance of laytime calculations? What documents are needed for this?

3. What factors influence charter markets?

4. Mention FOUR dry bulk cargoes (other than iron ore) and their charter party forms.

5. Write notes on (a) TRANSCHART, (b) FONASBA, (C) CHARACTERISTICS OF CRUDE OIL and (d)
IMPORTANCE OF WORLDSCALE.

6. What'are INCOTERMS? Explain SIX such terms.

7. Expand and explain the following terms: POL, SCNT, FAS, USNH, BENDS, COW, ILOW, IGS, SBM,
WIFPOR

8. From the following data prepare a time sheet and calculate demurrage or despatch ~Mv
PANAMAX loaded 74,000 tons iron ore
Statement of Facts:
Anchored -. T^Tue 0800 hrs
NOR tendered- 7th Tue 0900
Shifting to berth - 7th Tue 0900-1100
Loading started - . 7th Tue 1200
Loading completed - 10th Fri 0800
Vessel sailed - 10th Fri 1000

333
Please turn over

334
 A'

Charter party details:

Cargo to be loaded @ 20,000 t/day SHINC

Demurrage rate $ 9,500 PDPR, half despatch on laytime saved.
Time to count from 1400 if NOR tendered before noon and from 0600 next working day if NOR
tendered in the afternoon.

If loading commences before notice expires XA such time to count as laytime.

9. Explain and interpret in simple English:

(i) ANDREA 29000 CPP PG/ECI 12 OCT WS 195

(ii) DIRTY - "ATLANTIC" 25000 4/1 WAFR / INDIA USD 1.05 MIO (MOBIL)

(iii) SUNNY CLIPPER - 5600 CBM 3200 TONNES LPG GRANGEMOUTH/ IHAM DEC 15-17 HIGH
$10s PMT

(iv) STEAMER RBAY / JORF LASFAR COAL 60000-10% AUG 10/20 5.85 SAFMARINE FIO SCLD
/18000 T SHINC

(v) TBN 16000 CORN + 1000 MEALS USG / BEUNAVENTURA 28 DEC / 4 JAN USD 14.25 FIO 5000
/2500 (GARNAC)

10. What are the important issues raised when a B/L is issued pursuant to a C/P in (a) demise charter, and (b)
non-demise charter?

11. With reference to iron ore state

(a) Sizes and types of ships employed, and (b) Methods of loading and discharging.

12. How many types of gas carriers are there and how do they differ from each other? Why are they most
expensive to build?

13. Briefly explain the important characteristics of crude oil.

14. Name the major loading areas of crude oil and their loadports.

15. How is a standard vessel described in the WORLDSCALE?

**************

335
 MAROTTAM MORARJIISMSTITUT1 OF SHIPPING

FINAL YEAR
CHARTERING

THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCA TION PROGRAMME STUDY MA TERIAL FOR PROPER ANSWERS AND IN
NO WAY REFLECTS THE PATTERN OF THE ANNUAL EXAMINATION QUESTION PAPER.

TEST PAPER 3
1. Expand and explain the following terms: CHOPT, IMDG, TBN, NTCUU, BWDD, ARAGH,
GLFD, WWR, HSS, AGWWP, WOG and BBB.

2. Discuss the significance of the following: Off-hire clause, Beaufort Scale and WWD.

3. List THREE main clauses of the time charter party.

4. Write notes On QCC, I^TERTANKO, AFRA and OPEC.

5. Interpret the following:

(VI) VANCOUER/CASABLANCA VSL 35000 TONS SULPHUR PPT $ 17.50 FIO 10000 D LD SHINC/ 3000 D
DISCH FHEX (PRISM)

(VH) ATTICOS B 1976 29 165DWTDLY USG PPT TRIPREDLY GHRGE J7250/DAY +18000$ BB(ARMADA)

(VIE) CAPT MARIO 51000/10 ORE W AUST/RDAM PPT SC/25000C LOW USD 10(CSC)

(IX) CHEVRON ATLANTIC CRUDE BONNY / ABIDTAN 130000 T $ 275000 LS JAN 21 (BP)

(X) GAS ARIES 78500 CBM 12MOS TC FM 15 DEC WW TRADE DLY YANBU USD 850000 PCM

6. Which are the major crude exporting areas/ports? What type of ships are used?

7. "From the data given below prepare a Voyage Estimate; calculate T/C Yield and Break - even
freight rate."
DWT 65,000 Cubic 75,000 cm.
16 k @ 45t/d at 80 $/t and 2 t/d DO at 150 $/t
Cargo wheat SF 1.34, 54,000 tons 5 % MOLOO
Vancouver/Kobe 4,800 n.m.
Freight 7.8 $/t Commission 3.75 %
Port charges 65,000 $ both ends
Miscellaneous expenses 25,000 $
Loading 3 days, discharging 5 days SHINC
336
 42

From the following information make a time sheet by reversible; non-reversible and average
methods and calculate the final results in each case.

Charter party details:

NOR to be tendered in office hours. Laytime for loading and discharging shall commence at 1
p.m. if NOR is tendered before noon, and at 6 a.m. next working day if NOR is tendered after
noon.
Cargo to be loaded @ 4,000 mt/WWD SHEX UU Demurrage
rate $ 6,000/day prorata, despatch lA demurrage rate Discharge in
4 WWD SHEX EIU Statement of Facts: Cargo-21,562 tons
Vessel arrived - 14th May Thu. 0930 Berthed -1100 NOR
tendered-1100 Loading started -1430 Loading completed - 22nd
May Fri. 0945 Sailed-1100
16th May Sat. - cargo worked from 0800 to 1200
19th May-holiday
Stoppage due to rain - 15th May Fri. from 0900 to 1400
17th May Sun. from 2000 to 2100

337