Dry Cargo Chartering

DRY CARGO

CHARTERING

On behalf of INDIAN INSTITUTE OF LOGISTICS (A

SCHOOL

OF

MULTI-MODAL

TRANSPORT)

COPYRIGHT © by Indian Institut e of Logistics

Printed and Published on behalf of Indian Instit ute of logistics, Chennai

Al l RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any f orm or by any means graphic, electronic or mechanical, including photocopying, recording, taping, web distr ibution or inf ormation storage and retrieval systems without the wr itten permission of the publisher.

NO T FOR S ALE FOR PRI V ATE CI RCULATIO N ONLY.

Printed in 2011 (Edited Versi on)

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DRY CARGO CHARTERING INDEX CHAPTER NO

SUBJECT DETAILS

PAGE NO

CHAPTER NO 1

DRY CARGO SHIPS

4

TO NN AG ES, LO ADLINES, DI EMNSIONS AND C ARGOES CHAPTER NO 2

51

CHAPTER NO 3

FREIGHT M ARKETS AND M ARKET PR ACTICE

69

CHAPTER NO 4

CH ARTERI NG CONTR ACTS

107

CHAPTER NO 5

FIN ANCI AL ELEMENTS OF CH ARTER P ARTIES

149

CHAPTER NO 6

L AYTIM E

171

CHAPTER NO 7

VOY AGE ESTIM ATI NG

199

CHAPTER NO 8

BILLS OF LO ADING AND C ARGO CL AI MS

227

CHAPTER NO 9

WORLD TR ADES

260

CHAPTER NO 10 DISPUTES AND PROFESSION AL INDEMNITY

299

MOCK EXAM

318

SAMPLE PAPERS

320

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CH APTER- 1

DRY C ARGO SHIPS

This Dr y Cargo Chartering Course set s out t o ensure that a conscient ious reader will f inish up with a thorough basic knowledge of this

specialized

sector

of

ship

broking.It

explains

in

detail

t he

commodit ies invo lved, their carr iage requirements and the vessels ser ving this market.

The course cover s in depth the role of those

participating in the market – the Charters, Shipowners, Operators and Brokers

–

as

well

as

the

f reight

markets

themselves

and

their

document ation, char ter parties, bills of lading, letters of credit, etc. The mechanics of off ers and count er -off ers are dealt with as well as warnings regarding the dangers of f raud and unethical practices. Close attention is paid to aspects of f reights and hire s, wit h extensive explanat ion

of

how

to

perf orm

layt ime

calculations

and

voyage

estimates.

Finally, world trades and geography aff ecting the dry cargo market in part icular are examined as well as explanations of how dr y cargo chartering organizat ions are o perated, their off ice techniques, computer izat ion, the setting of disputes by reconciliation, arbitrat ion and by resort to law, and relevant insurance protect ion. It is an ext ensive undertaking in just ten lessons, but the course has been designed to help students in a pract ical f ashion, taking them lesson b y lesson in a logical manner thr ough the many and varied f acets of this f ascinating sector of the world‟s marit ime industry.

This f irst lesson int roduces the student to dr y cargo ships.

It

does not set out to be an exhaust ive st udy of the subject, som e of it has already been cover ed in the Introduction to Shipping, and others are

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dealt with in subsequent lessons.

But it explains many ever y -da y

expressions as they are used in connection with the vessels that participate in this market and should prove of value to those both relat ively

experienced

and

those

new

to

the

prof ession.

The

international dr y-car go market is immense, served by numerous ships of all sizes, ranging f rom general -cargo and specialized vessels through to commonplace bulkcarriers, and f rom small „coasters‟ wit h a cargo capacit y

of

a

hundred

or

so

tones

upto

enormous

„cape -size‟

bulkcarriers capable of carrying cargoes in excess of a quarter of a million tones of a bulk commodity such as iron ore. There are still elder sailing ships engaged in this most f ascinating of markets, as well as the latest, highly sophisticated, f uel -eff icient and „cargo -f riendly‟ modern vessels.

Some ships are highly specialized and unable t o carr y other than a particular commodit y – others ar e f lexible in design and able to transport a variet y of cargoes. In this Lesson, we will be examining of some of the ship t ypes to be f ound in the dr y -cargo sector of the international shipping market, their basic design and constructional details and their suit abilit y f or certain car goes and trades.

Ship Types Appendix 1.1 shows the inter -relat ionship of various dr y cargoship t ypes, and it should be noted that some basic designs are adapted to enable the vessel to becom e inv olved in more than one trade.

Thus modern designs of certain multi -deck vessels – originally

conceived to carr y general cargoes on an advertised, regular liner run – are nowadays capable of carr ying a part of f ull tram p cargo of containers or, perhaps, a bulk cargo, in addition to or instead of „break bulk‟ parcels of various commodit ies. If they are additionally equipped with a high capacity derrick (termed a „heavy lif t‟) capable, say, of saf ely lif ting f rom shore to cargo hold and vice versa, an articl e weighing in excess of 100 tonnes, they have yet another f acilit y of advant age to the vessel‟s owners/operators.

Thus vessels with this

cargo f lexibilit y can intrude upon t he specialized markets developed

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around the marine t ransportat ion of containers, b ulk commodit ies and „heavy lif t‟ items, in addition to the carr iage of bagged and baled goods.

Certain bulkcarr iers – out wardly the simples design of dr y cargo vessels – ar e adapted by their owners and / or builders to engage in specialist trades when an o pportunit y ar ises; f or example, the carriage of lumber in cargo holds and on deck.

Or the dimensions, design and

f ittings of the ship m ay perm it trading to particular geographical r egions – e.g.

The Great Lakes, or to ice aff ected areas of the wor ld.

T here

are even vessels – „combination carr iers‟ – capable of engaging in bot h „wet‟ markets and „dry‟. These large vessels (usually of 60, 000 tonnes cargo capacit y plus) are equipped to carry cargoes of crude -oil or dr ybulk commodities, such as ores, coal or grain.

In all cases, however, the concept behind dr y -cargo mer chant ship design has alter ed dramatically in the half -centur y since W orld W ar II.

Nowadays, vessels must be „cargo -friendly‟ basically designed and

equipped wit h modern conveniences t o spe ed cargo handling at load and discharge ports within a minimum of time and with a minimum of shore labour but wit h the capabilit y of eff iciently carr ying the maximum amount of freight earning cargo.

The soaring cost of oil f uel (ref erred

to as „bunkers‟) since the 1970‟s has also meant that modern main engines have been designed to consum e considerably less during sea passages than was once the case, and this emphasis on „perf ormance‟ has led to hull design innovat ions, such as the wide -spread design introduction of the „bulbous bow‟ (see Appendix 1:2).

As ports have been enlarged, deepened, developed and, in the richer countries, equipped with relat ively sophist icat ed cargo -handling equipment, so merchant ship naval architects have been r equired to incorporate general port needs int o vessel design, and t o plan yet larger vessels, capable of maxim izing earnings potent ial f or their owner s and of transporting goods wor ldwide at the lowest unit prices f or the commodities involved. So let us now study the basic dr y-cargo ship

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types, broadly divided into the common categories of : -

1)

General Cargo

2)

Bulkcarr iers

3)

Containerships

4)

RO/RO Ships

5)

Specialised

6)

Short Sea

1.General Cargo Commonly ref erred t o nowadays as „multi -purpose‟ vessels,

general -cargo

ships

f ulf il

the

same

f unctions

as

their

predecessors hundr eds of years ago – the abilit y to adapt to world trades and demands and to carr y a var iety of cargoes. These vessels were f irst mass -produced during W orld W ar II, when t he f amous 10,000 tonnes deadweight „Liberty‟ t ype ships were built. Later, many of these vessels were sold to sur viving and aspiring shipowners as the basis of modern post - war f leets, and their „three -island‟ design (i.e. f orecastle, midships- located

br idge

accommodation,

and

stern

superstructure)

remained in vogue until the 1960‟s ( see Appendix 1:2) when new designs – principally the Brit ish „SD14‟ (see Appendix 1: 3) and the American designed but Japanese pr oduced „Freedom ‟ (Appendix 1: 4), as

well

as

the

German

„Libert y

Replacement ‟

(the

G LR)

–

f irst

appeared. There st ill r emain a f ew elderly vessels (see Appendix 1:2), but these are becoming rare, the trend being towards ships with af t superstructur e,

bridge

and

engines,

and

with

„cargo -f riendly‟,

unobstructed hatchways and holds bet ween these and the f orecastle (as with

the

„Fr eedom ‟

illustrated

in

Appendix 1:4);

and

without

the

inconvenience of a „ shaf t-tunnel ‟ covering a lengthy pr opeller shaf t linking the „midships‟ main engine and the vessel‟s propeller, being exposed to potent ial damage f rom poorl y – operated „cargo -grabs‟ when discharging a bulk cargo, or f rom heavy units of cargo (e.g. scrap

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metal) being carelessly loaded. (Those engaging in the chartering of general – cargo ships will still encounter Charter Party clauses placing the onus of dam age to a ships shaf t -tunnel on the Shipowner, if that tunnel is not adequately protected). Cargo Liners and Tramps Multi-purpose vessels oper ating in the deep sea markets tend to be f airly small by today‟s standards, most being in the 10/25,000 deadweight size cat egory. Those employed on scheduled routes are normally more sophisticated and somet imes ar e built to custom-ser ve that operation, being termed, per haps, „cargo -liners‟, but such

vessels

are

declining

in

numbers,

line -operators

f requently

chartering-in convenient ly placed and priced „tramp - vessels‟ f rom the international dr y-car go market; vessels which ply the oceans voyage by voyage, their owners/operators seeking cargoes in the vicinit y of where their vessels happen to be available.

Liquid Cargo W ith the introduction of containers and of „parcel‟ tankers, there is nowadays less demand f or small quantit ies of liquid cargoes to be carried in the „deep -tanks‟ of cargo -liners, but there is increased demand for vessels with holds and decks capable of ca rrying several tiers of containers.

Thus, the internal as well as the external

designs of general cargo -multi-purpose vessels have altered in recent years and these charges can perhaps best be explained by studying var ious aspects applicable and, in some cases, peculiar to these vessels.

Dry Cargo Spaces Modern gener al-cargo ships are nearly always constructed with t wo (ver y occasionally t hree, see Appendix 1:2) decks and can t hus be ter med „t weendeckers‟ the upper deck being the „main‟ or

„weather - deck‟,

and

the

lower

deck

the

„t weendeck‟.

Most

tweendeckers have just one „t weendeck‟ located somewhat closer to the weatherdeck overhead than to the bottom of the cargo hold beneath – about t wo-thirds up the height of the holds (see Appendices 1:3 and 1:4) (see NB:1 below).

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The

Cargo

area

enclosed

bet ween

the

t weendeck

and

the

weatherdeck is, logically, ref erred to as the „ t weendeck space ‟, and the area beneath the t weendeck down to the bottom of the cargo area, the „hold-space‟. These vessels are ideal f or th e carriage of bagged, baled and drummed comm odit ies, the support of the tweendeck meaning that a high t ier stowage of these goods can be saf ely accommodated; whereas the same number of tiers in a bulkcarrier, f or example, m ight well lead to splitting of lo wer stowed bags or crumpling of drums due to the sheer weight pressing down f rom above. It is true to say, however, that this is less of a f actor than was previously the case, given the improvement in the qualit y of the cargo bags and the subsequent tendency to large sized bags ( e.g. one tonne „jumbo‟ cargo bags ).

The relat ively large number of individual cargo spaces (the SD14 shown in Appendix 1:3, f or example, has eight separate, various sized cargo compartments) is another advant age when f aced wit h sev er al commodit ies to be carried at the same time, yet kept separate f rom each other – e.g. to avoid „tainting‟ by smell, etc. or to enable loading and discharging at several ports dur ing a voyage, without extra handling of cargoes. W here a modern general -cargo tweendecker is built with the carr iage of bulk commodities and cont ainers in mind, in addition to convent ional „t weendeck -cargoes‟, the vessel can more accurately be termed a „ multi-purpose‟ ship.

An example of such a

ship-a Fr eedom Mk II – will be f ound in Appendix 1:4, being equipped with container f ittings and wit h retractable t weendecks that f old against the sides of the holds to f acilitate t he loading and discharge of bulk commodit ies.

The bottom of a cargo hold is not t he bottom of a vessel. Bet ween t he cargo hold and the ship‟s bottom will be locat ed var ious tanks, designed to carry wat er ballast or bunkers.

These are termed

„double-bottom ‟ tanks and the top of these tanks – their „ceiling ‟ f orms the bottom of the cargo hold located dir ectly above and, consequent ly, usually ref erred to as the „ tank -tops‟ – see Appendix 1:3, wher e the

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double-bottom tanks are clearly shown.

Cargo Fittings In order to carr y goods ef f icient ly, general -cargo vessels need built -in f acilities to handle saf ely a whole var iet y of commodit ies, as well as equipment to load, stow, secur e and discharge those goods.

Most hold spaces will be provided with f ire -smothering

equipment – e.g. CO2 f ittings – used to contain outbreaks of f ire, certain commodit ies being prone to spo ntaneous combustion (e.g. bagged f ishmeal) and/or easily combustible (e.g. baled jut e) .

Some

ships will be addit ionally equipped wit h mechanical or, more likely electrical vent ilation in their cargo carrying spaces; usef ul particular ly f or

commodities

tweendeckers

th at

may

„sweat ‟

have

heavily

„ coamings ‟

(e.g.

around

bagged

rice).

t weendeck

Older

hatchways,

designed as a saf ety f eature to pr otect those working in the t weendeck spaces f rom the danger of f alling int o the holds below (see the „Cargo liner ‟ i n Appendix 1: 2). Since the 1960‟s, however, with the widespr ead introduction of f orklif t trucks used to facilitate cargo handling, these tweendeck coamings have been almost universally dispensed with, the tweendeck hatchcovers f itting level with the surro unding tweendeck f loor and providing a clear, f lat unobstructed area. unobstructed

by

tweendeckers‟,

Other

t weendeck

term ed

„ f lush ‟

t ween -decker‟s

cargo

hatch -coamings,

are

Such vessels,

(Appendix 1:5).

obstruct ions

possible

in

a

compartments are columns or pillars supporting overhead decks.

It is

essent ial to check on the locat ion of such obstruct ions if intending to use a vessel f or large, bulky cargo. Some tweendeck vessels are f itted with „cargo-battens ‟ – somet imes called „ gratings‟, strips of timber f ixed at inter vals (usually horizontally but ver y occasionally vert ically) along the sides of holds and t weendeck spaces, and designed to keep bagged and baled commodities f rom being damaged by touching the sides of a ship which are invar iably we t through condensat ion and/or slight seepage through microscopic f aults in the plating.

Cargo -battens also

increase ventilat ion and reduce damage f rom moisture or sweating.

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However, they are f requently dam aged and have to be removed entir el y and stor ed e lsewhere when handling a bulk commodity. Since they ar e expensive to maintain in good condition and it is labour int ensive to keep repairing and removing cargo -batt ens, it is nowadays unusual to f ind tramp general -cargo ships f ully equipped with this f aci lit y. Instead cargo-nets might be used, but more com monly cargo is pr otected when necessar y by a combination of kraft-paper and other dunnage material f itted sometimes by the crew but more commonly by shor e stevedores as loading progresses.

Dunnage can b e of various mater ial but, is

usually loose wood of various kinds and sizes laid at the bottom of a cargo hold to keep lower -stowed goods clear of bilge water and f rom obstructing drainage, and also wedged bet ween parts of the cargo to keep the stow secur e and saf e (e.g. f or the carriage of drums). Certain trade, traditionally use other, local m aterials f or similar purposes, „cargo-mats‟ and bamboo, f or example, being utilized as dunnage material f or the export of bagged rice f rom South -East Asia.

It may also be necessar y to secur e some commodit ies with lashings. In these cases „ pad-eyes‟ may need to be welded to tank -tops and / or hold sides, so to provide saf e anchorages f or the lashing material. The cost and time of welding and removing these pad -eyes is usually f or the account of the Charter wit h Charter Part y clauses draf ted accordingly perhaps adding that, if not removed f ollowing discharge, the Shipowner is to be r eimbursed by payment of a set rate, say US $10.00 per pad-eyes lef t in situ. Naturally , care must be taken with an welding work in the vicinity of oil bunker tanks located beneath tank -tops. Such a Charter Part y clause may go on to list the lasing materials supplied by the loading Stevedores/Charterer s) stipulat ing that the Shipowner is to ensure that his Off icers take care of these and hand them over to Charteres‟ representatives in good condit ion at the end of the voyage.

Bulk Cargoes

W ith some gener al -cargo ships of certain designs,

additional special f it tings might be required bef ore a bulk grain cargo can be carr ied saf ely protected f rom the cargo shif ting dangerously

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when at sea. Most modern t weendecker s and multi - purpose vessels are designed to carr y gr ain wit hout special f ittings, some being f itted with permanent „part ial centre -line bulkheads‟, prevent ing the sideways shif t of cargo. Older vessels engaging in this trade might require the construct ion

of

temporar y

wooden

centre -line

bulkheads

bef ore

permission would be given to set out to sea.

As we shall see in the relevant sect io n of this paper, bulkcarriers are commonly f itted with „ self -trimming ‟ f acilit ies f or high stowing bulk cargoes such as grain.

It is not usual f or tweendeckers t o have this

f acilit y although attention to this def iciency has been given by the designers of some modern mult i -pur pose vessels. The Principle of hinged, hoistable t weendecks has also been ut ilized in modern mult i purpose vessels, such as the Freedom Mk II shown in Appendix 1:4.

Contai ners: W ith the revolut ion in cargo -handling since W orld W ar II, the design of general -cargo ships has had to adapt and conf orm to new methods.

Consequently, the cargo spaces of modern multi -purpose

vessels tned to be as square as is possible, so as to assist the stowage of containers and palletized -cargo, whilst on th e weatherdecks, modern design allow f or storage of containers, of ten two or more tiers high, bear ing in mind vessel st abilit y, visibilit y f rom the bridge, and deck strengths.

Ballast and Bilges: Older general-car go vessels were designed to carry quantit ies of liquids – e.g. palm oil – and many had small „ deeptanks‟ f itted with heating coils f or this purpose.

Occasionally cargo

holds, capable of being f looded to pr ovide extra stabilit y when the vessel is in ballast or partly - laden condition may be t ermed „ deep-tanks‟ although it is better to ref er to them as „ f loodable-holds ‟ to distinguish their purpose.

An example of a f loodable -hold‟ in a general cargo

vessel can be f ound by r ef erence to carg o -hold No.3 of the SD14 shown in Appendix 1:3.

A ver y f ew mod ern multi-purpose t ypes have been

equipped with older - style deep-tanks, but generally this trade has been

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taken over almost totally by „ par cel-tankers‟. Af ter washing cargo spaces, dirt y water is drained away f rom the hold bottoms into „ bilges ‟ through „ strum-boxes‟ which act as f ilt ers and prevent solid matter f rom blocking bilge pipes and damag ing pumps.

Prior to loading bulk

commodit ies, these bilge openings might be intent ionally cover ed over f or the same reasons.

Shelter Decker Another term that might be encountered – especially it seems in the short -sea market sector – is that of „shelter -decker‟. The „shelter ‟ ref ers to a design specif ically adapted to overcom e stringent tonnage regulat ions, by which vessels could maxim ize carg o capacit y and intake (and thus maximise earnings potential) yet r estrict the registered tonnage assessed against the vessels and thus reduce those expenses and liabilities which are based on the ship‟s registered tonnage (eg port costs and certain liabilities as to cr ew num ber s). The tonnage regulations creating these innovat ive designs have long been altered and ther e is now no need f or clever naval architecture to overcome this legislation.

Nevertheless, the term lingers on in certain

market sectors, and where the term „she lter- decker‟ is used today it should be taken to mean „t weendecker‟.

Cargo Gear The most obvious exter ior cargo f itting on a general -cargo ship is her „gear ‟ – her derricks or cranes .

Derricks may be old in design, but they remain important equipment; their use (and dangers) being readily understood throughout the world, relat ively simple, as they ar e, to rig and to maintain, and being reasonably inexpensive.

There are basically three parts to a derr ick

(see Appendix 1:6): -

1)

A vertical support ing pillar – a „samson post ‟ – sunk into the ship‟s weatherdeck, to the base of which is attached : -

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2)

The boom, and

3)

Riggin (e.g. wire ropes, blocks and tackle).

Derricks

are

oper ated

by

winches,

usually

electrically

or

hydraulically dr iven (see Appendix 1:6) . All parts of the cargo lif ting equipment must be rigorously and regularly checked with certif icates issued attesting to t he „ saf e working load ‟ – „sw1‟ of each unit.

These

inspect ions can be carried out by Classif icat ion Societies or by certain other inter nat ionally recognized author ities specializing in this act ivit y. Certainly, it is always best to ensure t hat a Charter Part y contains conf irmation be the Shipowner that a vessel‟s gear cert if icates are up to date and will remain so during the currency of the voyage / timecharter involved. Failure to attend to this aspect could cause shor e workers to ref use to handle a vessel or, worse, injur y or death result ing f rom def ective

or

uncer tif icated

gear

could

render

to

t hose

involved

enormous f inancial penalties in cert ain ar eas of the world.

The basic derrick can be extr emely ver satile and is capable of adopt ion f or certain trades.

„ Union Purchase ‟ is a method of joining

derrick booms t o a particular rigging method, simple to use and f ast in operat ion, so that loads ca n be moved speedily f rom shore to cargo hold, or vice versa.

The problem wit h the system is t hat once the

rigging is set up it has to be altered to adjust the places of lif ting and setting down of each load.

Thus car go has to be moved an exact

position pr ior to lif ting and t aken away f rom another exact position at the end of each movement cycle.

It is theref ore a labour intensive

method (although this is not a problem in certain areas of the less developed wor ld).

Additionally, however, the union of der r icks in this

way reduces the sw1, so that t wo 5 -tonne sw1 derricks mig ht have a union purchase capacit y of less than held the individual sw1 – say 2 tonnes.

However, for bagged goods, this may well not be a problem,

and the system has its advantages f or the discharge of bagged goods in less- developed regions.

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W here heavy loads are involved, union purchase is obviously not the answer.

The winch arrangement of certain vessels enables t wo

parallel derricks to be linked together with t wo adjacent car go winch es in a system termed „swinging derr icks‟ (see Appendix 1:6).

Swinging

derricks maintain the speed of operat ion of union purchase, but enable lif tings up to the m aximum capacit y of the smallest derrick or cargo winch involved, using in place of a third ca rgo winch a „deadman‟ – a suspended deadweight on one line (e.g. a mass of old wire) the purpose of which is simply to provide t ension. One winch is used to „swing‟ the boom f rom over the hatchway to the quayside, a second winch being used to „swing‟ the boom back to its original position.

A var iat ion is the „ self -swinging derrick ‟, or „crane-derrick ‟, a single derrick system that works in the same f ashion as a crane, by using only its own immediately associat ed winches and ther ef ore does not interf ere wit h car go-handling at adjacent hatchways. Such a derrick is normally to be f ound in isolat ion at a hatchway and, just like a crane, is capable of extremely f ast operation by only one, skilled dr iver utilizing a joyst ick control.

A commercial example of a s elf -swinging

derrick is the „Velle‟ type. Typically cargo derricks lif t between 5 and 15 tonnes sw1, but it is not unusual f or conventional – t ype der ricks to be adapted f or lif ts of up to 50 t onnes.

Some gener al -cargo ships are

equipped with „ St ulcken derricks‟ (see Appendix 1:6) which, in some cases, can saf ely lif t weights of up to 450 tonnes, having the added advant age of serving two hatchways im mediately f ore and af t of the location of its Samson posts. (Natur ally, when chartering general -cargo, multipurpose ships, the locat ion, saf e working loads and capabilit ies of the vessel‟s derr icks may be of paramount importance, and t he broker acting f or a Charter should ensure that he or she is ent irely f amiliar wit h the requirements of his principal and can p roperly evaluat e the ships proposed f or the business with regard to their cargo gear potential).

In a Chartering sense, the term „ double-rigged‟ means that two derricks ser ve each hatchway. Moder n mult i-purpose vessels are almost

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always equipped wit h crane s.

These ar e usually electrically power ed,

having the advant age over most derricks of being more ver satile and capable of accur ately placing and picking up cargo f rom a var iet y of adjacent posit ions.

Cranes are, however, more sophisticated and

expensive to maint ain, also requir ing more eff icient handling than derricks. Fewer cranes are needed than derricks, though, and they are self -contained in t heir own units, not requir ing supporting Samson posts, etc.

Typical lif ting capacit ies of shipborne cranes r ange f rom 5

to 25 tonnes sw1, with most modern vessels tending towards the higher capacit ies, perhaps having the f acilit y to unite the lif ting capacit y of two adjacent cranes, thereby substantially increasing the maximum capacit y – e.g. 2 x 25 tonnes crane s equat ing to 1 x 50 tonnes. To recap, most new buildings are f itted with cranes of around 25 tonnes sw1, derricks still being used to pr ovide a heavy - lif t f acilit y, where requir ed.

Cargo Hatches Some elderly vessels – part icular ly those engaged in the short sea trades – will be f ound to have wooden hatch covers, which are covered by tar paulins and then cleaned to secure them and to ensure that they are weather and waterproof . extremely har d wor k and labour -intensive.

Naturally, this is

Most deep sea vess els,

however, are f itted with steel hatch covers of what is known as „Macgregor type‟ Macgregor‟s being an organization which pioneered and patented hatchcover designs in the period f ollowing W orld W ar II, and which still plays an important role in the des ign of cargo -handling equipment.

Most hatchcovers ar e opened and closed by electric or hydr aulic power and some by winches and chains.

Compared wit h wooden

hatchcovers they are relat ively labour -f ree but, like derricks and cranes, are subject to stringent testing by Classif ication Societies to ensure that they remain sae and watertight.

Cargo damage by moist ure may well

be f ound to result f rom water ingress through hatchcovers and, as with cargo-handling equipment, Charter Party clauses usually st ipulate that Owners will maintain hatchcovers in eff icient, whatert ight condit ion.

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Depending upon the design of the vessel, t weedecks and cargo holds may be ser ved by one or more hatchways.

In the case of the

Freedom ( Appendix 1:4) Cargo Hold/T weendeck No.1 can b e seen to be ser ved by Hatchway No.1, wher eas Cargo Hold/T weendeck No.2 is ser ved by Hatchways 2 and 3, Hatchway No.2 located above the f orward part of the cargo hold/t weendeck and Hatchway No.3 locat ed above t he af ter apar t. and 4.

A similar pattern will be obs er ved over Holds 3

The Chart er Part y description of a Freedom Mk I should

theref ore contain the expression 4 holds/6 hatches‟, whereas an SD14 (Appendix 1:3) would be described as having „5 holds/5 hatches‟.

Some mult i-purpose vessels, however, hav e what are ref erred to as „t win- hatches‟ – i.e. hatchways located by side rather than f ore and af t as in the case of the Freedom Mk I. The object of twin -hatches is to provide easy access to the sides of a vessel‟s holds and tweendeck spaces to f acilit ate t he handling of heavy and bulky articles – such as containers or, perhaps, railway wagons.

The main disadvantage of

twin- hatchways, however, is the need f or a supportive centre -line beam running longit udinally bet ween the t wo hatcheway openings, (and sometimes

an

ent ire centre - line

bulkhead),

hamper ing

bulk

cargo

handling.

18 Go to Index Page

The term „open-hat ch‟ is more commonly associat ed wit h short sea vessels and containerships, applying where the hatchway stretches virtually f rom one side of the watherdeck to the othe r and f rom one end to the other.

In its open position it exposes almost the entire under -

deck area, enabling extremely f ast and unobstructed cargo handling, usually by shore equipment.

The syst em creates inherent structural

weaknesses f or larger vessels, however, and „open -hatch‟ systems are more or less conf ined to smaller tonnage operating in the short -sea sector,

or

to

deepsea

containerships

specially

constr ucted

wit h

compensating „double -hulls‟ – see later in this Lesson.

In most cases „t weendeck -hatchways‟ are located more or less exactly beneath weatherdeck hatchways, thereby f acilitating cargo handling. They usually also have the same dimensions. However, this may not be the case, especially with older vessels, and it is good practice to check thi s aspect when chart ering t weendeckers.

Self Assessment Questions

A)

Define and explain the terms: 1)

SW 1

2)

Flush-t weendeckers

3)

Pad-eyes

4)

Centre- line bulkhead

5)

Bilges

6)

Samson post

7)

Union-purchase

19 Go to Index Page

8)

Double-rigged

9)

Open-hatch

10)

Shaf t-tunnel

B) Your principals are seeking to charter a t weendecker f or the carriage of bagged cargo, but none of the candidate vessels ar e cargo-batten f itted. Inf orm them of alternatives to cargo -batt ens and advise about who, (in your opinion), should 1) supply an d 2) f it these alternatives.

2. Bulkcarriers Some of the items cover ed under general -car go vessels above – items concerning f or example, gear and hatchways, can apply equally to bulkcarriers and bulkcarriers can also – especially since the introduction of stronger synthet ic carg o -bag material -

be f ound

engaged carr ying commodities that were once t he main preserve of the tween-deck market. Bulkcarr iers, nevertheless, have dist inct ive f eatures (see Appendix 1:2).

They are singledeck vessels, those engaged in

deepsea markets and up to 50,000 tonnes deadweight size f requently (yet not always) equipped wit h cranes or , occasionally in older designs, with derr icks. The majorit y of bulkcarriers over this size, however, (as well as many modern short -sea „tulkers‟), are „gearless‟, having no cargo-handling equipment themselves and reliant on shore f acilit ies t o be loaded and discharged.

They range in appr oximate size f rom coastal craf t of around 100 tonnes to vessels of over 250,000 t onnes deadweight and, as their name implies, are intended pr imarily f or the transportat ion of bulk dr y cargo commodities, although they can be adopted f or the carriage of other goods-cargoes such as lumber, st eel products, containers, and even motor cars. Larger bulkcrarriers of between about 60,000 and 70,000 tonnes deadweight are usually contrasted with a beam and draf t suitable f or lim itations imposed on the market by the dimensions of the

20 Go to Index Page

Panama Canal – an important water way f or this type of vessel, giving rise to the terms „ panamax‟.

21 Go to Index Page

Typical dimensions of a „panamax builkcarrier‟ would be: -

LOA (length over all)

:

224 metres (735 f t.)

Beam ( width)

:

31.8 metres (104.5 f t.)

Draf t

:

13.35 metres (43.8 f t.)

Summer Deadweight

:

64,500 tonnes

Cubic Capacit y of :

73,625 cubic metre s Cargo Holds (2,600, 000 cubic f t.)

Holds

:

7

Hatchways

:

7 (each about 14 metres long by 13.5 metres wide)

Vessels too wide to transit the Panama Canal are termed „cape size‟ and usually t his t erm is t aken to mean vessels in excess of 100,000 tonnes deadweight, there being f ew bulkcarrier s bet ween 80,000

and

100,000

tonnes

deadweight

size.

(Appendix

1:7).

Bulkcarr iers of between, say, 20,000 and 50,000 tonnes deadweight size are f requently loosely termed „ handy-sized ‟ wher eas there is a specif ic class of bulkcarrier around 20,000/30, 000 tonnes deadweight designed with measurements enabling transit of the St. Lawr ence Seaway, and thus access to the Great Lakes system of North America, these maximum dimensions being: -

Length

:

Beam : Draf t

730 f eet 75 Ft. 6 inch.

:

26 Ft. f reshwater

Height above water level not to exceed 117 f t.Vessels transiting the Panama and Suez Canals and those trading to the Great Lakes require special f ittings in addition to being dimensionally suitable, and

22 Go to Index Page

such requirem ents w ill be dealt with in greater detail in Lesson 9. Cargo Spaces Bulk carriers have a basically simple design, as can be seen f rom Appendix 1:2, where superstr ucture, br idge and engines are located af t in nearly ever y case, leaving relatively unobstructed acce ss to cargo hatchways.

To avoid the expensive necessit y of employing

shore labour to ensure that bulk cargo saf ely f ills extrem ities of the holds – i.e. it is saf ely „trimmed‟ – most bulkcarr iers ar e constructed with „upper wing tanks‟ (see Appendix 1: 5), sometimes termed „topside tanks‟, providing „self -trimming‟ f acilities on their underside.

These

upper wing tanks are used to carr y ballast water when the vessel is empty at sea or only partly laden, other areas used f or this purpose being tanks located f orward and af t („f ore -peak‟ and „af ter -peak‟ tanks) and, perhaps, a m idships located „f loodable -hold‟, as discussed in the general-cargo vessel section.

As some bulk cargoes are relatively lig ht (e.g. bulk barley) and thus a vessel‟s hold can be f illed be f ore she comes down in the water to her permissible loadline marks, some „handy -sized‟ bulkers utilize the space in these upper wing tanks

f or certain commodities ( again bulk

barley might be an exam ple) that ar e relatively f ree -f lowing. By loading throug h openings in the weatherdeck above the upper wing tanks, these spaces can be drained of ballast water at the loading port, washed through, cleaned and dried, the cargo t hen f ed into the vacant spaces, thereby using other wise wasted deadweight capacit y. At discharging ports, the cargo is „bled‟ into the cargo hold immediately beneath through openings which are sealed when all cargo has been discharged and

prepar ation

made

to

t ake

…………………………………………………

on

ballast

by

no

water.

means

The

universally

employed …… ……… diff icult ies of satisfactorily cleaning and drying out the wing tank spaces – especially in cold or humid condit ions – and the increasing expense in human labour terms of the entire operation.

Purists

will

argue

that

there

are

no

true

„self -trimming

23 Go to Index Page

bulkcarriers‟, since such a vessel would require slopping areas located f ore and af t of the hatchway openings, as well as to port and starboard and t hat, ther ef ore, the expression is m isleading. In realit y one is f ully aware of the limitat ions of „self -trimming‟ vessels although, to be f air, there may be legal problems when utilizing this expression, with certain commodit ies in rare situat ions giving rise to ser ious disputes.

Thus

some owners pref er to use the less onerous expr ession „ easy-tr immer‟ when descr ibing their vessels.

In the bottoms of the cargo holds ar e „ t anktops‟ covering „double bottom tnaks‟, just as f or general -cargo ships, and in some cases (see Appendix 1:5), bulkcarriers have „side‟ and/or „ lower wing tanks ‟.

The

upper sides of lower wing tanks in the cargo holds give rise to the expression „ hoopered holds ‟, although some bulkcarrier designs have virtually square bottomed, f lat hold f loors, particular ly specialized „conf tainer -bulkcarrriers‟ – con-bulkers‟ – designed to perf orm in both the bulk cargo and container market sectors, and needing this f acilit y f or the convenient and saf e stowage of containers and, perhaps pallet ized cargo. (see Appendix 1:8). For other bulkcarrier t ypes – e.g. colliers – hoppered holds are desirable to assist t he saf e securit y of bulk cargo and to minimize its movement at sea.

Cargo Stow age Bulk cargoes can ver y considerably in their stowing propert ies – e.g. iron ore stows around 12 cubic f eet f or every t onne, wheras coke may st ow as high as 90 cubic f eet per t onne.

Obviously,

in the cases of iron ore, f ull deadweight will be reached with cargo holds litt le more than a third f ull, whilst a cargo of coke will f ill cargo holds to capacit y and the vessel may t heoret ically be losing potential revenue earnings becau se of lack of space in cargo compartments. (Unlike f ree-f lowing bulk barley, coke cannot be loaded in upper wing tanks, because it would not only be extremely dif f icult and time consum ing, if not impossible, to load it through the r estricted deck openings to the wi ng tanks, it would probably cont inually block the „bleeding‟ apertur es when it came to discharge).

24 Go to Index Page

For heavy cargoes of iron ore, it is important that bulkcarrier s be loaded so they do not become too „stif f ‟ and dangerous in their handling at sea. Consequently, cargo is normally loaded in adjacent holds – say Holds 2, 4, 6 and 8 of a 9 x hold bulkcarrier (see Appendix 1:7) – the vessel being especially „ hold-strengthened‟ during the building process of f acilit ies the dem ands of this trade. The facility of carrying cargo in adjacent holds with others empty is particularly useful for loading or discharging at more than one port when carrying commodities other than heavy ores.

Cargo

Gear

f acilit ies.

Some

bulkcarriers

are

f itted

with

„self -discharging‟

These m ay be a simple arr angement by which the vessel

carriers its own cargo -grabs which can be f itted to the ship‟s derricks or cranes and used to discharge or perhaps even to load car go.

Some

vessels have a „gantry‟ arrangement, by which a „travellin g‟ crane moves longitudinally the length of a bulkcarrier along a gantry rail, and is thus able to operate over any part icular hatchway. Other bulkcarriers, perhaps designed f or a particular trade, may be f itted with sophisticated discharging apparat us tha t operates on a conveyor belt and / or screw system (e.g. Siwert ell System), loading being lef t to shore based equipment. Such machiner y is usually tailored f or a specif ic cargo type and trade – e.g. bulk cement – and is not normally suitable f or a tramp bulkcarrier.

W ith certain bulkcar rier sizes, however, ship‟s gear is a def inite disadvantage,

trades

having

developed

around

sophisticated

and

speedy shore-equipment which needs clear, unhindered access to cargo compartments.

Consequently, most panamax and almost all cape -size

bulkcarriers are „gearless‟ and close at tention must be paid by their operators, charters and brokers alike, that each vessel „f ixed‟ f or a particular

trade

can

physically

f it

beneath

shore

loading

and/or

discharging apparat us, not on ly when laden but, pr ior to com mencement of loading and f ollowing discharge, in ballast condition. The dimension that determines a vessel‟s suitabilit y is the dist ance bet ween t he water line surrounding the vessel and the top of her hatchway coam ings

25 Go to Index Page

– f requently ref erred to as the vessel‟s „ air-dr af t‟, and not to be conf used with t hat ot her „air -dr af t‟ being the distance f rom the water line to the top of the highest f ixed point on a vessel (see the G reat Lakes dimensional restrictions ear lier in this Lesson) .

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Cargo

Fittings

Unlike

general

cargo

vessels

it

is

unusual

f or

bulkcarriers (especially older ones) to be f itted with electr ic ventilat ion, but many have f ire smothering (e.g. Co2) f acilities ser ving cargo -holds. Most have st eel hat ch -covers, opening for e and af t on the majorit y of handy-sized

vessels,

whilst

the

larger

vessels,

f rom

panamaxes

upwar ds, are f requently f itted with hatch -covers opening sideways when, in the open posit ion they cover the deck between coamings and the ship‟s rail, supported by a steel f ramework to allow ship‟s crew and shore workers to pass underneath when moving about t he vessel‟s decks.

This enables a bigger open hatchway space t han would

other wise be the case, the better to accommodate large shore -based cargo handling equipm ent and speedier cargo -handling.

T his hatch -

cover system is known as „side -rolling hatchcover‟ (see Appendix 1:7).

Speci alised Bul kcarriers W e have already examined some specialized bulkcarriers, f or example, those desig ned to transit the Great Lakes Seaway and the Panama Canal, and also those equipped with self discharging apparat us and thus able t o trade to areas where port equipment

may

be

inadequate.

We

have

also

encountered

t he

„conbulker‟ equipped to cross the boundaries of the container and the bulk cargo markets. There are others, however, and a brief description of some would be usef ul: -

Loggers Usually ar ound 15/30,000 deadweight, these bulkcarriers of particularly heavy construction are of ten f itted with derricks or wit h cranes in the region of 15/25 tonnes sw1, capable of loading and sustaining heavy logs in addition to other, conventional bulk cargoes. Logs may also be loaded on deck, secured by „stanchions‟ alongside „bulwarks‟ (rails or steel sheet ing running alongside the edges of the weath erdeck), and by heavy chains and securing tackle.

Stanchions

may be of the „permanent ‟ steel var iet y – or „collapsible‟ along bulwarks adjacent to cargo hatches so they can be lowered to lie hor izontally on the deck and allow clear unhindered access bet we en shore and hatchways – essential when cargo equipment is used f or loading or

27 Go to Index Page

discharging.

W here a logger is not f itted with steel stanchions,

however, temporar y wooden st anchions are somet imes used by shaving down suitable logs from the cargo, to enable them to f it int o stanchion sockets in the edge of the weatherdeck adjacent to the bulwarks. The substant ial construct ion of loggers is also of use when carr ying heavy cargoes such as ores, cement or cement clinker.

Lumber Carriers The aim of the designer of a lumber (or t imber) carr ier is to creat e suf f icient space in holds and on deck and hat chcover s f or the maximum amount of this high -stowing cargo to be carr ied.

Once

again stanchions are essent ial and the same remarks above under „loggers‟ applies to „ lumber carr iers.

W ith the latter vessels, however,

the chains and tackle are of a lighter construction so as not to damage the cargo.

Shif ting of lumber cargoes at sea is a r isk that all those

engaged on t his trade dread, and it is essent ial that no shor tcuts are taken when stowing and securing the cargo, which must always be to the

Mast er‟s

absolute

satisf action.

Timber

carriers

have

clear,

unobstructed and squarish holds and wide / long hatchways, sometimes f itted with longitudinal and / or transverse supports as a constructional saf ety f eature.

Because of the nature of this commodity, when a f ull cargo of lumber is carried, special regulat ions r egarding loadlines are applied, which

means

that

an

alternat ive

permitting deeper loading.

„ lumber

loadline ‟

can

be

used,

This is on the basis that with a f ull and

secure lumber deck cargo, vessel buoyancy and inherent saf ety has increased, and the eff ective „f reeboard‟ (the dist ance f rom the water line to a prominent position on the vessel

– usually the t op of

the

weatherdeck – which governs the position of a vessel‟s loadline) can in f act be adjusted to increase cargo intake of this particular commodit y.

Wood-chi p Carriers These vessels can be as large as 40/50,000 tonnes deadweight and are specially designed f ro the carriage of high stowing wood-chip products dest ined f or use in pulp mills.

They are

28 Go to Index Page

usually of light construction and unsuit able f or the carriag e of heavy, dense cargoes such as ores.

Nevertheless, where they can be

employed on a regular run - e.g. f rom the W est Coast of the United States and Canada to the Far East – they have in the past been adapted f or the pr of itable carriage of motor cars on the other wise valueless ballast leg (return journey), thus obtaining f reight -earning abilit y on both pa ssages.

Ore-Carriers At the other extreme from wood-chip carriers, cre-carriers have small, compact cargo spaces because the nature of their trade is concerned with heavy-dense mineral commodities. Not so many years ago there was an international fleet of these gearless vessels around 20,000 tonnes deadweight, but the introduction of the more versatile logger offered stiff competition at the time that ore-terminals worldwide were gearing up capacity to take cargoes in excess of 100,000 tonnes. Now ore-carrier s tend to be in excess of 100,000 tonnes deadweight and the largest dry cargo vessels in t he world ( in excess of 250,000 tonnes) are ore carriers, designed for a particular cargo -run, equipped wit h specially strengthened holds and tank -tops and with no need f or the self -trimming f acilit ies of other bulkcarriers.

Bulk Cement Carri ers There are a f ew sophist icat ed mechanical and pneumat ic bulk cement carriers, and even those that act as „mother ‟ or „f actory-ships‟, of f -loading f rom other vessels and stor in g or even bagging bulk cement abroad.

Of ten these vessels are converted f rom

suitably dimensioned bulkcarriers, and serve a particular trade route or are stationed in a particulars area, the better to meet the cement demands of a near by market.

Other wise , f or odd cargoes, ordinar y

bulkcarriers can be readily adapted f or the carriage of bulk cement or cement clinker (part manuf actured cement wit hout the sett ing agent, gypsum), by the cutting of small holes in hatchcovers to f acilitate loading and / or disc harge without creating unacceptable dust pollution, these holes being made good to Classif ication Societ y satisf action bef ore the vessel leaves port.

This operation is usually covered by an

29 Go to Index Page

appropr iate Charter Part y Clause, under the terms of which Charte rs usually reimburse t he Shipowner f or the cost of the hold - cutting and rewelding

operat ion,

with

t ime

so

used

to

count

as

layt ime,

if

employm ent on a voyage basis is involved.

30 Go to Index Page

Self Assessment Questions

A)

B)

Define and explain the terms:

1.

Gearless

2.

Top-side tanks

3.

Hoppered holds

4.

Gantry cranes

5.

Air-draf t

6.

Stanchions

7.

Side-rolling

8.

Self -trimming

9.

Cape- size

10.

Conbulker

W hat ideal sw1 capacit y and t ype of gear should be f itted on a

vessel to be used extensively in the heavy logs trade, and what deck equipment is essential?

3. Cont ainershipsT hese are ships specially designed f or the carriage of containers and ar guably, the moder n equivalent of the car go -liner of the immediate post -war years. These lar ge vessels tend to be employed

31 Go to Index Page

on scheduled voyages on f ixed routes, traveling at high speeds of around 20 knots or more.

They normally ser ve sophisticated container

terminals where ext ensive shore equipment is available and f or this reason, most of them are gearless.

T heir tur n -round time in p ort is

ver y short -perhaps only a matter of hours rather than days.

Containers ar e stowed below the weatherdeck in a secure, cellular steel f ramework („ cell-quides ‟), in heights of eight to ten tiers, with up to three to four tiers on deck.

Just as f or con vent ional cargo -

liners, however, the old stabilit y rule of „heavy weights at the bottom, light on top‟, holds good f or containerships. These modern vessels have large hatchway openings of the same width and length as t he holds they ser ve,

and the

hatch -covers

are f requently steel slabs

(„ pontoon

hatches ‟) lif ted on and off by shore gear.

Usually there is long itudinal f raming along the main hold within a double hull; this double „skin‟ being required to compensate for the loss of vessel strength owing to lar ge hold areas and open hatchways. (see Appendix 1:9). Whilst the size of almost all other merchant ships is normally described in tons (or the metric counterpart – tones), the capacity of container ships is usually expressed in terms of the number of containers it is designed to carry. As the standard container sizes are almost invariably either 20 feet or 40 feet long, you will encounter the expression TEU meaning „twenty-foot equivalent units‟.

Sizes can

range from a few hundred TEU‟s to over 4000 and there is even a tendency now to describe the largest of these ships in terms of FEU‟s (forty-foot equivalent units). Characterist ics of typical containerships are: -

Short Sea

Middle Sea Medium

Large Deep Sea

Loa

76.0m

104.0m

168.0m

208.0m

Beam

13.0m

16.50m

25.0m

32.0m

32 Go to Index Page

Draf t

3.7m

4200mt

16200mt

35000mt

Speed

13 kts

15 kts

17 kts

8 kts

The smaller container vessels are used as „ f eeder ‟ ships, f eeding the hinter land around major container terminals wit h loaded containers inbound f rom abroad, bef ore f eeding containers f or export back to the container term inal on the return journey. Because these vessels ser ve less sophisticated container ports they may well be geared – pr obably with gantr y cranes – enabling them to load and t o dis charge containers with their own shipboard equipment.

Relevant container terms are: Fully Cellular

:

A Containership fully fitted with cell guides.

Fully Fitted

:

A Containership f ully f itted with cargo securing with cargo securing equipment, e.g. twister locks, lashings, etc. with strengthened decks.

Shiptainer

:

A ship-borne gantry- crane.

4.RO/RO Vessels The concept

of RO/RO („Roll on / Roll off ‟) ships

being suitable only for short -sea ser vice has altered radically over the past t wo decades, despite

some dramatic ship - losses blamed on

inherent weaknesses in the design of the deck layouts and bow and stern doors.

For areas of the world possessing only limited port

f acilit ies, the RO/RO ship with its „self -sustaining‟ abilit y t o load and discharge prov ides an ideal mode of transport.

Appendix 1:10 shows the prof ile, plan and data f or a typical deepsea RO/RO vessel which, usually equipped with its own f ork -lift trucks and tractors and, perhaps a crane or two, is capable of handling f rom alongside a whole range of wheeled vehicles as well as pallet ized and containerized g oods.

Access to the interior of RO/RO vessels is

usually via a ster n „ ramp‟ which, in modern ships is capable of

33 Go to Index Page

sustaining ver y heavy loads of up to several hundred tones, and sometimes of being „slewed ‟ around and raised or lower ed to suit whatever berth access may be available. Once inside a RO/RO vessel, ramps or lif ts lead up or down to var ious deck levels wher e a whole var iet y

of

goods

may

be

stowed,

decks

and

tank -tops

being

strengthened to take heavy loadings. Every commodit y that lends itself to transportat ion via a RO/RO or a LO/LO („Lif t On/Lift Off ‟) system may be carried on this t ype of vessel, which can sustain all kinds and most sizes of rolling stock and merchandise that ca n be placed on wheels.

Because RO/RO vessels f orm an extension to the nat ural road transportat ion

envir onment

f or

wheeled

vehicles,

part icularly

f or

articulated lorr ies which can unhitch and deposit their trailer on board, certain RO/RO ships are som etimes r ef erred to as „trailer -carr iers ‟, their capacit y f or the carr iage of theses trailers being described in terms of length of available „lane meters‟. The width of a „lane‟ var ies according to the construct ion of an individual ship, though these must be a minimum of just over 2.5 meters (8 f eet), to suit standar d container dimensions.

To allow adequate space for lashing and securing cargo,

however, the realistic minimum of a lane should be 3 meters (10 f eet).

The „f amily‟ of IO/RO vessels can be expanded to include f erries which f requently carry a mixture of passengers as well as wheeled cargo, and vessels such as „railway‟ or „train -f erries‟ complete with rail trucks, equipped wit h a sophisticated and sensit ive ballasting system to enable t he ships rail tra cks to be saf ely and securely connected to the shore rail system. Another var iet y of RO/RO is the Car Carrier, „ Pure Car Carriers ‟ (or „PCC‟s ‟ as they are usually known) being specially designed wit h f ixed decks and sophisticated ventilat ion syst em f or the carriage of motor cars and nothing else. A development f rom this basic design is the „Pure Car and Truck Carr ier ‟ – the „PCTC‟ – in which the clearance of some decks can be adj usted to accommodate larger vehicles as well as cars.

All lend themselves to highly eff icient cargo -

handling, during which an entir e cargo of perhaps 5,000 motor cars can

34 Go to Index Page

be dr iven on or of f in a matter of hours.

(Appendix 1:11 illustrates a

„PCTC‟ with t ypical particulars).

5. Specialised Ships Heavy Lift Ships W e have already re ad of general-cargo vessels f itted with heavy- lif t derricks.

But ther e ar e certain articles moved by sea

that are f or too heavy f or even heavy - lif t derr icks capable of sustaining weights of up to 450 tonnes. To meet this demand, the last decade or so has seen the design and introduction of a new class of vessel – t he Heavy – Lif t ship. There are basically t wo types of heavy -lif t vessel, the smaller capacit y unit reliant on lif ting cargo on and of f wit h its own gear, and capable of sustaining lif ts of arou nd 500 tonnes unit weight, similar in some ways to its RO/RO cousin. The f ar larger, second t ype is the „semi-submer sible‟, equipped wit h a powerf ul ballast ing system by which tanks are f looded a requir ed, suff icient to submerge the vessels‟ cargo area, which can be located beneath the object to be transported – e.g. an oil dr illing platf orm or another ship.

Once all is

secured in the carriage position, the ballast tanks are pumped dr y and the mother vessel – the semi-submersible itself – emerges from the water bear ing the weight of the cargo. To discharge the cargo, the procedure is reversed.

A typical sem i -submersible vessel is illustrated

under Appendix 1:12.

Barge Carrying Vessels Cousins of heavy -lif t vessels are barge carrying ships, of which there are several designs. In fact barges can be readily compared with containers, in that they are self -contained units capable of being loaded and discharged at the places of origin and destination of their cargoes, being transported between the two by mother conveyances. However, the capacity of a barge is much greater than that of containers and these larger, floating units lend themselves to the carriage of large unit commodities. The barge units ar e „dumb‟ ( unable to self -porpel) but are designed f or ease of transport under one of sever al carr ying systems.

35 Go to Index Page

L ASH („Lighter Abroad Shi p‟) and SeeBee They both employ a system by which lighters ar e lif ted on and of f mother vessels, being collected and distributed along water ways by towing craf t. BACO uses a sys tem of f loating barges into the mother ship through large bow doors.

The

USSR has a particularly extensive LASH and SeeBee system, with mother ships capable of carrying individual barges of over 1,000 tonnes deadweight. Frequently, a combination of barges and containers can be handled.

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Livestock

Carriers:

Livestock

carriers

can

be

divided

into

two

categories- those designed to transport sheep, and those for larger animals such as cattle.

The obvious design difference is the extra deck

height required for the larger animals, but both require fodder storage, extensive water supply, excellent ventilation, suitable methods of animal waste

disposal,

non-slip

decks,

carefully

designed

ramps,

and

accommodation for those tending the animals. Most livest ock carri ers have been converted f rom exist ing vessels, notably sheep carriers f rom oil tankers, but occasionally specialized ships are constructed f ro the larger animals. Sheep carr iers tend to be f ar larger than catt le carriers, as can be seen f rom Appendix 1:13 .

Refrigerated Vessel s These vessels are specif ically designed and built to transport the many goods (neats, f ruits, f ish and veget ables, f or example) which would rapidly det erior ate in ordinar y hold conditions. Modern „reef ers‟ are built with holds and d ecks providing good access f or standard sized pallets and f or f orklift trucks, and are usually f itted with „side-ports‟ – openings in hull sides permitting immediate access to cargo decks, the f loors of which line up wit h quaysides. The layout of these vessels (see Appendix 1:14) also makes them suitable f or the carriage of motor -cars which f it beneth t he restr icted deck -heights, as well as f or other non -ref rigerated and pallest ised cargo, alt hough many of these vessels trade exclusively in t he ref rigerated markets on long term contract employment.

Certain r eef er trades are losing out t o the

containership market wit h the advent of ref rigerated containers, but there remains a substantial and lucrative reef er market f or those with specialist knowledge and ves sels.

Combination Carriers There are basically two types of „combination carrier‟ capable of transferring successfully from the distinctive dry-bulk market to what might be termed the „wet-bulk trades‟.

Both tend to be large ships in

excess of 60,000 tonnes deadweight, frequently more than 100,000 tonnes deadweight.

The most common (and usually the smaller) type is the „0B0‟

(„Ore/Bulk Oiler‟) which unlike the impression given by its name, has sufficient

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cubic cargo carrying capacity to enable it to carry economically not only heavy, dense ore, but also lighter stowing commodities such as coal and even grains. The distinctive f eature of an OBO is that the same cargo compartment that has been used to carry a dr y - bulk commodit y can be t he dr y and wet trades may pref er in ideal circumstances to employ specialized bulkcarriers or tankers, as the case may be, but f requently Owners of an OBO have an inbuilt f reighting advantage over their specialized rivals, in that ballast runs can be reduced because of their v essel‟s abilit y to indulge in t wo markets instead of just one. Thus, even though the upkeep of these vessels is f requently higher than f or a simpler ship specializing in just one market sector, encouraging prof its can be achieved

f rom

such

ships

given

ef f i cient

marketing

and

voyage

planning. Appendix 1:15 shows an OBO as well as the midship sect ion of its rival in this specialized market – the „O/O‟ („ore/Oiler‟).

Here the

ref erence to ore is accurate, Ore/Oilers having separ ate small cargo compartments s pecifically designed f or the carr iage of heavy ores, the crude oil part of their cargo commitments being carried separately in oil-tanks.

Ore/Oiler s can carr y dr y - bulk commodit ies other than or es,

but they would f ill t heir cargo spaces ver y quickly and be unable t o use their f ull deadweight.

Not only that , but because they are not

constructed wit h self -trimming f acilities, extra time and expense would be needed to „tr im‟ the cargo surf ace level.

Consequently, it is ver y

unusual f or Ore/Oilders to be enga ged in the carriage of other than iron-or e or crude oil, and they tend to be in excess of 100, 000 t onnes deadweight, this size of cargo being particularly attract ive to those engaged in the steel making industr y.

It should not be overlooked that once it wa s f air ly common place f or oil t ankers which would usually be engaged in the transportation of crude oil occasionally to carry cargoes of grain when the market so warranted the expense and t ime in cleaning tanks. In the lat e 1980‟s a United St ates f ood aid cargo was carried in an American - f lag VLCC (Ver y Large Crude Carrier) in excess of 250,000 tonnes deadweight,

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carrying a large grain cargo f rom the United States W est Coast to Pakistan.

The cargo was loaded through spouts and discharged by

vacuvat ors (po rtable suction machines).

6. Short Sea Short

Sea vessels ar e not just smaller versions of deep -

sea t ypes, they have modif icat ions peculiar to their trades. The moder n dry-cargo coaster needs f lexibilit y of intake of cargoes in order to sur vive in a ver y competitive business. Because of this they are usually constructed with just one hold ser ved by a large „open - hatch‟ steel hatchcover, their hold „ box-shaped‟ (see Appendix 1:5) the better to obtain good intake and saf e stowage of containers and pallet iz ed cargo. Modern shortsea vessels are built with steel f loors to t heir cargo compartments, f acilitating discharge by grab, although older vessels may well have a wooden, concret e or tacmacadam sheathing as protection to the tank -tops.

Equally, many older vessels still have

wooden planking cover ed by tarpaulins, securely cleated when sea going, serving as hat chcover s.

Few

have

self -trimming

f acilit ies

so

that

f ree -f lowing

bulk

cargoes, which are liable to shif t dangerously at sea, ar e secured by a combination of bagging and strapping part of the cargo at the of the stow.

For most grains this amounts to around 10% of the cargo, the

90% loaded under neath the bags and strapping being in bulk. some

particularly

f ree -f lowing

grains,

however,

(e.g.

W ith

rape -seed),

perhaps 20% of the cargo will require t o be bagged. Latest European designs allow f or river and canal trading by creat ing a „ low-prof ile‟ vessel, by which the superstruct ure locat ed at the af ter end of one hull can be hydraulically lowered to enable t he ship to pass beneath bridges and ot her overhead obstructions, wit h any masts being lowered – see Appendix 1:16.

Self Assessment Questions A)

Define and explain the follow ing terms:

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B)

1.

Cell-guides

2.

Pontoon hatches

3.

Slewing ramp

4.

PCTC

5.

Semi-subsmersible

6.

LASH

7.

Side-ports

8.

Vacuvators

9.

Bagging and strapping

10.

Low-pr of ile

As an exporter, you have a regular shipment of around 1,000

tonnes monthly of harmless chemical resin in jumbo bags f rom the United Stat es East Coast to Italy.

W hat are the alternative shipments methods open to you?

Test Question

List the standard it ems which you consider should be included in a period time charter party clause covering the descr iption of multi purpose vessel “SEAGULL”.

For each item on your list, a nd ref erring where necessary to the material in this Lesson, explain f ully the reasons f or its inclusion in your list.

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HANDY MAX BULK CARRIER WITH GEAR.

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COASTAL BULK CARRIER WITHOUT GEAR

CAPE SIZE BULK CARRIER- GEARLESS

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CONTAINER SHIP.

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OIL BULK ORE SHIP.

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DE RR IC K S HI P

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RE E F ER S HI P

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RO RO S HI P

SEMI SUBMERSIBBLE

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CH APTE R- 2 DRY C ARGO SHIP TONN AGES, LO ADLI NES

DIMENSIONS AND C ARGOES

Students may recall the dif f erent types of tonnages /loadlines studied in INTRODUCTION TO SHIPPING. Just to recall, Tonnages and Loadlines W hen describing a ship it is quite common to hear people stat e she is “of so many tons”, and leave it at that. In f act, in shipping, the word “ton” has many diff erent meanings and ship tonnage can be based on either “ weight” or on “volume”.

Ship Tonnage Based on Weight: The actual weight of the ship plus the weight of all it is carrying is termed its „ load displacement t onnage ‟ or, simply „displacement tonnage ‟. It is used to describe the size of certain ship types not built f or c argo carrying (e.g. icebreakers or naval vessels) but has lit tle pract ical value in the dry cargo market.

The

weight of an empt y ship – its „light displacement t onnage ‟ or „ldt ‟ f or short, is equally of tittle value to dr y cargo chartering personnel, although it is of particular interest to t hose engaged in the sale and purchase of ships, f or the ship demolit ion pr ices are based on this tonnage, which is used to establish a ship‟s steel weight.

The two tonnage descript ions of particular value to the dr y ca rgo market sector are a ship‟s „ deadweight ‟ – („dwt‟) – (ref erred to several time in Lesson One) which not only happens t o be the dif f erence bet ween a ship‟s loaded and light displacement tonnages but, more important ly, represents the total weight a ship c an carr y.

This total

weight will include, of course, not only cargo, but bunkers, f resh water, stores, spare parts, etc.

Those engaged in charter ing activities

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sometime describe this tonnage as „ DW AT‟ - short f or „deadweight all told‟, to distinguish it f rom „ DW CC‟ – short f or „ deadweight cargo capacit y‟ – which is f ound af ter deducting the amalgamated weights of bunkers, f resh wat er, stores, spar e parts, etc. f rom the vessel‟s „deadweight all told ‟. DW CC theref ore represents the quant it y of cargo a vessel should be able to load.

It is usual to base ref erences to deadweight on what can be carried

when

loaded

to

„ summer

m arks‟

–

a

vessel‟s

„ summer

deadweight ‟ ( occasionally expressed as „ summer f reeboard ‟) – all of which expressions can be f ound under th e heading of „ Load lines ‟ hereunder. Load Lines may be ref erred to as „ Plimsoll marks ‟ or „Plimsoll Lines ‟, af ter the Br itish polit ician Samuel Plimsoll Eventually, in 1890, a system of calculat ing and marking a saf e „ f reeboard ‟ (the distance f rom the wat er line to the weatherdeck) . A drawing of the actual „marks‟ is shown below and its will be seen that there are, in f act, six „load lines‟.

This is because account is taken of the world‟s

geography and weather condit ions in assessing the hazards of any particular voyage, as well as whether a ship is transitting a salt or, technically saf er, f resh water area.

The initials on the load lines

represent: -

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The actual load line mark (the disc wit h a line through it) lines up with the summer load line ref erred to earlier. On this mark you will see the letters „L‟ and „R‟.

These relate to the classif icat ion societ y which

sur veyed the ship to determine the posit ioning of her marks and thereaf ter arranged for them to be „cut - in‟ and painted on the side of the hull on behalf of the nat ion in which a ship is regist ered.

In this case

the „LR‟ stands f or „Lloyd‟s Regist er‟, but there ar e more than f if ty classif icat ion societ ies in t he world and, from these, common letters that might be seen could be AB (f or American Bureau), BV ( Bureau Veritas), NV (den Norske Veritas), GL (Germanischer Lloyd), and so on. Loadline Certificates are issued based on the surveyor‟s calculations and without these documents, shipowners would find it almost impossible to trade. (Lumber carr iers ref erred to in Lesson One, ar e granted a second set of load lines f or when carr ying a deck load of lumber – „lumber loadlines ‟ – and can sail with reduced f reeboard when so laden).

By internat ional agreement, the oceans and water ways of the world are divided into „ load line 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 spe cial Load Line Chart

(published in the United Kingdom, for example, by the Hydrographic Off ice).

A ship passing through a summer load line zone can load down to but no f urther than the top of the summer load line.

The same

arrangements apply f or trading i n winter or in tropical zones, but extra allowance can be m ade when trading in what are assumed to be saf er f resh wat er condit ions.

Ships wit h an overall length of 100 metres or

less, ar e f urther restricted when trading in the North Atlantic Ocean in winter. Great care must be taken when planning a voyage to think ahead and to avoid t ransitt ing a load line zone when too deeply laden to be able to comply with.

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Ship tonnage based on Volume

IMO Tonnage:

In 1982 a new inter national system of measurement

f or ships came into f orce, under an I MO (The International Marit ime Organisation - part of the United Nat ions) resolut ion. This applied to all new buildings, and by 1994 all vessels will have to conf orm to its provisions. The resolut ion def ines how a ship‟s i nternal volume should be measured in accordance with standard international rules, result ing in „cross tonnage ‟ and „ nett tonnge‟.

Gross tonnage is roughly the

volume of all enclosed spaces, and nett tonnage is calculated af ter certain deduct ions f or non -revenue earning spaces ( e.g. allowances f or the br idge, engine room, crew accommodation, etc) have been taken f rom the gross f igure. As a result, gross tonnage is a measure of how large in volume a ship r eally is, and most saf ety regulat ions are theref ore based on t his f igure. Nett tonnage is more a measure of a ship‟s cargo spaces, and hence her earning capacity.

Harbour and canal dues and similar

expenses are usually assessed against nett tonnage.

Registered Tonnage:

These are also known as „national ton nages‟

applying to those vessels built bef ore 1982 which have until 1994 t o change to the new IMO system.

Unt il then both measurement system s

will remain in place, since ships of certain f lags have advantages under their existing national measurement rule s when compared with exact sister ships f lying the f lag of other nations.

Canal Tonnage: Both the Suez and Panama Canal Authorities have their own rules f or the measurement of gross and nett tonnage, upon which their f ees f or canal transits are based.

The re has been talk of

these authorit ies adopting the I MO tonnage regulat ions in 1994, but so f ar no def inite decision has been taken.

Cubic Capacit y: As we have already considered in Lesson One, when calculating cargo intake, not only does a voyage estimator or ship‟s officers have to consider deadweigtht and load line zones, as well as requirements for bunkers, etc. it is

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necessary to calculate how much cargo the hold spaces will accommodate.

To do this, t wo measurements will be provided by shipbuilder s f or vessels such as bulkcarriers and general cargo ships. These are to the grain and bale capacit ies which are used f or measuring cargo space availabilit y f or bulk or f or general (non bulk) cargo. The measurements can be expressed in either cubic f eet of in cubic metres ; ref erence books such as ships‟ ( e.g. Lloyd‟s Register) f requently nowadays use the metric system. practit ioners

still

However, a large proport ion of dry cargo market utilize

cubic

f eet

when

descr ibing

the

stowage

propert ies of cargo, and so it is important f or all involved in this aspect of the industr y t o know that: - 1 cubic metre = 35.3158 cubic f eet , as conversion calculat ions f rom one measurement system to the other will f requently be required.

Grain Capacit y: is the capacit y of cargo spa ces measured laterally to the outside of f rames, and vertically f rom the tank tops to the top of the under weatherdeck beams, including the ar ea contained within a vessel‟s hatchway coamings.

Grain capacit y is theref ore an indication

of space available f o r a bulk cargo – not just f or bulk grain.

Bale capacit y:

is the capacit y of cargo spaces measur ed laterally to

the inside of frames or of cargo battens ( wher e f itted), and vertically f rom

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 capacit y is theref ore an indication of space available f or other than a bulk commodit y - e.g. bagged or baled goods. From this it would appear that grain capacity will always be greater than a ship‟s bale capacity. This is not necessarily the case, however. The short sea vessel described in Lesson 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. In trading, dry cargo ships ar e f requently descr ibed in dif f erent ways. RO/RO tonnage might be ref erred to in terms of available „lane metres‟, f or example, or a containership by the number of “teu‟s” or

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“f eu‟s” it is capable of handling.

Depending upon the cargo, however,

general cargo ships and bulkcarriers m ight be descr ibed in terms of summer deadweight or grain capacit y or, more probably in t he case of general cargo ships, in terms of bale capacit y. Table 2.1 – Comparison of Tonnage Measurements Tonnage

General Cargo

Bulkcarrier

Contai ner

Nett

5,000

25,000

8,000

Gross

7,000

36,000

15,600

Deadweight

12,500

54,000

17,000

18,000

72,000

23,000

Load Displacement Paragraph Ships

Many shipping regulati ons are based on gross or on deadweight tonnage.

Shipowner s theref ore construct vessels to take advantage of

the dif f erent regulations, hence ships of 499 or of 1599 gross tons, f or example, ar e popular.

Such ships ar e known as „ paragraph ships ‟

because they take advantage of a „ parag raph ‟ of the regulations.

Dimensions: W e have already encountered s ome important dimensions To recap :-

LOA (Length Over all ):

The extreme length of a ship, f rom f ore to af t.

Beam

The width of a ship.

:

It is important to est ablish the „extreme‟ length and breadth of a vessel, to ensure that passages in conf ined wat er ways are possible and that it is physically f easible f or a vessel to enter certain ports.

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Draft: The depth of a ship on the water. (A f loat ing ship will be de eper in f reshwater than in salt.

The dif f erence is shown on the Deadweight

Scale as that vessel‟s „f reshwater allowance‟.

Ai r Draft:

i)

The dist ance f rom a vessel‟s surrounding wat erline to the highest f ixed point on the ship.

(O bviously this can be

substant ially adjusted by specialist ships such as „low prof ile‟ vessels – see Lesson One).

ii)

The distance f rom a vessel‟s surrounding water line to the top of her hatch coamings – an indicat ion of whether a particular vessel can maneuver under shor e cargo hanlin g equipment.

In both cases these measurements can be var ied by ballasting or de-ballasting various tanks, but it must not be over looked that a dry cargo vessel‟s ballast tonnage capacit y will almost certainly be f ar less than her deadweight capacit y. Thus , a f ully ballasted vessel will be higher out of the water than if she was loaded and where height restr ictions are severe, calculat ions should be carried cut on the basis of a vessel being f ully ballasted – not loaded. …….. important dimensions include: -

Hatchw ays: The length and breat h of hatchways and, f or general cargo ships both weatherdeck and t weendeck hatchway sizes. occasionally t he

case

–

usually

wit h

bulkcarriers

It is

manoeuvr ing

beneath shore cargo handling equipm ent – that it is necessar y to know distances f rom a ship‟s rail to the inside edge of her hatch

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coamings and to the f ar side of the hatchway, as well as the length overall f rom f orwar d of the f oremost hatchway to af t of the aftermost hatchway.

Tank Tops and Decks: The square f loor area/d imensions of a vessel‟s hold bottoms and decks, also the height of holds and tweendecks.

Propul sion Although a f ew of the larger and older vessels (e.g. ore/oilers) are equipped with steam turbines, the major it y of dry cargo vessels are today powered by ei ther slow speed or medium speed diesel engines. Particular attention is paid in modern ships to the f uel preparat ion equipment, thereby enabling vessels to burn low cost residual Interm ediate Fuel Oils ( „IFO‟) eff icient ly and without harm to the engines.

Although a f ew ver y modern t ypes (ref erred to f requently as „eco-types‟ – „eco‟ being short f or „economical‟) use IFO in both their main and auxiliar y engines, many vessels consume Marine Diesel Oil f or their auxiliar y equipment (e.g. generators), and all vessels carr y some MDO on boar d f or possible use when a vessel is entering or leaving port and / or whilst navigating in conf ined waters. This is because the r esponse of a main engine to a change of throttle position is ver y slow when burning IFO.

As t his could aff ect the

saf ety of the ship when an inst antaneous response by the main engine is required, the f uel will be swit ched to MDO f or an almost instantaneous response. Modern vessels will be „f ully automated‟, which is to say that the main engine can be directly controlled f rom the navigating bridge.

W hen negotiating a vessel f or timecharter employment, it is usual to describe t he daily consumption at sea against each of a particular range of speeds at which the timecharteres may instruct the master to o perate.

It is also necessar y to include the vessel‟s

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port consumption when „idle‟ – when the main engine is immobilized and the vessel is using auxiliar y engines to provide heat, light and power but cargo gear is not being used. Port consumpt ion „working ‟ allows f or extra consumption needed to power a vessel‟s cargo - e.g. here cranes – and it is usual to additionally

equipment descr ibe

„working‟

consumpt ion

against

,

say,

ever y

„8

hours

working‟ or „per 24 hours, all gear working‟.

Fuel oils are graded according to qualit y.

Heavy f uel oil is

usually described around 380 c/s ( cent istokes) but many panamax and small vessels burn IFO (Intermediat e Fuel Oil) 180 c/s in their main engine or even better qualit y - say – IFO 150 c/s.

Certain

operators also opt f or higher qualit y gas oil rather than diesel oil in auxiliar ies, and with smaller, short sea craf t, it is common to run both main and auxiliary plant on mar ine diesel or gas oil. Finally, it is frequently the case that time charterers need to know the capacity of a ………………………….. bunkers and plan voyage strategy.

Self Assessement Question

a) Def ine and explain t he f ollowing terms: -

1. DW AT

6.

Grain capacit y

2. DW CC

7.

Bale capacit y

3. Summer marks

8.

Paragraph ship

4. Gross tonnage

9.

Air-draf t

5. Nett tonnage

10.

Cent istoke

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b) Draw a plan, prof ile and m idship section of a bulkcarrier. Provide a description including deadweight, draf t, grain and bale cubic capacit y, loa, beam and air draf ts.

Cargoes The var iet y of commodit ies carried at sea is greater no w than it has ever been and the list is continually increasing.

The

volume of the var ious seaborne commodities alters year by year, of course, but dr y cargo goods can nevertheless be classif ied into the f ollowing categories: -

Grains and agricultural products Coals an coke Ferrous ores Minerals Timber Metals Cements Chem icals Ref rigerated goods Unitized goods W heeled and heavy units Livestock and animal products Those concerned wit h dr y cargo charter ing should aim to have a complete

knowledge

of

the

physical

charac t erist ics,

carriage

requirements and trade routes of those commodit ies with which they are closely involved, as well as a good, working acquaintance with other dr y goods. Unf ortunately, space does not permit a thorough coverage of commodit ies within the co nf ines of a ten lesson course in the overall subject of dry cargo chartering and so it is necessar y to direct the reader ‟s attent ion to appr opriate addit ional r eading. The reading selected is Volume 2 of the „SEA TRADING‟ series,

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„Cargoes‟ by W illiam Pack ard, and this book is supplied with the course mater ial.

It is essential to read and digest the relevant content s of „Cargoes‟ chapter by chapter whilst tackling the remainder of this Course, wherein attention is also drawn to Lesson Nine, dealing wi th geographical aspect s of dry commodit ies, including those f actors specif ically af f ecting dry cargo trades.

Although certain of the

book‟s chapters deal with liquid trades, it does not harm f or those concerned pr imarily with the „dr y side‟ of our industr y to have a basic understanding of the „wet side‟, especially since those engaged in dry cargo charter ing may well become involved with com bination vessels that will seek employment in eit her market area, depending upon prof it incent ives. The remainder of this Lesson T wo will be taken up wit h a br ief summar y of important aspects of the car riage of dray commodities.

Cargo Measurement : This is all an important area f or the student f or,

on

cargo

measurement

depends

the

entir e

struct ure

of

commercial ship tradi ng, the amount of cargo a vessel can carry, and the „f reight‟

a car rier

will receive or

a shipper

pays

f or

the

transportat ion of that cargo. Gradually the int ernat ional shipping market

has

moved

away

f rom

traditional

methods

of

cargo

measurement based heav ily 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‟ t o descr ibe the weight of a bulk commodity, or measurement in „metres‟ rather than in „f eet‟.

The one exception to this dr if t towar ds metricat ion is that of „stowage f actors‟, which is the amount of space occupied by a given quantit y of any dr y commodit y whatever its mode of carriage, whether it be „loose‟ (e.g. „in bulk‟) or „c ontained‟ ( e.g. in bags or on pallets).

It is usual nowadays to describe the stowage f actor of a

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commodit y as „per metric tonne‟ rather than as „per long ton‟ , but the stowage f actor itself is usually described in terms of „cubic f act per tonne‟ instead of „cubic metres per tonne‟ mainly because it is so much easier

f or

practitioners to rem ember

stowage f actors of

particular commodit ies in terms of cubic f eet rather than in terms of cubic metres. Consequently, it remains essential to be able to readily and fluently convert imperial into metric units and vice versa, particularly so for the following:-

Long tons… to…metric tones Feet.. to …metres Cubic f eet… to… cubic metres Inches . to.. centimeters

(A chart of usef ul conversion f actors can be f ound in „Ca rgoes‟ on pages 142/143). Some cargoes (like ir on ore) stow heavily and others ( like coke) st ow lightly.

In f act, ref erence to „Cargoes‟ will

reveal that iron or e will stow ar ound 13 cubic f eet per tonne, whilst coke requires around 80 cubic f eet per tonn e.

That means that a

given space can contain around six t imes more tones of iron ore than of coke.

In terms of ships, im agine you are oper ating a

bulkcarrier of 5,000 tonnes deadweight cargo capacit y (dwcc) , with a cubic capacit y in her cargo holds of t w o million cubic f eet. If asked to est imate approximate intake of either coke or of iron ore, you would calculate as f ollows: -

2,000,000 / 13 = 153,846 tonnes iron ore

2,000,000 / 80 = 25, 000 tonnes coke

It should be imm ediately obvious that the ship is lim ited by her

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deadweight to a maximum cargo of iron ore of 55,000 tonnes, which will f ill only approximately a third of available hold space, whereas all hold spaces will be f ull if loading coke, but only about half of the available deadweight will hav e been used. This is a f airly extreme exam ple to illustrate the relat ionship of cargo stowage f actor versus ship cubic capacit y and deadweight that a dry cargo chartering person must consultant ly bear in mind.

Nevertheless, the f reight rate per tonne f or

25,000 tonnes iron ore to provide the same approximate return to the shipowner.

W ith certain ship types, the amount of bulk cargo that can be loaded will be great er or lessor than f or a diff erent ship t ype with an equivalent cubic capacity.

For example , t weendeckers m ight suff er

f rom

intake

a

restricted

tonnage

compared

with

a

self

trimming

bulkcarrier, because the „overhang‟ created by f ixed t weendecks will interf ere

with the stowing

of

cargo in the lower

holds,

creating

unusable, wast ed space – see the illustr ations on page 13 of „Cargoes‟.

But not all cargo, of course, is carr ied in bulk.

Much cargo is

carried in „containers‟ of one kind or another, f rom traditional bags through to modern pallets.

W hereas many bulk commodit ies will „f low‟

into the sides and corners of a ship‟s cargo compartments, bagged or pallet ized goods m ust be stowed and of ten cannot f it bet ween hold f rames and, indeed, may be intent ionally kept clear of hold sides devices

such

as

„cargo -battens‟,

in

order

to

encour age

cargo

ventilat ion. Thus, as explained ear lier in this Lesson, many dray cargo ships have t wo cubic capacities – „grain‟ (f or measurement of bulk commodit ies), and „bale‟ f or „non -bulk‟ goods. It follows that a vessel‟s „bale capacity‟ will usually be smaller than her „grain capacity‟, although with certain ship types such as modern shortsea traders, designed with one large sheer sided boxshaped hold, the two capacities are the same.

General Cargo Bef ore containersat ion the tradit ional („break -bulk‟) method of m oving general cargo in ships around the world‟s oceans and

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water ways was by means of a var iet y of „containers‟, in bags, bales, chests, barrels, casks, baskets, or simply by lasing goods together. Given today‟s widespread usage of the ubiquitous „box‟, m u ch of the skill (time and tedium) of loading general cargo vessels has been transf erred to packing („stuff ing‟) containers at container terminals, f actories and such like. It is now rare f or a general cargo vessel to be employed f or the carriage of such a var iet y of general cargo, most of today‟s „liner ‟ trades that are not totally „container ised‟ depending on „parcels‟.

Thus, consignments of bagged and/or pallet ized goods will

overstow small parcels of bulk commodit ies loaded in lower holds, whilst the vessel‟s weather deck may be f illed with containers.

However, it is still likely f or a general cargo vessel t o carr y a f ull cargo of bagged goods – e.g. bagged rice or bagged f ertilizers – and so the student of these lessons must acquir e knowledge of the imp ortance of ventilat ion, and m ethods of secur ing, manif esting and tallying bagged cargo, attention being drawn particularly to Chapt er One of „Cargoes‟ in this respect.

Bulk Cargoes Most modern bulkcarriers are descr ibed by their owners as „self -trimmers‟ ( see Lesson One and Figure 1. 7 of „Cargoes‟). However, this expression must not be t aken too literally as meaning that no extra trimming of bulk cargo by shore appliances is required. First ly, not all bulk cargo f lows easily.

For example, bulk scrap meta l

will need caref ul stowage and, because of handling dif f icult y, it is usual to divide a vessel‟s bale cubic capacit y by t he stowage f actor of scrap metal in or der to arrive at a more realistic estimate of cargo intake quantit y f or this commodit y.

Secondly, the expression „self -trimming‟ applies normally only to lateral trimming across a ship‟s cargo compartments, and rar ely to self trimming in either end, f ore and af t, of a cargo compartment. expression applies also to f ull holds.

The

It f ollows that f or a commodit y

which only partly f ills a cargo hold beneath the angled, self -trimming

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upper essential to spread the cargo acr oss the compartment to render it saf e f or seaborne t ransportat ion.

Thus the expression must not be

taken literally, although it is r easonable to assume that a fully laden bulkcarrier descr ibed as a „self -trimmer‟ should be capable of loading a cargo without shore trimming assist ance.

Nevertheless, if the term „self -trimmer‟ is used too f reely for all commodit ies and wit hout bear ing in m ind the f ull part iculars of loading methods, it is possible to create an expensive dispute.

As a result,

some operators of bulkcarriers pref er to use the term „easy -trimmer ‟, which

it

is

considered

conveys

a

m ore

realist ic

appraisal

of

a

bulkcarrrier‟s c apacity when loading bulk commodit ies.

Dangerous Goods Most shipowners are naturally eager to exclude the carriage of dangerous goods and the „car go exclusions clause‟ can f orm one of the most contentious parts of a negotiat ion leading to a dray cargo timecharter f ixture.

The shipowner will seek as much exclusion

as possible, whilst t he charterer will aim to have as f ew restrictions on vessel employment as it is possible to negotiate.

Chapt er Twent y of „Cargoes‟ gives a basis on the subject and readers of this Lesson should read those pages in conjunct ion with this material.

There ar e, of course, specialized vessels and shipowners

willing to carry (at a premium rate) mot commodit ies, dangerous or not, but analysis of cargoes commonly excluded by most shipo wner s will usually reveal f our categories of „dangerous‟ goods: -

1.

Those likely to imperil a ship – e.g. explosives,

2.

Those likely to harm if in some other way – e.g. sulphur.

3.

Those of danger to a vessel‟s crew or st evedor es – e.g. f errosilicon, and

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4.

Those goods liable to damage others – e.g. copra.

A list of commonly excluded cargoes f alling under one or other of the above categories is contained in Chapter T went y, but since the book was written a “ new” commodit y – toxic waste – waste – should be added to the list of undesirables, not only of danger to those coming into contact wit h it, but a cargo likely to be reject ed by the countr y of destination, thereby creating enormous problems f or shipowners f orced to carry it f rom port to port seeking a means of r emoval. Certain shipowners/operator s are extr emely st rict on what cargoes can or cannot be carried in their vessel(s), the list expanding item by item on the basis of exper ience.

By compar ison, other shipowners seem ver y

relaxed about the entire subject a nd ther eby court ser ious pr oblems.

Suff ice at this ear ly stage in the lesson material, to warn students that the „intention of a timecharterer expressed in a t ime charterparty to carry a particular commodit y does not remove the risk or the need to include a comprehensive list of excluded cargoes in the contract.

An

„intent ion‟ may be changed to a choice of a „dangerous‟ unexcluded cargo. 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‟.

Summary Having read thus far in this Lesson, the reader‟s attention is now directed to Chapters One and Two of „Cargoes‟ which should now be read. Thereafter, the remainder of the book should be read as the reader tacles the remaining lessons in this Course.

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Self Assessement Question

a)

Def ine and explain t he f ollowing terms: -

1. 2. 3. 4. 5.

Stowage factor Cargo-battens Angle of repose Self-trimmer easy-trimmer b)

6. 7. 8. 9. 10.

Break-bulk Tallying Hydrospcopic Cargo manifest Stowage plan

Give the stowage factor, method of packing (if any), and any special

precautions required during loading and carriage for:-

1.

Jute

6.

Cement

2.

Pertrol eum coke

7.

Ferro-silicon

3.

Barley

8.

W et hides

4.

W oodchips

9.

Salt

5.

Sulphur

10.

Steel products

Test Question Under your control is “GANNET” a multipurpose vessel of 20,000 mt dwcc, wit h f olding t weendecks and a capacit y of 1,000,000 cubic f eet grain and 950,000 bales.

Allowance has been made f or draf t, bunkers

and constant weight s.

For each of the f ollowing commodit ies, advise what special f ittings the vessel might requir es, what precaut ions might be necessar y, and estimate the quantit y of cargo the vessel could be expected to lif t, commenting where appropr iate on the reason f or the cargo quantit y: -

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1.

Bagg ed f ishmeal

4.

Packagd lumber

2.

Bulk wheat

5.

Bulk f oundr y coke

3.

Drummed asphalt

6.

Bulk manganese ore

CH APTER- 3

FREIGHT M ARKETS AND M ARKET PR ACTICE

The Dry Cargo Chartering Market cannot be rigidly divided into separate segments, but it is possible t o identif y local and wor ldwide business „arenas‟ in which charter ing activit y takes place. Nevertheless, the all-embr acing world- wide internat ional dr y -cargo mar ket has its rough divisions, according to ship t ype and size, and accor ding also to particular

commodities,

whilst

geographical

markets

exist

that

concentrate on regional trades, of ten specializing in smaller, coasta l or „short-sea‟ as opposed to „ deep-sea ‟ t onnage. One example of a highly sophist icated inter national charter ing arena is that developed around specialist „heavy-lif t‟ business, alt hough f rom time to time ships may be employed in this sector that would mo r e commonly be f ound in another market.

Alternat ively,

f or

example,

there

is

a

„ reef er‟

market,

comprising ref rigerated ships and cargoes only.

There is no single geographic centre, since this „market -place‟ is truly international, business being conducte d by word of mouth, on the telephone, or by more modern communication methods such as telex, f acsimile or subscr iber circuits (e.g. BI MCO M).

All you need to

participate in this „market‟ is the responsibilit y f or some goods - e.g. a ship or a cargo – the appropr iate communication equipment – and a lot of courage. It helps also to know what you are talking about – but that is why you are participat ing on this Course. ……….. was t ime when such wonders of modern communication equipment were not available and f reight markets theref ore developed around „traditional‟ shipping centres. Many of these historical centres remain act ive in dry -cargo

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shipping today, and participant are likely to maintain of f ices in places such as London, Oslo, Pamburg, Piraeus, New York, Singapore, Hong Kong and Par is.

T here are also regional centres, such as Janeiro,

Stockholm and Seoul, f rom which those specializing in locally controlled tonnage and cargoes negotiate locally or „plug -in‟ to t he international market to cover their requir ements.

The Baltic Exchange The only physical market place in the world specializing in the chartering of dry -carg o ships and commodities is the Balt ic Exchange, in London.

Nevertheless members of the Exchange,

both Corporat ions and individuals are engage d in numerous other spheres, r anging f rom the sale and purchase of ships and aircraf t through to commodit y trading and f utures markets.

However, the

largest daily act ivity conducted on „The Floor‟ remains t hat of the international day- car go f reight market , with it‟s charter ing of vessels of all f lags by Charterers f rom ever y trading nation.

The motto of the Exchange - “Our W ord Our Bond” – is the same as that of the Instit ute of Chartered Shipbr okers, and symbolizes t he importance of ethics in trading – the pr inciple of treating ot hers as one would wish to be treated oneself , and it remains possible to walk on to the Exchange in a broker member‟s capacit y and to leave an hour lat er having verbally committed your Pr incipal to employ a ship or to provide transportat ion f or a cargo.

Market Practitioners It can be seen t hat the persons populat ing the international dr y-car go shipping „m arket‟ have nationalities, knowledge and backgrounds as varied as t he range of commodities and ship t ypes and sizes that are to be f ound.

But the people at least can be sub -

divided a litt le more certainly, and no doubt readers of this lesson are able to place themselves and/or their Employers in one or more of the f ollowing categories: -

Charterer Those who „charter‟ ships to carry c ommodit ies.

There are

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many kinds of Charterers, f rom individuals operat ing small Corporat ions and concerned only with the carriage of a particular commodit y, right through to major international trading -houses, to whom involvement in the international dr y-cargo market (signif icant as that may be to the market)

represents

activities.

a

ver y

small

part

of

their

overall

Corporate

Consequently, some Charter es are involved as „Traders‟ in

the worldwide purchase, sale and transportation of a range of goods – e.g. grains, f ertilizer s, miner als, etc.

– others, perhaps Manuf acturers,

Mine-O wners, Farmers, Shippers or Receivers, f or a single commodit y or f rom a particular geographic ar ea.

Still other Charterer s may be state -oper ations-eg. The President of

India

(in

other

wor ds

the

Indian

Government)

–

Gover nment

employees being given the task of securing suitable ships f or the state needs. It is a worthwhile exercise f or those learning about t his subject to make a point of studying as regular ly as possible lists of reported dry-cargo f ixtures, and to try to categories Charter ers into one or more appropr iate headings.

To help you get started, sample pages f rom

Fair play Internat ional W eekly Shipping Magazine will be f ound in Appendix 3:1 list ing represent ative f ixt ur es f or particular weeks a month apart, and not only will this t ype of data supplement what should already have been learned about ships and cargoes in Lessons One and Two of this Course, but trades, t ypes of Charterers and markets can be identif ied by t hos e with an enquir ing mind assisted by an atlas.

Shipow ners

Just

as

f or

Charterer s,

there

is

a

wide

variet y

of

Shipowners. Some owner s are of a sing le ship; ot hers of lar ger f leets. Some concentrate on ships of a particular type (eg. Tween -deckers) or sizes (eg. Panamax bulkcarriers).

Other operate a var ied collection of

vessels. Some are state -controlled, or run their ships under the f lag of the countr y in which they reside, whilst others operate „off -shore‟ a „convenient‟ f lag, from which der ives the te rms „f lag of convenience‟.

The term „Flag of Convenience‟ was explained in Introduct ion to

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Shipping, but, to remind you, it may suff ice to say that a nat ion off ering such f acilit ies:

1.

Provides anonym it y f or a shipowner, who may oper ate his vessel(s) f rom be hind a „f aceless‟ Corporation r egistered in the same nat ion as the f lag f lown by the vessel(s).

2.

Gives f reedom f or the vessel to be m anned by a crew in whatever numbers or nationalit y the shipowner selects, at whatever wage scale the crew/owner negotiates.

3.

Levies a ver y small tax against the vessel ownership and no taxation against the earnings of the vessel.

Some are more

concerned about the qualit y of the vessel management and condition than ot her s, but it is f air to say that some of the best-maintained ships in the wor ld f ly a f lag of convenience, as well as some of the worst.

Many shipowners operate f rom one or more of the traditional or regional

centres

t hat

maintain

international dr y-car go market.

an

important

presence

in

the

Others operate t heir ente r prises f rom

these or f rom locations in their own country, alt hough (in or der to avoid taxes levied against ship -earnings) of ten under an „ agency agreement ‟ with the „of f -shore‟ owning Corporat ion off icially located, perhaps, in a more exotic and „convenie nt ‟ part of the world.

Operators This is a term used to describe an organization or individual exper ienced in the market and in its mechanisms, setting out to creat e income f rom „trading ‟ in ships and cargoes. Some operators specialize in secur ing ships o n charter f rom shipowners, thereaf ter hoping to re employ the ship(s) to other Charter ers at a higher f reight/hire rat e, thereby secur ing a prof it.

Other operators concentrate on secur ing

contracts f or the carriage of cargoes and, by f ixing -in outside ships at lower f reight rates, thereby cover their commitment to the original

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Charterers and, at the same time, make themselves a pr of it.

Certain operat ors 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 f ortune to maxim ise potential returns oper ators perf orm their undertakings perf ectly well, it must be appreciated that inevitably a f ew oper ators will become bankrupt, being unable to discharge their commitments sat isf actorily.

This is a risk that operators and those

trading wit h them have to consider and, ultimately, may have to bear. Nonet heless, international

operators dr y-cargo

nowadays market

f orm

and

are

a a

vital

element

prominent

of

f eature

the of

international trading.

Operator who employ a ship and then „re -employ‟ ( or „r e -let‟) that vessel f or f urther business, charter ing her out in a new role, ar e descr ibed as „Disponent‟ or „Time - Char ter O wners‟.

Some opr ators,

having secured a vessel f or a per iod, only to f ind to their good f ortune that f reight rates increase substantially in their f avour, are liable to „re let ‟ the vessel to a Charterer or t o anot her Operat or, thereby locking -in in a prof it f or the remai nder of their commitment to the original Shipowners. It is not unusual f or chain of several Disponent Owners to stretch bet ween an eventual Charterer and the original Shipowners.

Shipbrokers The individuals or Corporations who, act ing as brokers in the

middle

of

this

market -place

of

Charterers,

Shipowners

and

Operators of all Corporate sizes and of many nationalit ies, ident if y supply and demand f or ships and cargoes and thereby help the main players to secur e cargoes f or their ships and ships f or their car goes. In other words, Shipbrokers provide the lubr icat ion that enables the market mechanisms to f unction. A shipbr oker‟s income is in t he f orm of the reward of „com mission‟ (known also as „brokerage‟) paid f or a successf ul introduction and negation betwee n Shipowner and Charterer - leading to a „f ixture‟ .

Even af ter much hard work and expense, a

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negotiat ion t hat does not lead to a f ixture will normally result in no payment of any kind to the Shipbroker in the middle. Thus, Shipbrokers are natur ally kee n on „f ixing‟. Near m isses, however, excising, are not only pr of itless but a drain on resources, time and energ y.

( More

inf ormation about commissions will be f ound in Lesson Five, under the heading “Financial Elements of Charterparties”).

Some

Shipbroke rs

are

specif ically

hired

as

employees

Shipowners or by Charterers to „work‟ their tonnage or cargoes.

by

Most,

though, are separate individuals or Corporations acting f or principles in an „exclusive‟ or „semi -exclusive‟ capacit y or f ixing as an opportuni t y presents itself , as „compet itive‟ brok ers. The term „Shipbroker‟ is, however, wide -ranging. Shipbroker abound.

Other f unctions than that of a dr y -cargo

Activit ies, f or example, cover ing Port.

Agency

work; the Sale and Purchase or ships, the employmen t of specialist vessels such as tankers of „off -shore‟ craf t; Liner Agency and Ship Mangement.

All ar e roles in which Shipbrokers will be f ound.

In this

Course, however, we will be concentrating on the role of dry -cargo Shipbrokers.

A Shipbroker speciali zing in act ing f or merchants seeking ships to carry cargoes may be known as a „chartering broker‟ or as a „chartering agent‟ and, as noted above, such a brother may be either the employee of the merchants, dealing solely wit h that merchant ‟s business, or t he broker may be retained on an exclusive basis – i.e. : t he merchant ‟s business is her or his company‟s to handle exclusively. This exclusivit y may be lim ited to a chartering centre – e.g. „exclusive in London‟ – or it may be worldwide.

Certain merchant s pref er to employ a chain of

„sem i-exclusive‟ brokers to cover several shipping centres, perhaps f eeling that his will enable a more thor ough coverage of the „market‟ f or suitable ships, and the brokers concerned may possibly descr ibe themselves as „direc t brokers‟ f or the merchants concerned.

A Shipbroker in once centre may have „correspondent brokers‟

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that will be used co -operat ively to seek suitable tonnage or cargoes in another centre.

Most brokers will act „compet itively‟ if they f ind a

suitable „non-exclusive‟ ship f or a „non -exclusive‟ cargo during their f orays around the international marketplace, and a f ew mer chants will not employ brokers in an exclusive role but pref er to treat all brokers as competitors wit h one another, releasing details of th eir requir ements on to the f reight market as widely as possible and negotiating thereaf ter with the O wners of any suitable ship that is proposed to them through whichever broking channel the O wner selects.

Shipbrokers are nat urally keen to secure „exclusiv e‟ accounts. Not only does not brokerage these cr eate pr ovide 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 sometime tend to push their brokers into a purely „dealer‟ role.

Few can afford to rely totally on „exclusive‟ accounts,

however, and most brokers compete against others for additional income.

It is theref ore important f or Shipbroker s to circulate details of new business – „orders‟

- as soon as possible, and to maintain good

and close contact not only with those pr incipals pr oviding business, but also

with

„correspondent‟

br okers

and

with

Shipowners, whose vessels they may need to f ix.

those

represent ing

Even when there is

no particular order t o quote, it is advisable to maintain char tering and shipowning relations current and good -tempered, in order to f oster relat ionships and, hopef ully, to make it easier to conclude f uture business.

Certain Shipbrokers specialize in f inding and f ixing cargoes f or the

ships

of

exclusive

and

sem i -exclusive

client

Shipowners,

maintaining a list of „open‟ tonnage expected to become availabl e in the weeks ahead and,

just

as other

Shipbr okers circulate

details

of

available cargoes, so they circulate this „tonnage list ‟ to Charter ing

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Brokers and their principals, in their quest to locate suitable cargoes. The larger Shipbroking companies will probably have br oking staff represent ing bot h Chartering and Shipowning clients, as well as those acting in a compet itive capacit y.

But

securing

responsibilit y.

a

„f ixture‟

is

only

part

of

a

Shipbroker‟s

Following his f unction as the sole or one of sever a l

brokers involved in negations leading to a „f ixture‟ the charterers‟ Shipbroker then has the task of: -

a) Drawing up the char terparty f aithf ully recording all that has been agreed,

b) Dealing

with

any

subsequent ly

amendments

and/ or

additions to the negotiat ion s

c) Handling communications bet ween the parties, and

d) Dealing wit h f inancial exchanges – eg payments of f reights, voyage balances and hires.

Although it is nor mal pr actice f or a Charter ers‟s Shipbroker actually to dr aw up charterpart ies, the Shipowners‟ broke r must check the draf t version of that document, and attend to the other activities detailed above on behalf of his own principal. 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 t he ent ire operat ion f rom original nega tions through to the f inal f inancial transaction.

A t ypical deep -sea dry cargo f ixtur e will involve at least two

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Shipbrokers – one represent ing the Shipowner, the other the Ch arterer – 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. Thus more than ever, if acting as a sole Shipbrok er, that broker must act in a scrupulously professional manner, using all his endeavours to promote harmony in the negotiations an in post-fixture activit y.

Trading The dr y-car go shipping market is closely identif ied with letters of credit and these docume nts f requently inf luence charterparty terms and condit ions and t he manner in which „bills of lading‟ are worded and released, and in which f reight is paid.

It is theref ore vital that those

engaged in this part of the international shipping industry have a good basic knowledge of all aspects of inter national trade. Freights will be dealt wit h in Lesson Five, and trading documents, such as bills of lading, in Lesson Eight.

Nevertheless, a br ief acquaintanceship wit h

trading pr actices at t his stage of the Co urse will assist in understanding this and the f ollowing Lesson.

Those merchants selling their cargoes „as is/ where is‟ could be said to be selling „f ob‟, short f or „f ree on board‟, the cargo being delivered board a vessel f ree of cost to either the Carrie r (the Shipowner) or the Buyer/Receiver of the goods. Of course, it might be negotiated

specif ically

that

„as

cour se,

it

m ight

be

negotiated

specif ically that „as is/ where is‟ means just that not „f ob‟ and the Buyer will have to make arrangements f or stor age of the goods, transportat ion to the carr ying vessel and eventual loading.

Under strict „f ob‟ terms,

however, the Seller will arrange storage and loading the car go abroad, leaving a Buyer to arrange the chart ering of a vessel, payment of f reight, insur ance of the goods and delivery to t he Receiver at the port of discharge. Var iat ions may be „f ob‟ („f ree on quay‟) and „f ow‟ (f ree on wharf ), under both of which terms a Seller undertakes to deliver goods to the loading place, leaving loading procedures an d costs to be

77 Go to Index Page

arranged by the Buyer.

W here a Seller arranges a sale „C & F‟ (cost and f reight), goods are sold on the basis t hat the Seller himself arranges carriage and delivery to the Buyer, „cif‟ (cost, insurance and freight) stipulating that in additio n the Shipper arranges and pays for insurance. No

two

contracts

are

necessarily identical, and it behaves all concerned to f ollow caref ully basic saf eguards and to avoid document ary shortcuts. A Seller will not wish to release his propert y unt il he is assu red that the correct payment will be saf ely received by the time of this release. Equally, a Buyer will be reluctant to pay for goods which have not been saf ely received and / or have not been conf irmed as being in the condition described in the contract.

Furthermore, the transaction will perhaps be com plicated by

Seller and Buyer being locat ed thousands of miles away f rom each other, wit h the goods perhaps being located f ar away f rom either part y.

The transf er of goods and money obviously t ake place at a time and in a manner which ensures that both part ies are satisf ied their contract has been pr oper ly honour ed. There are various ways of achieving this objective, depending on market forces (ie. On the pressure or otherwise for a Seller or a Buyer to trade) and on degrees of trust between the parties concerned. Perhaps the simplest means of all is f or a Buyer to pay in advance f or goods – eg. Cash wit h or der – but, as we have seen, Buyers are not at all keen to trade in this manner. It is not uncommon, tho ugh, f or a cash deposit to make upon signing a sales contract.

The opposite case is where goods and their documents are despatched, the Seller await ing payment against his invoice.

In this

case the Seller is f inancially exposed, although he may not worr y unduly providing he has implicit f aith in the int egrity of the Buyer. W here either Seller or Buyer are thus exposed, however, t hey suf f er loss of cash-f low in that f unds are t ied up awaiting f inalizat ion of trading arrangement s.

For this reason alone, th ese payment methods

are unpopular, quite apart f rom the risks involved. A satisf actor y

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alternative and one widely ut ilized is f or the Buyer to draw up and to issue a „documentar y letter of credit‟ through a bank of good repute, satisf actor y to t he Seller. „revocable‟

or

A documentary letter of credit may be

„irrevocable‟,

although

the

f ormer,

being

open

to

cancellat ion 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.

Major preconditions specif ied in a „letter of credit‟ nat urally include some saf eguard in respect of the condition of the goods received and, since it is impract icable f or a bank to exam ine the goods themselves, bankers will of ten rely solely upon the descript ion of the condition of the goods as provided in a „bill of lading‟ ( see Lesson Eight). If a Shipowner (or a Ship‟s Mast er) conf irms that cargo received aboard is in good condit ion at the port of loading, bills of lading will be issued containing no adverse r emarks about the condition of the cargo in ot her words „unqualif ied‟ or „clean‟ bills will be issued, and these ar e f requently a pre -requisite bef ore a lett er of credit can be honoured. Having issued „clean‟ bills at a loading port, the Shipowner assumes responsibilit y f or the carriage of the cargo and f or its saf e deliver y into the custody of the eventual holder of the bill(s) of lading at the port of discharge,

when

t he

cargo

should

be

in

substant ially

the

same

conditiona as received on board.

Other than bills of lading, documents commonly requir ed as pre requisit es to release f unds under a letter of credit are : -

1)

Insurance papers (either a policy or cert if icate ) in accordance with the sale agreem ent.

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2)

Invoices covering the goods, and,

3)

Certif icates of origin of the goods.

A f urther method of transacting international payments is by „bill of exchange‟, a traditional and versat ile document which can be used either a s the vehicle of payment under a document ar y letter of credit, or in place of the letter of credit.

Market Reporting As with many prof essions, it is of little use learning a large amount

of

inf ormation and expertise

communicate this kn owledge to a third party.

if

you are

unable to

The whole basis of a

Shipbroker‟s working lif e is based on the giving of inf ormation and advice and, whilst a certain amount can be done verbally, a great deal of communication is in wr it ing. Consequently, all those engaged in shipping, and Shipborkers in particular, must gain exper ience and abilit y in the preparation of written reports to t heir pr incipals and seniors.

Some of these reports will be abbreviated, perhaps by telex

message, others lengthier , being designed f or transm ission by f acsim ile or by letter. Some will concentrate on a r elat ively small market sector – perhaps designed t o provide data on the shipment of a part icular commodit y, ship t ype or size, or geographic region, report ing f ixtures, available cargoes, tradi ng deals, market gossip, etc.

Other reports will be of a general nature, int ending to illustrat e in overall terms the state of the f reight market. One such example is that provided by London Brokers, Galbraith Limited,

in Appendix 3: 2,

wherein the dr y-cargo panamax, cape -size and handy-size markets are reported upon br ief ly together with relevant reported f ixt ures, the weekly report designed f or mailing t o var ious clients, not one in particular. One of the f ascinat ions of the international dr y -cargo f reight market is that one can see in day to day trading activit ies t he ef f ects of f ar-off political and climat ic events af f ecting the demand the demand f or ships

and

f or

cargo -space

and,

consequently,

f reight

rates.

A

80 Go to Index Page

worldwide depression in trade will ult imat ely have its ef fect on the shipping market and ships will lay -up f or want of prof itable employment. On the other hand, a buoyant f reight market will result f rom active trading and there m ight be too f ew ships to satisf y demand, leading in turn to high f re ight income f or those Shipowners/Oper ators f ortunate enough to be in a position to take advantage.

Read your nat ional newspaper with a view to transposing the events recorded in the general news, polit ical and business pages into what you believe will be t he ef f ect on the dr y-cargo shipping markets, whether local or int ernational.

W ill the bankruptcy of a grain dealer

seriously af f ect f reight rates f or 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?

The political consequences of changes of Government in

Eastern Europe. What effect will they have on immediate, medium and long term trade in, for example, grain? 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 others or from the effects of world trades, events and politics.

Self Assessment Questions

1.

Under what headings do the main pr actitioners in the dry cargo freight market f all?

2.

In what dif f erent roles may a dr y -cargo charter ing broker be acting?

3.

W hat is the motto of the Baltic Exchange?

Methods of Shi p Employmnet These can conveniently be divided into the f ollowing main elements

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1.

1.

Voyage Chartering

2.

Time Charter ing

3.

Bareboat Chartering

4.

Contracts of Aff reightment

5.

Joint Vnetur es

6.

Shipp ing Pools

7.

Parcelling

8.

Project Cargoes Voyage Chartering:

Voyage Charter ing occurs when a vessel

is employed f or a single trip, loading cargo f rom one or more ports f or discharge at one or more ports.

(Those f ixtures listed under the

headings Grain, Coal and Iron Ore in Appendix 3: 1, f or exam ple, ar e all voyage f ixtures).

I n return f or the carriage of the cargo and, perhaps

f or the expenses of loading and / or discharging the cargo, the shipowner will receive monetar y reward termed „f reight‟.

This f reig ht

can either be in the f orm of a lumpsum payment or, more commonly, it will be payable pro rata in respect of the quantit y of cargo carried, usually so much per tonne. It is normal t o specif y the amount of time a Charterer is allowed f or loading and disch arging the vessel – the „laytime‟ – and should this t ime be exceeded, then liquidated damages – termed „demurrge‟ will usually become payable. The dates between which the vessel is required to be presented at the loading port – the „laydays‟ – will also be recorded, as well also be recorded, as well as the cargo type and size that is to be carried.

2. Time Chartering: W here vessels are hired f or a specif ic period – eg. f or 12 months (15 days more or less) the responsibilities of the parties dif f er substanti ally f rom those involved in voyage Charter ing. charterer

assumes control of

the operational ( let

A Time

us call it, the

82 Go to Index Page

„commercial‟) appointment and payment of port agents, purchase of bunkers, etc. leaving the Shipowner responsible f or the management of the ship, with particular regard to maintenance, crewing, insurance, etc.The Shipowner is rewarded by t he payment of regular amounts of hire

money,

normally

paid

monthly

or

semi -mont hly

in

advance.

However, should the vessel f ail to perf orm properly or s uff er such interruptions to the smooth perf ormance as mechanical br eakdowns, she may be consider ed „of f -hire‟, during which per iod the Owner will not be ent itled to remuneration.

Many Charterers f ind it expedient to employ vessels on a timecharter basis f o r single or round -tr ip voyages (ref er, f or exam ple, to the Tweendeck f ixtures reported in Appendix 3:1) and this pr actice has given rise to the t erm „trip -chartering‟.

A trip -charter is similar to

voyage chartering with regard both to the durat ion of the vent ure and to the f act that the intention of the parties is to employ the vessel f or, say, one or t wo voyages.

But t here t he similar it y ends, and t he roles of

Charterer and Owner are ident ical to those assumed f or time charters of longer per iods.

Di vision of Timecharter responsibilities: Shipow ner

Charterer

Crewing

Employment

Repairs

Bunkering

Maintenance & Spar es

Port Expenses

Classif ication

Canal Tools

Sur veys

Stevedoring

Lubr icat ing Oils

Cargo Handling

Fresh W ater

Insuranc e of Cargo

Insurance of Vessel

Insurance of bunkers

Stores & Provisions

Heat ing and Cooking

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84 Go to Index Page

Under

Voyage Chartering

arrangement s,

most

of

the above

responsibilities will become those of the Shipowner, with t he except ion that usually (but not always) t he Charterer retains responsibilit y f or Stevedoring, Cargo Handling and the Insurance of Cargo.

3.Bareboat

Chartering:

Somet imes

termed

„demise‟

Charter ing,

Bareboat Chartering arises on those occasions where Shipowner s hire out their vessel to a Charterer , who virtually runs the ship as if he were the Shipowner – assuming bot h the Time charterer ‟s responsibilit ies (as def ined above) and most, if not all, of the responsibilities of the Shipowner.

I n return, the Shipowner r eceives a lower hir e payment,

commensurate with reduced responsibilities and r isks. Strict ly def ined, „dem is‟ Chartering diff ers f rom „bareboat‟ Chartering in that it may be agreed bet ween the parties that the Shipowner provides a master and/or of f icers and/or crew and, per haps, organizes insurance.

Demise

and

Bareboat ing

are

in

realit y

the vessel‟s f inance

tools,

designed to enable Investors to purchase ships, leaving the operation and management of the ships to Charter ers wit h more expertise in those areas. The Charter ers may, in f act, b e Shipowners without the f inancial resources to f und such a purchase direct ly.

4. Contract s of Affreightment : These occur when a merchant – perhaps in realit y either a Shipowner, a Charterer or an Operator – contracts to carr y a given quantit y of cargo bet ween named ports on agreed voyage Char tering terms over sever al voyages.

The merchant

may thereaf ter employ his own vessel(s) or charter -in outside ships in order to f ulf ill contractual obligations. The advant age of such a contract to a Shipowner is that secur ity of employm ent is obtained f or his vessel(s) f or the duration of the Contract of Aff reightment, especially valuable if the Shiponwer considers that f reight rates are about to f all. For Operators in a similar f reight market situat ion, the advantage is in the prof its they hope to realize by taking advant age of being able to f ix in tonnage at lower f reight rates than those they will receive f rom the Charterer.

85 Go to Index Page

But the Charterer s may also be able to obtain f inancial advantage in the event that market f reight rates rise once they have committed Owner or Operator „locked - in‟ to the Contract – always assuming that the O wner/Oper ator will keep their end of the deal and perf orm.

But

even if the market stays in „neutral‟ or moves against the Charterer by f reight rates f alling, at the ver y least the Charterer has exchanged the unrealibilit y of the daily market place f or f reight rate stabilit y, ther eby enabling emphasis t o be placed in the development and marketing of the commodit ies involved.

5. Joint Ventures:

W here those controlling cargoes negotiate and

come to terms under a „joint venture‟ arr angement wit h those controlling ships.

Normally prof its and losses will be shared, not only perhaps on

the seabor ne f reight element, but also on product ion and/or sa le costs of the goods involved.

These ventures can be f airly simple and of a

short durat ion – per haps f or a single, occasional cargo – or t hey can be of major importance, involving the mutual exploitat ion of a Third W orld nation‟s mineral deposits, the bu ilding and adm inistration of ports, marketing of products, as well as the t raining of personnel f or each section of the entire structure.

An example of this degree of joint

venture is provided by the liaison between the Nor wegian Klaveness Group

and

the

G uinearn

Government

in

the

bauxite

product ion,

transportat ion and m arketing of the joint venture concern „Guinomar‟.

6Shipping Pools: W here a group of Shipowner s band together to „pool‟ their tonnage and collect ively market their combined f leet.

They may

well become involved in extensive contr acts of af freightment and joint ventures with outside groups, and this t ype of operat ion is more likely where a specialized commodit y or trade is involved (eg reef ers and Cool Carriers – Stockholm or Laurit zen – Copenh agen, where numerous Charterers may become involved in contracts with the pool). Pool income is collected together and once pool running costs have been deduct ed, residual income is distributed amongst members by means of a

„weight ing

system‟

by

which

each

entered

vessel‟s

individual

86 Go to Index Page

character ist ics ar e t aken into account and measured against a „pool model average‟, debits and credits being applied accordingly.

Freight

market risks are somewhat alleviated by an individual Shipowner – perhaps with litt le or

no previous shipping exper ience

– gaining

admission to a well -r un pool. Furthermor e, management over heads will be

considerably

reduced

by

collectively

managed

chartering,

commercial and f inancial operat ions.

7. Parcelling: Generally in dr y-cargo shipping , the smaller the quantit y of a commodit y, the more expensive it is to ship. some

Operators

specialize

in

transporting

Recognising this,

smaller

par cels

of

a

commodit y by grouping them together in a vessel sailing f rom one or more ports in a part icular re gion to one or more ports in another area. This trade is pr ominent, f or example, in commodit ies exported f rom Australia to destinations in the Far East and in the Atlantic Basin. Specialist

Oper ator s

in

the

ar ea

contract

to

move

parcels

of

commodit ies, t hereaf ter grouping these together with other parcels in one „bottom‟, probably contracted in on a trip -t imechar acter basis. (Even t oday you will encounter the old -f ashioned expression „bottom‟ as an alternat ive to t he word „ship‟ or „vessel‟ tradit ion die s hard in the shipping industr y).

Consequently, in addit ion to negotiat ing the highest possible f reight rate and best terms f or each, individual parcel, the operators seek the widest possible date spread during which to load the parcel and a wide cargo qua ntit y margin, so as to give themselves maximum f lexibilit y to f it the individual hold compartments of whatever ship they contract, thus easing their chartering restrictions f or suitable tonnage. Having identif ied the most suitable vessel, the Operators t he n rely on their shipping exper tise to timecharater - in the ship at a cost which is, overall, less than the f reight they expect to earn f rom the collect ion of var ious

parcels

t he

ship

will

carr y

–

the

dif f erence,

less

their

overheads, creat ing the prof it ele ment they seek.

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8Project

Cargoes :A

specialized

f rom

of

joint

venture/contract

of

aff reightment is terms a „project cargo‟ or a „turnkey project‟ , a term commonplace in the heavy lif e market, wher eby a mar ine specialist undertakes complete responsibilit y f or the seaborne movement of both small and large prefabricated struct ures, construct ional equipment, and raw mater ials (eg cement) together wit h all the par aphernalia of major projects (eg. site hut s and machiner y) to the project ‟s eventual location. An

example

would

be

the

movement

of

material

and

equipment

necessar y to constr uct a de -salinisation plant or cement factor y in a developing nat ion.

Charteri ng Negotiations Having f ound a potential ship t o carr y a Principal‟s cargo, or what appears to be a suit able cargo f or a ship, t he Shipbrokers concerned usually converse to exchange addit ional f acts, so as to ensure the business is mutually interest ing and workable with a f air chance of success – all this normally prior to discussion with the Principals.

On e or other Broker will then seek and receive his

Principal‟s author it y to make an off er for the business.

Although this

may, at f irst sight, seem a simple pr ocedur e, ser ious pr oblems can arise if a basic code of conduct and practice is not f ollowed in the tender ing and receipt of such off ers.

First, negotiations need to be conducted with care and attention to detail, as there must be complete agreement bet ween the t wo Principals f or an enforceable contract to come into being.

A day -book

or log, or some ki nd of f irm off er check -list which can be amended as negotiat ions pr oceed, should be caref ully kept and re -conf irmatory telex or f acsimile messages summarizing the f inal agreement, should always be sent to bot h part ies. Some Shipbrokers, in f act, f eel it i s advisable, in the int erests of certaint y, to conf irm each of f er and counter -off er in that manner.

Shipping is, af ter all, an international business and,

although most chartering negotiat ions are conduct ed bet ween parties f luent in the use of the English language, honest errors do occur and are best ident if ied at an early stage.

88 Go to Index Page

Verbal communication both during negotiat ions an outside (eg. passing on instruct ions to the Masters of ships) should always be r e conf irmed back to the instructing Principal. Initially, the elements of a standard opening offer f or dry cargo voyage business can be itemized .

Essential details of a Firm Offer for Voyage Business . 1. 2.

Reply by For account of

: (Place and time limit) : (name and perhaps beackground Charterers) : (including description, eg flag, year of build; class; pandi club; loa; beam; deadweight; draft; cubic capacity‟ single/tween; number of holds and hatches; gear)

3.

Name of Ship

4.

Position and estimat ed readliness of vessel:

5.

Cargo Descr ipt ion & Quantit y :

6.

Load Port(s) / berths

7.

Discharge Port(s) / berths:

8.

Laydays/Cancelling

:

9.

Loading Rate

:

10.

Discharging Rat e :

(per ww dya/sh inc/shex)

11.

Freight Rate

:

(where, when and how paid)

12.

Demurrage Rate

:

(half dispatch)

13.

Loading/Discharging Costs:

14.

Address Commissioner

15.

Brokerage

:

(more or less %)

(always af loat/naabsa) (always af loat/naabsa)

(per ww day/shinc/shex)

(f io?)

: :

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16.

Charterparty

:

17.

Subjects

:

(details/stem/shipper s‟ – receivers‟ appr oval)

The procedure concerning off ers and counter off ers in timechartering is similar to voyage estimating, except that such off ers will be tailored f or the major elements of a timecharter,

Essential details of a Firm Offer for Time Charterin g:

1.

Reply by

:

(Place and time lim it)

2.

For account of

:

(name and perhaps background of Charterers)

3.

Name of Ship

:

(description as f or voyage Charter ing

plus

speed

and

consumpt ion)

4.

Position and estimat ed readiness of vessel

5.

Redeliver y

:

(when/ wher e ready; aps; dop; passing „x‟)

6.

Laydays/Cancelling

:

7.

Durat ion Trip

:

8.

Deliver y

:

(W hen/W here ready; dop; passing „x‟)

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9.

Trading Area

:

(eg. worldwide; Atlantic Basin, excluded countries)

10.

Intended Trade

11.

Cargo Exclusions :

12.

Hire Rate

:

(eg. grain trading, trip with coal)

:

(daily; per deadweight tonne per month) (? Including overt ime) (where, when and how paid)

13.

Ballast Bonus

:

(Gross or nett)

14.

Bunkers

:

(prices and quantities both ends)

15.

Address Commission

:

16.

Brokerages

17.

Charterparty Form :

18.

Subjects

:

:

(details)

(See „I ntroduct ion to Shipping‟ f or glossary of abbreviat ions)

Offering and Countering The art of off ering and counter -off ering is governed both by legal dicta tes as well as by a code of prof essional conduct – the t wo not necessar ily coinciding.

Legally, f or example,

having made an offer, one is f ree to withdraw it any t ime prior to its acceptance by the other part y or bef ore any time lim itation on the

91 Go to Index Page

validit y of the of f er expires.

Prof essionally, however, one is expected

to maintain the of f er, unaltered, unt il it is either count ered or accepted, or until its time limit ation has expired. Again, legally, while negotiations continue, one can alter what has alrea dy been „agreed‟. Professionally, this is f rowned upon, although it may be that such „back -broking‟ is acceptable

if

terms

subsequent ly

revealed

during

negotiations

substant ially af f ect what has previously been settled and which one party ought to have di sclosed to the ot her at an earlier stage.

Incidentally, you will of ten hear the expr ession „counter -of f er‟ and when actual negations are proceeding (especially near the closing stages) you will even come across the words „Accept -except‟ which obviously means that the part y saying it is prepared to accept the other‟s of f er with only a f ew (although they could be vital) alterat ions. However, let us be ver y clear on one point, when one makes a counter off er one is in f act saying „I decline your off er and I now make you the f ollowing f irms off er‟.

Consequent ly unt il both parties have agreed on

all and ever y detail, there is no contract and the one last in respect of an off er (or counter off er) f rom the other is f ree, at any time, to „walk away‟ f rom the negotiations.

Just because the parties have started to

negotiate t his is no way binds them to continue, although to break off capriciously and wit hout warning whilst it may be legally permissible, would not be counted as ethically good practice. There is an e xception to the „each and every detail‟ having to be agreed – in the USA. This is dealt with towards the end of this lesson. Remember also there are two rules of paramount importance in chartering negotiations, and which all studying this Course must remember and apply throughout their chartering career. These are:

1.

Always to act wit hin your authorit y.

2.

Do not of f er the same ship or cargo to more than one other party at the same time.

92 Go to Index Page

Warrant y of Aut horit y A Shipbr oker is deemed to enj oy the f ull author it y of his Principal, and should never act without that f ull author it y. In f act, it is incumbent upon the broker to ensure t hat he has f ull authorit y f or all off ers and counter -off ers made on the Principal‟s behalf . If f or some reason, a broker does not have aut horit y f or an off er made, he may be legally liable in an action brought by an injured part y receiving and accepting an unauthor ized off er.

Such an action would

be on t he basis of „breach of warranty of authorit y‟, either „with‟ or „without negligence‟ .

(The broker „warrants‟ i.e. guarantees that he or

she has the authorit y to make the contract).

In the case of breach „with negligence‟ a br oker will be legally liable but, f or a breach „wit hout negligence‟ the broker is entit led to legal r ecourse agains t the part y passing him the m istaken or erroneous off er. In practice such an action may not succeed – especially in such an internat ional market place involving many dif f erent codes of law. Even if legally successf ul under one or more codes, the chances of f ull f inancial recompense may be limited.

The

dif f erence

bet ween

these

br eaches

can

be

illustrated

diagrmmatically as f ollows: -

SHIPOW NER__________ BROKER

A

|

|

BROKER

B________CHARTERER

Let us assume that the SHI POW NER off ers his ship to BROKER A at US$ 25 per tonne BROKER A passes the off er correctly to BROKER B, who mistakenly passes the of f er to the CHARTERER at US$ 24 per

93 Go to Index Page

tonne.

The CHARTERER accepts. There is no contract bet ween the

SHIPOW NER and the CHARTERER, but BROKER B could be liable f or an action f or breach of warrant y with negligence.

Alternatively, let us assume that the SHI POW NER off ers his ship to BROKER A at US$ 25 per tonne, but on this occasion BROKER A mistakenly passes on the of f er to BROKER B at US$ 24 per tonne, who in turn passes the off er at US$ 24 to the CHARTERER.

Again the

CHARTERER accepts.

There is still no contract bet ween the SHIPOW NER and the CHARTERER, and BROKER B is still liable f or breach of warrant y of author it y, but this t ime without negligence.

BROKER

B may have the r ight

to proceed legally against

BROKER A f or passing an erroneous off er, but may f act problems in gaining appropr iate r ecompense f or the reasons detailed above.

The two pr incipals could insist on t he contract being f ulf illed in which case the broker‟s liabilit y would be f or the diff erence bet ween the author it y given

by

the

Owner

and t he accept ance

given by the

Chraterer.

The breach of war ranty could be on an item f ar less easily apparent than a dollar diff erence in the rate and may, ther ef ore, not come to light until the ship‟s voyage is well advanced.

The principle,

however, remains the same in that the broker f rom whom the injur ed party r eceived the erroneous off er is responsible f or the damages the principal suff ers.

This may seem ver y harsh in the case of „without negligence‟ as the broker being held responsible will have acted at all t im es in good f aith and meticulously passed on such of fers as he or she received f rom

94 Go to Index Page

the errant broker. How ver y much more unf air, however, it wou ld be to the injur ed part y if action against the nearest broker was not the accepted legal route particular ly as the broker who initiated the breach may be in another countr y.

The injured pr incipal was completel y

innocent and what the law is really saying is that a broker has to satisf y himself of the bona f ides of those with whom he or she is dealing.

Prudent brokers usually insure themselves against both sorts of breach of

warrant y of

authority.

Fortunately cases which pr ove

intractable to an am icable s olut ion are rare but when the wor st happens in can be spectacular. spectacular.

A f ew year s ago there was a case be

A f ew years ago there was a case wher e there was a

f raudster in the „chain‟ of brokers.

He is now languishing in an

American pr ison but t he f unds were never recovered and t he London brokers had to make a three million dollar claim against their insurers.

Firm Offers The second rule of paramount importance involves f irm off ers. It must be remembered that a ship cannot be under off er f or two or more cargoes at the same t ime (ot her than f or part carg oes) as, if both off ers were accepted, the vessel could not carr y both at the same time.

Similar ly, a Charterer cannot off er the same cargo to more than

one ship at the sam e time. Even wher e a Br oker is conf ident the same time. Even where a Broker is conf ident his Principal‟s f irm of fer will not be accepted by the other part y, only one off er at a time can be made.

W hen broking pressure is intense, and when perhaps more than one

opportunit y

pr esen ts

itself ,

it

may

becom e

ver y

dif f icult

to

negotiable so as to select the best alternative f or a Principal, because it may be that by concentrat ing upon one order or upon one ship, a second, better alter native slips away.

But negotiations cannot perf orm

by means of off ering to more than one party at a t ime. An original off er must have expired (or been withdrawn) bef ore a second of f er is made to the alternative candidate or, at least, a counter - off er received and declained. Naturally a Br oker may have to exercise much skill and tact

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to perf orm his task eff ectively in such circumstances, and act in the best interests of his Principal. It is, however, possible to negotiable a ship or a cargo on the basis of being „subject open‟ or „subj ect unf ixed‟ .

In this way t he other side receives clear advice that alternative

negotiat ions ar e being conducted, although some Principals will be unwilling to negotiate on this basis s, even if „f ixing‟ the alternative business may t ake procedure, and they would be lef t with nothing to show f or their time and trouble.

Nevertheless, with certain trades – f or example, with Indian Gover nment cargoes on certain occasions – working „subject open‟ is not unusual and where, say f our vessels off er f or what is quoted as one cargo (but may, in fact, turn out to go be several cargoes on the same position f rom the same port), the most attractive of f er may be countered to „clean‟, the next on the basis of „subject open‟, the third „subject unf ixed t wo‟ and the f ourth „subject unf ixed three ‟.

There may not be

f our separate cargoes and as, perhaps, ships 1 and 2 drop out dur ing negotiat ions, it may be that successf ul negotiations are concluded only with ships 3 and 4, in such a way just if ying what at f irst sight appears to be a rather tireso me procedure. It is, however, pr of essionally unethical to misleadingly counter to another part y on the basis of being „subject open‟ when not, in f act, under off er to anyone else.

Indications Having f ound a potent ial ship to carr y his Pr incipal‟s cargo the Broker involved will normally gather addit ional data in an eff ort to ensure that the opportunit y is really of interest and workable wit h a reasonable chance of success.

Indications of f ixing levels may be

exchanged, and these may be made in the f orm of off ers by including dates when a ship or a cargo may be available, the f reight rate a principal is prepar ed to pay or to accept, the cargo quantit y, etc. There may even be a „counter indicat ion‟ or an indication said to be „f irm‟.

However an indication is not an offer. It is not binding on the party making it, and several indications may be made for various cargoes or ships

96 Go to Index Page

at one and the same time.

An indication is merely an advice of the

„approximate‟ terms and conditions upon which a Principal is pre pared to undertake business, or from which level that Principal is prepared to negotiate. It must also be remembered that it is considered unethical to imply that a ship or a cargo is held „firm‟ when it is not, in order to secure an of f er or a counter -of f er f rom a Principal and indications should not be abused in this way any more than should actual off ers.

Self Assessment Questions

1.

How many methods of ship employment can you list? (the Lesson had eight).

2.

For what items would a time charterer be responsibl e which would not be the responsibilit y of a voyage charterer?

3.

W hat is meant by „br each of warrant y of author it y?

Charterparties It is common practice when advertising a cargo to include the t ype of charterpart y on which an eventual f ixture will be based – eg. Gencon CP – and certainly this should be the case when initially of f ering or counter -off ering.

It is, however, unusual f or a

contract to be based upon a blank copy of the named charter party f orm, it being normal practice t o base negotiations eit her o n a prof orma contract prepared by Charterers including any special terms and conditions

relevant

to

their

business

or,

more

com monly,

f or

negotiat ions t o be based upon terms agreed f or a similar previous f ixture, if possible upon a signed „worked‟ copy of a previous f ixture‟s charterpart y.

It is usually only when negotiat ions are under way and have successf ully

reached

perhaps,

the

„main

terms‟

stage,

that

the

charterpart y upon which the charterer wishes to base t he f ixtures is

97 Go to Index Page

made available to the Shipowne r and/or Owner‟s Broker.

This may be

due to the relat ive geographic locations of the parties involved, or down to a natural reluct ance to go to the trouble of exchanging documents when it is by no means certain that the negotiat ions will show signs of reaching a successf ul climax and so warrant an exchange. It also may be considered poor negotiat ing tactics t o appear too keen t o give or to receive a prof orma governing charterparty at too ear ly a stage in negotiat ions.

Sometimes it

is diff icult to lay ones

hands on appropriate

document ation f rom an earlier f ixture, and most brokers will have exper ienced a f rantic search at an advanced st age in negotiations f or a copy of a suitable base charterpart y.

Ver y occasionally when local

copies of suitable draf ts ar e unavailable, t here is no alt ernative to basing, negotiations upon a blank charterpat y f orm, together with tediously copied telexed or f axed ent ire charterpart y terms, alternations and rider clauses.

Nevertheless, the time is now with us when an essenti al part of ever y Broker‟s and Principal‟s basic off ice equipment is a f acsimile machine, by which charterpart y terms can be speedily transmitted around the world.

This has had a prof ound ef f ect on charter ing

negotiat ions by making the exchange of charterp arties so much easier and the „f ax-machine‟ can be said to have brought about a fundamental change in chartering tactics by which

party purposely intr oduces the

basic terms and condit ions at an ear ly stage in negotiat ions, thereby eliminating the „main te rms‟ stage altogether.

Timing It is important that off ers and counter -of f ers not only state t he time by which a reply is due, but also the place where any r eply must be wit hin that time limit ation.

Failure to f ollow this procedure may

mean, f or example, t hat a Principal replies in good time in, say London, with t he other pr incipals based in Singapore unaware of the valid counter-of f er, and thus negotiat ing and perhaps f ixing elsewhere

98 Go to Index Page

The time and place f or reply to an of f er must be quite explicit – eg. “f or reply in Singapore latest by 1500 hours local time 23 r d June”. Any conter -of f er made in London to meet his deadline will have to be in suff icient t ime reasonably to perm it it to be relayed to Singapore pr ior to 1500 hours local time threat. Beware of imprecise expressions such as „For prompt reply‟ or „For immediate reply‟. The latter does not mean what it at first seems to say. An offer made through broker(s) for immediate reply in fact means that time has to be allowed for contact to be made with the principal. He has to reply straight away but even using the „most expedient means of communication available‟ it may take quite a while for the message to travel all the way there and back.

Subjects Charterers off ers and counter -off ers are almost always made with

„subjects‟ eg

„subject

stem ‟;

„subject

receiver‟s

approval‟ or

whatever. „Subject stem‟ is an expression about which there has of ten been debat e as to it s origin even its precise meaning. def ined by example.

It can best be

Supposing a chartere r has a contract to buy a

million tons of coal over a per iod in ships of around 50,000 tonnes. One cannot have such a quantit y sitting on a quay waiting f or a ship to be chartered and so the charterer needs to ver if y that the cargo can be brought down to the port to coincide with each proposed ship. If it is in order the shipper will tell the charter er to „lif t‟ that „subject ‟. The reason f or „subject receiver ‟s or shippers‟ approval‟ is f or a similar purpose, the charterers need to check whether a ship i n that precise posit ion can be accommodated. Sadly both expressions are occasionally abused. There are cases wher e a f ixture is made bef ore the cargo is even bought, respect ively sold, but those abusing accepted codes of ethics usually get f ound out .

Under English Law t here is no f ixture until all „subject‟ have been lif ted and, f rom an Owner‟s point of view, it is theref ore desirable to place a t ime-limit on the removal (ie the „lif ting‟ of any subjects agreed upon).

This will have t he eff ect of concen trating the eff orts of

Charterers to lif t the subjects in good time or to risk losing the ship to other compet ing business.

A t ime limit on subjects also provides less

99 Go to Index Page

opportunit y f or an unscrupulous Chart erer to cont inue unobtrusively seeking cheaper ton nage whilst supposedly clear ing subjects. The time available to a Charterer to clear subjects is negotiable, like charterpart y terms, but should obviously be suff icient, reasonable and practicable, or else a Charterer may simply need to request ext ensions of time to comply with these requirements.

This available time is, however,

potent ially capable of misuse by Charterers, and Shipowner s are normally ner vous about being too lenient by allowing too many subjects f or indeterminate periods, especially when d ealing with previously unknown and untest ed Charterers.

On t he other hand, Charterers may

quite legitimately need a consider able length of time, especially when obtaining reconf irmation of a cargo‟s availabilit y on certain dates in a remote corner of the world.

However, it is not always Charterer s who put subjects on a negotiat ion. W here Charterers are unknown to O wners, it is quite likely that Owners will make any off er subject to „approval of Charterers by Owners‟, or at least they will enquir e of their background and histor y, probably seeking references f rom Shipowners with whom the Charterer has conducted business in the past. As a last resort, a Shipowner may insist on a bank guarantee in support of the Charterer, alt hough this is expensive and f requently dif f icult to arrange, and is not usual.

Owners should be particular ly war y wher e a Charterer is not named in a quoted cargo, being ref erred to perhaps as “FCC” – short for “First Class Charterer”. A dfefinition of what is “first class” differs, of c ourse, from person to person. Frequently there is nothing sinister about a Charterer not declaring his name behind an order, this being simply because the Charterer is hiding his involvement from market competitors, or, perhaps, because a Broker is quoting business passed to him from a „Correspondence Broker‟ in whomhe has faith will not deal with unscrupulous Charterers of a bad reputation, and is happy to re-quote the business prior to gaining a thorough knowledge of the background to the order. It is e xtremely unwise, however, f or an Owner to agree to f ix his vessel to an un -nam ed Charterer. There have been

100 Go to Index Page

cases where a broker has given an assurance t hat his pr incipals are f irst class to the other side and the so -called pr incipal has def aulted. There is more than ethics involved here because legal action has successf ully been pursued against br okers who have given such an assurance recklessly.

One does not even have to be one of the brokers involved t o risk action being taken in the case of negligently or recklessly given advice. You will learn about the civil wr ong of tort in your law lessons. Suff icient to say that someone asking f or your prof essional advice has the right to consider you to be qualif ied to give that advice, even if the advice is giv en gratis. Should the enquirer acts on your advice and the deal goes wrong, you may be in trouble.

Unless the subject Charterer

(or owner) is ver y well known to you to be „f irst class‟ , better by f ar to report on your experience, f or example – „we f ixed a ship to t hem on si x months time Charterer and they paid the hires bang on time ever y month‟. If there is no clear experience to report, you should suggest that

the

enquirer

makes

his

own

enquiries

through

more

f ormal

channels. Of course if you have had a bad experience you should pass on the f acts just the same but in the same way as you should not give an assurance of excellence if you are not absolutely conf ident, always remember that there are laws of libel and slander, so be car ef ul not to make out the Charterer of another party t oo badly.

101 Go to Index Page

Negotiating Once a f irm off er has been made, all subsequent counter off ers should be pref ixed in one of f our ways: -

1.

“W e decline Oner‟s / Charterer ‟s of f er and off er instead …….”.

2.

“W e accept owners / Charterer ‟s la st, except …….”

3.

“W e repeat our last”.

4.

“W e repeat our last, except …………” W ith parties engaged in serious neg otiat ion, diff erences will

gradually be eliminated and reconciled until either negotiat ions end in f ailure wit h neither, side willing to concede on o ne or more issues or until agreement is r eached, albeit with var ious „subjects‟ st ill be lif ted. Traditionally, this m ay be termed having reached agreement on „main terms‟ or having reached the „subject details‟ stage, leaving the charterpart y st ill t o be negot iated bet ween the parties.

Ethically there

is no reason why t here should now be a subsequent ser ious impediment to reaching a f irm f ixture.

It may happen, however, that the Charterpart y contains one or more terms which substant ially af f ect the previ ously „ag reed‟ main elements of the negotiat ion. The Seriousness of these „details‟ may not be realized until negotiat ion on charterparty terms is under way but it is incumbent upon Charterer‟s Brokers to ensur e, if possible, that the original negotiations leading to agreement on „main t erms‟ contain all main t erms.

That would help to avoid disagreement over terms which

substant ially

af f ect

items

already

ag reed

–

e.g.

the

freight

rate

………….. as mentioned ear lier, the t ime is now with us when an essent ial part of every Broker‟s and Principal‟s basic of f ice equipment is a f acsimile machine, by which chart erpart y terms can be speedily transmitted around the world.

This has had a prof ound eff ect on

chartering negotiat ions by making the exchange of charter parti es so much easier and the „f ax -machine‟ can be said to have brought about a

102 Go to Index Page

f undamental change in chartering tactics by which a party purposel y introduces or requests the basic terms and condit ions – in other words the charterpart y – at an ear ly stage in n egotiations, ther eby eliminating the „main terms‟ stag e altogether.

The traditional method of negotiating is still widespread, however, since, if agreement cannot be reached on major but simple issues such as cargo size, vessel‟s / cargo‟s available dates, f reight rate, etc., there is little point in dealing with perhaps tedious and relat ively minor charterpart y clauses. Under English Law, however, there is no binding contract at the „main terms‟ stage of neither negotiations, nor will there be any such agreement until each and every detail of the contract has been agreed and all subjects lifted. Legally, therefore, there is nothing to stop one or other of the parties renegotiating a feature of the „agreement‟ reached – eg the freight rate – although, professionally, and unless justified by the discovery of a previously hidden „major‟ item, this would be considered highly unethical.

As ment ioned ear lier, under present American Law, however, there may be a contract once „main terms‟ have been neg otiated and agreed, unless bot h sides decide to withdraw f rom the negotiations; unilater al withdrawal is not suff icient. Agreement reached on what may be interpreted as the „essent ial‟ parts of a contract may well result in a legally binding f ixtur e, even though a mas s of relatively m inor details have not even been discussed, let alone resolved, and even though numerous subjects r emain to be lif ted.

The solution to this potent ial problem would seem to be to elevate the „subject details‟ stage from a legally insignif i cant process to an essent ial part of a contract. stage

so

ther e

charterpart y

is

details

no is

Negotiat ing on a charterparty at an early

dist inct ion one

between

method,

widespr ead use of f acsimile machines.

the

eased

„main

t erms‟

particular ly

by

and the

H owever, if parties to a

negotiat ion under American Law pref er not to be committed to what ma y legally be interpr eted as „f ixt ure‟ bef ore all details, major and minor,

103 Go to Index Page

have been agreed, and all subjects lif ted, they should make this patent ly clear by the us e of appropr iat e wording. An example of such wording would be “subject to O wner ‟s / Charterer ‟s f ull appr oval of the prof orma charterpart y dated …………. wit h logical amendments thereto”. It may be t empting in the heat of negotiat ions to use a short, easy phrase like “subject details” but, wit h American Law as it presently stands, this is not suff icient, and it is saf er to get into the habit of being more explicit.

Summary You have now covered the basics of f reight markets, trading and negotiations. There is much to learn of a pr actical natur e, but what you have read in this Lesson is int ended to supplement and support your current or eventual working act ivit ies.

In the next Lesson we will

turn our attention to investigat ing the world of dr y -cargo char terpar ties. In the meant ime, you should by now have read up to Chapter Four of “CARGOES”.

If not then you should read some bef ore starting Lesson

Four.

Test Question

Using the dat a provided in Appendix 3:1, provide a f reight market report of about 200 words. C hoose whether you are addressing your report to a Shipowner or to a Charterer.

The Shipowner has two „capasize‟ vessles

open „prompt‟ one in Osaka and the other in Rotterdam and he prefers the iron ore trade.

The Charterer has t wo ear ly cargoes of iron or e to ship, both of about 100/150,000 tonnes, one f rom Dampier to Rotterdam and the other from Tubarao to Rotterdam.

Descr ibe the methods commonly used to discharge bulk grain.

104 Go to Index Page

ALBR AI TH‟S LTD

SHACKLETON H 4 BATTLE BRI DGE, LONDON ST, TELEPHONE: 071 -371 TELEX : 884621/ 4C FAX : 071-521 Dry Cargo Market Report

for w eek ending noon 8 t h June, 1990.

P AN AM AX The f reight market has been dif f icult to work this week wit h levels st ill relatively low and little opt im ism f or a near -f uture recover y. The prospects f or an early revival ar e slim as the summer season is technically here now.

US Gulf to Japan cargoes are being discounted

f or July shipment by upto $2.00 per ton over the June positions. In the timecharter sector tr ans -At lant ic round voyages have been r eported but the rates are as was expected.

Amongst them f eature to CRUSADER

VENTURE taken by Pacif ic Mar ine f or a trip with coal f rom USNH to the Mediterranearn at $8,800 per day plus a ballast bonus of $140,000.

A

Maersk vessel was taken by Danish Char terers f or a South American round voyage at a similar level of $8,500 daily. The STAMP Cont inent to Egypt with a f air ly short dur ation.

It was not all bad news though,

with t he ANANGEL EXPRESS being f ixed to Japan f rom the Continent via Brazil at $12,250 daily. The THALIA reported in more detail below, was taken at a level about $250 per day less than the Cinoussian Strength a week ago f or a trip to Aquaba via US Gulf .

On the voyage market more act ivit y has taken place in general terms with f reights no better on any of the usual routes.

Coal from South

Af trica was f ixed t o Sapin at $9.30 at the back end of last week and now wit h the current timecharter levels obtainable, t his rate would be less t han $9.00 per ton.

In the At lantic $7.25 was agreed by Be lgian

Charterers f rom USNH to Ant werp f or 62,000 tons of coal. T he numbers

105 Go to Index Page

of f ixtures concluded this week are symptomatic of the large volume of tonnage on the market.

Capesize

Inspit e of numerous f ixtures being reported this week, rate

levels have decli ned, thanks t o a surplus of early tonnage. The outlook the short term appears to be “more of the same” although we are inf ormed that the Japanese steel mills should start to build up stocks again during July/ August, which presum ably should lead to a f irm ing of the f reight market.

Transatlant ic time charter levels now at about 50

pot of levels reached ear lier this year . Period enquir y is gathering momentum - - a natural consequence of the current low spot market - although we do not so f ar see much evid ence of owners grabbing the business at rates charterers are prepared to pay.

There is increasing

ner vousness among st charterers about longer term per iod f ixing in view of the substantial.

Handy Size Lack of f resh grain and T/C operat or enquir y has kept t he Atlantic

market

f airly

cool

happened to rate levels.

this

week

thus

nothing

inspir ing

has

For deliver y Passero / Cont range Lakes

charterers secured tonnage disappoint ing f or Owners, whereas grain f ixtures ex Lakes show impr ovement, indicat ing the tigh t position being exper ienced

by

ar ea

but

generally

operators

are

quiet

as

they

contemplate the existing strike situat ion at certain ports and the possibilit y of a general strike commencing 12 t h June.

P AN AM AX VOY AG E FIXTURES

CSK FO RTUNE 60000/10 PCT COAL #1 3.00 NEW CASTLE NSW /1 S. SPAI N 20,000/12, 000 OR 15,000 20 -30 JUN ( MO SK)

CHINA GLORY 60000/10 PCT COAL $9.30 R‟BAY / TARRAGONA SCALE / 12, 000 SATPM SHEX 20 -30 JUN (CARBOEX).

106 Go to Index Page

JADRAN 70000/CO AL $8.00 RICHARDS BAY/R‟DAM SCALE LOAD / 25000 SC 25 JUN – 10 JUL ( COBELFRET)

JARDAN

62000/CO AL

$7.25

BALT+NORFLK/ ANTW ERP

3.5

DAYS

SHINC 10- 20 JUN (COBELFRET)

ALKYONIS 51000/ 5 PCT DAP $24.75 USGULF/ CHI NA 32 DAYS SHINC FIO 20-30 JUN (SINOCHART)

SEA VI CTORY 75000/10 PCT IRON ORE $7.50 TUBARAO / GIJON 7 DAYS SHINC 25 JUN -10 JUL (ENSIDESA)

ARARAT 62000/BARLEY $15.25. LAW / JEDDAH 5 DAYS / 3.000 FHEX 106-2 JU (DREYFUS)

HANJIN CASABLANCA 5000/10 PCT HSS $11.25 NOPAC/S. KOREA 10.000/ 7.25 SHEX FIO 20 -30 JUN ( PANOCEAN)

UNITED ACE 53500/HSS $21.50 USG ULF/JAPAN 1 CO MBO 11 DAYS SHEX FI 15 – 25 JUN ( MOSK)

ARKAS 52000/HSS $21.50 USG ULF/JAPAN 1 CO MBO 11 DAYS SHEX 20-29 JUN (EX MAR)

NIKITAS ROUSSOS 54000/5 PCT HSS $22.50 USGULF / TAIW AN 5 DAYS / 4.00 SHEX 10 -18 JUN (CONTI)

ATLANTI 52000/HSS $19.75 USGULF/JAPAN 1 CO MBO 11 DAYS SH EX 01-31 JUL (NIPPO)

LAURA PANDO 72500/GRAIN $11.00 MISS R./ROTTERDAM 12 DAYS SHEX 14- 28 JUN (ADM) P AN AM AX T/C/ FI XTURES

107 Go to Index Page

MISTRAL 79760 DW T ABT 13K ON 34 LIB 74 DELY CONT 25 MAY -05 JUN TRIP VIA USGULF OR ECSA REDELY SKAW /PASSERO $10000 DAILY (SOVFRACHT ) WORLD SPEAR 69001 DWT ABT BR ‟83 DELY CONT 10-20 JUN TRIP VIA USGULF REDELY JAPAN $11500 DAILY (NAVIX) ROLLON 67826 DW T ABT 13K ON 32.5 GRK ‟75 DELY CONT 26MAV – 03 JUN TRIP VIA SAMERICA REDELY CONT $8500 DAILY ( ARMADA) THALIA 65161 DW T ABT 14K ON 37.5K L/32 B PAN ‟82 DELY USG ULF (15-20

JUN

REDELY

AQABA

$10000

DAILY

+

$200000

BB

(TRADIGRAI N) MAERSK BEVERLEE 63979 DW T ABT 12K L/ 13K B 30/31, PHIL ‟75 DELY

PASSERO

02 -07

JUN

TRIP

VIA

SAMERICA

REDELY

SKAW /PASSERRO $8500 DAILY (ARMADA)

ASCONA 63916 DWT ABT 13K ON 30 DELY NOPAC 15-20 JUN REDELY TAIWAN $8500 DAILY + $150000 BB (HANJIN) ANNITSA L 62871 DW T ABT 14 K ON 37L/33B GRK ‟83 DELY GIB 04 09 JUN VI A ORINOCO + USG REDELY SKAW / PASSERO $9750 DAILY (NAVIOS) STAMOS 62589 DW T ABT 13K O N 28 TS GRK ‟85 DELY DO P R‟DAM 05-10 JUN TRIP VI A EGYPT REDELY PASSERO $10600 DAILY (NNC)

CRUSADER VENTURE 61883 DW T ABT 14K ON 38/39 (380 CST) BRIT ‟82 DE USNH 15 -20 JUN REDELY ANNABA $88000 DAILY + $ 140000 BB (PACMARINE) ANITA VENTURE 61776 DW T ABT 14K ON 38/39 (3500) + 1. 1+1.3 DO/FO BEE DELY RETRO SKAW

25 MAY TRIP VIA SAMERICA

REDDELY SKAW /PASSERO $8900 DAILY (SOVFRACHT)

ANANGEL EXPRESS 61537 DW T ABT 13.5K ON 32L/36B (320 CST)

108 Go to Index Page

LIB ‟82 R‟DAM 05 -10 JUN TRIP VIA BRAZIL REDELY FEAST $12250 DAILY (GRANT) C APSIZE FIXTURES

SALPURI 100000 10 PCT IRON ORE NO UADHIBO U/ROTTERDAM 6 SC 20/30 JUL 3.35 DLPS (NEDLLOYD)

DI MITRICS 120000 10 PCT IRON ORE PT UBU, FOS 5 SC 15/30 JUNE 6.35 D (CETRAGPA)

LOCUST 150000 10 PCT IRON ORE TUBARAO/ROTTERDAM 25/30 JUNE 6SC 5.95 DLRS (MOSK)

SIDERMAR

TONNAGE

10000

10

PCT

IRON

ORE

NOUADHI BOU/DUNKIRK 15/30 6SC 4. 30 DLRS ( MOSTK) BELCARGO 90000 10 PCT COAL HAMPTON ROADS/HANSAPORT 20‟28 JUNE 3SC/2000 SC 6.25 DLRS KRUPP) EUROPA 10000 10 PCT COAL HAMP TON ROADS/ ROTTERDAM 25 JUNE/5JULLY $35000 SC BENDS ( PANBU LK)

TIMECH AR TER

GALLANT DRAGON 121185 13. 258/12.50 OFF 43 DEL CONT VIA BOLIVAR RULE CONVEY 100000 LPS (3%MAP) H ANDYSIZE FIXTURES „IRO‟ 30817 13K O N 30 – 2.5 DO DEL N.FRANCE 6/10 JUNE TA RV REDFL GIB/SKAW &7500 (DREYFUS) „OLYMPIC MIRACLE‟ 29670 13K JON 17 + 1.5 DO DEL PSSG GIB PPT 2/4 MO TC REDEL SKAW/PASSERIO $ 7150 (CNAFOR) „SAC MALAGA‟ 30499 13K ON 29 + 2 GAS DEL TARANTO PPT LAKS RV $630 (ITALMARE)

109 Go to Index Page

„NEW MARQ UESA‟ 33207 ON 22 + 0.2 DO DEL BO ULOGNE PFT TRIP REJN &9600 (UNITRAMP) „SUMMIT VENTURE‟ 344 56 12K O N 27 + 2 DO DEL PSSG PASSERRO 17/20 JUN TRIP VI A E. MED REDEL FEAST $10100 (INTRAF) „W ORLD ARETUS‟ 37472 12.5K ON 25 + 2 GAS DEL PSSG GIB PPT TRIP DIA BRAZI L REDEL FEAST 10250 (PACMARINE) „STADION‟ 33527 13K ON 27 + 2 DO DEL VITORIA 10/15 JUNE TRI P FEAST &10000 - $110000BB (NETUBULK) G A L B R A I T H ‟S

L I M I T E D

110 Go to Index Page

CH APTER- 4

CH ARTERI NG CONTR ACTS

In this lesson we will examine the documents which control the whole chartering market and f orm the cornerstone of shipbr oking lif e. So much of t he practical lif e of a broker revolves around the various requirements of charter parties that it is absolutely essential you understand them as f ully as possible. No one expects ever y broker to understand ever y charter party in detail, but brokers should be aware of the basic structure of voyage and t ime charter f orms, and should also be capable of nominating a suitable charter part y f or any particular commodit y or trade. Whilst in shipping almost anything is possible (provided it is legal) there are usually specific charterparties which relate to particular trades, and 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. To help you in this aim, Appendix 4.1 lists a selection of important dry-cargo charterparties under the headings of various commodities.

As you can see f rom this list, some dr y -cargo charterpart ies in use today are around eight y years old and, although many during that period have grown unsuitable f or the trade f or which they were originally intended and/or the trade itself has become obsolet e, leading to the discontinuation of use of those charterparties, some of these older f orms have still a valid role to play and have been updated when and where necessary to keep step with. Even so, new dry-cargo charterpart y f orms are published f rom time to time and older ones revised and updated, and active in this f ield are t wo bodies that you will encounter in particular – The Balt ic Int ernational Mar itime Council (BI MCO), and The Associat ion of Shipbr okers and Agents (ASBA). BI MCO, based in Copenhagen, has an international membership and originated as a shipowners‟ lobby group bef ore expanding its broker and

charter

membership

in

recent

years.

ASBA

is

an

American

111 Go to Index Page

organizat ion, based in New York and, as its name implies, is an associat ion of shipbr okers and agents.

As will be seen in Appendix 4 : 1, other bodies are also act ive in draf ting

charterpart ies,

some

inter nat ional

(eg

FONASBA)

so me

national (eg UK Chamber of Shipping – now part of the General Council of British Shipping) and in some trades, the charter ers themselves have draf ted the charterparties f or their own commodit ies (eg S. Af rican Authract ite Producer s Assn.). There are any number of charterparties we might have selected to analyse t horoughly and to illustrate t o readers the basic st ructure of these documents, but many of the older exist ing f orms are little more than a ver y brief printed f ace to which are attached r ider clau ses relevant to the particular trade and var ying in content wit h the individual requirement s of the parties negotiating a contract. Accordingly, we have selected t wo f orms which contain an illustrative structure in their pr inted versions, and which are thu s of value f or our purposes in this Course. The two selected are the MULTIFORM of FONASBA (The Federation of Nat ional Associat ions of Shipbrokers and Ag ents), (Appendix 4 : 2), as our voyage charterpart y, and the ASBATI ME of ASBA (Appendix 4 : 4) f or our t imecharter, supported by the AMW ELESH (Appendix 4 : 3) and the New York Produce (Appendix 4 : 5), both of ASBA. More about these later. In the meantime we will start with exam ining charterparties in general terms.

A proper ly signed and authenticated char te rparty states in wr itten f orm the contract bet ween the shipowner (or the disponent owner or operator of a ship) and charterer . It should f actually record their negotiated agreement and the terms and condit ions reached in that agreement. A charterpart y is n ot the contract itself , which will have been reached (as we have seen in Lesson Three) by word - of -mouth or telex exchanges, or whatever. Thus it can act independently to the physical movements of the vessel and in some cases, especially in the f ast-moving wor ld of short -sea trading where a vessel may complete t wo or

even

three

car goes

in

one

week,

f requently

the

draf ting

of

112 Go to Index Page

charterpart ies is some way behind physical events, and a ship ma y have loaded, carr ied the cargo and discharged, f reight may have been pad and laytime calculated and settled even bef ore a har d -pressed broker has set to work to draw up the contractual agreement – the charterpart y. On the other hand, the availabilit y of the charterparty may be an essential f or trading pur poses, the release of letters of credit, etc. and thus it should be the aim of every broker, no matter how har d pressed, to prepar e a charterpart y as soon as possible f ollowing the successf ul

conclusion

of

a

negotiation.

Just

occasionally,

the

preparat ion of the charterpart y r eveals an error in the negotiating process, and the sooner such errors are brought out into the open and reconciled the better f or all concer ned.

„Official Charterparties‟ Certain charterparties ar e „of f icial‟, in that they have been inspected and passed by an author itat ive body – eg a chamber of shipping – whilst others have not been so treat ed of may have been f ound lacking in some respect. Certain organizations take it upon themselves on behalf of their members and, in the case of BIMCO, as a ser vice t o world shipping, to inspect and, where possible, to „recommend‟ or „approve‟ var ious f orms, going so f ar as to themselves draf t and issue some documents. The explanat ion of certain varied words of recommendation at the head of some charterparties can be brief ly described as f ollows

Agreed or Trade : The charterpart y wording has been „agreed‟ bet ween a body such a BI MCO (broadly representing owners‟ inter ests) and a charterers‟ organizat ion f or a particular t rade. The printed condit ions of such a charterpart y may not be altered in any way without t he express agreement of all the organizat ions drawing up the document, which is compulsor y f or all engaged in the particular trade. An exam ple is the SOVIET COAL CHARTER, agreed bet ween the Documentar y Council of BI MCO, the Scandinavian Coal Charterers‟ Federat ion, and the USSR Chamber of Commerce.

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Adopted: W here a body (eg a chamber of charterpart y

that

has

been

„agreed‟

shipping) „adopts‟ a

bet ween

say,

a

charterers‟

organizat ion and BI MCO.An example is the POLCOAL VOY charterpart y, adopted by the general Council of Br itish Shipping. Such a body can also adopt a charterparty t hat has not been „agreed‟, should it appr ove of that document ‟s contents, although in the latter cost the clauses can be alt ered by mutual cons ent by contract ing parties in the trade.

Recommended: W here charterpart y text is liable to alterations in negotiat ions, although the wording of the print ed text meets with the approval

of

the

inspect ing

body,

the

f orm

can

be

used

as

a

„recommended‟ documen t. An example is the GENCO N charter party.

Approved: Simply an expression descr ibing „r ecommended‟, „adopted‟, or „agreed‟ charter parties.

Issued: A charter party f or which a group such as BI MCO is r esponsible f or draf ting and making available f or use.

Charterpart y Library For students f aced with the awe - inspir ing task of studying

popular

dry -cargo

charterparty

f orms,

it

will

be

f ound

product ive f or the purposes of both examinat ions and practical trading, to examine such blank printed document s as one can obt ain, alongside f inal,

negotiated

and

duly

am ended

charterpart ies.

In

this

way

commonplace alterat ion , delet ions and addit ions to printed wording can be obser ved and lessons learned f or f uture negotiat ions. Addit ionally, f or students and f or practicing brok ers alike, the maintaining of a comprehensive f ile of sample charter parties – both blan and worked examples – is an excellent habit and one which will r epay the time and trouble involved many times over dur ing a career in the industr y. In large centers suc h as London and New York, blank copies of most charterpart y f orms can be obtained f rom specialist stat ioner s supplying maritime documents, f ailing which local shipbrokers or the organizat ion publishing the f orm may be able to provide guidance on its availa bilit y

114 Go to Index Page

in part icular ar eas.

Charterpart y Wordi ng The wording of most charterparties (other than in „agreed‟ documents) is used only as a basis f or negotiat ion and, where necessar y, the printed text is altered, deleted or added to, so as to ref lect the spec if ic agreement reached. To the amended „main‟ f orm will usually be added various t yped additional clauses, known also as riders, or as side clauses, and peculiar to the part icular business. On some occasions, an addendum or a side letter, or t wo, will be a dded to the charterparty, to record a part icular clause of clauses t hat one or other of the contracting parties wish kept conf idential f rom certain others who m ight subsequent ly ref er to the charterpart y. For example, the rate of f reight or hire may be tre at ed in the conf idential manner, with t he main char terparty clause ref erring only to a rate/hire „as agreed‟, t he actual f igure decided upon appearing only in a detachable addendum or side letter to the charter party. Thus port agents, etc. would be unaware of the rate of f reight/hire agreed upon, since they would need only the main charter part y and rider clauses to perf orm their f unctions sat isf actorily.

Occassionally, addit ional agreement(s) will need to be made subsequent to t he f ixture and t he drawing -up of the charter party, and these subsequent agreements are normally recorded in addit ional addenda. It is good practice to refer to the number of any additional clauses at the foot of the main charterparty form, with such wording, for example, as „additional clauses 29 to 55 inclusive, as attached, are deemed part of and are incorporated into this charterparty‟. Such is not necessarily the case with addenda, however, and it may not be apparent to those reading the main charterparty 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.

A side letter is an alternat ive to an addendum f or recording agreement s that bot h parties consider too sensitive f or general perusal

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the guaranteeing by one company of a sister company‟s perf ormance of the contract. The general market f eeling, however, is that a side letter is not quite so close to the heart of a contract. The general market f eeling, however, is that a side letter is not quite so close to the heart of a contract (the charterpart y) as is a numbered addendum and perhaps, if legally tested, a side letter would not carr y the weight of an addendum.

It is common p ractice in sea -trading, however, not to draw up a charterpart y f rom a blank f orm but no base negotiat ing upon a previous f ixture, altering main terms and additional clauses alike as required. This system is bot h labour -saving and expedient, at the same tim e providing evidence t o shipowners and their brokers that certain clauses they encounter in the charterpart y and perhaps f ind unattractive have been pr eviously agreed by other owners.

In certain cases, where charter ing business is sub - let by a head charterer, the sub-charterer may be rest ricted to negotiat ing strict ly on the basis of the head -charterpart y, using only clauses that ar e identical termed

back -to-back

with

the

main,governing

contr act.

charterpart y may diff er in some part icular aspect, some

Each

including

peculiarities not seen in others. It is the task of the sea trader to be aware of the pitfalls and advantages of major charterparty forms, and for shipbrokers to advise their principals of these when conducting chartering, so that by adept negot iation the most f avourable conclusion can be reached.

W ith

some

documents

it

is

commonplace

during

f ixing

to

negotiate that pr inted sections of text be deleted or amended in some way. These negotiat ions are always subject, however, to t he relat ive strengths of the parties involved and, although one or ot her may be f ull y aware of the potent ial pitf alls of a certain clause, it may not be possible to alter it f avourably if the other part y is negotiating f rom a position of strength. Additionally, depending upon t he part icular circumstances of

116 Go to Index Page

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 of financia l failure of the venture.

But to start with a sea -trader owes it to himself and his pr incipals to be at least aware of common charterparty wordings and alterat ions thereto that act advantageously or otherwise to prospect ive ventur es. Unf ortunately,

it

is

n ot

possible

to

lear n

all

of

these

technical

peculiarit ies f rom books on the subject . Much must be learned f rom exper ience and f rom the advice of colleagues. Knowledge can also be gained

f rom

comparison

negotiated

cont ract s,

newspaper

and

bet ween

and

magazine

f rom

blank

pro -f orma

intelligent

reports

of

shipping

and

perusal

of

disputes

previously shipping and

legal

decisions. Implicat ions f or charter ing of legal decisions are r eported in circulars issued by bodies such as BI MCO, P & I Clubs and t he like – all essent ial reading f or the sea -trader.

Draw ing up Chart erparties Once negotiations leading into a f ixture have been concluded, it becomes the task of the shipbroker acting f or the charterer to draw up the charterpar ty, amending the pr inted text where necessar y, and adding appropriate side clauses and addenda. Care should be taken to avoid repetit ion and the inclusion of irrelevant and unnecessar y clauses which are liable to creep in if the f ixt ure is based upon a completed charterpart y dr awn up on a pr eviou s occasion. But

nothing

should

be

deleted,

inserted

or

alt ered

without

the

agreement of the owner‟s br oker. It is also advisable to include the text of all clauses agreed upon, not merely t o mention them. For example, if protective clauses ar e included – eg 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 f or all to read if required.

There are schools of thought on what should happen next. Ideally, bef ore any person s igns a charterparty, it should be checked by

117 Go to Index Page

all concerned so as to conf irm their agreement with the contents. It is also polite to f ollow this course of action. However, where t he part ies are spread across the globe, this is impracticable and t ime - consum ing. Of course, a f ixture has been made verbally or in a series of telex messages or cables, and the charterpart y‟s existence or otherwise does not alter that agreement. But a charterpart y‟s prime f unction is to f actually record an agreement in an easily re ad document, so as to avoid

later

misunderstandings

or

poor

memor y.

Thus

its

ear ly

product ion is indeed desirable.

For practicable pur pose, theref ore, it is best that the charter broker promptly prepares the document and either subm its same to his principal, or signs on his pr incipal‟s behalf under authorit y so to do, bef ore dispatching the half -signed original t o the owner‟s broker, retaining working copies f or his own and his pr incipal‟s use. Any errors which the owner ‟s broker discovers upon checking the charterpart y should be discussed with the charterer‟s broker and, if necessar y, rectif ied.

Once

content

that

the

document

bef ore

him

f actually

represents all that has been agreed, the owner ‟s br oker should similar ly arrange

f or

his

principal

to

sign

or

sh ould

himself

sign

under

appropr iate author it y.

It is then a matter of courtesy – t he charterer‟s broker having drawn up the original document – f or the owner‟s broker to provide whatever copies are required by the various part ies to the contract, the original charterparty usually being ret ained by the owner. 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.

Signing Charterparties Care should be taken by the brokers when and if signing on behalf of their principals to show the means of that authority, eg : -

By telex authorit y f rom

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MEGABULK UK CORPORATION, Monr ovia For and on behalf of ABACUS CHARTERI NG LI MITE D, London (as agents or brokers only) John Sm ith, Director . 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. Thus, with such a qualif ied signature, a br oker will not be held personally liable f or the perf ormance of the contract unless t here is a clause or working in the charterpart y clear ly showing that the broker is in f act a principal. Addenda and side letters should be treated in the same f ashion as ch arter parties, being signed by both part ies, or their brokers, in the manner descr ibed above.

Additional

Originals

Occasionally,

perhaps

in

agreements

where

document ar y credits are involved, it may become necessar y to produce two or more „original charterpa rties‟. In such cases, each document should bear its pr oper title – eg „First Or iginal‟, or „Second Original‟.

The Vo yage Charterpart y This document overs the largest proportion of any f ixtures arranged on the chartering market, despite the trend in recent years f or charterers to take more vessels on tr ip t ime charter terms than was once the case. W hilst the f ollowing list of caluses is by no means exhaustive, it provides some idea of the normal clauses required in a voyage charterpart y f or dry - cargo vessels :-

List of Voyage Charterpart y Clauses 1.

Preamble

17. Overtim e

2.

Cargo descr ipt ion / quantit y

18. Shif ting/Seaworthy T rim

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3.

Loading places

19. Cargo Separation & Tallying

4.

Loading orders / rotation

20. Dues and Taxes

5.

Discharging Places

21. Ports Agents

6.

Discharge orders/rot ation

22. Bills of Lading

7.

Laydays and Cancelling

23. Lightening

8.

Freight

24. General Average

9.

Cost of Loading/Discharging

25. Strikes

10. Notice of Resadiness/Time

26. Except ions

Counts 11. Loading/Discharging rates

27. Commissions

12. Except ed Periods

28. Protection Clauses

13. Demurrage/Despatch

29. Lien

14. Notices

30. Ice

15. Ship‟s Gear

31. Signature

16. Grab Discharge/Stevedore Damage

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Elements of a Vo yage Charterpart y: W e will now examine the items on the above l ist in the context of an actual printed charter part y f orm, with ref erence to the text of the MULTIFORM Mult i -pur pose Charterpart y 1982 – as revised in 1986, which document you will f ind reproduced in Appendix 4. 2 to this Lesson, wit h occasional ref erences to the AMW ELSH charterparty in Appendix 4. 3. You will probably find the best way of understanding the following references is to first read the relevant text in the MLTIFORM charterparty and then the written commentary below.

Preamble: This can be ext ens ive in some charterparties. In the MULTIFORM much of what may be f ound in pr eambles of cer tain f orms is contained in clause 1. There are t wo important aspects of the brief MULTIFORM

pream ble,

however

–

t he

place

and

dat e

of

the

charterpart y.

Place: This can be important as, in the absence of a clause to the contrar y, 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. Thus, if the place is London, English Law may ver y l ikely prevail. The place can be def ined as where the contract is made, usually the domicile of the charter‟s broker, not necessarily the abode of one or other of the principals. For certainty that a dispute can be heard under particular jurisdiction, it is strongly advisable that a contract should include an „exclusive jurisdiction clause‟, in other words, the charterparty should state, f or example, that „English Law is to apply‟.

Date: Equally important, the date to be shown is that by which f ixture negotiat ions are concluded, with all subjects lif ted – in ot her words, when all negot iating f ormalities are complete.

Names and Domiciles of contracting parties: (Clause 1) The names of

the

shipowner

(or

disponent

owner)

and

charterer,

and

their

domiciles – i.e. their „f ull st yles‟.

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1. Name and brief description of vessel: (Clause 1) The MULTIFORM allows f or a more complete vessel description in t he main, pr inted part of the f orm than many (eg. Compare with the AMW ELSH), others utilizing an additional, r ider cla use, to provide concise details relevant to the trade/cargo envisaged. The position of the vessel at the time the contract is negotiat ed is also important (see line 4) as this governs its likely readiness to load (see line 5). These lines are of ten treated ver y lightheartedly in contemporar y negotiat ions and you will f requently encounter the simple wor d „trading‟ af ter the pr inted wor d „now‟ as in line 4. The courts, however, attach considerable importance to the accuracy of inf ormation about except ed readi ness to load and any substant ial error in the stated posit ion of the vessel can be considered misrepresentat ion. This could, ther ef ore, be treated as a breach of condition ent itling the charterer to rescind the contract. In the absence of any more specif ic stipulation, the ship is obliged to proceed to the loading port with „r easonable despatch‟. It would not, f or exam ple, be right f or a shipowner who had f ixed his ship with laydays and canceling 1/20 July st ating „now trading and expected ready to load 3 r d July‟ to slip in an additional short voyage and tur n up on the 17 t h July instead of around the 3 r d . The time span bet ween laydays and canceling is to cover the owner against unf oreseen delays and if the owner has been reckless or deliberately m isleading i n t he expected readiness of his ship, the charter er would be ent itled t o claim damages f or any loss attributable to t he undue delay. The charterer would not, of course, be permitted to rescind the charter unless the result of the breach was such as to f rus trate the ent ire object of the contract.

Condition of vessel: (Clause 2). It is usual f or a shipowner (or disponent owner) to conf irm that a vessel is in a suitable condit ion saf ely and pr oper ly t o undertake the cont ractual voyage (line 24).

2 Cargo descri ption and quantit y: (Clause 2). Commodit y and nature of goods to be carried (eg in bulk or bagged); stowage f actor (eg about 55 cubic f eet per t onne); and either minimum / maximum quantit y or

122 Go to Index Page

cargo size margins and in whose option (eg 12,000 tonnes, 5% mor e or less in owner ‟s option).

3. Loading Places: (Clause 2) Names of loading place(s) and/or range (eg

Bordeaux

/

Hamburg

range);

mention

of

number

of

safe

berths/anchorages charterers entit led to use at each place; whether vessel to remain „always af loat ‟ or „saf ely aground‟; maximum/minimum available draf ts.

4. Loading port orders/rotation : (lines 31 to 34). Rot ation can be ver y important, since extr a steaming can be involved, adding to an Owner ‟s expenses, whereas it might be essent ial f or a charterer t o negotiate loading in a particular rotation so that ship availabilit y f its in with cargo availabilit y.

5 & 6 Discharging places and port orders/rotation : (Clause 3). The comments under 3 and 4 above apply.

7Laydays and Cancelling : (Clause 4). The spread o f dat es dur ing which a vessel is to present her self at the f irst (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 .

8. Freight: (Clause 5). The amount and currency of f reight , to whom, where and when payable. The r isk of vessel and/or car go loss on passage in r elation t o f reight should be specif ied – i.e. whether f reight is deemed earned as cargo is loaded ( as in the MULTIFORM) or upon deliver y (eg. As in the CORE 7).

9. Cost of Loading / Discharging: ( Clause 6) which of the part ies to the contract is to appoint and pay f or cargo handling at each port. (See also Clause 6 of the AMW ELSH).

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10. Notice of Readiness / Ti me Count ing: (Clause 7). An important clause in the calculation of Laytime – see Lesson Six).

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11. Loadi ng / Discharging Rates : (Clause 8). The speed at which cargo-handling activities are to be perf ormed.

12. Except ed Peri ods : ( Clause 8) Periods when car go-handling normally does not take place and t heref ore, 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 (eg iron ore) where ther e are no excepted periods and the abbreviated SHINC (Sundays and holidays included) will appear in the negotiat ions.

13. 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 laytim e, as well as any stipulat ions to dispatch (at usually half the rate of demurrage) – see Lesson Six.

14 Notices: (Clause 10). A shipowner/maste r may be requir ed to give comprehensive not ices of a vessel‟s expected arr ival at the f irst (or sole) loading port, f ailing which the shipowner may f ace a penalt y in t he f orm of extra laytime allowed a charterer.

15 Shi p‟s Gear: (Clause 12). A normal claus e in dr y cargo shipping, specif ying that a vessel‟s gear will be maintained to a hig h standard and specif ying what happens in the event of gear breakdown resulting in extra expense.

16. Grab discharge/Stevedore damage : Clauses 14 & 15). Owners normally co nf irm that a vessel is suit able f or grab discharge and f ormalities need to be set out in the event that a vessel suff ers damage during the cargo -handling processes. Frequently, however, masters are required

to

notif y

charterers

or

stevedores

upon

„occurrenc e‟

of

125 Go to Index Page

damage, even though this may not be discovered until overstowed cargo is unloaded at ports of discharge. Thus it is reasonable that the word „occurrence‟ be replaced by „discovery‟.

17. Overtime. (Clause 17) who is to pay f or overtime.

18. Shifting / Seaw orthy trim : (Clauses 18 & 19). W ho is to pay shif ting costs (if any) bet ween berths, also whether time so used is to count as layt ime. The vessel is to be lef t in saf e seaworthy condition bet ween ports. It is important to add in a clause of this natur e that it is up to the Master to decide whether a vessel is in saf e seaworthy tr im or not. Silence on this point may lead to eventual disput e.

19. Cargo Separations and Tall yi ng: (Clauses 13 & 16). W here a vessel is to carr y various parcels of cargo, it ma y not be possible f or all separat ions

bet ween

the

individual

parcels

to

be

„nature‟

–

i.e.

separated by bulkheads and/or, in the case of tweendeckers, by tweendecks. The parties may need to agree bet ween themselves on how parcels loaded in the same compart ment are to be separated – eg by polyethylene sheeting or by tarpaulins – and on who is to supply and pay f or this f acilit y. The tallying (checking) of cargo as it is loaded or discharged is f requently an expensive operation and, if not carried out conscient iously, substantial cargo claim s can ar ise f or alleged short deliver y bad condition, etc. It is essent ial that some provision as to who is responsible at least f or payment of tally clerks be entered in a charterpart y covering the loading of bagged or sim ilar cargo.

20. 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.

21. Port Agents: ( Clause 21). In any charterpart y it is advi sable that ref erence be made as to which of the parties is responsible f or the

126 Go to Index Page

selection of an ag ent. It is important to remember that the agent remains the ser vant of the shipowner, and the shipowner remains responsible f or paying the port costs and the a gency f ee. Nevertheless, the appointment of an eff icient agent is also important to a character, who will need to f eel secure in t he knowledge that proper liaison is being

maintained

bet ween the

agent

and,

say,

a carg o shipper.

Consequently it is of ten the case that charterers specif ically negot iate that they have the right to nominat e the port agents that will be appointed by the shipowner

22. Bills of Lading: (Clauses 22 & 4). The f ull import of these provisions will be better underst ood af ter reading Les son Eight. For the present it is important to make sure that similar provisions should be contained in all voyage charterparties.

23. Lighteni ng: (Clause 23). W here cargo lightening is necessar y, a comprehensive clause covering all f acts of this sometimes complex operat ion should be negotiated. The MULTIFORM and AMW ELSH clauses bet ween them cover sever al of these f acts but not nearly all of them. (You might like to think about what else is necessar y t o mention bef ore reaching the end of this lesson).

24. General

Average: (Clause 26).

All

clauses specif ying

where

General Average ( if any) is to be adjusted (eg „in London‟) and/or paid, irrespective of the ports of call involved and the laws r elating to GA threat – eg „as per York/Ant werp Rules 1974‟. Earlier c harterparties may r ef er in their printed text to York/Ant werp Rules 1950, which should be amended dur ing negotiation to r ef lect the latest

Rules. It is

sometimes negotiated also that where a cargo involves voyages to/f rom the United States or United States pr incipals, the New Jason Clause be incorporated into t he contract, dealing with General Aver age Law and practice f or adjustments made in the United Stats (see Clause 22 of the AMW ELSH).

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25. Strikes (Clause 27). Both part ies to a charterparty have risks a nd liabilit ies in the event of a strike. Var ious clauses exist, some in f ar greater detail t han in others. The MULTIFORM r epeats the Str ike Clause f rom the GENCON charterpart y, notor ious f or its conf using language and ver y much in owner ‟s f avour. Most str i ke clauses are in f act biased in f avour of charerers, placing the risk of strikes on owners – eg compare the sweeping provisions of the AMW ELSH Clause 4.

26. Exceptions: (Caluse 28). The rights of contacting parties to cancel the charterparty in case of events making its performance virtually impossible – eg Force Majeure or Acts of God.

27. Commission: ( Clause 31). Specif ies the amount and to whom commissions

and

brokerages

commissions/ brokerages

are

are payable

payable, on

usually

freight,

adding

that

de adf reight

and

demurrage.

28. Prot ecting Clauses : ( Clauses 32 & 33). A set of clauses commonl y included in the printed f rom of a charterparty or as additional clauses. The New Jason alr eady ment ioned is one such clause that is not included in the MULTIFORM. However, others have their roles to play, which are : -

(i) P & I Bunkering Clause : Sets out owners‟ rights to deviate f or bunkers during the contractual voyage.

(ii) Clause Paramount : incorpor ates a set of rules into the contract (and into bills of l ading issued under t he contract), which govern the rights and responsibilit ies of the carrier. Appropriat e amendm ent should be made to the older f orms to ensure that the latest rules apply, the MULTIFORM updating the long established Hague Rules, to incorp orat e the ague/Visby Rules of 1968. Other charterparties involving voyages to/f rom America and/or Canada should utilize either t he USA or the Canadian Clauses Paramount (see the AMW ELSH, Clause 22).

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(iii) Both to Blame Collision : Covers an owner‟s r ights i n respect of American Law in case of collision at sea.

29 Lien and Cesser : (Clause 24). Most charterpart ies contain a cesser and lien clause and the MULTIFORM and AMW ELSH (Clause 26) are no except ions.

30. Ice: (Clause 33). Depending on the trade involved, it may not be necessar y f or an ice clause to be included in a charterpart y, but wher e one is required, great care should be taken over its wording.

The AMW ELSH is silent on this aspect of trading, whilst the MULTIFORM uses t he BI MCO -recommended GENCON ICE CLAUSE, which is widely, r eproduced in other charterpart ies f orms, although some omit the ref erence to spr ing (sub- 9 clause d). 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.

31.War Risks : (Clause 33). W ar risks clauses should be examined in detail as some are unf air to shipowners, others to charterers and/or patent ly unsuitable f or the purpose intended. For example, the Chamber of Shipping W ar Risk Clauses 1 and 2 are some f if ty years old, out of date, and silent on several important issues, one being cancellation rights in the case of an out break of war bef ore or af ter a vessel‟s voyage to her loading port, or af ter arrival. Yet still the Chamber of Shipping Clauses are widely utilized – see, f or exam ple, the AMW ELSH Clause 24.

A W ar Risk Clause should pr ovide a shipowner with the r ight to ref use to allow his vessel and her crew t o enter or to remain in an area which has become dangerous due to war like act ivit y. To accomplish this objective, MULTIFORM uses the VOYW AR 1950 Clause, itself f orty

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years old and although better suited to current nee ds, biased in owner‟s f avour and strongly recommended by BI MCO f or inclusion in all voyage charterpart ies.

32. Signature No charterpart y is com plete without the signatures of or on behalf of the parties concerned.

Voyage Charterparties for Specific Trades

A quick glance down the

list of charterparties in Appendix 4 : 1 will show var ious voyage charterpart ies under the headings, grain, coal, f ertilizers, et c. As well as containing basic clauses as detailed in the above „elements‟ sect ion, each of these „tra de‟ charterpart ies has specif ic clauses t hat are of particular import f or the commodit y involved.

Grain: Appendix 4.7 contains the important NO RGRAI N char terparty, as revised in 1989. Students should look particular ly at the f ollowing clauses that ref er sp ecif ically to grain car riage related problems: -

Clause

12 – Self -trimming / W ing tanks 14 – Cargo separat ions 15 – Securing of Cargo / Bag bleeding 16 – Cargo f umigation 18 (e) – Cargo compartment in inspection.

It is usual in grain trading that f ull f re ight (or at least a substant ial percentage ) is paid bef ore release of the bill(s) of lading by the owners/master to the shippers. The responsibilit y of paying the cost of loading can var y, being negotiable as either f or owner ‟s account and ref erred to as „ gross load‟ or f or charterer‟s (shipper ‟s) account either ref erred to as „f ree load‟ (f ree of expense to the vessel) or „nett terms‟. The NORGRAIN clauses 10 & 11 leave it to the parties to decide and to

130 Go to Index Page

record the result of their negotiat ions.

Coal: The AMW ELSH in Appendix 4:3 is now the wor ld‟s major coal charterpart y deaing not only with cargoes of coal f rom America (as the name implies) but with coal cargoes f rom elsewher e – eg Australia. The latest edit ion was revised in 1979 f rom the original version which, as the f ull name tells us, was an adaptat ion of the W elsh Coal Charter 1896 and much of the wording is over a centur y old. Here loading costs are divided. Charter ers pay wharf age dues, leaving owner s to pay not only port charges on the vessel, incld uign „pilotages, agency f ees and consulages‟, but also loading, dumping and trimming costs (see Clause 6). Dumping is specif ic to the pract ice in America of „dumping‟ coal f rom railway wagons at the loading port. Thus this expense must be included in any voyage estim ates conducted by t he shipowners. Clause 4 should be read part icular ly caref ully, especially the ref erence ( in lines 32 & 33) to „causes beyond charterers‟ control‟. This clause was t ested under English Law dur ing the 1980‟s in the case of the „ MOZART‟ and it was held that t ime inter rupting loading because of breakdowns of shore machiner y „beyond Charterers‟ control‟ – i.e. not operated by Charterers – will not count as layt ime. Thus the risk of breakdown of sore equipment is nearly always at O wn ers‟ r isk.

Ore: Appendix 4. 8 contains the O REVOY 1980 charter part y. There ar e var ious ore charters and we could have selected the long -established MEDITERRANEAN ORE – t he C ORE 7 c/p – but decided against t his because of the old -fashioned language employe d and the ref erences to obsolete ports and currency which, in any case, are nowadays widely deleted, so much so that t he C ORE 7 is litt le m ore than a widely deleted main f orm with var ious individually designed rider s attached. However, some ore charters ( including the C ORE 7) have the same penalizing provisions as contained in Clause 4 of the AMW ELSH coal charterpart y (see above) also, f or relatively short duration deepsea voyages, it is of ten the case t hat f reight is paid only af ter deliver y of the cargo at the discharge port. Ore is usually lodaded in wettened

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condition, and weight loss dur ing the voyage as moisture evapor ates and drains may be considerable. Consequently, although the OREVOY is not ver y clear on this point, it is normally t he case that c harterers negotiate the right t o pay f reight on either (1) the bill of lading quantity established at the loading port, (2) on the out -turn weight ascertained at the port of discharge, or (3) basis „less half of one percent of the bill of lading weight, in lieu of weighing‟, f requently the latter.

Fertilisers: There are var ious f ertilizer charterparty f orms. The one selected here in Appendix 4:9 is the AFRI CANPHOS 1950, widely utilized in the major trade involved around the export of bulk phosphate rock f rom W est Af rica (eg Kpeme) right round to North Af rica (eg Sf ax).

A peculiarity of this trade is that loading costs are frequently for the shipowner‟s account (as per Clause 7) and loaded at a „scale‟ rate established by the cargo quantity (see the scale ins erted at the side of the charterparty). This is described as „Scale Gross Load‟ and costs are currently around US$ 2.00 per tonne loaded plus a percentage addition for value added tax. Occassionally the agreement may also allow for gross discharge. There is tradit ional „turn time‟ applicable at the loading post, as expressed in Clause 4 of the char terparty, and sometimes this applies also at the discharging port (se Clause 18).

Other Commodities: Other commodit ies have specialized clause in their charterpar t ies – eg timber – and those students likely to be engaged

in

t hose

trades

should

f amiliar ize

themselves

with

an y

peculiarit ies involved. Factors specif ic to var ious trades will be f ound in „CARGOES‟ as com modit ies are encountered upon reading the book. However, students are advised to take seriously the suggestion of starting their own charterpart y „librar y‟ adding to this as and when t hey come across new f orms, which should be read through both f or the sake of interest and to gain f urther knowledge.

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Self Assessment Questions

1.

W ho pays f or the cost of loading when „gross terms‟ apply?

2.

W hat charterparty f orm would you expect to use f or a cargo of coal f orm Australia? Auscoal

3.

Name

f our

bodies

active

in

draf ting

charterpart y

f orms.

BI MCO/ASBA/FOW OSBA/ NYPE/ICC.

4.

W hat eff ect does an Ice Clause have?

The

Time

Charter

Part

As

we

have

seen

f rom

Lesson

Three,

timecharter ing ca be sub -divided bet ween period t imecharter s – perhaps involving sever al years – and trip t imecharters, f or one or several trips. There are no charterpart y f orms designed pur ely f or trip charters, an employm ent techniq ue that has become particularly popular dur ing recent years, trip charters being negotiated on standar d timecharter f orms and adapted slightly where appropriat e. Alt hough considerabl y f ewer in number than the wide choice available f or voyage chartering, there is an adequat e number of dry -car go timecharter f orms f or use in the industr y, although by f ar the largest number of deep -sea dry- cargo trips and per iods are f ixed on t he basis of the New York Produce Exchange Charterparty, f irst drawn up as long ago as 1913. It has been updated since, most notably in 1981, when it was renamed ASBATI ME. Nonet heless, by that time the 1946 ver sion had become widely used and, to the basic p r inted text, many char terers had added over the year s numerous side - clauses. It transpired that f ew charterers wer e prepared to abandon t heir NYPE 1946 + side clauses charterpart y and so, despite the

availabilit y

in

the

ASBATIME

of

a

neater,

more

up

to

dat e

charterpart y incorporating many of the previous NYPE clauses, and standard rider addit ions, the „market‟ remains wedded to the NYPE 1946 c/p.

Consequent ly,

although f or

convenience

we

will

examine the

elements of a time charterpart y based on the ASBATI ME ( Appendix 4 :

133 Go to Index Page

4), students will also f ind the NYPE f orm enclosed in the appendices (Appendix 4: 5), since it is essential that shipbrokers intending to work in the deep-sea side of the dry-cargo industry, have a working knowledge of that document in partic ular.

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W hilst the f ollowing list is by no means exhaustive, it provides some idea of the normal clauses required in a voyage chart erpart y f or dry-cargo vessels : -

List of Time Chart erpart y Clauses 1.

Preamble

17.

Logbooks

2.

Vessel Descr ipt ion

18.

Spercarg o

3.

Durat ion of Period/ Descr ipt ion of Trip(s)

19.

Pollution

4.

Trading intent ion/limits

20

Salvage

5.

Cargo intention/exclusions

21.

Laying –up

6.

Vessel Condit ion

22.

Arbitrat ion

7.

Owners‟ responsibilit ies

23.

Lien

8.

Charterers‟ responsibilit ies

24.

Assignment

9.

Deliver y and Redelivery

25.

Except ions

10. Bunkers

26.

Requisit ioning

11. Hire

27.

Bills of Lading

12. Off -hire

28.

Stevedoring Damage

13. Vessel Perf ormance

29.

Commissions

14. Vessel Maintenance

30.

Protective Clauses

15. Cargo Claims

31.

Signature

16. Master/Off icers 1.

Preamble: Contrar y to the MULTIFORM and the AMW ELSH, the

preamble of the ASBATI ME is lengthy, taking up most of the f irst page of the charterpart y, and cover ing a wide range of subject s wit hin its text, not least the pla ce where the contract is made, the date of the charterpart y and the names and domiciles of the contracting parties.

2.

Vessel Description: (Preamble lines 5/23). Depending upon the

complexit y of the int ended trade, the descript ion of the vessel may be more or less as f or voyage charterparties, with the important addition of speeds and bunker consumptions. For the sake of clar it y, it is also advisable to include clarif icat ion of the term „good weather conditions‟

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(in line 19), usually wit h ref erence to weath er and sea condit ions (eg Beauf ort W ind Scale and, perhaps Douglas Sea State – see Lesson Nine)

against

which

f actors

a

vessel‟s

perf ormance

should

be

measured. Not f orgetting the vessel‟s position and readiness (line 23) which is as important to a time ch arterer as to a voyage charterer.

3.

Duration

of

Peri od/Description

of

Trip( s ):

(Preamble

lines

27/30). The duration of a period time charter should be entered, together with a mar gin either side of the f ormal per iod – eg ‟15 days more or less, at chartere rs‟ option‟. The parties can agree an exact redeliver y date, but in practice this is difficult to comply wit h and, in the event of legal disputes, most courts would imply a reasonable margin.

For trip-charters designed f or specif ic voyages, it is common pl ace to insert an approximation of the voyage durat ion – eg ‟45 days‟ – although this is normally qualif ied by the addition of the words „all going well‟ or „about‟ or „without guarantee‟. (Here a word of warning f or shipowners and their brokers. Legally „a bout‟ will be given a r easonable implication, An act ual durat ion of „50 days‟, f or example, could be interpr eted as „about 45 days‟. However, „without guarant ee‟ means exactly means. In eff ect redeliver y after only ‟10 days‟ is legall y satisf actor y).

4.

Tr ading Intentions/ Limits: (Preamble lines 57/62) – Clause 6. The

areas of the world in which the vessel is to b employed should be entered – eg „worldwide, but always wi thin Institut e W arranty Limits‟ (see Lesson Nine) – as well as listing those countr ies a nd parts of the world specif ically excluded f rom the permissible trading area. W here there is insuf f icient space to t ype in t he f ull agreed data, it may be necessar y to include same in a rider clause, using blank lines in this part of the charterparty to r ef er the reader to the relevant r ider clause. This also becomes a logical point in some charterpart ies to include lim itation to the effect that a vessel must trade always between „saf e berths and ports‟, usually „always af loat ‟.

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5.

Cargo Intention/ exclusions: (Preamble lines 45/56) – Clause 12).

Include details of cargoes which can and those which cannot be carried (see ref erence to cargo exclusions in Lesson T wo). Trip t ime charters of ten specif y the act ual cargo to be carried although, if this is only an „intent ion‟, a cargo exclusions clause must still be included.

6.

Vessel Condition: ( Preamble – lines 8/9 and lines 41/454). Just as

f or voyage charterparties, an undertaking by the vessel‟s owner s that the vessel is in good condition.

7.

Ow ner‟s Responsib ilities: (Clause 1) Lists what an owner is to

provide.

8.

Charterer‟s responsibilities: (Clause 2) Lists what a charterer is

to provide

9.

Deli very and redeli very: (Preamble lines 34/41, Clauses 28 and

34). Places of deliver y/r edeliver y, laydays/canceling, notices to be given by owners prior to deliver y and by charterer pr ior to redeliver y.

10. Bunkers: (Clause 3). It is common practice f or time charter ers to take over and pay t he owner f or bunkers remaining on boar d a vessel upon deliver y on to time charte r, and f or owners to act similar ly upon deliver y, the quant ities of f uel, diesel and/or gas oil, and t he prices per tonne of each, being negotiated when f ixing. It is of ten the case that about the same quantit ies and pr ices prevail at both ends of the timecharter, althoug h occasionally one side or the other benef its by shrewd negot iation, and obtains eit her inexpensive bunkers or sells at a good prof it with some trip charters of short durat ion, however, this system of taking over and paying f or bunkers rema ining on board ma y prove

unnecessarily

cumbersome,

and

it

may

be

arranged

that

charterers supply suff icient bunkers f or the trip at their own expense, or that they pay an owner f or only the estimated quant it y of bunkers required f or the trip out of the tot al remaining on board. Balances in one

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side‟s f avour or the other ar e sett led upon completion of the time charter in the f inancial reconciliat ion.

The grade and qualit y of bunkers supplied to a vessel has developed dur ing the 1980‟s into a subject of cons iderable importance. The wording of the printed ASBATIEM does not ref lect this importance, however, restr icting itself to just a brief ref erence in the pr eamble, lines 15/18. Almost certainly an additional r ider clause will be required, which contains a f u ll specif ication of the qualit y of bunkers that must be supplied to a t ime chartered vessel.

11. Hire: (Clauses 4, 5 and 29). Amount, when, were and to whom hire is payable, and arrangements f or other payments, less deductions f or items such as port expen ses and cash f or master. Agreement f or procedure in case of late payment of hir e. (The subject of time charter hire is dealt with at length in Lesson Five).

12. Off-Hire: (Clause 15). Provisions leading to of f -hire situat ions – eg poor perf ormance; strike of crew; dr ydocking; etc. – and appropr iate deduct ions f rom hire payments. (See also Lesson Five).

13. Vessel Performance: There is no especial st ipulat ion about vessel perf ormance in the ASBATI ME which, in common wit h most dry -cargo carters penalizes thro ugh its off hire provisions (see Clause 15) f or poor perf ormance but, in contrast to tanker time charterparties, does not reward dr y-carg o owners in the event that their vessel perf ormance exceeds the contractual speed and/or consumes less bunkers than specif ied. There is a valid case f or dry -cargo timecharterer s to cop y tanker traditions and to enter in the chart erpart y a range of speeds and consumpt ions, say f rom 8 knots up to 15 knots, in both laden and ballast condit ions. Ideally a master should be give n specif ic instructions at

the

commencement

perf ormance

of

requirements,

each and

voyage f ailur e

to

leg

as

perf orm

to

a

charterer ‟s

as per

charter

commitments should be penalized whereas extra perf ormance should be

138 Go to Index Page

rewarded.

14. Vessel Maintenance: (Clauses 20 & 21). The ASBATI ME restricts its comments to drydocking and to ship‟s gear. Yet there might well be additional rider clauses depending on the complexit y of the ship t ype and/or trade involved – eg a ref er or a logger. For trip charters it is customar y to delete the drydocking clause and replace it by a simple statement such as „no dr ydocking during this t ime charter, except in cases of emergency‟.

15. Cargo Claims : For their mutual benef it, it is important that time charterers

and

owners

of

time

char tered

vessels

reach

an

understanding on how cargo claims (if any) will be handled, which of the t wo is to handle them, and under what authorit y. Clause 30 of the ASBATI ME sets out a ver y brief division of responsibilit y but many time charterpart ies draf t a rider clause incor porating int o the chart erpart y the detailed

NEW

YORK

PRODUCE

EXCHANGE

INTER -CLUB

AGREEMENT. The latest revision being dated 1984. The pr ovisions of this document will be considered in reasonable detail in Lesson Eight and the Agreement i tself will be f ound under Appendix 8 : 1 to that Lesson.

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 owner‟s legal servant he must act under the orders of the charterers as f ar 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 charter ers rights should they f eel t hat the Master and/or his off icers are not car rying out their responsibilities towards the charterers in a reasonable manner.

17. Logbooks: (Clause 11). Another protect ion clause f or charterer‟s interests. In f act, it is f requently the case that charterers add a c lause, or wording to this clause, that they have the r ight to check a vessel‟s

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perf ormance by ref erence to a specialized weather -routing company – eg Ocean routes – and in the event that the logbooks and t he independent reports disagree, the independent re ports take procedure over the logbooks. This is important in respect of off -hire claims and vessel‟s perf ormance.

18. Supercargo/Victualling: (Clause 10). Spells out charterer‟s right to appoint a super cargo and the costs of exercising this right with regard to meals and accommodat ion. A r ight not exercised ver y f requently, but an invaluable means not only of watching over a time chartered ship‟s per f ormance, but of providing training to a charterer ‟s personnel.

The second part of the clause details with me als which are to be provided by t he owners, and the cost of these meals.

19. Pollution: (Clause 38). Many stat es are becoming ext remely conscious of pollut ion of their wat er ways and coast lines and merchant ship owners must ensure that their vessels comply with a host a international and nat ional legislation in connect ion with this subject. Not only does this aff ect tankers. The cost of cleaning up and f ines levied f ollowing pollut ion can be considerable, even if caused by, say, a dr y cargo ship‟s rupt ured b unker tanks. Contracts should theref ore specif y the rights and responsibilities of the parties, as well as listing the certif icates that the contracted vessel is expected to carr y.

P & I Clubs pr ovide insurance cover for entered vessels against oil spillages and result ing f ines and clean -up expenses. Certain states, however, may insist that owners of all vessels calling at their ports (dr y cargo

as

well

as

tanker

ships)

pr ovide

evidence

of

f inancial

responsibilit y f or pollut ion liabilit y in case of oi l spillage – such evidence

being

usually

in

the

f orm

of

a

certif icate

of

f inancial

responsibilit y. Potential amounts demanded as immense sums of capital against relat ively sm all r isks of pollut ion. As a result, P & I Clubs do not

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encour age states to insist on t heir own, individual demands f or secur it y, instead providing dry -cargo owners with just the United Stat es Federal W ater Pollution Control Act Cert if icate. Further P & I Club assistance with

cert if ication

to

comply

wit h

any

requirements

of

individual

governments is not possible. Consequently, owners should not agree time charterparty clauses that provide f or same.

20. Sal vage. (Clause 19). It seems f air that expenses and rewards in cases of salvage should be shar ed, and t his is normal pract ice.

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21. Laying- up: (Clause 37). Unlike tanker time charterparties it is onl y rarely that dr y-cargo owners and t ime charterers consider the risks of a vessel laying -up through lack of employment. For a trip charter this is, of course, not necessar y, but f or lengthy pe riod employment, this attitude should be caref ully reconsider ed. W hat most dry -cargo time charterpart ies do include, however, is r ef erence to what happens if a vessel is detained in port f or periods in excess of 30 days.

22. Arbitration: ( Clause 17). An es sential part of any contract. The ASBATI ME specif ies New York, since the charterparty is draf ted and published by a body resident in New York. Frequently, however, this clause is either deleted and r eplaced by a r ider arbitrat ion clause specif ying some oth er venue, or the r ef erence 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 l ines 31/33). Def ines a charterer‟s right to sub-let the vessel to other charterers.

25. Exceptions: (Clause 16). Similar to the voyage charter clause.

26. Requisitioning: (Clause 33). Arrangements in the event a vessel be requisitioned by t he government of her f lag state.

27. Bills of Lading: (Clause 8). Specif ies t he manner in which bills of lading are to be dr awn up, the signing of same, and protection f or an owner in case of paper inconsistencies.

28. Stevedore Damage : (Clause 35). Provisions f or notif i cation of stevedor e damages and repairs.

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29. Commissions: (Clauses 26 & 27). Specif ies amount and to whom commissions and br okerages are payable.

30. Protecti ve Clauses: You will recognise most of the prot ective clauses f rom the above comments under the el emtns of a voyage charterpart y,

including,

Clauses

Par amount;

New

Both

to

Blame

Collision; and the New Jason. It is important, however, that only W ar Clauses designed f or time charterpar ties are used

– not voyage

clauses. I n case of a major war bet ween the so-called „super -powers‟, or involving nations connected in some way with the charterpart y, the contract may become null and void. Thus is it common pract ice to incorporate a clause to this ef f ect, listing the nations involved and spelling out t he r ights and r emedies of the part ies in the event of such war-like activit ies.

There is also protect ion f or an owner (see the last paragraph of Clause 16)

f or

the

vessel

to

have

various

„libeties‟ .

As

in

the

voyage

charterpart y counter part, the object of a time cha rter ice clause should be to prevent a Master being lef t wit h no alternative but to pr oceed to a contractual

destinat ion

irrespective

of

ice

conditions.

Clause

24

achieves this to a certain degree.

31. Signature: Not to be f orgotten

The Bareboat Charterpa rt y Bar eboat chartering, or „chartering by demise‟ as lawyers love to call it, is the contracting f or the lease of a vessel, whereby the owner charters away the ship to another party who, in turn, assumes m ore the role of owner than charterer, the vessel coming under the complete control of the bareboat charterer, who has to supply ever ything including Mast er, of f icer and cr ew. The true owner assigns to the bareboat charter er all r esponsibilit y f or operating the vessel, and thus entitlement to any prof its ( or losses!) the ship may make, in return f or an agreed and regular paym ent of hire. Naturally, such a method of period employment is designed f or years rather than

143 Go to Index Page

f or months, and bareboat ing ser ves t he adm irable purpose of allowing persons who ar e not exp erienced in shipping to invest in a ship without the responsibilit y of organizing its day to day aff airs, at the same time permitting those with exper ience and an entrepreneurial spir it to assume the r ole of an owner without the necessit y of raising f inanc e to purchase a vessel.

BIMCO designed two bareboat charterparties in the 1970‟s to meet

increased

demand

f or

suitably

wor ded

contract

f orms;

one

intended f or the bareboat ing of exist ing vessels ( with or without mortgages) – the BARECON A – the other f or newbuildings f inanced by a mortgage – the BARECON B. Recently ref lecting changes in bareboat practice with particular regard to „f lagging out‟ and t he registration of mortgages under „of f -shore‟ ship registr ies, a BI MCO documentary sub committee desig ned a new bareboat charterpart y, incorporating the updated BARECON A and BARECON B provisions into one f orm – the BARECON 89 – together with optional sections.

Although a system of vessel employment of which it is important to have a general knowledge, it is not essent ial in a Course of this nature f or students t o have as detailed an under standing as f or voyage and t ime charter ing. Consequent ly, the BARECON 89 charterpart y text is

included

under

Appendix 4 .6

to

this

lesson,

and

whilst

it

is

recommended that t he largely self-explanatory clauses be studied, there is not the need for analysis of the elements of a bareboat charterparty in the same way as for voyage and time charterparties described above. However, at this stage the student‟s attention is drawn in particular to Clauses 6, 7 8 and 9 of the BARECON 89 in preparation for tackling the following self assessment questions.

Self Assessment Questions

1.

W hat are the essent ial dif f erences bet ween deliver y and redeliver y sur veys f or Time Charters and Ba reboat Charters?

144 Go to Index Page

2.

W hat was the previous name f or the ASBATIME charter part y?

3.

To whom is the ship‟s Master responsible under a Time Chart er?

4.

W hat name do lawyers use to descr ibe bareboat chartering?).

Customary Terminology and Abbeviations Commercial shipping is awash with terms and abbr eviations. On occasions, the speed of negotiat ions is such that much labor ious eff ort can be saved by utilizing such a system – but only if both sides have the same under standing of the term of abbreviation used . Some ter ms have alr eady been used and explained in the Lesson to date. Other s that are usef ully remembered are :-

APS: Ari val Pilot Station : Signif ies a location, on arrival at which a vessel will deliver on to a time charter. Of advant age to a shipowner when compared with TIP, which see. BB: Below Bridges: Indicates agreement f or a vessel to proceed to that section of a port or a river/canal t hat is „below br idges‟ in other words below the place(s) where height restrictions would prevent a vessel navigating b eneath certain overhead obstruct ions. eg: „Vessel to discharge at one saf e berth River Thames, below bridges‟.

Ballast Bonus : A Lumpsum amount paid to a shipowner, usually as a reward (a bonus) for posit ioning his vessel at a certain place as a prerequisite f or her deliver y on to time charter – eg. f or a ship exMediterranean Sea, „deliver y United St ates Gulf f or a time charter trip to the Far Est at US$5,000 daily, plus a ballast bonus of US$100,000‟. Occasionally paid as a reward f or accept ing redeliver y f rom time charter in an unf avourable posit ion.

145 Go to Index Page

A Ballast Bonus may be nett (i.e. f ree of address comm issions and brokerages) or gross (i.e . subject to deduction of brokerage and address commission). . BBB: Before Breaki ng Bul k : Freight not to be paid un til af ter arrival at the discharge port but bef ore commencement of unloading – i.e. : bef ore breaking bulk. (See Chapter Six).

BW AD Brackish Water Arri val Draft : Ref ers to either available water at a port or, more usually, to a ship‟s maximum draf t on arri val at a port on the basis of brackish water – a mixture of saltwater and freshwater, such as would be experienced in an esturial port – eg : berths alongside the River Cycle

C&F Cost and Frei ght

Goods are to be sold on the basis that the

seller arranges their seabor ne transportat ion and deliver to the buyer.

CD Customar y Despatch : See CQD

Chart Dat um : W ater level calculated on t he lowest tide that can conceivably occur, and used as a basis f or is known as the Lowest Astronom ic Tide (LAT), and presupposes that, at the ver y worst, there would always be that depth of available water at that particular spot.

CHOPO T Chart erer‟ s Option : May r ef er, f or example number of ports – eg „up to three ports Taiwan, in charterer‟s opt ion‟. Or perhaps relative to a cargo size mar gin – eg : ‟10,000 tonnes, 5 per cent m ore or less chopt. (See MOLCO).

CIF Cost, Insurance and Freight : As f or C & F, except the seller will also insure the goods.

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CO A Contract of Af ffreightment : See Lesson Three.

CQP Customary Quick Despatch: The vessel is to be loaded or discharged as quickly as is customary and possible.

CVS Consecuti ve Voyages :A ser ies of Consecut ive voyag es, usually laden f rom Port A to Port B, returning in ballast condition, and so on until complet ion of f inal cargo discharge .

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DFD Demurrage/Free Despatch : An expression conf irming that a shipowner may be entitled to demurrage f or port delay to his vessel, but that no dispatch is applicable in case layt ime is saved – eg : „$2000 Demurrage/Free Despatch‟. Common in short -sea and ot her trades where turn-r ound in port is speedy; f or exam ple, ro -ro vessels.

DHD Demurrage/ Half Despatch : ore f requently encount ered than DFD in deep-sea trades, where dispatch earned is agreed to be at half the daily rate of demurrage.

DOP Dropping Out w ard Pilot : Signif ies a point of delivery onto or redeliver y off time charter, f ollowing a vessel‟s sailing f rom a port.

DWAT Deadweight All Told : The total deadweight of a vessel at any time, or estimated against a particular draft. Includes cargo, bunker s, constant weights, etc.

DWCC Deadw eight Cargo Capacit y: An estimate of the act ual cargo intake against a particular draf t, allowing f or bunkers, constant weights, etc.

EIU Even if Used :Signif ies that t ime spent on cargo working in excepted per iods – eg : during a holiday – will not count as layt ime, even if used.

ETA Estimated or Expected Time of Arrival

ETC Estimated or Expected Time of Departure

ETS Estimated or Expected Time of Sailing

F AC Fast

As

Can : Another

layt ime term, under

which the ship

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concern ed is to load or discharge itself (eg: f or a „self -discharger‟) as f ast as it can manage.

F AS Free Al ongside or Free Al ongisde Ship : Goods to be brought alongside the carr ying vessel at the por t of loading, f ree of expense to the carrier.

FCL Free Container Load

FIO Free In and Out : Cargo to be loaded and discharged f ree of expense to the carr ier.

FIOS Free In, Out and Stow ed : Car go to be loaded, stowed and discharged f ree of expense to the carr ier – f or bulk commodities. FIOST Free In, Out, Stow ed and Trimmed: Certain Commodit ies require both stowing and trimming – e g scrap in bulk. This term ensures that none of the loading, discharging stowing or trimming expenses will be f or the account of the carrier. For sim ilar terms f or some goods, trader s must be even more explicit. For example, with motor cars, equivalent terms would be used so as to read: - „f ree in, out, lashed, secured and unlashed‟. FIOST Free In, Out and Spout Trimmed . Free-running cargo – eg. : bulk grains – to be loaded, spout -trimmed and discharged, f ree of expense to the carr ier.‟

FHEX Fridays and Holidays Excepted : Laytim e will not court during Fridays and Holidays.

FHINCFridays and Holidays Excepted : Laytime will not court dur ing Fridays and Holidays.

FHINC Fridays and Holidays Included: Opposite to FHEX. Laytime counts

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during Fridays and Holidays, which are to be considered as working days.

FOB Free on Board: Cargo to be deliver ed on board f ree of cost to either the buyer or carrier.

FOQ Free on Qua y: Cargo to be deliver ed on the quay, f ree of expense to the buyer or to the carrier.

FOW Free on Wharf : Sim ilar to FOQ or Free Open Water Ref ers to the earliest possible resumption of trade to an ice -bound port or area – eg : to load FOW ! Churchill, Hudson Bay.

FP Free of Pratique : See Lesson Six

FWD Fresh Wat er Arri val Draft : See BW AD. Relevant to trading in f reshwater ar eas, such as prevails in the Panama Canal.

Gross Terms: Under which the carrier has to arrange and pay f or cargo-handling, although layt ime will pr obably apply. The opposite t o Net Terms. H AT Hi ghest Astronomic Ti de : The opposite t o Lowest Astronom ic Tide – See Chart Datum.

HWOST High Water on Ordinary Spring Ti des : The opposite to Low W ate on Ordianr y Spring Tides – which see.

IWL Institute Warrant y Limits : Geographical limita t ions to permitted trading areas, drawn up and imposed by under wr iters, and commonly applied thr oughout the marit ime wor ld. O wners wishing their ship to proceed outside these limits (e g : to the Great Lakes at any t ime of the year ; or to the Northern Bal tic Sea in W inter) must usually obtain permission f rom their under writer s to „hold covered‟ their vessel against payment of an additional premium.

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L AT Low est Astronomic Ti de : See Chart Datum

L/C Letter of Credit : See Lesson Three or Laydays/ Cancelling : A spread

of

dates

–

eg:

„Laydays

1st

September/Cancelling

15 t h

September‟ bet ween which dates a vessel his to pr esent f or loading. Too early and she will probably have t o wait. Too late and she risks being cancelled by t he charterers.

LCL Less than Full Con tai ner Load

Liner Gross Terms (Has La y Time)

TermsThe responsibilit y and cost of loading, carr ying and discharging cargo is that of the carrier, f rom the moment the goods are placed alongside the carr ying vessel in readiness f or loading, until discharged alongside at their destintat ion. Time spent cargo -handling is also at the carrier ‟s risk.

LO/LO Lift on/Lift off : A term descr ibing the method of loading and discharging cargo by ship or sore gear.

LT Long Ton: A ton of 2240 pounds, equivalent to 1.016 met r ic tones.

EWOST Low Water on Ordinary Spring Tides : A measure of water depth at the low matter mark on Ordinar y (ie. : not except ional) Spring tides – see Chart Datum and MLW S.

MHWS Mean Hi gh Water Spring

MLWN Mean Low Water Spring : Average depth of wa ter available at the times of low and of high tides during periods of Spring tides. Some charts are calculat ed against these „averages‟ rat her than based on

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chart datum.

MHWN Mean Hi gh Water Neaps

MLWN Mean Low Water Neaps Average depth of water available at t he times of low and high tides during period of Neap Tides.

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Min/Max Minimum/Maximum : Ref ers to a f ixed cargo size – e.g ‟10,000 tonnes min/max‟.

MOLMore or less : Ref ers to a cargo size opt ion – say, 10, 000 tonnes, 5 per cent more or less‟ – usually clar if ying whose option to select the f inal cargo size

MOLCO More or Less Charterer‟s Opti on ,

MOLCO More or Less Ow ner‟s Option

MT Metric Tonne : A tonne of 2,204 pounds or 1, 000 kilograms, equivalent to 0.9842 long tons.

N AABS A Not Alw ays Afl oat But Saf ely Aground: Most owners will agree only that their (especially deep - sea vessels) proceed only to ports where there is suff icient water to remain always af loat, so as to avoid the risk of hull damage. There are areas and ports, however, where water dept h is restricted but, the bottom being sof t mud, it is customar y f or ships to saf ely lie on the bottom at certain st ates of the tide. River Plate. In such a case, owners will probably agree to proceed NAABSA.

Neap Tides The opposite to Spring Tides ( which see) . Neap Tides occur when t idal range is at its lowest – in other words during periods of relat ively low high tides, and of relatively high low t ides. A vessel that is prevented f rom berthing of f rom sailing with a f ull cargo or, in deed, is trapped in a ber t h by the onset of neap t ides, is said to have been „neaped‟.

Nett Terms Opposit e

to

Gross

Terms.

Cargo -handling

is

the

responsibilit y and f or the account of the charterer or the carg o seller. NOR Notice of Readiness : See Lesson Six.

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PPT Prompt: Indicates that a cargo or a ship is available prompt ly.

ROB Remaining on Board : Ref ers to cargo, bunkers or f reshwater remaining on boad a sip at any particular time.

RO/RO Roll On/Rol Off : A term indicating that cargo is to be driven on at the loading port and dr iven of f upon discharge – eg : a car carrier. Also used to describe a t ype of vessel specializing in such trades (See Lesson One)

S A Safe Anchorage

SB Safe Bert h

SHEX Sunda ys and Holidays Excepted : Means that layt im e will not count dur ing Sundays or Holid ays.

SHINC Sundays and Holida ys Included : Opposite to SHEX. Laytim e counts dur ing Sundays and Holidays, which are considered t o be normal working days.

Sous Palan Under hook – cargo will be brought alongside the carr ying vessel – i.e. : under her „hooks‟ – f ree of expense to the car go buyer or the carrier.

SRSpot The height of a tide var ies ( being inf luenced by the phases of the moon). Approxim ately t wice a mont h, tidal levels attain t heir highest high water and lowest low water marks, being termed Spring ides. The dif f erence between high and low water is called the tidal range and this range is theref ore at its greatest during spring tide periods. Because of greater available r afts dur ing spr ing tide per iods, when ships can enter and leave around the high water time more deeply laden than other wise, some ports experience a f ar greater volume of traff ic than normal, being

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termed Spr ing Tide Ports. An example is Goole, on the River Ouse, in North-Eastern England (See Neap Tides) .

Stem Refers to the readiness of cargo and is vessel – eg : „subject stem‟ (i.e. subject to the cargo availability on the required dates of shipment being conf irmed).

SWLSaf e Worki ng Load : Ref ers to lif ting capacities of cranes or derricks.

SW AD Salt Water Arri val Draft : As f or brack ish W ater (which see), except that the prevailing water is saline.

T/ C Time Charter

TI P Taking Inw ard Pilot: Signif ies a locat ion on arrival at which (but only upon taking abroad the pilot a ship delivers on to her t ime charter. Of advantage to a t ime char terer when compared with APS ( which see) as, in the event of a suspension of the pilotage ser vice, or of late boarding by a pilot , the risk and expense of delay is t hat of the shipowner.

WIBON Whether In Berth Or Not : See Lesson Six

WP Weight or Measure : The method on which liner car go may be charged.

WP Weather Permitting : See Lesson Six

WW Weather Worki ng : See Lesson Six

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WW Read y When and Where Read y: Ref ers to a ready position where a vessel will be handed over to buyers or will be deliver ed on to/redelivered of f time charter.

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APPENDIX 4: 1 DRY C ARGO CH AR TERP ARTI ES OF MAJO R IMPORTANCE 1.Voyage Forms General Purpose Title

Date

Codename

PUBLISHER

Uniform General

As revised 1922

GENCON

BIMCO

GENCON

BIMCO

1966 layout) Uniform General

As revised 1922

(Box Type)

(1974 layout 1982 (Revised 1986).

MULTIFORM

Grain

1913

BALTIMORE

Approved Baltimore Berth

(adapted 1971)

FORM C

Grain C/P – Steamer

1973

NORGRAIN

FONASBA

ASBA

North American Grain Grain Voyage

(amended 1998) 1966

GRAINVOY

(revised 1974) Continent Grain

1957

SYNACOMEX

(amended 1974)

Syndicate National Commerce Extericurdes Cereales

Australian Wheat

1983

AUSTWHEAT

Australian Wheat Board

Australian Barley

1975

AUSBAR

(revised 1980) River Plate

Australian Barley Board

1914

CENTROCON

UK Chamber of Shipping

Fertilizer

1942

UK Chamber

Fertilizers Charter

(amended 1950)

FERTICON

of Shipping

North American Fertiliser

1978

FERTIVOY

Canpotex shipping Services

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Vancouver Phosphate C/P

1950

AFRICANPHOS

Coal : South African Anthracite

1974

SAFANCHART No.2

Americanised Welsh Coal

1953 (amended 1979)

AMWELSH

Australian Coal Charter Ore : Mediterranean Iron Ore Iron Ore Standard Ore Sugar Sugar C/P Bulk Sugar Charter – USA Cuban Sugar Australia / Japan – Bulk Raw Sugar Fiji Sugar Mauritius bulk Suga Timber Baltic Wood

2. Period Forms Timecharter Uniform Time Charter Uniform Time charter Uniform Time charter (Box type) New York Produce Exchange T/C New York Produce Exchange T/C Bareboat : Standard Bareboat Charter

S.African Anthracite Producers‟ Assn. Johannesburg ASBA

AUSCOAL C (ORE) 7 NIPPONORE OREVOY

1980 1969 (revised 1977) 1962 (revised 1968) 1973 1975

-

1977 -

MSS Form

1964

NUBALTWOOD

The Japan Shg Exchange Inc. BIMCO

CUBASUGAR -

BALTIME 1939 (amended 1950) 1968 1968 (1974 layout) 1913 (amended 1946) 1981

1989

LINERTIME -

UK Chamber of Shipping The Japan Shg Exchange Inc. BIMCO

BIMCO

NYPE

ASBA

ASBATIME

ASBA

BARECON

BIMCO

Cargoes You should by this stage have read Chapter s 5 and 6 of „CARGOES‟ Agricultur al Pr oducts and Timber. Consequently you should be in a position to tackle the f ollowing Self Assessment Quest ion: -

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1.

W hat process would be of prime import ance in t he treatment of copra bef ore shipment?

2.

W hat are the major bulk raw sugar exporting areas of the Indian Ocean?

3.

W hat shipboard equipment is essent ial f or the carriage of coffee?

4.

W hat f ittings should a logger have?

5.

W hat is the stowage f actor of woodchips?

Test Questions

1.List t he elements you consider should be included in a lightening clause f or a voyage charterpart y, then draf t a suitable clause to cover the shipowner ‟s interests in the event of „SKUA‟A, a handy -sized bulkcarrier, being or dered to the Bay of Bengal, where she will have to lighten bef ore reaching her discharging berth in Chittagong.

2. Assume t hat it is your responsibilit y t o give instruct ions t o the Master of a ship which has just been chartered. You will arrange f or a copy of the

charterpart y

to

await

him

on

ar rival

at

loading

port.

W hat

inf ormation do you consider yo u must give him by radio bef ore he gets there?

(NB : To maintain schedule of f inishing „CARGOES‟ more or less simultaneously wit h the complet ion of this Course, you should by now have r ead Chapter 5 – “Agricultural Products” – and Chapter 6 – “Timber”)

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CH APTER- 5

FIN ANCI AL ELEMENTS OF CH ARTER P ARTIES

Introduction The whole purpose of shipowners arranging to carry goods in their vessel(s) is to ear suf f icient income to operate their enterpr ises successf ully and, hopef ully, t o make a prof it. Charterers, on the other hand, ar e anxious to move their cargoes at the lowest possible unit pr ice commensurate always with saf e deliver y. It f ollows, theref ore, that close attention must be made in all shipping contracts, not only to the amount of income involved and to its calculat ion, but also to the met hods and t imes of paym ent, and t o the various risks of the parties involved.

For voyage charter ing, income will result f rom f reights, deadf reghts and f rom the calculat8ion of laytim e, whilst f or time chartering; income will result f rom payment of hire. In each case, however, there are var ious additions and deductions one needs t o take into consideration to achieve an accurate calculation of income and, in this Lesson; we will be exam ining these aspects in some det ail.

Voyage Chartering

Currency : In most cases, f reights are paid in United States dollars – currency of internat ional shipping – but this is not always the case, particularly f or shor t -sea and coastal shipping where local currencies applicable to the trade are f requently used.

Risk of loss of Freight : Usually the occasion on which f reight is deemed to be earned is specif ied in the contract of carriage, other wise it is legally construed as „a rewar d payable upon arrival of the goods at their destinat ion, r eady to be deliver ed in merchantable condition‟. Freight would then be payable concurrent with deliver y of the goods at the discharge port(s), and a consignee would not normally be entit led to

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take deliver y of the goods unt il the f reight had been tendered. It f ollows that, unless other wi se specif ically agreed, the risk of losing the f reight bef ore saf e deliver y of the cargo f alls upon the carr ier or shipowner. The party at risk should theref ore prudently seek cover against potential loss of cargo (and theref ore of f reight entitlement) f rom the insurance market, where f reight insurance is nor mally available at a modest premium, adjusted by the risks involved such as age of ship, duration of voyage, etc. Frequently, however, shipowners negotiate that f reight „deemed earned upon loading‟, in which case the risk of losing the cargo and being liable to pay f reight (even without receiving the goods) becomes

that

of

the charterer,

who

is

lef t

to make appropr iate

insurance arrangements instead of the shipowner.

This risk of loss of f reight is independent of when f reight is physically paid. Thus, even if freight is paid in accor dance with a charterpart y term stating that „f reight to be paid within seven days af ter signing and releasing bills of lading‟, in t he event of a tota l loss of ship and cargo, say f if teen days into the voyage, f reight might have to be returned to charterer s if the risk of loss was deemed to be the carriers. As a result of this, in the right place. It is usual f or f reight and hir es to be paid by means of a transf er of f unds from the charterer ‟s bank to the owner ‟s. Even this can take time and so it is important f or the charter party t o state where as well as when the f unds have t o be credited to the shipowner‟s bank account. Many charterpart ies leave it t o the contracting parties t o incorporate the ar rangements they require, eg : the

AMW ELSH

Clause

2

(gv),

but

others

demand

more

specif ic

inf ormation, eg the OREVOY Box 29.

When Freight payable : Voyage f reight may be payable in advance – eg „f ully pr epaid‟ – or upon reaching its destination – eg „upon right and true deliver y‟. It may also be paid at some time during a vessel‟s voyage – eg‟ within seven banking days of signing and releasing bills of lading‟, or at the destination but prior to discharge – eg „bef ore breaking bulk‟ – (abbreviated as „bbb‟ in negotiations).

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Voyage f reight is also f requently paid in stages. It is commonplace f or a majority of the f reight – say 90% t o be paid during a voyage, with the balance wit hin a set period af ter discharge ha s been completed, together with adjustment f or demurrage or dispatch owed by one part y or the other. For example : „Ninet y percent of f reight to be paid within f ive banking days of signing and releasing bills of lading marked – “f reight payable as per char terparty” – balance to be paid within one month of complet ion of discharge, duly adjusted f or layt ime used during loading and dischar ging operations‟. (W ith ref erence to „Laytime‟ in the above paragraph, st udents should note that this important subject wil l be exam ined in detail in Lesson Six).

How Freight is calculated: Freights are paid usually against the quantit y of cargo loaded – of ten on a tonnage basis, but occasionally in accordance with cargo volume or ship capacit y. Thus f reight f or a bulk cargo – eg coal – will ver y likely be paid at a rate of US$ per long ton or per metric tonne (see AMW ELSH, lines 15/16). It is importat, however, to specif y how the cargo quantit y is to be established. Of ten this will be achieved by „shore measur ement‟, f rom whic h a „bill of lading weight‟ is obt ained, and on which f reight is based. Sometimes, though, shore instruments are suspect – perhaps non-existent – and cargo/bill of lading tonnage – „int aken weight‟ – is calculated by means of „ship‟s dr af t survey‟. I n some trades there may be a discrepancy bet ween shore cargo f igures and cargo intaken quantit y estimation as assessed by ship‟s draf t survey. Provided such discr epancy is of relat ively minor proportions, the pr oblem may not be serious but, given the high value of certain commodities, a substant ial dif f erence bet ween these t wo sets of f igures calls f or immediate and closer invest igation.

On some occasions, f reight is to be assessed on „cargo out turn quantit y‟ at the port (s) of discharge and again, this quantity may be calculated by means of shore gauges or by ship‟s draf t survey. W here „draf t sur veys‟ are involed, of ten a charterparty will include a clause specif ying that the surveyor will be independent and also that the ship‟s

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off icers are to provide ever y ass istance to the surveyor to the ext ent of providing ship‟s plans and ref raining f rom pumping water or bunkers during the sur vey it self . In certain trades – eg f or iron or e – where cargo is liable to suff er f rom weight loss (due pr incipalit y to the evapor ation of moisture) dur ing transit, it is common to give charterers the opt ion to abide by loaded f igures on which t o base f reight calculations, or to weigh the cargo upon its discharge. S a f urther alternative, a charterer may negotiate the right to deduct f r om f reight a percentage off the bill of lading weight obtained at the loading port – say 0.5% - „in lieu of weighing‟ cargo upon discharge. In most trades this is now an option which is r arely exercised but the clause sur vives and so the 0.5% becomes just another „picking‟.

Cargo Size Occasionally a shipowner undertakes to carr y an exact cargo size – eg 40,000 t onnes minim um / maximum coal in bulk, stowing around 47 cubic f eet per tonne‟ – but of ten a margin is negotiated to enable a master to maximize his ship‟s lif ting (which will var y depending upon the quantit y of bunkers she has on board) – eg ‟40,000 tonnes coal in bulk, 5% more or less in owner‟s options‟. It may be

that

this

margin

is

at

“Charterer s‟

opt ion”

although

such

an

arrangement precludes the certaint y t hat the vessel‟s master can maximize his cargo lif ting, and means that the owner must estimate on the minimum cargo quantit y when calculat ing the viabilit y of such a prospect ive f uture. W here a shipowner contracts to load or a charterer to provide about a certain quant it y – eg „about 10, 000 metric tones bagged f ishmeal‟ – t he word „about ‟ is construed to mean within, say, a reasonable margin of (say) 5%; in other words, bet ween 9,500 and 10,500 tonnes.

However where the word „about‟ is replaced by „without guarantee‟ it means just that. There is „no guarantee‟ and the cargo can legally be of any size.Occasionally a st ated margin is agreed eg. „30/32,000 tonnes‟. Here it is understood that the cargo to be loaded and/or supplied will be bet ween 30 ,000 and 32,000 tonnes of cargo and, to

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make mattes absolut ely clear, the words „minimum/maximum‟ or sim ilar might be added – eg „within 30/32,000 tonnes m in/max‟ whilst the additional phrase „in owners/shippers‟ option‟ def ines whose right it is to decide upon the exact cargo quantit y within the agreed lim itations.

Al t ernati ve

means

of

Calcul ating

Freight

On

other

occasions,

however, the likely loaded commodit y may be dif f icult to calculate in advance. In such events, there are alter natives open to the neg otiat ing parties:-

1. The onus can be shif ted f rom the shipowner to t he charterer and f reight paid on a „lumpsum basis‟. Here it is up to the chart erer to see that the maximum cargo is loaded in his own interest – consistent always with the vessel‟s maximu m permit ted draf t and her saf ety. There is, of course, no f inancial advantage to the shipowner f rom maxim issing cargo intake in this case.

2. W here the cargo consists of awk ward shapes and sizes – eg general cargo – or where it is uncertain just what can b e f itted into a ship‟s var ious shaped cargo compartments f or a unif orm – style commodit y – eg packaged lumber – alternat ive is for freight to be calculated on either the „available cubic capacit y‟ of the ship‟s cargo compartments, or on the „cubic quantit y of cargo loaded‟.

Deadfreight Should a charterer/shipper f ail to provide a f ull cargo in accordance with that described in the contract of carriage, a shipowner can claim „deadf reight‟ which is a f orm of damages being computed on the basis of loss of f rei ght, less any expenses which would have been incurred in ear ning it – eg stevedores‟ costs – and less any advant age taken by the owner f rom the deadweight unexpectedly available – eg extra bunkers. Deadf reight is added t o f reight earned and, likewise, is usually liable to appr opriate commissions and brokerages.

Freight Taxes The author ities of some (principally developing) nations

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lwevy taxes upon f reight deemed earned on outbound cargoes (and a f ew on inbound carg oes as well). It is the recipient of the f r eight who is liable to pay this t ax, not the part y paying same, and theref ore this charge is f requently levied against the shipowner, being usually added to port disbursements incurred by the vessel concer ned, and thus collect ed via the of f ices of the port agent.

Consequently, appr opriate allowance f or f reight tax must be made in voyage estimates and subsequent ly in f reight rates negotiated by shipowners. Further more, mention of any f reight taxes should be made in

charterpart ies

contracting

parties

and

contracts,

clearly

sp ecif ying

is ult imately responsible f or

which

payment

of of

the such

charges, as, even though in the f irst inst ance the recipient of f reight is liable f or payment of taxes, it may be negotiated that a shipper or charterer is ultimat ely r esponsible and must in due course reimburse a carrier f or expenditure so incurred.

Some governments which impose taxes on f reight negotiate bilateral

agreements

wit h

other

governments

under

which

ships

registered in certain nations are exempt or partial ly exempt f rom such charges, and it behoves all concer ned in negotiat ing ocean voyages to check caref ully f irst whether f reight taxes are likely to be levies and, secondly, which nat ion‟s ships, if any, ar e exempt. This can be clar if ied via t he good of f ice rs of an agent in the port(s) involved or perhaps more simply in BI MCO ‟s „Freight Tax‟ booklet, although, being an annual publication, this may be slightly out -of -date f or the particular case under review.

It is essential to clar if y the exact circumstan ces under which vessels will be exem pt f rom f reight tax. It may be that Greek flag ships, f or example, ar e exem pt under one particular nation‟s r egulations, providing only that the f reight benef iciary resides in Greece. Thus a Greek f lag ship owned ostensi bly by a Liberian corpor ation (even though the shares in that corporation are held by Greek nationals)

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would not qualif y f or exempt ion; wher eas if the vessel was t ime chartered to a Greek resident, individual or corpor ation f or the voyage in question, as d isponent owner that resident or corporat ion might ver y well qualif y f or exemption.

Bills of Ladi ng: These documents will be exam ined in Lesson Eight. However, ment ion should be made of the clausing of bills of lading in relat ion to f reights. Sometimes lett ers of credit bet ween t he seller and buyer of a cargo stipulate that bills of lading are to be claused „freight prepaid‟, and a buyer is then entitled to assume that freight has indeed been paid when the bills eventually come into his possession. It can, in fact, be tantamount to fraud to reach an alternative agreement between seller and shipowner/carrier and mark bills of lading „freight prepaid‟ where none, or only partial freight has been paid.

Not only that, if a shipowner releases bills marked „f re ight prepaid‟ bef ore receiving any or all f reight, that shipowner is in ef f ect admitting receipt of all f reight and may f ind extreme dif f iculty in obtaining any balance, whilst being obliged to deliver the car go in f ull to the receiver/holder of the bills. There can be no object ion to causing of bills such as „f reight payable as per char terparty‟, and it is surely better f or a shipowner or his port agent to retain bills of lading marked „f reight prepaid‟ unt il the f reight is actually received.

Although, as we have seen f rom Lesson Four, most voyage charterpart ies give a shipowner/carrier a lien on the cargo f or non payment of f reight and deadf reight (see clause 24 of the MULTIFORM), this will not apply if the shipowner has r eleased „f reight prepaid‟ bills of lading. Somet imes charterers of f er to issue a „Letter of indemnit y‟, indemnif ying

shipowners

f or

issuing

„f reight

prepaid‟

bills

without

physical receipt of the f reight. Depending on their trust of the charterer, some shipowners accept such a letter, bu t wise ones demand that it is countersigned by a f irst class bank.

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Commissions and Brokerages A shipbroker‟s income f rom voyage chartering is based on a percentage of the gross f reight payable to a shipowner, and this income is payable by t hat shipowner to all the brokers involved in the f ixture. In addition, each shipbroker may be entit led to an equivalent, percentage of the gross amount of any deadf reight although, since deadf reight is, in f act payment by a charterer of damages f or f ailing to pr oduce an e nt ire, contracted cargo and not str ictly a f reight ent it lement by the shipowner, a shipbroker‟s right to receive income based on deadf reight must be specif ically recorded in a charterparty. It is also nor mal pract ice f or shipbrokers to be entit led to r eceve income in the f orm of a percentage of any demurrage that might accrue af ter the calculation of layt ime, although this too has specif ically to be recorded.

A shipbroker‟s income is usually termed „brokerage‟ to dist inguish it f rom „commission or „addr es s commission‟ used to descr ibe a charterer ‟s negot iat ed ent itlement to a discount on freight payment, ostensibly to cover expenses incurred as a result of employing tonnage to carry the goods. In fact the practice of deducting „address commission‟ from freight, deadfreight and/or demurrage, is one peculiar to the dry cargo trades and is rarely, if ever, encountered in the „wet‟ or tanker trades.

In deep-sea markets, brokerage norm ally amounts to 1.25% of gross

f reight,

deadf reight

and

demurrage,

and

is

pa yable

by

a

shipowner f rom sum s received to each broker involved in a t ransact ion, although it f requently occurs that a charterer will deduct an appropr iate amount f rom f reight payment to the shipowner and undertak e to pay the brokerage direct to his own an d/or to ot her brokers involved. Thus, f or the involvement of two brokers, 2.5% brokerage is payable, 3.75% f or three and so on. This var ies, however , and a broker regular ly and exclusively employed by a part icular shipowner or charterer may agree to a brok erage of , says , only 1%. Alternat ively, if that broker undertakes to handle all the post -f ixtur e work on behalf of that owner or charterer, his brokerage may be increased to, say, 2%, to cover the costs of the extra time

167 Go to Index Page

and expenses involved. Furthermore, a broker involved in transactions of relatively small value – says a short-sea broker – may be entitled to a higher basic brokerage than 1.25% - say one third of 5% or 2%.

Address commission also var ies in am ount. A f ew charterers do not apply it at all whilst a f urther f ew negotiate as much 5%. Thus the total commission (i.e. address commission plus br okerages) due on dr y cargo business may var y f rom as little as 1.25% to as much as 7.50% perhaps even ore. T he norm f or deep sea dr y -cargo business is aro und 3.75/5%, although f or certain trades – eg sugar business – it is tradit ionally higher at 6.25%, and other tradit ionally less – eg. The W orld Food Programme, of the Unit ed Nations – at 1.25%. W hatever the amount of total com mission, however, it is a mat ter f or assessment in the appropr iate f reight rate, just as f or any other f actor – eg port time. Shipowners must obviously take the total amount into considerat ion when negotiat ing f reight levels, as it is on net income that returns and prof its/losses are calculated.

Although in certain cases these brokerages may seem gener ous, it should be remembered that a broker‟s income ver y much f ollows the f luctuations of the freight market in which he or she is involved. The lower the f reight rates, the harder it i s necessar y to strive to f ix business and the lower the r eturn if successf ul, based as br okerage is on depr essed f reight rate levels. Further more, a broker receives income only if successf ul. All those f ailur es and near m isses, even though costly in terms of time and expenses, count f or nothing unless a conf irmed f ixture results.

Nevertheless, a broker may be able to gain some protection in the case of „non -performance‟ of conf irmed business, as is pr ovided, f or example, in the GENCON charter part y, which states – „In case of non execut ion at least 1/3 r d of the brokerage on the est imated amount of f reight and dead -f reight to be paid by t he Owners to the Brokers as indemnit y f or the lat ter‟s expenses and work. In case of more voyages

168 Go to Index Page

the

amount

of

indemnit y

to

be

m utually

agreed‟.

Few

printed

charterpart ies are so generous, however, and it behoves brokers to endeavour to persuade pr incipals to cover them against the f inancial expenses and t ime involved in the case of cancellat ion of a negotiated f ixture.

It should also be not ed that a broker will have great diff icult y in perusuing a claim ag ainst a shipowner, for example, f or non - payment of brokerage. The broker is not a part y to the contract bet ween charterer and shipowner and if brokerage is due but unpaid, the broker must obtain the support on one part y to claim against the other. Help m ight be at hand thr ough under wr iters of Prof essional indemnit y insurance schemes (see Lesson Ten) or through the off ices of bodies such as the Balt ic Exchange or BI MCO, the def aulting shipowners per haps being shamed int o paying their dues if f aced with adverse publicity r esulting f rom non-payment. It can, however, become a tricky situation f or the broker(s) concerned.

Some shipowners are better than others at paying broker age, settling sums as and when they become due –eg paying 90% of brokerage once 90% f reight has been received. Others ar e extremely tardy, only paying t he f irst and only sum of brokerage months af ter completion of the voyage(s) concer ned and, of course, ev en longer af ter the f ixtur e was conf irmed.Also, in some cases charterers negotiate that the f ull, 100% of address commission and, per haps, brokerage, is deduct ible f rom any advance f reight paid to a shipowner. It is also important f or brokers to enter thei r entitlement to brokerage into the charterpart y

signed

by

both

principals

because

than

at

least

a

miscreant shipowner cannot deny being aware of brokerage due.

Self Assessment Questions

1. How can charter ers protect themselves against t he r isk of loss of f reight during a voyage if f reight is deemed earned by a shipowner upon

169 Go to Index Page

loading of the cargo?

2. As a br oker, what means would you employ to encour age prompt payment of your br okerage af ter f ixing a vessel?

Time Charterering Much of what has been wr itten a bove under the heading “Voyage Chartering” applies also to “Time Chartering”. There are naturally, however, substant ial dif ferences in the calculation of f reight applicable to voyage chartering, and hires applicable to t ime chartering.

How Hire is calculat ed: Time charter hire is commonly calculated and descr ibed in dr y-car go charterparties as a daily rate – eg US$ 8,000 daily. To this is applied a pro -rat a adjust ment f or part of a day. Thus a vessel on hire f or 10 days 12 hours – in other words f or 10.5 da ys – would be ent itled to gross hire of US$ 84,000.

Thus f or hire paid „semi -monthly‟ (i. e. 15 days in advance f or a thirt y day calendar month) gross hire would amount to US$ 120,000 (US$ 8,000 x 15), or US$ 240,000 f or the f ull calendar month. An alternative but less utilized method of calculating hire is to base same on a vessel‟s deadweight tonnage per calendar month. T hus f or a 40,000

tonne

summer

deadweight

bulkcarrier,

the

equivalent

timecharter rate to US$ 8,000 daily can be calculated as f ollows: -

US$ 240,000 – 40, 000 sdwt = US$ 6.00 per sdwt tonne.

However, the duration of a „calendar month‟ varies month by month. One month it will indeed consist of 30 days, another of 31 or event 28 days. Consequently, it is nor mal to use as a f actor in such calculations, the average number of days in a calendar month allowing, of course, f or the leap year. An average calendar month will theref ore be f ound to exist of 30.4375 days, and t his will give a slightly dif f erent daily value to our bulkcarrier:

170 Go to Index Page

40,000 tonnes sdwt x US$ 6.00 per tonne – 30.4375 = US$ 7.885. 01 daily.

The ASBATIME char terparty (f or example) allows f or either method of hire calculation in clause 4.

When Hire is pa yable: In near ly ever y case, it is agreed t hat hire is payable in advance i.e. monthly, or sem i -monthly, or ever y f if teen days in advance. The ASBATI ME, clause 5 selects „semi -monthly in advance‟ but, in the inter ests of easy account ing, convenience and certaint y, it is common pract ice t o pay hire ever f ifteen days in advance, which continues to allow f or subsequent equal payments irrespective of whether a calendar month comprises 28, 29, 30 or 31 days. For the period leading up t o redeliver y, when there will probably not be an entire „semi – monthly‟ period outstanding, charterers ar e normally reluctant to pay hir e in excess of that which is est imated to be due. Nevertheless, the ASBATI ME, in common with most other time charters, stipulates that „hire shall be paid f or the balance day by day as it becomes due, if so required by owners ‟.

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When Hire is payable : Just as f or voyage chartering and the payment of f reight, time chart er hir e has to be transf erred in good tim e f rom the bankers of a charter er to the bank account of a shipowner. If this hire does not arrive in time, then technic ally the charterer is in br each of the contract and one would consider, perhaps, that the shipowner has a case f or withdrawing his vessel f rom the charterer ‟s employ.

In f act, it is not as simple as t hat because, in a legal sense, the shipowner has to sh ow that the charterer consistent ly paid late and had been consistently warned that the owner was contemplat ing withdrawal. One has to realize t hat f or ever y def ault ing charterer who misbehaves because of stringent f inancial problems, there may, at certain, stages of the f reight market, be a shipowner who is anxious to f ind any excuse to withdraw his ship f rom a timecharter com mitment at a low rat e of hire to take advantage if possible of higher freight and hire levels elsewher e.

The object of a well -draf ted time charterparty should be to as f ar as

possible

remove

any

temptation

f or

potential

miscreants

to

misbehave. W hilst hire is to be paid and received by the shipowner‟s bank in advance at agreed int er vals, and the time charterparty should clearly state t his, so it has t o be realized that inevitably banks will occassionaly accidentally delay transf ers of moneys or m isr oute same. Thus it is t ypical to insert a side clause requiring owners to give some notice of any intention to wit hdraw their vessel, thereb y providing an opportunit y f or time charterers to make amends or to remedy an y banking error – eg a „period of grace‟. In f act the ASBATI ME includes a suitable opt ioned clause in clause 29 of that charterparty.

Ballast Bonuses: W here some ships deliver on to timecharter some distance f rom their original position, their owners may negotiate a positioning bonus to cover time and expenses (eg bunker costs or canal tolls) incurred bet ween departure f rom the original position to the vessel‟s deliver y under the n ew employment. (Ver y occasionally, if a time charterer redeliver s a vessel in a poor position relat ive to f ollowing

172 Go to Index Page

employm ent opportunit ies, it may be possible f or an owner t o negotiat e a redeliver y positioning bonus, although this is not ver y common). Such a lumpsum payment, however, whether applicable to delivery on to or redelivery off timecharter, is termed a „ballast bonus‟ and a delivery ballast bonus is usually payable in full together with the first hire due under a new timecharter.

Payments in respect of hire are usually subject, of course, to a discount for address commissions and/or brokerages (just as for freight), but not so in respect of bunkers or canal tolls. Consequently, with ballast bonuses containing elements of both hire and voyage expense reimbursement, the question arises as to whether such bonuses should be paid „gross‟ (i.e. liable

to

deduction

f or

commission/br okerage)

or

„nett‟

of

such

deduct ions. In practice it all depends on the negotiat ing strength of each part y and the state of the f reight market. In some cases ballast bonuses will be nett and in others t hey will be gross. It is not unusual, even, f or ballat bonuses to bet nett of address commission but gross of brokerage.

Bunkers: As we have seen in Lesson Four, when a vesse l delivers on timecharter, remaining

on

the

charterers

board

the

will

vessel

normally at

that

take time,

over and

the

bunkers

r eimburse

the

shipowner accordingly. Payment is usually made with t he f irst hire payment.

On

redeliver y,

the

reverse

process

takes

place,

with

charterers estimat ing the quantit y of bunkers remaining on boar d on redeliver y and deducting the equivalent monetary value f rom the f inal (or penult imate in the case of large quantity of bunkers) hires payment. Adjustments in both cases are ab le to be made upon receipt of deliver y and deliver y and redeliver y sur vey reports.

Deli very and Redel iver y : W hen a vessel delivers on to time charter, not only does t he „time charter clock‟ st art to tick, but it set s in mot ion also the payment of the f irs t hire and any addit ional sums such as f or bunkers remaining on board at the t ime, and ballast bonus. It is theref ore essential that copies of the sur vey reports signed and

173 Go to Index Page

witnessed by the master and port agents and, if available, by a charterer ‟s repr ese ntative such as a supercargo, be distr ibuted to all concerned. In this way the accounts procedures can avoid being unnecessar ily complicated.

It is also vital to specif y whether deliver y and redeliver y tim es will be recognized as being as per local t ime s or as per some convenient „standard‟

time,

such

as

Greenwhich

Mean

Time

(G MT).

If

the

charterpart y is silent on this aspect, English law will assume t hat actual „elapsed t ime‟ will apply to the t imecharter period, i. e. as if a stop watch was started on t he bridge of the ship upon deliver y only to stop upon r edeliver y ( and, of course, f or any of f -hires). If local t ime is specif ied, however, one part y or the ot her might „benef it‟ by gaining time by applicat ion of time zone changes. You can work it out f or yourself with an at las showing time zones and can calculate whether a ship

moving

east/ west

or

west/east

is

to

the

advantage

of

a

timecharterer basis „local time‟. W ith GMT or equivalent, there is no advant age to either party and this, theref ore, is to be r ecommended.

Additions to Hire: Quite apart f rom ballast bonuses, there may be other addit ions to hire paym ents made f rom time to time. In Lesson Four, under the section dealing with elements of time charterparties, students will recall, f or example, the cl ause concerning (1) supercargo accommodat ion , provision of employees‟ meals. In addition there may be claims f rom the owner f or radio message expense r eimbursement, f or communications necessar y on behalf of timecharterers, as well as f or gratuities expended on charter ers‟ behalf to certain employees at ports of call. Finally a time charter invar iably insists upon the vessel being redelivered „in like good order and condit ion‟ as when she was t aken over by the charterer. This would, theref ore, mean that the t imecharter would be requir ed to emply labour to clean the ship‟s holds and she would remain on hir e all the t ime this was taking place. Hold -cleaning can, however, be quite easily done by the ship‟s cr ew on the ballast passage to the next loading port and quite of ten the charterer is able to

174 Go to Index Page

negotiate the right t o redeliver the ship without that f inal cleaning. The quid prop quo f or this concession is usually a lumpsum „in lieu of cleaning‟ payable wit h the balance of outstanding hire. All these need to be costed, vouchers supplied and claims made.

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Deductions from Hi re: As we have already seen, us f or f reight, hire is subject to deductions f or:

1) Addr ess Commission and/ or brokerage. However, hire is also subject to other deductions: -

2) Port disbursements. Quite of ten the owner of a time chartered vessel will avoid appointing a port agent to attend on their behalf , relying instead on t he time charterers‟ port agent and reimbursing any expenses the t ime charterer and/or the port agent may incur, (eg cash to vessel‟s master, chandler y bills, cr ew leaving or joining etc.) by means of a routine deduct ion f rom hir e. Most time charterparties give charterers a „reward‟ for carrying out this service of payment of a percentage based on the amount involved. In the ASBATIME LINES 128/132, this „reward‟ amounts to 2.50% commission on any such advances.

3) Domestic bunkers. Bearing in mind that ASBATIME although intended and marketed as a replacement of the NEW YORK PRODUCE EXCHANGE TIME CHARTER 1946, is rarely used, and is used here only for ease of illustrating the elem ents of a timecharter and part icular clauses, it is important to draw students‟ attention to an omission in regard to domestic bunkers. Ref erence to the widely ut ilized NYPE 46 f orm, line 20, will r eveal that „f uel used … f or coking, condensing water, or f or grates and stoves to be agreed as f or quantit y, and the cost of replacement same, t o be allowed by owners‟.

No ment ion of this „domestic f uel arrangement‟ is contained in the ASBATI ME.

Nevertheless,

a nd

despit e

despit e

the

old -f ashioned

language introduced originally when steam -power ed vessels were the norm, it has been legally upheld under English law during the 1980‟s that the spirit of this clause applies in pr inciple also to modern diesel engined ships. Consequently, providing agreement can be reached as to quantit y (usually by a pre -calculation during f ixing negot iations) and no

matter

what

charterpart y

f orm

is

being

used,

char terers

can

176 Go to Index Page

negotiate ent itlement to an allowance f or a vessel‟s domestic f uel consuption f or heating, lighting, cooking, etc. and this is usually deduct ed in the f orm of a lumpsum payment f rom hire.

4) Off Hire: Clause 15 of the ASBATIME provides a valuable summary of the many reasons why a charterer will be entit led to place a time chartered ship „of f -hire‟. W hilst a time charterer vessel will r emain „on hire‟ whilst f ully at the service of charterers inevitably, even f or the best run vessel, a t ime will come when that ship will be placed „of f -hire‟. Such occasion may occur th rough mechanical break -down either of a ship‟s mot ive power or cargo gear, or it may be that the vessel has to deviate f rom her course to land a sick seaman. An off -hire clause normally covers such event ualit ies f ully and ther e should be no reason f or any dif f erences of opinion. However , much the same as when a vessel delivers on t imecharter at sea instead of at a convenient and easily ident if iable place – such as „dropping out ward pilot Elbe No.1‟ it may be ver y dif f icult to establish the exact lim its of o ff-hire and, consequently, the eq uivalent amount of hire.

One sit uation which can be considered under t he same heading as „of f -hire‟ is that of poor perf ormance when the charterer claims that the vessel has f ailed to perf orm in terms of speed of f uel consumpt ion as provided f or in the charterpart y. Most moder n ships are able to provide a r ange of combinations of speed and f uel, allowing charterers to select whichever combination is most suitable f or their pur pose. They may f or exam ple have a tight schedule to meet in which case they will want the highest speed even though this means higher f uel costs. Conversely time m ay not be so important and economical use of bunkers is pref erable. However, whichever speed range is selected the charterpart y will specif y that such a speed and consumpt ion is only achievable in f air weather condit ions. In a disput e over speed and consumpt ion t he owner will claim the weather was at f ault whilst the charterer will argue other wise and dem and f inancial compensation f or the alleg ed poor perf ormance.

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As we have seen in Lesson Four, it is usual f or a vessel‟s log books to be made available to a time charterer and it may well be that it is also agreed that in such disputes, ref erence will be made to an outside

body such

as Oceanr outes,

to assess

whether

a

vessel

perf ormed poorly or not and, if so, the f inancial ext ent of the poor perf ormance.

W ith tanker chartering, it is of ten the case that the owner of a tanker exceeding the stipulated t imecharter perf ormance, is rewarded by payment of extra hire ref lecting the f inancial extent of the better perf ormance. Only rarely is this the case with dr y -cargo chartering, although there is no reason why dr y -cargo ships should not be similar ly assessed. In f act, although it would create an addit ional workload f or those entrusted wit h perf orming the calculations, wit h t he aid of computer technolog y this is no longer the chore it once was, and there is less reason f or shipowners to midescr ibe t heir vessels dur ing negotiat ions leading to a f ixt ure, if they are to be rewarded any way f or enhanced perf ormance in accordance wit h the t imecharter value of their vessel. Consequent ly, there is ever y reason to „borrow‟ one of the tanker industr y‟s good ideas.

Lines 190 to 195 of the ASBATIME ref er to diversions from a vessels‟s planned course, and it is necessar y f or those involved in this area

of

shipping

to

f amiliarize

them selves

with

simple

deviation

calculations used to assess the cost ing s of off -hire incidents. In the f ollowing example, let us as sume that our vessel is deviat ing to land a sick seaman (the cost of which, incidentally, should be covered under the terms of an owner ‟s P & I insurance cover) or, perhaps, is proceeding to a dr y -dock f or routine repairs. Let us also assume that both inci dents are clearly of f -hire and the only pr oblem is f or the parties to calculate the t ime spent off -hire and the quantit y and cost of excess bunkers consumed.

178 Go to Index Page

Example One

The deviat ion is normally calculat ed by the Master and sent direct ly to bot h hi s owners and charterers or to charter ers via his owner s and will cover extra time and bunkers used. From the actual time used to deviate f rom Point A to Port /Drydock and to return to point B (including all t im e spent in Port/Dr ydock) must be deducted the estimated

t ime

timecharterer s‟

that

would

inst ructions

have f rom

been Point

taken A

to

if

steaming

Point

B

as

direct.

per The

dif f erence is off -hire. These f igures can be checked by t imecharterers, even if they employ no -one with sea going exper ience, by de xtrous use of

marine

accurate,

distance will

give

tables a

which,

close

alt hough

possibly

approximation.Fuel

not

and

entirely

diesel

oil

consumpt ion can be checked by applying C/P bunker f igures to the speeds used in the deviat ion calculat ions, compared wi t h distances involved.

179 Go to Index Page

Thus, using the example, and assuming that the distance bet ween each point is 312 nautical miles and that a the ship spent 5 days in port both dr ydocking and repair ing alongside the shipyar d f acilit ies, and given that the charter er‟s instruct ions were f or the ship to proceed at 13 knots on a consumption (as per charterparty) of 20 tonnes f uel oil daily at sea we can est im ate:

(Ship‟s speed

13 knots (13 x 24 hours)

=

312 NMPD

Deviat ion: -

Point A to Port: 312 nm

=

1 day

Port to Point B: 312 nm.

=

1 day

Port to Point B: 312 nm

=

5 days

Total Deviat ion

=

7 days

=

1 day

=

6 days

Less Point A to Point B : 312 nm. Off – Hire

Bunker Consumption:

F/O

Point A to Port

:

20 tonnes

Port to Point B

:

20

40 Less

Point A to Point B

:

20

20 tonnes F/o

D/O. : say 1 tonne D/O per day (as per c/ p_ Off – Hire 6 days thus -

6

tonnes D/O.

The above example is obviously ver y simple but the principle is exactly the same f or more complicated calculat ions.

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Example Tw o

A vessel en route f rom Cape of Good Hope to Fremant le deviates t o Durban

to

collect

urgently

needed

spare

parts.

To

calculate

approximate of f -hire and extra bunker consumption:

Dist ance according BP Distance Table: -

i)

Cape of Good Hope/ Fremantle

ii)

Cape of Good Hope / Durban

4,670 NM.

Durban/Fremant le

755

4,996

4,241

4,996

------------------------Deviat ion

4,241

326 NM.

------------------------Assuming vessel‟s speed and consumption as per Example One:

326 / 312 = 1.045 days off-hire 1.045 x 20 tonnes F/O = 20.09 tonne F/C + 1.045 tonnes D/O.

Self Assessment Question

List the reasons you can identify for a vessel to be placed off -hire. Test Questions The bulkcarrier „ALBATROS‟ has performed a voyage charter followed by a timecharter. You have now received the final papers for both employments and are in a position to draw up final statements for each using the following data, and producing the balance due :-

181 Go to Index Page

1.

VOYAGE

Loading Agaba Discharging Montoir Cargo: 21,475 tonnes bulk phosphaste Freight: US$ 21.00 per mt. Address Commission: 2.00% Brokerage: 2.50% 90% Freight paid in advance Total Despatch at Agaba: $ 9,500.00 Total Demurrage at Montoir: $ 12,250.00 2.

TIMECHARTER Delivery dop Monitor 15 t h March 0600 hours GMT Redelvery dop Madras 30 t h May 1800 hours GMT Bunkers on delivery : 465 tonnes f/o and 53 d/o Bunkes on redelivery : 450 tonnes f/o and 47 d/o.

Bunker prices both ends: US$ 105 per mt. F/o. US$ 165 per mt. d/o. Hire: US$ 8,000 daily Address Commission 2.5% Brokerage 3.75%

Domestic Consumption: 0.25 tonnes d/o daily at t/c price.

Owner‟s port disbursements (at 2.5%):

Hamburg

US$

4,250

Rotterdam

5,000

Suez Canal

2,500

Bombay

3,750

182 Go to Index Page

Madras

1,500

Radio Messages:

March

US$

525

April

750

May

225

Meals and Gratuities

Meals

Hamburg

US$

Gratuities

1000

US$

20

Rotterdam

50

225

Suez Canal

25

900

Bombay

550

250

Madras

525

225

Hire Payments : 15 t h March

US$

112,500.00

30

th

March

112,500.00

14

th

April

112,500.00

29 t h April

112,500.00

14 t h May

20,000.00

Payment for Bunkers on Delivery: US $ 58,620.00

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CHAPTER-6

LAYTIME

Laytime is the time permitted in a contract for loading a nd/or discharging a voyage chartered ship. If this permitted time is exceeded, the owner or operator of the ship will be entitled to damages. These damages are normally agreed to be „liquidated‟ – that is to say that a daily sum (or „pro-rata‟ for part of a day) will be negotiated in the form of „demurrage‟, payable for each day or part day of delay. If a vessel finishes before the allowed time – or „laytime‟ – has been used, a charterer may be entitled to a „reward‟ in the form of payment of „despatch‟ mon ey – usually payable at half the caily rate of demurrage. Laytime calculating is not an activity to be undertaken lightly. There may be considerable sums of money at stake, which will have a noticeable effect on a ship‟s profitability, or on a charterer‟s income.

The calculation of laytime can be divided into „Seven Stages‟:-

1.

Read the relevant clauses in the governing CONTRACT.

2.

Obtain the STATEMENT of FACTS.

3.

Determine how much laytime is available – i.e. its DURATION

4.

Establish the COMMENCEMENT of laytime.

5.

Allow for INTERRUPTIONS to laytime

6.

Establish when laytime will cease – i.e. ESSATON, and,

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7.

Calculate how much DESPATCH or DEMURRAGE is payable.

1.Contract : The relevant charterparty or the sales contract should specify laytime terms, so that by referring to the contract in relation to the details supplied by the statement of facts form, a „time sheet‟ can be drawn up which shows whether the allowed laytime has been exceeded or is not fully used.

The

interpretation

of

many

of

these

clauses

and

their

true

significance is almost an art in itself, and careful wording needs to be employed in the drafting of laytime clauses, guided by knowledge of specialized case law on the subject.

2Statement of Facts: One of the prime functions of a port agent is to produce a written record of events occurring during a vessel‟s port visit – known as a „port operations log‟. Thus are recorded a ship‟s arrival date and time. When berthed or shifted to another berth; worked cargo, bunkered and departed; the time notice of readinesses was tendered and accepted; weather conditions; and whatever else is relevant.

No matter the reason for a vessel‟s visit to port, whether it is for drydocking or repairing; bunkering; cargo-working; whether or voyage or timecharter; a port agent should produce a Statement of Facts form to be forwarded to his principal upon the vessel‟s departure. Many port agent use their own in-house designed form for this purpose, but a standard document which can be used at any port, worldwise, is available from BIMCO, and can be used if the agent or his principal so wishes (see Appendix 6 : 1). It will be from this that a Time Sheet (such as in the form of Appendix 6 : 2) will eventually be drawn up.

It is good practice for principals to br ief a port agent fully about operational and chartering matters before a vessel‟s arrival in port. If possible the port agent should be sent a copy of the charterparty / sales contract for perusal and guidance. In this way the agent should be aware of information ultimately needed to be incorporated into the statement of facts form.

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To avoid unnecessary dispute, interested parties to a vessel‟s visit to port – eg the ship‟s Master, port agents, shipper/receiver – should sign the completed statement of facts form. There should rarely be any objection to signing that if it sets out to be simply what its name implies – a statement of facts. It is in the laytime interpretation of those facts. It is in the laytime interpretation of those facts that disputes are likely to arise, not in the recording of events. If, however, one or other of the parties has an objection to the contents of a statement of facts form, it should be signed „under protest‟, a statement being added, clarifying the reason(s) for the objection.

3. Duration: Duration of laytime can be sub-divided into three categories :-

Definite

Calculable

Indefinite

Definite Laytime: The simplest of the categories, specifies how many days/hours are allowed, whether for loading or for discharging, or for both activities, the latter sometimes being known as for „all purposes‟. Terms might be : „Cargo to be loaded within 5 weather working days of 24 consecutive hours‟, or „7 working days of 24 consecutive hours, weather permitting, for all purposes‟.

Calculable Laytime : In these cases periods of definite laytime as described above can only be established once a calculation has first been carried out, based on factors contained in the contract and in the statement of facts form. Calculable laytime can be sub-divided into two further sub-sections :-

Tonnage Calculations: Tonnage calculations are the most common types of calculable laytime. A contract will state that a vessel is to load and/or

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discharge at a set rate of tons/tones per day/hour. Thus, for a ship load ing 40,000 metric tones of cargo, minimum/maximum, at a rate of 10,000 tonnes daily, there will be 4 days of laytime available to her charterers.

However, it might be that the ship‟s Master has a margin within which to load – eg 40,000 tonnes/5% more or less. Thus, if the ship eventually loaded 41,258 tonnes of cargo, available laytime can be assessed as follows :

41,258 tonnes / 10,000 tonnes daily = 4,1258 days.

4, 1258 days equates to 4 days 3 hours 1 minute in the following manner :-

-

4.1258

D

H

M

4,0000

4

00

000

-

03

00

-

00

01

4

03

01

0.1258 -

0.1250

0.0008 0.0007

A table giving the decimal parts of a day to help in calculations of this kind will be found in Appendix 6 : 3.

Hatch Calculations: Are more complicated than Tonnage Calcu lations, but occasionally need to be performed. Nonetheless, there are well -established procedures to assist. Let us assume that general cargo vessel „HERON‟ is discharging bagged wheat flour on the basis of:-

i)

A discharge rate of 175 tonnes per hatch daily.

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ii)

Total cargo of 7,000 tonnes,

iii)

1,575 tonnes cargo in the largest cargo compartment, and

iv)

Vessel has five (5) hatches.

„Per Hatch dail y‟ The vessel is to be discharged at 175 tonnes per hatch daily. Thus 5 (hatches) x 175 tonnes = 875 tonnes daily,

Thus 7,000 tonnes cargo / 875 = 8 days permitted layt ime.

„Per Workable Hatch dail y‟ W here the terms „workable‟, „working‟ or „available hatch daily‟ are introduced, complications set in. To be „workable‟ under English Law, a hatch must be capable of being „worked‟ – that is to say, there must be space beneath that hatch at the loading port, and there must be cargo under t he hatch at discharge port. Taking the above example of the „HERO N‟, as each hatch is emptied, the discharge rate would reduce by mult iples of 17 5 tonnes daily, unt il all holds become empt y one by one. This is, however, a cumbersome and sometimes complicat ed method of calculat ion, and English law procedure lays down a simpler alter native which is f ollowed in such cases. First it is necessar y to est ablish the „largest‟ unit of cargo in the vessel. Ref erence to the „stowage plan‟ shows that 1,575 tonnes contained in No.3 hold and tweendeck beneath No.3 hatch constit utes the „largest‟ unit. Thus, 1,575 tonnes / 175 daily = 9 days layt ime over all.

Howe ver, where the largest unit of cargo is served by t wo or more hatches, the unit tonnage must be sub -divided. Assuming two hatches ser ved No.3 hold and tweendeck, f or example, 1,575 tonnes would f irst be divided by 2 bef ore applying the f actor of 175 tonnes daily. In that

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case, the largest indivisible cargo unit would become the 1500 tonnes contained in No.2 hold and t weendeck, and the layt ime durat ion calculation would then be: -

1,500 tonnes / 175 daily – 8.771428 days laytim e. (8.571428 days can be convert ed to days, hours and minutes by using the table in Appendix 6 : 3).

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Indefinite Laytime : Occasionally, an owner or operator will agree f or his ship to be loaded or discharged as per „custom of the port (COP); „custom ar y despatch‟ (CD)‟; „customar y quick d espatch‟ (CQ D), or „f ast as can‟ (FAC) terms.

The common f actor with these terms is that all pr ovide a shipper or receiver wit h an „indef inite‟ period during which to per f orm cargo operat ions, although they must act „reasonably‟. It is „unr easonable‟, f or example, f or cargo not to be available upon a vessel‟s arrival wit hin agreed laydays, and in such a case, the owner or operat or of the ship would normally become entit led to reimbursement by „damages f or detent ion‟. But risk of bad weather, port conge stion, and suchlike are all f or the shipowner/operator to bear.

„Fast as can‟ applies normally to self -loading/discharging vessels (see Lesson One) and stipulates that the cargo will be loaded and/or discharged „as f ast as the vessel can‟, of ten ad ding a f urther stipulation that charter ers or shippers/receivers m ust be able to „deliver‟ or „take away‟ cargo at a par ticular daily tonnage rate.

Deadfreight : W here only part of a cont racted cargo can be supplied and,

consequent ly,

where

„deadf reight‟

be comes

payable

to

a

shipowner/operator as a result, under English law laytime is nonet heless applied only on the portion of cargo actually loaded. Thus : -

i)

Contracted cargo: -

10,000 tonnes m in/max.

ii)

Loading rate : -

2,000 tonnes daily

iii)

Cargo supplied : -

7,000 tonnes

iv)

Deadf reight : -

3,000 tonnes (10, 000 7,000)

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v)

7,000 – 2,000 = 3.5 days.

Laytime:

However, also under English Law, a shipowner/operator claiming deadf reight must ret urn to the charter er any benef it received. Thus t wo layt ime calculations should be carr ied out, one based on actual cargo loaded/discharged and the other on the hypothetical cargo that should have been loaded/ discharged. Any dif f erence in the owners f avour should be credited t o the charterer in ret urn f or payment of dead f reight.

American calculating

law

is

more

deadf reight

straightf orwar d on

what

has

in

been

cases

of

loaded,

deadf reight, plus

tonnage

equivalent to the deadf reight paid by charterers.

Commencement : For layt ime to have„commenced‟,

a vessel

must

have „arrived‟ at the place where cargo operat ions are to be perf ormed (1) „arrival‟: must be physically able to undergo cargo operations (2) „readiness‟; and have dealt with (3) „cont ractual commitments.

Arri val: Laytime is a subject which lends itself to disput e, a nd the def init ion of whether or not a ship has „arrived‟ in a laytime sense may sometimes be extremely legally complicated, there being much English law on the subject. Simply, to have „arr ived‟ at a port, a vessel must have reached either the loading/disc harging place or, should that place be busy, normal waiting place. Furtherm ore, a ship‟s Master or agent must have tendered Notice of Readiness, in accordance with t he contract requirements (eg „within of f ice hours, Mondays to Fridays‟).

Notice of Readin ess can be given or ally, but usually a written f orm is used, an example of which can be found in Appendix 6:4. It is an important function of a port agent to assist a ship‟s Master in tendering notice of a ship‟s arrival, and also to ensure that shippers/receivers officially „accept‟ the vessel‟s notice of readiness, accomplished usually be signing and timing acceptance on the notice from, although shippers/receivers or charterers‟

191 Go to Index Page

nominated port agents, will „accept subject to charterparty terms and conditions‟.

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Readiness : A ship must be physically capable of perf orming cargo operat ions – eg at a loading port, holds must be cleaned and prepared f or receiving cargo and, if the contract so specif ies, holds must be inspected and declared suitable by an appro pr iate authorit y bef ore notice of readiness will be accepted.

Contractual Commitments: Contracts usually state that bef ore laytime commences, a vessel must, (a) have been „ent ered‟ at the local custom house and (b) be in „f ree pratique‟ (given the go ahead to proceed by the port health authorit y).

Congestion: In case cargo berths are occupied upon a vessel‟s arr ival, contracts usually specif y that notices of readiness can be tendered f rom a „normal wait ing place‟, „whether in bert h, or not‟ (W IBON); „whethe r in f ree pratique, or not ‟ (W IFPON); and „whether custom‟s cleared or not‟ (W CCON). It is nor mal that time spent in eventual shif ting from the waiting place to the first cargo berth will not count as layt ime.

Turn Time: This occurs at certain ports where ships wait their „tur n‟ to load/discharge. W hen wait ing turn, layt ime will not usually count. Sometimes „turn time‟ is

lim ited

–

say to „48‟ hours‟

– laytime

commencing once t his period has elapsed, or ear lier if cargo operat ions begin wit hin that per iod. W here no „tur n t ime‟ lim it is specif ied, the r isk of excessive delay is that f or a shipowner. W hen markets are in their f avour, some charterers attempt to impose „t urn t ime‟ condit ions into a charterpart y, even though there is no such custom f or same at th e ports involved – eg ‟36 hours turn time both ends‟.

Commencement : O nce a vessel has arrived at a port, complied with all f ormalities

and

contractual

commitments,

and

tender ed

notice

of

readiness, layt ime will commence in accordance with the contract ter ms – eg „at 0700 hours next working day‟, or ‟12 hours f ollowing tendering and accept ing notice of readiness‟.It is important to remember that the commencement of time counting and the commencement of actual

193 Go to Index Page

loading or discharging can, under cer tain circum stances, be quite dif f erent. Take, f or example, a charter party with 36 hours turn time „even if used‟ also Sundays and Holidays excepted „even if used‟ and Notice of Readiness to be given dur ing normal off ice hours. Such a ship could arr ive at, say, 6 p.m. on a Friday, work the entir e weekend and time would not commence to count unt il 36 hours af ter 8 a.m. Monday. Such a ship would have been working f or over f our days bef ore time even commences to count. Vital, ther ef ore, to ensure also that Notice of Readiness is handed in at the earliest permissible moment. Never think that as work has already started a notice of readiness is not needed.

Self Assessment Questions

1.

W hat are the seven stages to be taken into consideration when calculating laytime?

2.

W hat is the dif f erence bet ween a Statement of Facts and a Time Sheet ?

3.

W hat is „Free Pratiq ue‟?

4.

W hat is the eff ect on laytime calculations when deadf reight is involved?

Interruptions: Once laytime has commenced, unless a vessel‟s cargo handling equipment b reaks down, it will continue unhindered unt il the completion of cargo oper ations or until layt ime expires or demurrage commences. Nevertheless, contracts f requently include express clauses interrupting layt ime in the event of W eekends and holidays , Shif ting bet ween berths , Strikes, Bad W eather and Br eakdowns

Weekends and holi days: If these are t o int errupt laytime, t he contract can be said to be on „SHEX‟ terms (Sundays and Holidays Excepted), or

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on FHEX terms (Fridays and Holidays Excepted) if in Moslem co untries, Should weekends and holidays count as laytime, the contr act can be said to be based on SHINC (Sundays and Holidays Inclusive) – FHI NC in Moslem countries. Normally a charterparty will specif y the actual time bef ore a holiday or a week end that lay time is t o be suspended – eg‟ f rom 1800 hours on the day preceding a holiday‟. If no such time is specif ied, latime is usually suspended f rom midnight on the day preceding a holiday. A charter part y will normally specif y the actual time of resumption of lay t ime f ollowing a holiday or weekend – eg 0700 hours Monday. If no such t ime is specif ied, laytime will usually recommence at 0001 hours on t he day f ollowing a holiday or weekend. If cargo work is per f ormed during an excepted period, laytime will not normally count, unless the contract allows it to – eg „time not to count during

weekends,

„unless

used‟.

Alternatively,

a

contract

may

emphasise that „tim e used during weekends is not to count, even if used‟. Occassionally, agreement is reached that „actual time used during weekends is t o count as laytime‟, or even „half time actually used to count‟, It may also be agreed that the period bet ween notice of readiness being tendered and the comm encement of layt ime may count as layt ime „if actually used‟.

Shifting betw een berths: It is common practice f or contract wording to permit loading / discharging at more than one berth or anchorage at each

port.

Consequent ly,

berths/anchorages

is

normally

time taken

spent to

be

shif ting f or

owners‟

bet ween account.

However, sho uld the agreed number of berths/anchorages be exceeded, it becomes reasonable that the shif ting time involved should count as layt ime, and that the expenses involved – eg towage and pilot age – should also be f or the account of the charterers.

Strikes: There is nearly always an expr ess clause in a cont ract to the eff ect that delays due to shore strikes ar e not to count as laytime.

Bad Weather : Clauses in a shipping contract ref erring to bad weather

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interruptions of layt ime at one time could be divided into t wo types – „weather days‟ and „days, weather perm itting‟. For many years it had been accepted that the f ormer expression f avour ed charter ers and the latter f avoured shipowner s. In case of „weather working days‟, laytim e does not count dur ing period of bad weather that interrupt loading or discharging, nor (and this is the important f actor) does laytime count when bad weather occurs dur ing a working day even if , had the weather been f ine, no attempt would have been m ade to work. „W eather working day‟ descr ib es a t ype of working day. It does not matter whether the vessel was actually working or not.

It f ollows, theref ore, that even if a

ship is not actually on the loading (or discharging) berth, f or example because it is occupied by another ship, if time has s tarted to run and bad weather occurs dur ing a working day, that time will not count against charterers as layt ime.

Take note of the word „working‟ day ( we will be studying this a litt le more deeply lat er in the lesson). A working day not only ref ers to a day when work normally takes place, it is also t hat part of the day when work is normally done in the port in question. If, theref ore, the wor d „working‟ is not qualif ied in any way, t he bad weather would have to occur dur ing the port working part of the day f or it to be deducted f rom the layt ime. Conversely, where t he charterparty reads „wor king day of 24 consecutive hour s‟ ( which is now m ore normal), then bad weather occurring at any time (once layt ime had started t o run) would be deduct ible even if the charterer had no intention of working during such a period.

In cases of „days, weather perm itting‟ it was understood until recently, that only working time actually interrupted by bad weat her would f ail to count as laytime. All this, however, was bef ore t he case of the „VORRAS‟ in 1982. That vessel was a tanker and the judges of the English Court of Appeal had to det ermine the meaning of the term ‟72 running hours, weather perm itting, Sundays and holidays included …. ‟, where the vessel was kept f rom a load ing berth f or some days owing to

196 Go to Index Page

bad weather. They held that bad weather at the time was such as to prevent t he loading of a vessel of the „VO RRAS‟ t ype and as such, layt ime should not count. In other words, that decision on a tanker has eff ectively eroded the long -held and sacr ed dist inct ion in the dry -cargo market between „weather working‟ and „weather permitting‟.

Frequently in moder n charterpart ies one will st ill encounter either the terms „weather working‟ or „weat her is permitt ing‟ , although under English law, at least, there is eff ectively now no dif f erence. However, both will probably r ef er in the same clause to „days of 24 consecutive hours‟, a similar expression to the „running hours‟ used in the case of the „VORRAS‟. The word „consecutive‟ is, in f act, extremely important, having evolved over ver y many years in order to avoid cost ly disputes.

W here the term „days of 24 consecutive hours‟ is incorporated into a charter part y‟s layt ime provisions – and t his is t he ter m used in almost all modern dry-cargo charter parties – it in eff ect means that a layt ime day will run continuously f or 24 hours each day, unless specif ically interrupt ed by some charterparty f actor such as a weekend or holiday, bad weat her, or a strike. It is of no consequence whether th e „working day‟ of a port is of less than 24 hours. The par ties to the contract have agreed, in ef f ect, to ignore port „working days‟ and to def ine a „layt ime day‟ as running cont inuously f or 24 hours, except f or any specif ied interruptions. Once the stude nt of dry-cargo layt ime can understand this point, the eff ect of interruptions on layt ime should ceases to be a m yst ery. Where the words ‟24 consecutive hours‟ do not appear, as occasionally happens by intent, although perhaps more often by mistake, variations in today‟s practices may arise. The term „weat her working day‟ on its own wit hout qualif ication is indeed af f ected by the number of hours actually worked in a port. Should bad weather occur outside working per iods in the normal, non - working and other wise idle time, laytime will not be af f ected. However, if bad weather occurs in normal working time, even if the vessel was idle at t he t ime, layt ime will be interrupted and the degree of interruption has to be reached by

197 Go to Index Page

apport ioning working time in a por t against a 24 hour day.

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Thus, and assuming port labour works a 12 hour day, f rom 0700 hours unt il 1900 hours : -

Laytime used

Day 1 : worked 0700/1900

=

1.0 day

=

24 hours

=

1.0 day

=

24 hours

0 hours

Day 2 : worked 0700/1900 rain

2200/2400

Day 3 : rain

0001/2400

=

0.0. day

=

Day 4 : rain

0700/1900

=

0.0 day

=

0 hours

=

0.5 day

=

12 hours

=

0.25 day

=

6 hours

=

0.75 day

=

18 hours

Day 5 : worked 0700 / 1300 rain

1300/1900

Day 6 : worked 0700 / 1000 rain

Day 7 : rain

1000 / 1900

0700 / 1000

worked 1000 / 1900

Since the case of the „VORRAS‟, the term „working days, whether permitting‟ should be taken to be the same as f or the above example, and the terms „weat he r working days of 24 hours‟ and „working days of 24 hours, weather permitting‟ ( i.e. without the all - important „conecutive‟) must also be treated in the same manner .

Breakdow ns: It is reasonable that if a vessel‟s gear is being used and it breaks down, layt ime should not continue dur ing the period of breakdown. It may be that, f or example, one crane out of f our has broken down and, in such a case, appor tionment of the degree of loss

199 Go to Index Page

must be carried out. In that relatively simple example, laytime would continue at a rate of 75% until the cr ane is repair ed.

There are, however, shore breakdowns, and it may be that the shipowners have knowingly or unwitt ingly assumed responsibilit y f or these in their contract. Ref er, f or example, to clause 4, line 33, of the AMW ELSH

charterparty

and

there

the

words

„beyond

Charterers‟

control‟ ef f ectively mean just t hat under English law. Thus a shor e crane breakdown that is judged to be „beyond charter ers‟ control‟ (i. e. Charterers do not own or other wise „control‟ the crane) s uch a break down will, theref ore, interrupt layt ime. Under Amer ican law it may be that the alternat ive view would be upheld, in shipowners‟ f avour, although that is not completely certain. The AMW ELSH is not a lone example of the inclusion of the words „bey ond Charterer s‟ control‟, there being several widely -used f orms containing this expression to similar ef f ect.

Cessation: Gener ally, dr y-cargo laytime ceases simultaneously with the terminat ion

of

cargo -operations

–

i.e.

as

loading

is

completed.

Occasionall y, however, special cargo work such as trimming, lashing or secur ing will be necessar y, the time f or which would reasonably be added to layt ime. Most charterparties ar e silent also on the eff ect on layt ime of time taken f or reading draf ts, perhaps an essen tial activit y bef ore bill of lading weight can be assessed. Usually, Charterers will recognize this act ivit y as essential and include same as layt ime, especially since it normally involves a relat ively short time. Ever y now and then, however, a draf t surve y is ser iously impeded by, f or example, bad weather, and t here might well be a dispute bet ween t he part ies unless the contract specif ies whether time devoted to ascertaining a vessel‟s draf t should count as layt ime or not.

Calculation:

This

can

usef ully

be

sub-divided

into

the

f ollowing

categories: -

200 Go to Index Page

Damages f or Detention Demurrage Despatch Averaging laytime But

bef ore

examining

each

of

these

f our

categories,

it

is

important at this stage to examine „t ime sheets‟.Armed with a statement of f acts and the relevant charterparty, the calculat or having reached this seventh stage‟ can move on to using a „time sheet‟ to compile the layt ime calculation. A t ime sheet is a document showing laytim e utilized, taking into account all the f actors mentioned in th is Lesson, bef ore arriving at a balance of dispatch money in f avour of charterers, or demurrage money in f avour of owners/operators. They ar e based on inf ormation supplied f rom the statement of f acts as interpreted by the relevant

layt ime

clauses

in

the

go ver ning

contract,

themselves

interpr eted by knowledge of the law relat ing to laytime. As in t he case of statement of f acts, BI MCO produce a standard t ime sheet f orm which is available f or use wor ldwide,and this is reproduced under Appendix 6 . 2.

Damages for Detention: If charterers f ail to abide by t he pr ovisions of a contract and, as a result, permitted layt ime is exceeded, shipowners are normally ent itled to reimbur sement f or their loss, if any. One method of reimbursement could be by claiming „damages f or detent ion‟, however

this

could

be

a

lengthy

and

cost ly

legal

exercise.

Consequently, most parties t o a shipping contract avoid the problem by negotiat ing a daily level of „liquidated damages‟ – i. e. „dem urrage‟ – f or the time spent in excess of agreed lay tim e.

Demurrage: W hen all perm itted laytime is used bef ore the completion of cargo operations, and the part ies to a contract have f oreseen this possibilit y, it is usual that a gover ning contract will provide f or demurrage to be paid to the shipowners. The amount of demurrage is negotiated with the contract and is usually described as „$ … per day‟

201 Go to Index Page

or pro rat a f or part of a day. (Ver y occasionally demurrage might be descr ibed as „$ x cents per ton‟ but in such a case it is vit al t o establish whether the „t on ‟ ref ers to a summer deadweight tonnage of the ship involved, or „per car go ton‟, or „per registered ton‟, and whether metric or long, gross or nett). Usually address commissions and brokerages are deduct ible f rom demurrage payment s, just as in t he case of f reight or

deadf reight

but

this

has

to

be

clear ly

stat ed

in

the

commission/br okerage clause(s).

Demurrage is intended to ref lect the daily r unning cost of a vessel, including port bunker consum ption, and where applicable, a reasonable prof it level. Shipp ing being a f ree market, however, and exposed to market forces and necessities, there may be occasions when shipowners accept low or negotiate high demurrage rates. Once layt ime has been f ully used, demurrage should normally run continuously, night and day, weekend and working per iod, with no interrupt ions until cargo work is completed unless the contract expr essly provides ot her wise –eg‟ shif ting time f rom anchorage to berth not to count as layt ime or as time on demurrage‟. Normally, however, layt ime interr uptions such as bad weather, weekends and holidays, will not interf ere wit h demurrage time, although breakdowns on a vessel affecting discharge will interrupt demurrage time. Given these except ions, it can usually be said that the well-known

shipping

expre ssion;

„once

on

demurrage,

always

on

demurrage‟ means what it says.

Despatch: It is ver y of ten agreed t hat if a vessel completes cargo operat ions wit hin the available laytime, the charterer will be rewarded by the payment of dispatch money, which is normal ly set at half the daily rate of demurrage.It should be borne in m ind, however, that a ver y f ew charterers – eg certain Chinese Charterers – negotiate that daily dispatch is the same as daily demur rage, whilst f or vessels that normally m ight except a f ast turn-round in port –eg ro-ro ships, car carriers, or coasters – it is not at all unusual f or the contract to specif y „f ree

despatch‟

–

i.e.

no

dispatch

at

all.However,

no

addr ess

202 Go to Index Page

commissions or br okerages are payable on dispatch m oney.W here dispatch is payable, it can be sub - divided as being payable on all time saved, or on working time, or layt ime saved.

It is perhaps easier to understand dispat ch on „all t imes saved‟ by the used of an example.

The „HERON‟ completes loading at 1200 hours on a Fr iday, her charterpart y being „per weather working day of 24 consecutive hours, Saturdays, Sundays and Holidays excepted, even if used‟. Thus laytime would be suspended in normal circumstances f rom Friday 2400 hours t hrough to Monday 0001 hours.At 1200 hours on Fr iday there are 3 days of layt ime r emaining and, since the term „all t ime saved‟ means exact ly what it says, the calculat or of layt ime has to base f igures on the hypothetical case that “if the vessel had not completed loading on the Friday at 1200 hours, but ha d remained in port working cargo when would layt ime have been f ully used”?

Despatch would thus be calculated in the following fashion:-

„ All Times Saved‟

„laytime‟

Friday

1200/2400 hours

12 hours

Saturday

0000 / 2400

0 hours

Sunday

0000 / 2400

0 hours

Monday

0000 / 2400

24 hours

Tuesday

0000 / 2400

24 hours

W ednesday

0000 / 1200

12 hours

5 days

3 days

Allowing f or the weekend that has been „saved‟ by t he charterers due to their f urnishing bef ore the expir y of permitted layt ime, t hey have in eff ect, „saved‟ the shipowner some 5 days and, under „all

203 Go to Index Page

time saved‟ terms, are thus ent itled to 5 days dispatch.

Using the same exam ple, on the basis of „working tim e‟ or „laytime saved‟, only the 3 remaining days of laytime would apply as dispatch, despite weekends or holidays or bad weather or any other f actor occurring once the ship had departed.

The question remains, however, is „working time saved‟ the same as „layt ime saved‟? W ith laytime described as „a day of 24 consecutive hours‟ it will be the sam e. Other wise, if one is involved in apportioning „working time‟ in the manner shown f ewer than 5.4 above, then dispatch should be apport ioned in the same manner.

You will readily see that „despatch on all time saved‟ f avour s the charterer whilst „layt ime saved‟ or „working time saved‟ is better f or the owner; the „f airness‟ of one ver sus the other is a per petual debate. The owners naturally say that as layt ime excepts certain periods like Sundays and holidays, then dispatch should be on the same basis. The charterer counters this by arguing that a ship is earning all the t ime she is at sea regar dless of which day of the week it is so t hat getting the ship to sea t hat much quicker should reward the charterer f or every day without exception.

One f inal word about dispatch. It should be borne in mind that some markets (eg bulk sugar) are based on layt ime f ar in excess of the time actually required to perf orm cargo operations. It is, theref ore, important f or shipowners to t ake this into account whe n negotiat ing business and t o ref lect the „saved‟ t ime as a „despach expense‟ in a voyag e estimate.

Averaging La ytime : This is an overall title which should in realit y be sub-divided into Normal (or „non reversible‟) layt ime ,Reversible and Average

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Normal or Non-reversible Laytime : If nothing is specif ically mentioned in t he contract,

and where loading

and discharging port layt ime

allowances are separeately assessed, it can be t aken that layt ime is „normal‟ or „non -rever sible‟. The layt ime f or loading ort(s ) and f or discharging port(s) are assessed entirely separately and it is possible even

to

calculat e,

claim,

dispatch/demurrage sums

negotiate

and

bef ore even a

settle vessel

the

load

port(s)

has r eached

her

discharge port(s).

Reversible

Laytime :

W here

allo wance

f or

both

the

loading

and

discharging ports ar e added and calculat ed together. Eit her the contract may openly be on „r eversible‟ terms wit hout actually stat ing so – eg 7 days, „all purposes‟, or ‟16 total days‟ – or there may be an express clause giving the charterers the r ight or the option to apply reversible conditions if they so wish – in other wor ds, if they calculate it to be in their f avour to do so. Thus any laytime saved

f rom the loading ports

can be carr ied f or ward and added to layt ime allow ed at the port(s) of discharge.

Average Laytime : Arises where separ ate calculat ions are per f ormed f or the loading and f or the discharging ports, with the f inal result s f or each being combined in order to assess what is f inally due – eg 2 days demurrage at load port would be cancelled out by 2 days dispatch at discharge port, even though the daily value of demurrage may be t wice that of dispatch. At f irst sight it may appear there is no dif f erence bet ween the application of reversible and aver age layt ime. In f act, dif f erences can ar ise and, with the sam e basic f acts, it is possible to reach three dif f erent results by applying each of the above alternatives.

Laytime Definitions: Appendix 6:5 contains what is known as „The Laytime Def init ions 1980‟, in which lay t ime terms have been def ined by a group of dist inuguished internat ional shipping pract itioners. It may be f ound usef ul in everyday laytime calculat ing. One word of warning, however.

The

def init ions

relat e

to

international

practice

and

not

205 Go to Index Page

necessarily to a par ticular code of law. Thus there may be slight but signif icant

dif f erences

bet ween

the

def initions

appearing

in

this

document f rom legal pract ice in a part icular countr y – eg def inition 9 is dif f erent f rom the English law calculat ions.

NB : Another word of warning : This lesson is designed to provide you with an introduction to this most complicated of subjects. This lesson will not, however, have made you an expert. That can only come with exper ience (some bitter) and by extensive reading. There are prob abl y more aritrat ion and court cases connect ed with „t ime counting‟ than any other single aspect of charterparties. O ne needs to keep up to date by reading newspaper and magazine articles. For example, in addit ion to the (many say per verse) judgement in th e case of the „VORRAS‟ ref erred to earlier, an apparently simple dispute r ecent ly went all the way to the English House of Lords. This concer ned the „KYZIKOS‟ which had been f ixed with time com mencing to count „wheather in port or not‟, „whether in berth or not ‟, „whether in f ee prat ique or not‟ and „whether cleared at the Customs House or not‟. She had to wait f or the berth to become f ree so time started to count but when the berth became available, the ship was unable to move immediately because of f og. T he charterers argued that bad weather impeding navigation was a ship‟s concern so t ime should not count between calling the ship ont o the berth and her actually getting there including the delay caused by the f og. The owners contended that had the charter e rs not been tardy in providing a ready berth, the f og would not have caused any trouble. In the event their Lordships

r uled

in

charterer ‟s

f avour.

By

no

means

ever y

commercial/shipping person agreed wit h that decision.

Self Assessment Questions

1.

W hat events can interrupt layt ime counting?

2.

Does t ime cont inue to count if shore cranes break down?

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3.

W hat is (a) demurrage and (b) dispatch?

4.

W hat is meant by „Reversible Layt ime?

Self Assessment Questions

Attempt the f ollowing and check your answers f ro m the text of Chapters Nine and Ten of “CARGOES”: -

1.

W hat is the dif f erence bet ween cement and cement clinker?

2.

W hat is D.R.I. and what are the problems associated wit h its carriage?

3.

On what conditions would a shipowner probably insist bef ore agreeing to carr y f erro -silicon?

Test Question

Having completed lesson six attempt the f ollowing and submit your answer to your Cour se Tutor.

Set out a detailed Time Sheet and calculate Demurage or Despatch f rom the f ollowing inf ormation contained in a St atement of Facts.

M.V. „OSPERY‟

Arrived

0600 Thursday 9 Februar y

NOR tendered

0900 Thursday 9 Februar y

Holds passed by Inspector

1230 Thursday 9 Februar y

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NOR accepted

1230 Thursday 9 Februar y

Loading commenced

0700 Fr iday 10 Febr uar y

Loading completed

1515 W ednesday 15 Februar y

Sailed

0600 Thursday 16 Februar y

Cargo loaded 22,000 metric tons.

C/P stipulates: „Layt ime to commence at 1300 if notice of readiness given bef ore Noon, at 0700 next working day if given af ter Noon : notice to be given in or dinary off ice ho urs‟. „Layt ime shall not commence to count bef ore holds are passed as clean by Shippers‟ Inspector.

„Cargo to be loaded at the rat e of 5000 metric tons per weat her working day of 24 consecutive hours‟. „Time f rom 1700 Fr iday or the day preceding a holiday t o 0800 Monday or next working day not to count unless used (but only actual t ime used t o count) unless vessel alr ead y on demurrage‟.„Dem urrage US $5000 per day and pro rata / Despatch at half demurrage rate on working time saved‟.

Normal port working hours at 0700 – 1700 Monday to Friday. On Tuesday 14 Febr uary rain stopped all work in the port f rom 0700 t o 1130. The ship worked f rom 07.00 to noon on Saturday 11 Februar y, but other wise was not worked during other excepted periods. Repairs to vessel‟s auxiliar y engine delayed sailing af ter completion of loading.

(NB : Appendix 6:3 will help convert decimal parts of a day to hours and minutes, and vice versa)

Notice of Readi ness

To Messrs ______________________

Notice of Readiness

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Please note t hat the ship _____ _______________________ nationality : ______________

call

sign

:

__________________

has

arrived

at

____________ on _______ at _______ hours, and in every respect ready to commence

loading/discharging

a

cargo

of

_________________,

in

accordance with the terms and conditions of the Charter Party / Booking Note dat ed __________.

Time is to count as per the terms and conditions of the above mentioned Charter Party / Booking Note.

Please conf irm receipt of this Notice of Readiness by signing and returning the co py at tached.

Place : __________ Date : _____________ hours.

___________________ Master/ Agent

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Laytime Definitions 1980

The f ollowing def initions are widely accepted by the trade, in the absence of overriding condit ions to the contrar y. They may be adop t ed by the parties to a charter part y in order to avoid differences in interpr etation. For exam ple, in the pr esent state of the law, judgments of the Court do not equate with the tr adit ional understanding in t he market as set down in Numbers 17 and 18. The agreem ent of the parties, dur ing Chart erpart y negotiat ions, to adopt t hose t wo def init ions of interpretation would override any common law judgment.

List of Definitions

1.

“Port”

17. “W eather working day of 24

2.

“Saf eport”

3.

“Berth”

18. “W eather permitting”

4.

“Saf e berth”

19. “Excepted”

5.

“Reachable on arrival” or

20. “Unless used”

“always accessible”

21. “To average”

6.

“Laytime”

22. “Reversible”

7.

“Customar y dispatch

23. “Notice of readiness”

8.

“Per hatch per day”

24. “In wr iting”

9.

“Per working hatch per day” or

25. “Time lost waiting for berth to

consecutive hours”

“per workable hatch per day”

count as loading/discharging

10. “As f ast as the vessel can receive / deliver”

time” or “as layt ime” 26. “W hether in berth or not”

11. “Day”

or “berth no berth”

12. “Clear day” or “Clear days”

27. “Demurrage”

13. “Holiday”

28. “On demurrage”

14. “Working days”

29. “Despatch money” or “dispatch”

15. “Running days” or “consecutive

30. “All time saved”

days”

31. “All working time saved” or

210 Go to Index Page

16. “W eather working day”

“all layt ime saved”

Definitions

1.

“Port” – means an area wit hin which ships are loaded with and/or discharged of cargo and includes the usual places where ships wait f or their turn or are ordered or obliged to wait f or their turn no matter t he distance f rom that ar ea. If the word “Port” is not used, but the port is (or is to be) identif ied by its name, this def init ion shall st ill apply.

2.

“Safe port” – means a port which, during the relevant period of time, the ship can reach, enter, remain at and depart f rom without, in t he absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and se amanship.

3.

“Berth”

- means t he specif ic place where the ship is to load

and/or discharge.

4.

“Safe berth” – means a berth which, during the r elevant period of time, the ship can reach, remain at and depart f rom without, in the absence of some abnormal occur rence, being exposed to danger

which

cannot

be

avoided

by

good

navigation

and

seamanship.

*5.

“Reachable on arri val” or “alw ays accessibl e” – menas that the charterer undertakes that when the ship arrives at the port there will be a loading/discharging berth f or her to which she can proceed without delay.

6.

“Laytime” – means the period of time agreed be t ween the parties during which the owner will make and keep the ship available f or loading / discharging without payment addit ional to the f reight.

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7.

“Cust omary dispat ch” – means that the charterer must load and/or discharge as f ast as is possible in the circumstances prevailing at the tim e of loading or discharging.

8

“Per hat ch per day ” – means that layt ime is to be calculat ed by

multiplying the agreed daily rate per hatch of loading/discharging the cargo by the number of the ship‟s hatches and dividing the quantit y of cargo by the resulting sum. Thus :

Laytime

=

Quantit y of Cargo ---------------------------------------

= Days

Daily Rate x Num ber of Hatches

A

hatch

that

is

capable

of

being

worked

by

t wo

gangs

simultaneously shall be counted as t wo hatches.

9.

“Per w orking hatch per day” or “per w orkable hatch per day” means that layt ime is to be calculated by dividing the quantity of cargo in the hold with the largest quantit y by the result of multiplying the agreed daily rate per working or workable hatch by the number of hatches ser ving that hold.

Thus Laytime

= Quantit y of Cargo -------------------------------

= Days

Daily Rate per hatch x Number of Hatches Ser ving that hold

A

hatch

that

is

capable

of

being

worked

by

tw o

gangs

simultaneously shall be counted as to hatches.

10.

“ As fast as the vessel can recei ve/ deliver”

- means that the

212 Go to Index Page

layt ime is a per iod of time to be calculated by ref erence to the maximum rate at which the ship in f ull working order is capable of loading/discharging the cargo.

11.

“Day” – means a continuous per iod of 24 hours which, unless the context., other wise requires, runs f rom midnight to midnight.

12.

“Clear day” or “clear da ys” – means t hat the day on which the notice is given and the day on w hich the notice expires are not included in the notice period.

13.

“Holida y” – means a day of the week or part(s) ther eof on which cargo

work

on

the

ship

would

nor mally

take

place

but

is

suspended at the place of loading/discharging by reason of the local law or the local practice.

14.

“Working da ys” – means days or part (s) thereof which ar e not expressly excluded f rom layt ime by the charterpart y and which are not holidays.

15.

“Running days” or “consecuti ve days” – means days which f ollow one immediat ely af ter the other.

16.

“Weather w orking day” – means a working day or pat of a working day dur ing which it is or, if the vessel is st ill waiting f or her turn, it would be possible t o load/ dischage the cargo wit hout interf erence due to the weat her. If such in terf erence occurs (or would have occurred if work had been in progress), there shall be excluded f orm the layt ime a period calculated by ref erence to the ratio which the dur ation of the interf erence bears to the time which would have or could have been wor ked but f or the interf erence

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17.

“Weather w orking day of 24 consecutive hours” – m eans a working day or part of a working day of 24 hours during which it is or, if the ship is still wait ing f or her turn, it would be possible to load/discharge the cargo wit hout interf erence due to the weather. If such interf erence occurs (or would have occurred if work had been in pr ogress) there shall be excluded f rom the laytim e the period

during

which

the

weather

int erf ered

or

would

have

interf ered with the work.

18.

“Weathering

permitting”

–

means

t hat

time

during

which

weather prevents working shall ot count as layt ime.

19.

”Excepted” – means that the specified days do not count as laytime even if loading or discharging is done on them.

20.

“Unless used” – means that if work is carried out during the expected days the actual hours of work only count as layt ime.

21.

“To average” – m eans that separate calculations are t o be made f or loading and discharging and any t im e saved in one oper ation is to be set against any excess time used in the other.

22.

“Reversible” – means 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.

24

“In w riting” – means, in relation to a notice of readiness, a notice visible expressed in any mode of reproducing words and includes cable, teleg ram and telex.

25

“Time lost w aiting for berth to count as loading/di scharging time” or” laytime” – means that if the main reason why a notice

214 Go to Index Page

of readiness cannot be given is that there is no loading / discharging berth available to the ship the layt ime will commence to run when the ship starts to wait f or a berth and will continue to run, unless pr eviously exhau sted, unt il the ship stops waiting. The laytime except ions apply to the wait ing time as if the ship was at the loading/discharging berth provided the ship is not already on demurrage. W hen the waiting time ends t ime ceases to count and restarts when the sh ip reaches the loading/discharging berth subject to the giving of a notice of readiness if one is required by the char terparty and to any notice time if provided f or in charterpart y, unless the ship is by then on demurrage.

26

Whether in berth or not” or “ berth no berth” – means that if the location named f or loading/discharging is a berth and if the berth is not immediately, accessible t o the ship a notice of readiness can be given when the ship has arrived at the port in which the berth is sit uated.

27

“Demurrage” – means the money payable to the owner f or delay f or

which

the

owner

is

not

responsible

in

loading

and/or

discharging af ter the laytim e has expir ed.

28

“On demurrage” or “dispatch” – means money payable by the owner if the ship completes loading or discharging bef ore the layt ime has expired.

29

“ All time saved” – means t ime saved to the ship f rom the completion to loading/discharging to the expir y of the layt ime including periods excepted f rom the laytime.

30

Al l w orking time saved” or “all layti m e saved” – means the time saved to the ship f rom the completion of loading/discharging to the expir y of the layt ime excluding any not ice time and periods

215 Go to Index Page

excepted f rom the layt ime.

* The def init ion should be used select ively. For example in Numbers 5 and 26 the words “always accessible” and “immediately accessible” might, in the trend of recent judgments, be interpreted as m eaning that although a berth is f ree any delay to the vessel in reaching it (bad weather, shortage of pilots, strikes of tugmen) would be the risk of charterers (not the tr adit ional market approach).

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CH APTER- 7

VOY AGE ESTIM ATI NG

Voyage est imating is an important skill f or all persons engaged in the activit y of dry- cargo chartering, whether f rom an owner‟s or a charterer ‟s perspect ive, eve n f or competit ive br okers.It is common these days f or chart erers to undertake contracts, to relet tonnage and to take in vessels not owned by them, on voyage or on timecharter, whereas competit ive brokers need the abilit y to evaluate potent ial business, to enable them to present outwardly unattractive cargoes and vessels in their true light. So it is not only those closely associated wit h the control of tonnage that need the knowledge abilit y this lesson sets out to help you acquire.

The f irst essent ial in voyage estimat ing is to examine the subject heading itself . Despite the ref erence to „voyage‟, voyage est imating will inevitably include the realistic valuat ion of timecharter trips, since these are rarely as f inancially straightf orward as they f irst might appear. The work „estim ate‟ speaks f or itself and, whilst we have no wish to promote inaccuracy, it is necessar y to point out that ships do not run like clockork and it is, theref ore, impossible to calculate to perf ection. That is not to suggest that one‟ s aim should be less than tot al accuracy, and it is essential to do best towards achieving a realistic appraisal of the potent ial worth of any pr oposed vent ure.Vessel f ixed on FIOT terms with relevant clauses reading

USNH (United States, North of Cape Hatt eras) – say Hampton Roads – and Rotterdam, lasts for 11 days in good weather. Under this relatively simple

system,

representative

voyages

can

be

calculated

and

memorized. Provided you remember to correct the time allowed in accordance with various speeds, this should make the task much easier than otherwise might be the case.Having established a method of calculating the length of a sea -passage, we can next consider the basic

217 Go to Index Page

elements of a voyage estimate and produce a „skeleton‟ on which to hang the „flesh‟ of any particular calculation. But before we start on examining the make-up of an estimate it is as well to determine just how it will be produced.

Computerisation As in many walks of life, there are now some very sophisticated and „user -friendly‟ voyage estimating programmes available for general use, or even astute colleagues who can use their computing talents to design personalized programmes „in house‟. Nevertheless, it is vital that those setting out diligently to learn about voyage estimating learn the basics and that is made very much easier by starting with handproduced calculations prepared by no more sophisticated a method than brainpower, pencil and paper, aided where necessary by pocket calculator; after all, that is how navigators are trained. The aim should be for students of voyage estimating to build up confidence by the knowledge that if necessary and the computer „goes down‟, a relatively accurate voyage estimate can be hand -prouced in reasonable time.

Estimate Form It will help you cons iderably in producing consistent estimates to use a standard estimate form f or each calculation. Appendix 7:1 provides a sample from containing all the necessary elements, and it may be that you will discover that form provides you with all that is required for successful voyage estimating throughout your career. Not only that, but the form neatly sub -divides into the five stages of voyage estimating:-

Itinerary

1.

CARGO QUANTITY

2.

EXPENSES

3.

INCOME

4.

RESULT

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A voyage estimate consists broadly of income minus expend iture, like any profit and loss account. W hich form of procedure you use is, however, a matter of personal preference, but all can be classif ied under the heading of „method‟. It is easy to reduce an estimate to the back of an envelope and, indeed, there m ay be isolated occasions when speed of negotiating will make this a necessity. But if all the various elements are set out in front of you, it is far more difficult to overlook the odd, important item, which can make all the difference between profit and loss. So whether you intend to undertake voyage estimates regularly or simply for the initial purposes of this course, select a suitable form and use it consistently.Usually is an Institute examination involving voyage estimating, a blank form will be provi ded for a candidate‟s use. However an estimate can quite, adequately be made on plan paper. The vital thing is to acquire „method‟. In this Lesson, therefore, we will be following the stages listed above and, indeed, the later examples are used on that system.

Stage 1: Itinerary

This first stage of any voyage estimate maps out the proposed employment and can itself be sub -divided into :-

Voyage plan

Duration

Bunker Consumption

This will enable you to see at a glance just what is to be estimated, and can be called the „itinerary‟.

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Of course you will need to know details about the vessel itself, its deadweight and drafts, cubic capacities and speed and consumptions of fuel oil and diesel oil. Perhaps more, depending upon the complexity of the calculation that is required or the commodity to be carried.The most important point is always to work in the same way, so as to avoid confusion, and it is recommended that the commencement of a voyage should always be from the place where the vessel completes discharge of her previous cargo, allowing for the time and costs against the previous voyage, allowing for the time and costs spent leaving the last discharge port to be costed against the previous voyage. In this manner, the first part of the voyage will be a ballas t leg, commencing with dropping the outward port pilot, unless the shipowner or operator is fortunate enough to find a cargo from the port in which the vessel has just discharged. A few estimators commence their estimates at a loading port and follow the laden passage with a theoretical ballast leg back to the same loading port. However, since tramp dry -cargo vessels rarely proceed again on the same voyage, this is hardly a practical alternative to the more logical method of commencing from where a vessel i n open and seeking next employment – i.e. upon completion of the previous employment.Turning once again to the blank sample estimating form and with distance tables to hand, it is not difficult to estimate the length of ballast and laden voyage legs, to pl an out the sea-time and routes of the estimates, and to fill in the appropriate boxes.W hen attention is directed at port times, however, immediate difficulties are encountered. Unlike tankers, dry-cargo voyages vary enormously in their port time conent. The difficulty is that often one cannot calculate port time until cargo quantity is known, and cargo quantity cannot be calculated until an assessment is made of the bunker quantity remaining on board at strategic points in the proposed voyage, and this cann ot be properly calculated until voyage duration is assessed. Fortunately, even when working all cargo gear, dry -cargo vessels normally consume very small quantities of bunkers in port and so port bunker consumption can largely be overlooked for the purposes of cargo quantity estimation. Nevertheless, it may sometimes be necessary temporarily to postpone completion of the itinerary section of an estimate until the cargo calculation in Stage 2 has been

220 Go to Index Page

concluded.Be very careful also over the route selected. S ometimes there are alternatives and only a marginal difference will till the balance in favour of one route or another. Bad weather at certain times of the year; high canal tolls on one route; cheaper bunkers on another. All factors must be considered. As an example, consider for a moment the alternatives for an estimator of a vessel proceeding from the United States Gulf (say from New Orieans) to Singapore.

Alternative 1: Via Gibraltar & the Suze Canal

11461 miles

Alternative 2: Via Panama Canal

11905 miles

Alternative 3: Via Cape of Good Hope

12951 miles

On the f ace of it, Alternat ive 1 seems t he better selection. But this is to over look the cost of canal tolls and allowances f or canal transit delay in com parison with the longer but probably cheaper C ape of Good Hope rout e. But is t ime of the essence? Is it necessar y to complete the voyage as quickly as possible? In which case the estimator may have litt le choice but to proceed by the shor test, more expensive route.

Speed may, in f act, be an important f actor. In some cases it may be more cost-ef f ective to proceed more slowly and to economise on bunkers. Particular ly might this be so where bunkers are expensive and f reight rates are low, or in coastal estimating, where voyages ar e f requently dependent on tidal depths. There may be little point in steaming f ull speed, only to have to await a suitable tide f or some hours f ollowing arrival of f port. On the other hand if an early arr ival of f a port means the master can tender not ice of readiness that much soo ner, it may st ill be more cost advantageous to proceed at f ull speed.

Canal transit duration must also be calculated. Alt hough usually without incident, occasionally the transit of vessels through canals is seriously disr upted, and although there is usuall y little notice of such events,

sometimes

it

is

common

knowledge

that

delay

can

be

221 Go to Index Page

anticipated and their eff ect should be tak en int o account.

Multiple ports wher e a vessel has to call at, say several loading and/or discharging ports, means extra time shoul d be allowed f or delays in entering and leaving each port.

Bunkering calls can on occasion be lengthy, but generally it is appropr iate to allow half an extra day (plus idle port consumption of bunkers) in an estiame.

Bad Weather does not normally affect the drafting of a voyage estimate unless it is certain from the nature of the trade that delays will be experienced, either at sea or in port.

Bunker Consumption W hen all distances and t imes are calculated, it should be possible t o calculate estim ated bunker consumpt ion bot h at sea and in port, and to conclude this stage o the estimate, although allowance must also be made for a vessel‟s bunker consumption through the confined waters of a canal, as this may bear little resemblance to normal consumption whilst steaming in un-obstructed waters at sea.

Stage 2 : Cargo Quantit y As we have seen, cargo quantit y may substant ially aff ect time spent in port by a dry cargo vessel, and it may f irst be necessar y to calculat e this bef ore being able to enter port time in Stage 1 above.O n the assumption that there are no dr af t lim itations anywhere on a voyage, it may be sufficient jus to know a vessel‟s available deadweight in order to assess cargo capacit y, other wise adjustments must be made in accordance with available dr af t. From the eventual available t onnage must be deducted the vessel‟s constant weights (consist ing of stores, f resh water lubricants, spares – even the weight of the crew) . A vessel‟s constant weight is rar ely critical but must be accounted for. (For vessel of around 15/25,000 tonnes sdwt it will be about 250/350 tonnes and, f or vessels in excess of , say 35,000 tonnes, some 4/500 tonnes).The other important deduct ion is that of

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bunkers remaining on board a vessel, and here it may be necessar y to obtain appropr iate data f rom the vessel‟s managers or f rom her Master. Bunker calculat ion can be extremely complicated and we will examine this in mor e detail later in this Lesson. Suf ice at this stage of the Lesson to be awar e of bunkers constituting a major consider ation.In the meantime, let us assume we have r eached a suitable f igure f or deadweight cargo capacit y. Regrettably this is not the end of the problem. Our vessel may be able to lif t the weight of „X‟ amount of tones of cargo, but has she the space to contai n it? Thus is t he point at which the importance of cargo stowage f actors we f irst met in Lesson Two enters into our considerat ion.In theory, by dividing a vessels‟ grain or her bale capacit y by the stowage f actor of the cargo to be loaded, we reach volume capacit y. This maximum amount of cargo that can be carried

within

available

cargo

compartment

space

must

then

be

compared wit h the available cargo weight. The smaller quantit y is the restriction with which the vessel‟s operators must comply. It is normally the available deaweight which proves to be the lim iting f actor but, occasionally, a high stowing cargo such as coke or certain agricult ural products (see exam ples in „CARGOES‟) will restrict tonnage intake. Also it may be necessar y to load sever al grades or t ypes of cargoes, each requir ing a separate cargo compartment and possibly causing, theref ore, an inability t o use all a ship‟s cargo space. The voyage estimate f orm provides space f or draf t, deadweight and cubic capacit y calculations under t he appr opri ate heading.Finally, it may be that a vessel cannot be laden to her f ull available draf t at the port of loading, because of the necessit y of crossing restricted loading zones en rout e to the port(s) of discharge. A vessel cannot enter a wint er line, f or example, when loaded to summer marks and thereby submer ging winter f reeboard. The „cargo calculat ions‟ sect ion of the „estimat e f orm‟ makes allowance f or loadline considerations and f or deduct ions f rom the appropr iate deadweight tonnage of bunker quantit y re maining on board, and f or constant weights. However, knowledge of loadline zones is essent ial. Maps can be obtained showing these, and the subject is covered in Lesson Nine of this course.

223 Go to Index Page

Time in Port W hich brings us back to Stage 1 since, knowing the car go quantit y as well as the loading/discharging rates per day of the proposed cargo, it is now possible to deduce port time with some accuracy, to enter the inf ormation in the appropr iate boxes of the estimate f orm, and to calculate port bunker consumption. However, as always it seems, there may be f urther pit f alls to avoid. As we have seen f rom the previous Lesson on Laytim e, weekends and holidays will f requently not count as layt ime in dr y -cargo shipping and, in f act, dry cargo ships are of ten lef t idle an d unworked dur ing such periods. Moreover ther e may be weather delays, the ef f ect of which it may be reasonable to ant icipate and to allow f or by an adjustment in expected port time.

Let us take an example :

„m.v. “KI NGFISHER” is to load 35,000 tonnes of car go, the c/p loading rate being 2,500 tonnes per weather working day of 24 consecutive hours, Saturdays Sundays and Holidays except ed.

By dividing 35,000 by 2,500 we calculate that the loading time allowed to charterer s is 14 days. This calculation, however , is to be conducted on the basis of „Satshex‟ terms.

Thus, if we exclude Saturdays, Sundays and Holidays we are lef t with approximately a f ive day week, and the „real‟ permitted layt ime approaches three weeks. If allowances are made also f or notice time a nd f or some other inter ruptions, it will become realist ic to allow some 20/21 days in por t f or loading.

If loading is to take place over some im portant public holiday eg Christmas and New Year, or in Moslem Countr ies, dur ing the f asting period of Ramadam, even mor e port time should be allowed.

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Alternatively, if allowed time is described as „shinc‟ not „satshex‟, less allowance will be needed, perhaps 15 days maximum. Even with „shinc‟ terms, however, there will be inevitable delays on arrival, f or shif ting, waiting f or tides, etc.‟

As a rule of thumb there is a „magic f ormula‟ that can be used to calculate overall port time in normal „shex/f hex‟ circumstances and that is to mult iply the original f igure by a f actor of 1.4. Thus, taking the „KI NGFISHER‟, 35,00 0 t onnes divided by 2,500 = 14 days x „1.4‟ = 20 days, and that latter f igure should be enter ed in the est imate „box‟ under loading port time, on which loading port bunker consumpt ion should be based.

225 Go to Index Page

This „system‟ is perf ectly adequate f or most occasions and, in general, the full time allowance should be placed in our estimate form and allowance for demurrage and/or dispatch should be ignored. Unfortunately, very little is straightforward in shipping, and different criteria have to be used for what are termed „demurrage‟ or „despatch‟ trades.

Demurrage Trades Ever y now and ten a cargo is marketed where those involved are f ully aware that layt ime will be exceeded and demurrage will accrue. In such a case, f ull estimated port time should be calculated, inclu ding f ull allowance f or weekends and holidays occurring during laytime. In this way the realist ic overall voyage time will be recorded in the est imate and, f rom an assessment of f ull „lay‟ time (plus allowances f or weekends and holidays an shown above) dem urrage ca be calculated. This anticipated „demur rage income‟ should then be incorporated wit h „f reight income‟ should then be incorpor ated with „f reight income‟ (per haps being entered in our voyage estim ate f orm in the second line of the „gross f reight‟ bo x).To this should be applied commission (as f or freight) whereaf ter the nett amount should be added to nett f reight.

Despatch Trades T here are certain trades – bulk sugar is one – wher e it is well known in the dr y -cargo f reight market that ships habitually load (or discharge) well within their perm itted layt ime and, indeed, Shippers (or receivers) expect to earn considerable dispatch money. In order to ensure that an est imate f or a „despatch trade‟ shows a r ealistic result, the actual expected port time sho uld be entered in the itiner ary section, with the amount calculated to be payable f or dispatch entered as an expense.

Stage 3: Expenses This third stage is where all the var ious costs that can be f oreseen ar e collated and analysed.The voyage est imating f or m in Appendix 7:1 list s various headings, and here will be f ound spaces f or obvious costs such as port disbursem ents and canal tolls, as well as

226 Go to Index Page

the not so obvious regarding extra insurance premiums, stevedor ing costs, etc. Perhaps the major cost item, how ever, will be f ound to be that of bunkers.

Bunkers. Bunkering a vessel is an art, and no t wo voyages are likely to be exact ly the same, due to seasonal changes, price f luct uation, and the need to balance f uel prices against f reight income. It can sometimes be more f inancially benef icial to take less cargo in a port where bunkers are cheap and to f ill up with bunkers instead. One must also take into considerat ion lim itat ions imposed by loadlines against the need or desirabilit y to take bunkers enroute.At f ir st glance, it may seem advant ageous to call f requently at bunkering ports to shorten the intermediate steaming time and bunker quantity requirements, thereby maximizing cargo intake. But no shipowner willing ly put s into port unless absolutely necessar y, be cause of the extra time, risk and expense involved. „A‟ ship earns money only when laden and at sea‟ is a ver y accurat e maxim.However, in this era of wildly f luctuat ing bunker prices, of ten purely as a result of unexpected polit ical decisions rather than because of discernable economic t rends, bunker programming is not the straightf orward case one might other wise expect. The best advice in practice is to obtain repr esentative pr ices an route if time permits, other wise to base the estimate on the pr ice and q uantit y required at the loading port and to treat cheaper bunkers discovered later in the voyage as a bonus.W here a vessel is likely to spend some time in port where bunkers are dif f icult and/or expensive to obtain, it is essent ial to preplan your strateg y and t o arrive with suff icient quantit y on board so as to avoid the necessit y t o ref uel.Saf ety sur plus quant it y will be needed and the amount required f or this purpose will need to be judged by exper ience and knowledge of the condit ions likely t o be encountered and the availabilit y enroute of alternative bunker supplies.

Port charges cannot easily be assessed without experience, and most companies

will

keep

recor ds

of

previous

calls

to

assist

them.

Organisations such as BI MCO provide valuable inf ormation on many

227 Go to Index Page

ports, but probably the most reliable method is to contact an agent in the port in question, asking f or a prof roma disbursement account based on the relevant pert inent data of your vessel. Ethically, of course such an enquir y be direct ed to the agent which will be appointed if that (or other) business is successf ully concluded.

Stage 4 : Income Knowing your cargo quantit y, the f reight rate and total commissions and br okerages, it is a relatively small st ep to calculating nett f reight, adding demurrag e wher e this is applicable – all leading to …..

Stage 5 : Result By the application of Expenditure to Income and taking into account the total number of days shown in the I tinerar y, a Result in the f orm of the Gross Daily can be calculated. From this f igu re can be deducted a vessel‟s daily Running Costs, if desired, leaving the Nett Daily. For easier negotiat ions additional calculations provide the Gross Daily adjustment f igure f or each 10 cents variation in f reight rate, whilst the f inal box in the voyage est imate f orm provides space f or the timecharter equivalent rate to the gross daily return to be shown.

Freight Taxes and Bill of Lading Weight Adjustment s : Freight Taxes were

explained

in

Lesson

Five.

In

voyage

estimating

they

are

considered an expense, but they are not a f ixed expense. Calculated as they are on the basis of a percentage of the total f reight, if treated as a f ixed amount and included in the Expenses section the est imator has constant ly to adjust the f igure as negotiat ions proceed and as the f reight rate alters. Consequently, the best solution will be f ound to consider a f reight tax along with commission and brokerage, adding the three items together and deduct ing same f rom Gross Freight.The same strategy applies to deduct ions f rom bill of lading cargo weights „in lieu of weighing‟. A deduction of , say, 0.5% can simply be added to commission/br okerage f or ease of application.

Time Charter Estimating As the pr actice of charterers taking vessels

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on timecharter f or trips has become widespread, the need has arisen to estimate t he daily pr of it of this t ype of employment in the same manner as f or voyage charters in order to compare the t wo alter natives. Lesson Five, in f act, showed how to compare timecharter rates expressed in terms of a daily am o unt with those shown as per summer deadweight tonne. Many

merchants

pref er

the

relat ive

simplicity

of

voyage

chartering, not having the organizat ion to enable them successf ully to operate timecharter ered vessels. Ther e are others, however, who f requently em ploy vessels on t imecharter trips as an alternat ive, where they calculate a saving in overall costs. Consequently, it is vital to be able to est imate the real „nett ‟ cost of timechartering and compare it with voyage charter ing alternat ive).

Fortunately

trip

timechartering

estim ation

is

a

relat ively

straightf orward exer cise; in many cases it being necessar y only to deduct comm ission and brokerage f rom the gross daily hire f or a ready comparison with an alternative voyage result. Care must be exercised, however, over it ems such as domest ic f uel costs, hold cleaning payments, bunker price dif f erentials, et c. where these are not totally realist ic.The real pr oblems ar ise in tim echarter estimat ing, where a vessel is not taken on hire immediately af ter her previous employment, and allowance has then to be made not only f or the time lost to her owner s whilst the vessel is unemployed, but also f or bunkers consumed during that period. Even her e, the result ing calculat ion is not dif f icult if total income and expenditure is considered caref ully and applied to the number of days f or the ent ire ventur e.

As we have already seen in Lesson Five, depending on the strength or weakness of the f reight market, a charterer may pay an owner a „ballast bonus‟ towards the expenses of p ositioning a vessel f or deliver y on to a t imecharter or, ver y occasionally, f or redelivering a vessel in an unattractive position, f acing the ship owner wit h a ballast voyage

to

regain

a

place

where

suitable

employment

can

be

obtained. But whether shipowner s have to f inance a ballast run bef ore or

229 Go to Index Page

af ter a trip timechart er f rom their own pocket or with the aid of a ballast bonus paid by a t imecharterer, the principle of how to account f or this in estimat ing terms is very much the same. All income - timecharter hire and ballast bonus – must be added together and compared with all expenses – perhaps bunkers and tolls for a positioning canal transit. The result divided by the total number of days overall provides us once again with a „gross daily‟, on the basis of which the venture can be judged f inancially and compared, perhaps, wit h a voyage alternat ive.

W hen f reight markets are week charterers f requently succeed in negotiat ing ballast bonuses that do not ref lect the real cost to an owner of positioning a vessel . Conversely, when f reight markets are strong, a charterer may have to pay f ar more than that real cost. Such are the essent ial

elements

of

a

f ree

market,

but

it

does

mean

that

timecharterer s and their brokers as well as shipowners must be f inancially astu te and capable of performing accurat e ballast bonus calculations when called upon to do so.Other Voyage Est imating Techniques : Voyage Estimat ing is a science and, as with any science, there are techniques (such as „back -hauling‟ and „voyage eq ualisation‟) that the astute perf orm f rom time to time to provide mor e realist ic guidelines to better overall prof itabilit y. This lesson has t aught only t he basics. Do not theref ore leave this lesson wit h the impression that you now know all that it is necessar y to kn ow. You should no longer be an amateur, but you wi ll not be an expert. Nevertheless, based on what you have read so far and with the aid of the f ollowing examples, you should by the end of this Lesson be able to deal competently with most calculations that come your way.

Practical Example Let us now carr y out a voyage est imate. This particular one concerns a choice of voyage routes f or the operators of a panamax bulkcarrier – the „CURLEW ‟ – necessar y to discover which of two (or possibly three or f our route s) provides most prof itabilit y. If you turn to Appendix 7:2, you will f ind a t ypical estimat ing problem set out in detail and giving all the inf ormation required in order to carry out a

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calculation – the kind of calculat ion perf ormed ever y day of the week by a busy market practitioner. In the r eal market, though, it will be necessar y f or an est imator to seek and t o gather relevant and vit al data f rom all over, both f rom „in -house‟ records, f rom ref erence books, and f rom

outside sources.

Here,

however,

all

inf ormation required to

complete the estimat e is provided, as would be the case, of course, f or an estimat ing question set in an examination.

If you ref er now to Appendix 7:3, you will see a suggested answer f or one alternative set out in detail on the sam e estimating f orm as recommended f or use and illustrated in Appendix 7: 1. Let us now f ollow the way this est imat e should have been prepared and, to help you, it may be f ound convenient (but not essential) to have beside you an atlas, a loadline zone map an d distance tables. First caref ully r ead the inf ormation provided in Appendix 7:2. The operator s of the „CURLEW ‟ have f ixed a cargo of coal f or shipment f rom Australia t o the Cont inent, the applicable f reight rate being US$ 16.00 per tonne. The problem is that there is more t han one route f rom the loading port of Newcast le (New South W ales) to Rotterdam.

First

alternative

is

south - about

round

Australia

and

then

west wards across t he Southern Indian Ocean to the Cape of Good Hope. Ther eaf ter the vessel would head northwards acr oss t he At lant ic Ocean and on throug h the Channel to the discharge port of Rotterdam.

A second alter native is once again to proceed south -about round Australia but then to proceed northwesterly, across the Indian Ocean to the Red Sea, vi a the Suez Canal, through the Mediterr anean Sea and northwar ds around the Iberian Peninsular and via the Channel to Rotterdam.

A third alternative would be to pr oced to the Suez Canal northwar ds ar ound Australia, but t his will entail passage bet ween the Great Barrier Reef and the Australian Mainland and through the

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dangerous and shallow waters of the Torres Straits. A pilot would need to be hir ed and cargo would be cut out because of the draf t limitation.

A f ourth alternative is to proceed east erly f rom New cast le, across the southern Pacif ic Ocean, aided by westerly winds, and around the southern t ip of South America, either around notor ious Cape Horn or through the Magellan Straits, and then northwar ds acr oss t he At lant ic Ocean to Europe and to Rotterdam. S hips f acing this route must take into consideration the likelihood of bad wather around the South American Continent, and the distance is somewhat f urther than other choices.

Thus the selection is really bet ween Alt ernatives one and Two. Alternative one is the longer in duration and made even longer by the f act that the vessel will ver y likely experience strong headwinds f or the entire passage bet ween Southern Australia and the Cape of Good Hope, and these winds – „The roaring Forties‟ – will pr obably add a round t wo days extra steaming to passage time calculated f rom dist ance tables. However, against t his, Suez Canal tolls in Alternat ive T wo will be an expensive consider ation. It is theref ore necessar y to perf orm two estimates, one f or each of Alternatives O ne and T wo, to enable the right choice to be selected.

Let us start with Alt ernative One, and the f irst task should be to include in the est imate details of the cargo and of the ship. This will ref resh the memory immediately bef ore the start of calculation s and also be usef ul f or f uture ref erence. It is assumed that the vessel‟s optimum speed on t he basis of the f reight market and current market bunker pr ices is 14 knots in eit her ballast or in laden condit ion, and this data is entered. ( Note that

f uel oil consumption at sea is descr ibed

appropr iately f or ballast or laden condition at 14 knots).

The voyage it inerar y can be calculat ed by ref erence to m ileages bet ween Osaka and Nescastle (NW S) and bet ween Newscastle via t he

232 Go to Index Page

Cape

of

Good

Hope

to

Rotterdam.

To

this

must

be

added

the

af orementioned allowance f or anticipated strong head winds bet ween Newcast le and the Cape of Good Hope.The mileages can be divided b y 336 (naut ical miles daily at 14 knots) and the resulting days and decimal parts of a day rounded up to t he next whole f igure. (NB. For short distances – say one and a half days – this may not be realistic and the entr y this case, it is perhaps simpler and just as accurate to round up as suggested).

Bunker consumpt ions can be obtained by multiplying the daily bunker consumpt ion against the days dur ation of each voyage leg. Thus 13 days (f rom Osaka to Newcast le) x 36 tonnes daily ( when in ballast condition at 14 knots) = 468 tonnes.Port Consumption m ight have t o wait until cargo quantit y has been establish ed. In this case, however, where a ver y f ast daily tonnage loading rate of 20,000 tonnes is involved, an approximate port time can be calculated on the assumpt ion that around 62,500 tonnes cargo should be loaded, thus : -

62,500 mt / 20,000 = 3.125 days x 1 .4 („magic f ormula‟ to allow f or weekends and holidays) = 4.375 days.

4.375 days rounded up to the nearest „whole‟ day, t o allow f or notice time, etc. = 5 estimated port days at Newcastle.

Rotterdam discharge is based on „shinc‟ t erms, not on shex‟ as at Newscast le. Thus

62,500 / 20,000 shinc = 3.1215 days, which rounded up to allow f or notice time, etc. = 4 days.

5 days ( Newcast le) + 4 days (Rotterdam) = 9 days x 2 tonnes diesel oil daily in port = 18 mts. (Most panamax bunkers are „gearless‟,

the

„CURLEW ‟

being

no

exception.

Thus

port

233 Go to Index Page

consumpt ion f or these ships is always basis gear being „idle‟ and does not dif f er whet her the vessel is loading or discharging.

It is now possible to complete the Itiner ary boxes of the estimate and to see that the proposed voyage is excepted to take 62 days and the vessel to consume 2068 tonnes f uel oil and 125 tonnes diesel oil.

For cargo calculations it is necessar y t o consult t he load line zones map. The por t of Newcastle is in a permanent summer zone and this zone stret ches all the way to Southern Af rica and up into the Atlantic Ocean. There is a permanent tropical zone str addling the Equator as f ar northwards as the Canary Islands bef ore a transitting vessel re-enters a permanent summer zone. So f ar there is nothing to prevent a vessel loading to her summer marks as an inter vening tropical zone is no hindrance. Problems only set in with the vessel‟s r eaching the northwestern t ip of the Iber ian Peninsula, near Vigo, wher e the next zone may remain as a summer area f or part of each year or be classif ied as a winter zone f or the rem ainder of the year, the affected area reaching all the way to Rottedam and beyond. Thus at cert ain times of the year a northbound vessel adjacent t o Vigo will be crossing f rom a summer into a wint e r lodline zone and her master/operators will have to ensure that winter marks are not submer ged.

In our case we are told t hat the „CURLEW ‟ is loding at Newcastle during April. Consequently, by the time she reaches the area of Vigo in May/June, the zone wil l be summer, and the ef f ect of a winter zone can thus be disregarded. At other t imes of the year it may be necessar y f or an est imator to calculate whether the winter zone will af f ect the cargo quantit y that can be loaded at Newcast le or not. To do this one has to ascertain whether the ship will have bur nt off enough bunkers to raise her draf t to winter marks and the way to do this is to r un f igures back wards f rom Vigo by calculat ing the distance back to Newcastle or to the pr evious bunkering port, and t he v essel‟s anticipated bunker consumpt ion f or that part of her voyage. This consumpt ion tonnage is

234 Go to Index Page

then added to the vessel‟s winter deadweight, and the result equals the quantit y of cargo the vessel can load at Newscastle, always providing this does not exce ed the vessel‟s summer deadweight. In other words, if the estimated bunker consumption exceeds the diff erence bet ween the winter and summer deadweight, the summer deadweight remains the restricting f actor. (It is possible, of cour se, to increase cargo lif t ing by bunkering en route – say at Cape Town or in the Canar y Islands, but of ten the value of extra cargo loaded in this way does not compensat e f or delay and even t he slight deviat ion to collect bunkers).

Thus we know in the case of the „CURLEW ‟ that the vessel can load to summer marks at Newcast le, but no f urther. From this tonnage of 64,650 metric tones – must be deducted constant weights and bunkers carried on board bef ore car go lif ting can be calculated. Constant weights, we are told, amount t o 500 ton nes f or the „CURLEW ‟ but bunker assessment again requires the estimator ‟s skill.It is not suff icient solely to determine the mileage f rom Newcast le to Rotterdam, to calculate the voyage days and to mult iply this by the daily bunker consumpt ion of the „CURL EW ‟, calling this suf f icient bunkers f or the voyage. The ship will r equire to carr y a saf ety surplus of bunkers in case the voyage is lengthened by any unf oreseen eventualit y. This saf ety sur plus varies depending on expected weather condit ions but should never be less than, say, 15%, but can be inf luenced by the scarcit y or wide selection of ports en r oute f rom which bunkers can be taken

in

emergency.

Even

where

bunkering

ports

are

available,

however, it is sensible policy to be self -suff icient in bunker ma tters, as one can never be certain that suppliers will be available when needed, or available at a realistic price. To deviate and delay f or expensive bunkers is not prudent ship operat ing and it is f ar more sensible to take an appropriate supply of surplu s bunkers, tailored f or the proposed voyage, even if this means a slight reduction in cargo intake.

So let us study the voyage bef ore us. As we have seen, bunkers are available in bot h Cape Town and in the Canar y Islands – both

235 Go to Index Page

recognized bunkering station s. W e have checked and discovered the f ollowing prices available en route: -

Fuel Oil

Diesel Oil

$

$

85

195

Newscast le

110

200

Cape Town

65

190

Las Palmas

75

150

Rotterdam

65

125

Osaka

The cheapest f uel oil is available at Cape Town a nd, at the end of the voyage at Rotterdam, where inexpensive replenishm ent can be obtained f or the f ollowing voyage. As a rule of thumb it can be seen that the deviat ion to Cape Town will only be slight but the savings f or ever y tonne

of

f uel

oil

taken

commencement

of

the

on

voyage

at

Cape

at

Town

Osaka

instead

would

of

amount

at to

the $20.

Approximately a third of the voyage rem ains at Cape Town, and a t hird of the total f uel oil r equired – 689 tonnes (2068 / 3) – would save the „CURLEW ‟s operator s about $13,750 (689 x $20). Port

costs at Cape

Town will be about $2,500, the deviat ion is barely not iceable, and the delay to be expected only about half

a day. Consequently, it must be

worth calling at Cape Town f or f uel oil, since the daily voyage value is ver y unlikely t o reach $11,250 x 2) on t his particular voyage. Not only that, extra cargo can be taken at Newcastle, and if bunker prices at Rotterdam show signs of increasing by the time the vessel reaches Cape Town, extra bunkers can be purchased. So we ta ke suff icient bunkers at Osaka saf ely to reach Cape Town via Newcast le, and there the balance saf ely to reach Rotterdam. But what about our saf ety surplus? Study t he atlas. There is no need to take saf ety sur plus f or the Osaka/Newcast le leg. If the worst c omes to the worst af ter a diff icult ballast voyage, extra bunkers can be taken alongside at Newcastle. The

236 Go to Index Page

problem is the long stretch of 6545 miles f rom Newcast le to Cape Town, made even longer by the strong head winds of the Sout hern Indian Ocean. A surp lus of 15 percent on top of an extra t wo days consumption allowance f or adverse weather should be suff icient, thus : -

Fuel Oil

Diesel Oil

1.

Osaka/Newscastle

13 days

468

26

2.

Newcast le/Cape Town

20 days

800

40

3.

Adverse W eather

2 days

80

4

4.

Saf ety Sur plus 120

6

--------

-------

1468

76

--------

-------

(15% of 2)

Total

It is assumed in est imating that a saf ety surplus will not necessarily be used. It must be allowed f or in the calculation of cargo intake, etc. but not costed as one cannot be certain it will be used but instead will probably be taken f or ward to the next voyage in the f orm of a credit. (This estimate is slightly unusual as we are Assurance the vessel is completely empt y of bunkers at the start of the voyage in Osaka). Thus one can expect that the saf ety sur plus of 120 tonnes f /o and 6 d/o will remain on board upon arrival at Cape Town. Since the voyage leg f rom Cape Town to Rotterdam is less than f rom Newcastle to Cape Town, there is no need to take any further safety s urplus supplies at Cape Town, but simply to cost the extra bunkers required to reach Rotterdam – some 19 days away.

The more observant amongst you will note that our itinerary has adjusted since our original figures. Not only do we have an extra half day‟ s delay to account for at Cape Town, our policy of rounding decimal parts of a day up to the next full day has „increased‟ our voyage by one day. We now have a voyage of 63.5 days, f uel consumption (not counting saf ety surplus) of 2108 tonnes and a diesel consumption of 125 tonnes.

237 Go to Index Page

But we can at least conclude the cargo part of our calculation as our bunker quantit y at Newcastle can be estimated at : -

Fuel Oil

Newcast le/Cape Town Adverse W eather Allowance

Diesel Oil

800 80

40

4

Saf ety Sur plus

120

6

--------

-------

1000

50

--------

-------

Total

Thus cargo can be calculated as: - 64,650 tonnes (per sdwt)

Less : Constant weig hts : Bunkers

500 1050

Cargo Intake

1,550 63,100 tonnes

One f inal wor d of warning bef ore we go on to voyage expenses, and that is about diesel oil. A saf ety surplus of only 6 tonnes of diesel oil is in realit y no saf ety surplus at all. In r ealit y it would be norm al to carr y around 50 tonnes spare. Thus our cargo should be reduced f urther f rom 63,100 to 6 3,050 tonnes.

So we have already made a good st art to calculat ing voyage expenses by solving the problem of calculat ing bunker costs. W e know that 1468 tonns f uel oil ar e to be purchased in Osaka and the remainder in Cape Town. Similar ly, we can treat 76 tonnes diesel as being purchased at Osaka and the remainder at Cape Town, alt hough the price diff erence is mush smaller.As regards port costs, Newcast le disbursement, we are told, amount to US$ 50,000 and Rotterdam to $60,000, with Cape Town amounting to $ 2,500.Thus, voyag e expenses can be estimated to amount to US$ 303,010.

238 Go to Index Page

Income can be calculated by taking our anticipated cargo of 63,050 mt and applying the freight rate of US$ 16.00 per mt; thus a nett anticipated f reight rate of US$ 958,360, af ter the a pplicat ion of 5% commission and brokerage.The result can be ascertained by deduct ing $303,010 expenses f rom nett income of $958,360 and by dividing the result by t he over all estimated voyage duration of 63.5 days – thus :- $ 10,320 daily. W e are told that the running costs of the „CURLEW ‟ amount to $4,500 daily, so nett income will amount to $5,820 daily.

To calculate the value of each 10 cents on the f reight rate – a usef ul aid dur ing negotiations – it is necessar y to adjust t he f reight rate by 10 cents – say to $15. 90 or to $16.10 – and run the f igures through to either the gross or nett daily stage f or compar ison pur poses wit h exist ing f igures. The diff erence can be entered in the appropriate box.

Finally, the equivalent timecharter rate can be expr essed in terms of daily hire by taking gross daily of $10,320 and applying to it a f actor represent ing the likely commission/brokerage payable. Thus, basis a total commission/brokerage of 5 %:-

$ 10,320 / 0.95 = $ 10,863 gross timechar ter daily hire.

To convert this t/c hire rate into terms of $ x per summer dwt tonne, you will need to refer to the calculations in Lesson Five.

So how did you f ind it? Feel conf ident? Good! Now you should be able to tackle the second part of the calcul ation and submit the answ er to your Course Tut or. All the inf ormation you need to know is provided in Appendix 7:2 with the exception that bunker prices en rout e are : -

Fuel Oil

Diesel Oil

$

$

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Jeddah

75.00

195.00

Suez

72.50

195.00

Algeciras

75.00

165.00

Ceuta

70.00

155.00

Assume port charges at each bunkering port ar e $2,500, except Suze, where assume no extra charges in addition to transit costs of the Canal. Allow one day f or transitting the Suez Canal, and an extra half day if bunkering at Suez , and half a day if bunkering elsewhere.Finally, if you f ind that this second alternative shows less daily return than the alternative one, rem ember that somet imes the Suez Canal Author ities can be persuaded to lower their canal tolls in order to attract b usiness. W hat reduction would be required to produce the same daily return as f or Alternative One?The exercise you ar e asked to carry out compares the dif f erent routings f or the same piece of business but voyage estimates are made f or almost ever y cargo se riously contemplated by an owner, generally bef ore embarking upon f irm negotiations. Estimates could, theref ore, be used to compare one cargo with another, voyage business

against

t ime

charter,

even

(in

the

grimmest

of

times)

comparing trading with laying up.Judgem ent beyond the cold f igures will also be needed because voyage A may work out ver y much better than voyage B on paper but that may be because voyage A terminates in an area where near by following business is hard to f ind or non -existent so that a long ballast run will be needed to r each the next loading port.

Self Assessment Questions

1.

W hat is the 4:2:1 ratio of bauxite?

2.

W here is pumice likely to be loaded?

3.

W ould you apply the stowage f actor of scrap metal t o a vessel‟s bale or to her grain capacit y – and why?

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4.

W hat are „cantlines” ?

Test Question

1.

“Time to count f rom 1400 hours if notice of readiness to load

tendered within of f ice hours bef ore noon and f rom 0600 hours next working day if notice tender ed wit hin ordinar y of f ice hours af ter noon. If loading commences bef ore notice expires, half such time used to count as layt ime”.

“Cargo to be loaded at an average rate of 20,000 tonnes per weather working day of 24 consecut ive hours, Sundays and holidays inclusive”.

“Demurrage US $ 10,000 daily/half dispatch on laytime saved”.

Explain the significance of the laytime clause excepting time counting for any breakdowns caused by reasons “Beyond charterer‟s control”.

2. A “clean” bill of lading is of paramount importance to Shippers. Discuss. The Master of mv “SHELDUCK” wishes to clause a bill of lading in respect of rusting and indentation of steel cargo brought forward for loading, but the Shippers ask him to load the goods and leave the bill “clean”, offering a letter of indemnity holding Master and Shipowners harmless in case of claims brought against them by Receivers. Advise the Master.

3. Analyse the basic division of responsibilities between Shipowners and Charterers under a dry-cargo time charterparty.

4.You are in Disponent Owner of the OBO “TEAL” open in Baltimore and described as :-

-

66,000 tonnes sdwt on 45 it sswd

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-

2,491,000 cubic feet grain

-

fwa : 12 inches

-

tip : 175

-

constants : 500 tonnes

-

13 knots on 45 tonnes IFO (180 c/s) plus 3 tonnes DO daily laden at sea – 41 tonnes plus 3 tonnes wh en in ballast.

-

Port consumption: 3 tonnes DO daily.

-

Daily hire cost : US $ 10,000

Your period timecharter of the vessel is coming to and end, and in order to redeliver to her Owners of „DOP safe port UK/CONTINENT or, in Charterers‟ option, upon passing Cape Passero or Skaw westbound” you are considering the following cargo, which you believe you can fix as follows : -

-

50,000 tonnes (5% moloo) Green Delayed Petcoke (stowing maximum) 47 cubic feet per tonne)

-

Lake Charles (40 feet swsd)/iskenderun

-

15,000 tonnes shinc load/10,000 tonnes shex discharge

-

$15.00 per tonne fiot – 5% total commission

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243 Go to Index Page

APPENDIX 7: 2

mv. „CURLEW ‟

Gearless panamax bulkcarrier -

64,650 mt sdwt on 13.02 metres ssw

-

7 Holds / Hatches

-

3,029,000 cubic f eet grain capacit y in main holds.

-

225 metres loa

-

13.21 metres beam

-

14 knots on 40 tonnes f/o + 2 tonnes d/o – daily laden at sea.

-

14 knots on 36 tonnes f/o + 2 tonnes d/o – daily ballast at sea.

-

2 tonnes d/ o daily idle or working in port

-

Daily running costs US$ 4, 500

-

Canal Transit Consumption: 10 tonnes f /o + 10 tonnes d/o.

Fixture:

-

60,000 tonnes coal in bulk – 10% more or less owner ‟s option.

-

Loading 1 sb Newcastle (NSW ) 20/30 April

-

Discharging 1 sb Rot tedam

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-

20,000 mt shex load

-

20,000 mt shinc discharge

-

Fiot

-

Freig ht US$ 16.00 per mt.

-

Coal grade stows maximum 45 cubic f eet per tonne.

-

Freight Insurance Charterer‟s Account.

-

Total Commission/ Br okerage: 5%

Voyage Data: Port Disbursement :

Newcast le

:

US $ 50,000

Rotterdam

:

US $ 60,000

Suez Canal

:

US $120,000 (in cluding $110,000 tolls)

Distances : Osaka/Newcast le :

4323 nm iles

Newcast le/Cape Town :

6445 nm

Newcast le/Rotterdam :

12765 nm

Cape Town/Rotter dam :

6220 nm

Newcast le/Suez Canal :

8177 nm

Suez Canal/ Rotterdam :

3287 nm

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CH APTER- 8

BILLS OF L ADI NG AND C ARGO CL AIM S The Mate‟s Recei pt As cargo is loaded, or upon complet ion of loading, a ship should normally issue mate‟s receipts containing remarks as to the nature, quantit y and condit ion of the goods concer ned. These documents may, in f act, be prepar ed pr ior to commencement of loading, thereby providing advance inf ormation f or ship‟s personnel about the cargo to be loaded, assisting stowage plans, and f orming a convenient means of recording a cargo is good condition, or remarking upon its shortcomings. Such receipts also f orm valuable evidence of cargo quantit y and qualit y. Mate‟s receipts are, however, merely r eceipts and not documents of title that can be exchanged commercially. They are released to shippers in return f or cargo loaded and ther eaf ter tendered to the master or to the owner‟s agents in return f or one or for a set of signed bills of lading.

The Bill of Ladi ng A bill of lading (B/L) can be drawn up in a variet y of ways and wor dings, but it is nearly always prepar ed on a pre -printed f orm. T his f orm may relat e to a specif ic or to a general cargo trade – see Appendix 8:1 – or it may be designed f or liner ser vices. W hatever its f orm a bill of lading f ulf ils sever al f unctions: -

1.

A receipt f or the cargo, signed by the master or by the

owner ‟s port agents on behalf of the carrier, with r emarks as to the condit ion of the cargo;

2.

A document of title to the cargo, by which means the

propert y may be transf erred to another part;

247 Go to Index Page

3.

Evidence of a contract governing terms and condit ions of

carriage.

The Bill of Ladi ng as a Receipt. This will show t he quantity of cargo loaded, and may well contain t he words “said t o weigh” or something like “dock weight or “shipper ‟s weight” if it is not possible f or the ship to check the weight. Similar ly, if the goods are in a container of some sort, it may not the possible f or the ship‟s staff to check numbers, so that the words “said to contain” may be used.Unless ther e is some such qualif icat ion, a ship will be bound to deliver the quant it y or number stated in the B/L, or f ace a claim f rom the consignees. (See later paragraphs on Cargo Quantit y).

A Bill of Lading will also comment on the condit ion of the cargo, usually

by

saying

“in

appar ent

good

order

and

condition”.

(See

paragraphs on “ Clean Bills of Lading”).As we ll as ref erence to quantit y and condition the B/L will also give any detail necessar y in order to identif y the cargo. In the case of packaged goods this will consist of dist inguishing marks and numbers.Addit ionally the B/L will of course show the names of the shipper and consignees, the name of the ship, the loading port and the destination. There will also be some reference to the freight payment, either that it has been prepaid or that it has to be collected. Finally it will have the signature of the Master (often signed „for the Master‟ by the ship‟s agent) and the date. The date can be very important, affecting as it does, letters of credit and trading terms.

The Bill of Lading as a Document of Title A shipper can transf er owner ship of goods by making t he bills of lading over to a named consignee, or t o the „order‟ of that consignee, or by “endorsing” the bills of lading to another party. In f act, such transf er of ownership and the buying and selling of bills of lading is common pract ice in international trade and a bill of lading may change hands sever al t imes bef ore it reaches the part y who will event ually claim and take deliver y of the cargo at the dischar ge port(s).

248 Go to Index Page

W here

payment

f or

the

goods

has

been

arranged

via

a

document ar y credit (of ten called a letter of credit) the B/L becomes vital in its other role as a document of title, namely as securit y f or payment. Banks never want actual tit le to the goods, with all the responsibilities that also t itle to t he goods, with all the responsibilit ies that al so involves, but they do want the secur ity of denying payment to a shipper until sat isf ied t hat all the condit ions of a contract of sale have been carried out and, of course, denying tit le to consignees unt il payment has been made by t hem to the bank conce rned. The Bill of Lading as Evidence of a Contract W here consignment of Liner Cargo are concerned, the actual contract may well be no more than a telephone conversat ion ( ver y occasionally a „Booking Note‟) and so the B/ L is of ten the only means of setting out t he terms and conditions of carriage which are usually printed on the r ever se side of the B/L f orm and so provide evidence of a contract.In the case of homogeneous bulk cargoes, however, bills of lading should contain ref erence to (i.e. : evidence of ) the relevant charterpart y; adding, f or example, that “all terms, condit ions and except ions of charterpart y dated London ….., are deemed incorporated herein”.

Indeed, charterpart ies f requently contain wording to the eff ect that certain charter party clauses (eg : clauses Paramount) are to be f ully incorpor ated into bills of lading issued thereunder, and it is particularly

important

that

the

charterparty

arbitration

clause

be

incorporated into bills of lading as, f ailing this, a bill of lading holder may not be able to call f or an arbitration against the carrier.Should any of the terms of these t wo documents be in conf lict, however , those of the bill of lading will take precedence over those of the charterpart y. This may sound str ange at f irst when one consider s how much work went into prepar ing the charterparty, but remember the paragraph about the B/L‟s role as a document of title. If , for example, t itle to a cargo has indeed been „sold on‟, a new consignee should be quite remade f rom the original negot iations bet ween the charterer and the shipowner. W hat

249 Go to Index Page

the consignee would have, however, is his document of title and that is that he paid money f or and that the what he has a right to receive. W hilst, theref ore, a B/L may incorporat e the charterpart y it does not mean that it incorpor ates anything that is more onerous than that which is specif ically stated in the B/L.

From all this, we can see that the main elements of a bill of lading are: -

1.

Quantit y of cargo.

2.

Accurate cargo description and condit ion.

3.

Date of the bill of lading

4.

Names of shipper and consignee

5.

Ports of loading and dicharge

6.

Ship‟s name.

7.

Terms and conditions of carriage.

8.

Payment of f reight.

Bills of Lading at the Loading Port A ship‟s port agent may be given the task of drawing up bills of lading, and if these are subsequent ly required f or letter of credit transact ions, it is usef ul that the agent be supplied with appropriate details of that letter of credit so that all relevant material can be included in the wording.

All bills should be signed by eith er the ship‟s master or by a duly authorized agent, in their capacities as servants of the shipowner or of the disponent time-charter owner – i.e. : the carrier. If time does not permit the ship‟s master to sign the bills, a letter is usually drawn up givi ng the port agent appropriate authority to sign bills of lading (see Appendix 8:2). Alternatively, it may be agreed at the time of negotiating the charterparty that “charterers and/or their agents be authorized by owners to sign bills of lading as

250 Go to Index Page

presented on master‟s and/or on owner‟s behalf, in accordance with mate‟s and/or tally clerk‟s receipts, without prejudice to this charterparty”.

It is important also t o dat e bills of lading correct ly, and as per the date on which t he complete cargo (in the case o f an homogeneous commodit y) of an individual item (f or liner goods) is actually loaded. W here

cargo

is

loaded

later

than

specif ied

in

letter

of

credit

transactions, shipowners may be appr oached t o sign back -dated bills of lading, possibly ag ainst letters o f indemnit y to be issued by the shippers or charterers. In f act, the consignee may be well aware of the delay in loading and be happy wit h the suggested arrangement, which other wise might involve time -consuming and tedious extra

paper work.

Nevertheless, t he wise shipowner will consider such an appr oach ver y cautiously, perhaps contact ing his P & I Club f or advice, even in cases where

he

is

convinced

that

all

part ies

are

f ully

awar e

of

the

circumstances.

A shipper may requir e the ship‟s mast er to carr y on t he voyage an original bill of lading with the ship‟s papers – i.e. in the “ship‟s bag” – f or handing over at t he destination to a named consignee. In connection with this ser vice, the master may be asked also to issue t he shipper with a letter – termed “disposed letter” – conf irming the arrangement. This procedure was vit al in the days of sailing ships when the cargo carrying vessel could well reach the discharging port bef ore any other means of physical communicat ion. It become less important when steamships t ook over f ast mail sips could carr y docum ents much quicker than the tramp. It is, of course, now becom ing rare given the speed and reliabilit y of airmail; but is still encountered in the short sea and coastal trades.

A relic of those early days which s t ill persists, much to the perplexit y of many people in the shipping industr y, is that of issuing more than one original B/L (that is not count ing sever al non -negotiable copies). You will see this in Appendix 8:1 wherein, just above the

251 Go to Index Page

signature there is a dotted line where the number in the „set‟ has t o be entered. I n the days of f ail and the early steam era, one could quite understand the dispatch of one original via f ast mail packet, one in the ship‟s bag and one held back by the Shipper in case t he oth er t wo became lost. Today, when letters of credit are so of ten involved, the banks obviously want all the originals other wise they lose their secur it y, so the reason f or a set of more than one is something of a myster y. However, if that is what principals want, it is not f or an agent to reason

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Releasing Bills of Lading Bills of Lading should not be “released” to shippers marked “f reight prepaid” or containing any similar expr ession indicating that f reight has been r emitted to the shipowner (or to the disponent owner in the case of a time -charterered stop) without that party‟s express aut horit y so to do. The release of such bills wit hout f reight actually having been made places a shipowner in a weak legal position, as he may well lose the r ight of lien on t he cargo if subsequently t his is needed in order to f orce payment of f reight. Consequently, either f reight should be f ully prepaid – is indicated on the bills of lading – or alter native wording acceptable to all parties and to the letter of credit arrangem ents must be f ound. I n order to give a charterer the t ime t o make necessar y f inancial transact ions, it is of ten arranged that f reight is to be paid within so many days of the signing and/or the releasing of bills of lading by the shipowner, and there should be no reason why, with suf f icient f oresight, letter of credit arrangements cannot be adapted to this system.

Cargo Quantit y and condition It is im portant that cargo quantit y and condition be adequately and correct ly described in the bills of lading. Quantit y of general or bagged/baled goods can usually be accurately assessed by tallym en – employed by eit her a shipowner or shipper, or joint ly by both, in which event the tally -clerk‟s receipt takes t he place of the mate‟s receipt. W ith bulk homogeneous carg o there may be dispute bet ween cargo quantit y assessed by shore apparatus and by the calculations of ship‟s off icers based on a draf t sur vey. In some cases where shore apparat us is unr eliable (or even non -existent) ship‟s draf t measurement is the accepted means of assessing intaken car go weight, and the basis theref ore of any bill of lading f igure.

Ideally, a dr af t survey should be perf ormed by an independent sur veyor and should commence with the vessel in ballast condit ion. The dif f erence in draf t when f ul ly laden calculated against the ship‟s plans and allowing f or bunkers and f resh water, etc. supplied and consumed in the meantime, will provide a f airly accurate measurement of cargo

253 Go to Index Page

loaded. Nevertheless, reasonable assessment of cargo on board can be achieved even when commencing draf t calculations with a laden vessel and, should a master be f aced with a substantial discrepancy bet ween ship and shore f igures, he should clause the bills of lading with “ship‟s weight”

f igures

if

possible,

support ing

these

re marks

with

an

independent surveyor‟s report or, f ailing this, certainly his owners should strongly prot est over the discrepancy.

The condition of most cargoes can be checked by tallym en or by ship‟s of f icers as loading progresses, and relevant comments ent ered in either tally or mate‟s receipts, and thereaf ter in bills of lading. But f or certain commodit ies – eg: steel products – claims f or damage can be so high that a f ully f ledged loading sur vey is necessar y. A Shipowner ‟s local P & I (Club representat ives m ay assist in arranging f or a reputable sur veyor to inspect all it ems presented f or loading, recording damages apparent in t he goods pr ior t o loading (i.e. : indentat ion or rust) and support ing same wit h colour photographs where deemed advisable.

Clean Bills of Ladi ng: Irrespect ive of the actual condit ion of cargo, many letter of credit transactions call f or “clean” bills of lading – i.e. : bills stating that goods descr ibed therein are in “apparent good order and condit ion”; wit h no additional or alternat ive wording indicat ing def iciencies in the goods. Unf ortunately, diff icult though it may be f or shippers, a carrier cannot agree to issue clean bills of lading when cargo is not in good condition, even wher e letters of socalled indemnit y are of f ered by the parties concerned. Bills of lading must accurately ref lect the actual condit ion is to act f raudulently. Purchasers of a cargo rarely have the opportunit y t o examine same and to assure themselves of its good condit ion. Instead they must r ely upon descriptio ns of qualit y and of quantit y as entered in bills of lading. Despite a clean bill of lading indicat ing car go to be unblem ished, should good be def ective in some way, the consignee (as an innocent party to a f raudulent act) has the right to claim redress f r om the carrier, or to assume that the cargo was damaged at Sea – again ver y likely the responsibilit y of the carier.

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It f ollows t hat great care must be exercised by ship‟s masters and by port agents alike to ensure that bills of lading contain only accurat e statements as to cargo condit ion, despite pressures and inducements f rom shippers and f rom certain port authorit ies.On the ot her hand, remarks contained should not be of trivial nature cover ing some insignif icant def ect normally acceptable in the trade c oncer ned, as this might have the ef f ect of interf ering with a letter of credit transaction f or non reason.It can be seen that a shipper or seller presented with “unclean” bills of lading f or a transaction where “clean” bills are needed,

is

in

a

dif f icult

p osit ion.

The

problem

need

not

be

insurmountable however. The consignee or buyer can be inf ormed of the diff icult y, given a copy of a relevant sur vey report, perhaps renegotiate t he purchase price, and still give instruct ions t o is bankers to accept the “qu alif ied” bills. Alternatively, and ver y occasionally, t he issue of clean bills against a letter of indemnit y may be justif ied where the buyer is f ully aware of actual condition of the cargo, and where the goods will not be resold pr ior to the delivery at t he port(s) of discharge.

Bills of Ladi ng at the Discharging Port Cargo should only be delivered t o a part y (a consignee) who can produce an orig inal bill of lading cover ing the item of cargo claimed. The port agent should examine the bill of lading thus pr esented so as to ensure its good order and, once he is satisf ied that all is correct, he will r elease the cargo, or issue a “deliver y order” in exchange f or the bill of lading. The consignee thereaf ter presents the deliver y order to the dock authorit y/term inal operator or the stevedor es and claims release of the item/cargo concerned.

In the meantime, the original bill of lading presented should be stmped, signed and dated by the port ag ent, and in doing this he is said to have “sighted” the bill of lading o n the master‟s behalf . Should the agent return the bill of lading to the consignee were this is t he custom instead of issuing a deliver y order, he must keep a caref ul record, as it is essential that not more than one “original” be “sighted”, or more one

255 Go to Index Page

“deliver y order” be prepared f or ever y set of bills. As an aid to recor d keeping in this regard, a copy of the “cargo manif est” may be ut ilized, on which to record “sighted” bills.W here the consignee claims an original bill f rom the “ship‟s bag”, the master and or port agent must, of course, saf ety themselves of the correct identit y of the claimant.

It is customar y in certain trades f or a consignee to endorse the reverse sides of bills of lading with conf irmation of recept of cargo, and such bills ar e said t o be “ accomplished” . Occasionally it is necessar y f or a shipowner to obtain an “accom plished” bill of lading as a prerequisite f or all or f or part of his f reight. W here bills of lading arr ive at a discharge port unreasonably late (f or example, af ter a ship‟ s arrival) they may be said to be “stale” , the same term being used to descr ibe bills presented to a bank f or freight collect ion lat er than the terms set by a letter of credit.

Deli very of Goods w ithout Production of a Bill of Lading. Per haps the most ser ious dif f icult y ar ising at a discharging port in relat ion to bills of lading is where f or some reason the bills are unavailable. Normally such dif f icult y can be overcome providing the consignee issues a suitable letter of indemnit y, f ully guaranteed by a re putable bank. This indemnit y is held by the port agent on the shipowner‟s behalf of lading, which latter document can then be attended to in the normal way.Agents should not delay in exchanging a letter of indem nit y f or the proper ly presented B/L because b anks charge quite steeply on a t ime basis f or their count er -signature on such documents, Appendix 8:3 is an example of such a letter of indemnit y.

Types of Bills of lading

A Clean Bill of Lading . As already discussed, this is a Bill which is unclaused ad i s ther ef ore a f ully negotiable document.

A Foul Bill of Lading Is a Bill of Lading which is in some way claused

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or dirt y. This implies that the cargo loaded on board is not perf ect in ever y condition and the shipowner is t hus protect ing himself against a cargo claim f or bad deliver y at the discharge port with an appropr iate endorsement.

Recei ved for Shi pment Bill of Lading W hilst most bills of lading are issued when t he car go is actually shipped on board the vessel, in the liner trades there in the alter nat ive where the liner trades t here in the alternative where cargo is actually received into the cut ody of the shipowner or his agent, such as a whar f inger or dock authorit y, and is not actually on board the vessel at t hat particular time. It is also sometimes called a custody Bill of Lading. If such a bill of lading is issued,

the

shipper

is

ent itled

to

demand

f rom

the

carrier

an

endorsement on the B/L when the goods have been shipped on board stating „Since shipped‟ giving the date of shipment and a f urther signature. Received f or shipment B/ L‟s are common in the container trade where cont ainers or cargo are of ten taken into the carrier ‟s custody at an inland depot.

Shipped Bills of Lading As the name implies, this is t he bill of lading which is normally issu ed, especially f or bulk cargo, and conf irms that the cargo descr ibed is actually on board the vessel. Needless to say, if the Shipment Bill of Lading”, this must be surrendered when he issues the actual “Shipped Bill of Lading” itself. Alternatively he can merely endorse the “Received Bill of Lading” with the name of the ship into which the cargo has been loaded and the date of shipment. A Shipped B/L is often (especially in letters of credit) tautologically descr ibed as a “Shipped on Board” B/ L.

Direct Bil l of Ladi ng This is a bill cover ing the carriage of goods in one vessel dir ect f rom one port to another.

Through Bill of Lading Such B/L‟s are issued where the car go will only be carried f or part of the voyage by the carrier signing the B/L. The

257 Go to Index Page

remainder may be over land transport or it may be transshipment into another vessel. The essence of a Through B/L as opposed to a Combined Transport B/L (q.v.) is t hat with a thr ough B/L the carr ier signing it is only responsible as a principal f or his part of the ca rr iage acts an agent f or the shipper f or the other part (s).

Combined Transport Bill of Lading As t he name implies, such a B/L is f or cargo carried by more means than t he ship itself . It is particularly used in the container trade when the different „modes ‟ of carriage can – in an extreme case – be quite complicated. For example, the carrier could take deliver y of a container at the shipper ‟s premises, truck it to a railway term inal, rail to the port, ship it on boar d a f eeder vessel, transship it on to the ocean vessel and then repeat all that in reverse at the discharging end. With a Combined Transport B/L the carrier signing it takes responsibility as a Principal from start to furnish but includes limitations of liability for the different sections accord ing to the appropriate international conventions (eg Hague -Visby for the sea transport, C.I.M. convention for rail, C.M.R. for road etc.).

Order Bill of Lading This is not to be conf used with an “ open” B/L which shows no cosigner at all; such would be a mo st unsatisf actory document as it would be like a blank cheque.An order B/L is ver y common indeed because of its value in letter of credit transactions. It can best be compar ed wit h a cheque drawn to “cash” and once it is endorsed by t he shipper it becomes in eff ect a “bearer” document. This sounds a ver y dangerous pr ocedure as, theoret ically, if someone dropped it in the str eet, the person picking it up could claim the cargo; in f act the syst em works ver y well.

You will recall ear lier in the lesson it was m entioned that the banks in a letter of credit transaction do not want to assume the liabilit ies and responsibilit ies of a consignee but simply want to hold the Original B/L‟s as securit y. Theref ore, instead of the bank being named as the consignee and then endorsing it over to the actual importer, the

258 Go to Index Page

bank insists on the section of the B/L marked „Consignee‟ having just the words “To Order” wr itten in, and the shipper ‟s endorsem ent on the back. W hen all is in order the B/L is handed t o the importer who can claim the cargo f rom the carr ier. Most order B/L‟s have a space f or a „not if y part y‟ to be inserted. This is usually the actual importer and putting his name there ensures that he knows when to contract the bank. Incidentally, there is no actual legal oblig at ion on a line t o pass inf ormation to the notif y part y.

Liner Bill of Lading W hilst a Liner Bill of Lading is still only evidence of a contract it carr ies f ar more detail then a charterpart y B/ L because the reverse of a Linear B/L contains t he f ull text of the contract of carriage. W ith a charterpart y B/L such masses of wording are not necessar y as the contract is, of course, the charterpart y itself and it is only, theref ore, necessar y to devote a sentence or t wo to incorporate it (and the arbitration cla use) into t he B/L. Appendix 8:4 shows the f ront and back of a typical liner B/L (The „Conline B/L – reproduced by kind permission of the Balt ic and Internat inal Marit ime Council). Study the var ious clauses, comparing and contrasting them with the wording o f a charterpart y.

Waybills Using a sea waybill inst ead of a B/L is becoming more prevalent, specif ically in the liner trades. There is nothing new about a waybill as a document, as it has been in use f or air f reight almost since the beginning of carrying m erchandise by air. A waybill looks ver y similar to a B/L and indeed has to cover t wo of its uses, namely a receipt f or cargo and evidence of a contract. W hat it does not have is any negotiabilit y; it is not a document of title. This means that the goods can only be delivered by the carrier to the named consignee.

That is no disadvant age at all if the consignee has no int ention of selling the cargo on‟ and/or if letters of credit we not involved such as trading with a branch off ice or with a tried and truste d trading partner who will settle the invoice f or the goods at the right time. A waybill‟s

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ver y lack of negotiabilit y is one of its advantages because there can be no doubt and theref ore no room f or error when it comes to deliver ing the cargo to the consig nee. Not being pr oof of title, it does not matter if the ship arrives bef ore the documents. You will readily see that a waybill lends itself admirably to elect ronic transmission. There are some problems to be overcome bef ore waybills become even more widespr ead, these ar e mainly due to t heir not being thought of when Bill of Lading Acts wer e written into statut e books. However, many legal brains are being set to work to overcome this diff icult y.

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Self Assessment Questions

1.

W hat is a clean bill of lading?

2.

W hy do many B/L‟s show the words “To Order” instead of named consignee?

3.

W ho signs the Letter of Indemnit y presented in lieu of a B/L at port of discharge?

4.

W hat are the B/L‟s t here basic f unctions?

Cargo Claims

Insurance Almost all shipowners will be well insured and det ails of this complex subject are more to be f ound in the Tutorship courses on Ship Management and Marine Insurance.

In essence, however a shipowner ‟s insur ance will f all under three main categories: -

a)

Hull & Machiner y

b)

W ar Risk

c)

Protection and Indemnit y

The f irst two major types and self -explanator y and are nor mally covered through Lyod‟s of London or major insur ance companies, or a combination of the two. The third type – Protection & indemnit y can best be thought of as insurance against third party risks and is almost invariably covered through a mutual association or „Club‟ as they are usually called. Such clubs, as their name implies are not profit making companies or individuals as in the

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cases of other insurance, but are associations run by groups of shipowners for their mutual benefit. The operation of their day-to-day business is entrusted to firms of professional managers. The risks covered with the P & I Clubs include such things as claims for damage to other people‟s property (eg hitting a quay wall) injury to individuals (eg a crew member or a stevedore falling into a hold) and cargo claims (eg claims made by consignees for damage done to (or loss of) their cargo whilst in transit).

Cargo Damage Even the best run ship may eventually be involved in damage to cargo. There are also certain commodities that are notorious in that shipowners may be held responsible f or damage when the damage occurred either bef ore loading or f ollowing discharge – steel products being the bette r known example, and where it is essent ial to conduct “pre-loading” and “af ter discharge” sur veys to verif y the condition of ever y item carr ied so as to avoid potent ial claims at a lat er date.

Most voyage charterparties incorpor ate by means of a Clause Paramount either t he internat ional „Hag ue Rules‟ or the lat er, updated ver sion – the „Hague – Visby Rules‟, which set out the responsibilit ies of carrier and owner of goods at sea. In f act the whole subject of cargo damage is ver y im portant to be understood b y those trading in ships and commodit ies and it would help to understand it better if we took the opportunit y in this lesson of brief ly plotting the pr ogress of the law relat ing to cargo carriage dur ing the past centur y, bef ore examining the Rules

in

great er

detail.

Since

much

internat ional

sea - trading

is

conducted under the terms of English law, we then will exam ine the „Hague

Rules‟

and

the

„Hague -Visby

Rules‟

under

the

English

equivalents – the „Carriage of Goods by Sea Acts, 1924 and 1971‟.

Brief Background to the Hague Rules and the Hague-Visby Rules During the 9 t h centur y ther e was a great deal of general dissat isf action and unrest with the conditions upon which goods were carried by sea. This unrest came about the to many elabor ate „negligence clauses ‟ which were introduced int o bills of lading. These Clauses were designed to

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def eat completely the eff ect of legal decisions against shipowners in the Courts. Many of these clauses were pr oduced in extremely ambiguous f ashion and were quite impossible to i nterpret. As a consequence of this the posit ion of many shippers, bankers and cargo under wr iters became ludicrous as they were quite unable to understand and inter pret the extent of their r ights against a carr ier in the area of carriage of cargo by sea.

The liner companies at this t ime f ound themselves in a most monopolistic posit ion because, being relat ively f ew in number, they could combine together to agree var ious terms of carriage whereas shippers, f or example, f ound that they were quite unable t o comb ine eff ectively in order to negotiate with shipowners on equal t erms. The general ef f ect of this was to produce a f eeling within the Industr y of general

dissatisf act ion

and

growing

agitation

f or

Gover nments

to

introduce legislation to remedy the situation t hat had developed f or the necessar y protect ion of shippers, banker s and under wr iters alike.

Thus in 1893, t he United Stat es passed the Harter Act which laid down many condit ions upon which goods wer e to be carr ied by sea. This, of course, affected only th e carriage of goods being shipped to and f rom the United States of Amer ica. Following this, however, similar legislat ion was introduced by other Governments in an ef f ort to correct the unf air situation and, among the leaders in this respect, were Australia, ( who developed their Sea Carriage of Goods Act, 1904) Canada (The W ater -Carriage of Goods Act, 1910) and also New Zealand, wher e a series of new Acts was passed.

In 1920 the Imperial Shipping Committee made recommendations to the Government that there sh ould be some unif orm legislation throughout the Brit ish Empir e to standardize the Law reg arding the carriage of goods by sea. However, the shipping communit y itself f avoured more the idea of adopting a set of unif orm rules for voluntar y adopt ion

rat her

tha n

to

introduce

legislation.The

Mar itime

Law

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Committee of

the International Law Asociat ion,

theref ore, held a

meeting to discuss the conf licting views of shipowners and cargo interests and did, in eff ect, draw up a set of rules subsequentloy to be known as the Hague Rules, 1921.

Nevertheless, the voluntary adoption of these rules did not materialize and there was further agitation for legislation on this issue. This is turn led to the Conference on Maritime Law at Brussels in 1922 where the “Hague Rules” were adopted as the basis of a “draft convention for the unification of certain Rules relating to Bills of Lading”. The International Compensation was signed by many participating countries at Brussels on 25 th August, 1924 and was subsequently given force of Law in the United Kingdom by the “Carriage of Goods by Sea Act 1924”. This lesiglation ______ in existence until 1971 when further legislation was introduced following amendments to the “Hague Rules” by a set of modified Rules known as the “Hague -Visby Rules”, which were given the force of Law in the United Kingdom by the “Carriage of Goods by Sea Act 1971”. The original “Hague Rules”, as embodied in the “Carriage of Goods by Sea Act, 1924” were modified and extended to a certain degree. This means that the 1924 Act has now been repealed and replaced by “The Carriage of Goods by Sea Act 1971”. One of the main reasons for the 1971 amendments was, of course, to take account of the effect of containerization.

The Carriage of Goods by Sea Acts The ef f ect of the 1971 Act, like its predecessor in 1924, was to place the Hague -Visby Rules int o Britain‟s statute book thus making it a „contracting state”. The majorit y of countries in the wor ld did something similar.The rules apply to any bill of lading or similar docu ment of title r elating to the carr iage of goods by sea providing: -

1.

The bill of lading is issued in a contract ing State,

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2.

The carriage in f rom a port in a contract ing state

3.

The contract continued in or evidenced by the Bill of Lading

provides that t he rules or the legislat ion of any State giving eff ect to them are to gover n the Contract, whatever may be the nationalit y of the ship, the carrier, the shipper, the consignee or any other interested person.

Those three sub - par agraphs are part of Article X of the HagueVisby Rules and you will see that the third way f or the rules to take eff ect is if “The Contract … provided that the Rules … are to govern the Contract …”. The way in which one ensures the B/L makes that provision is by including a Clause Par amount ( you will see this in the Conline B/L Appendix 8 : 4). The word „Paramount ‟ is used because the eff ect of such clause is to make it clear that if there is anything in the B/L which would place the shipper in a whose position than provided f or in the Rules then the Rules take precedence over the wording of the B/L in

that

regard.The

Hague/Hague -Visby

rules

do

not

apply

to

charterpart ies but it is common practice but it is common practice to insert a clause in a C/P stipulat ing that any B/L‟s issued un der that charter shall contain a Clause Paramount .

Some Important Elements of the Cats

Coasting Trade Under the 1924 Act, owing to strong representat ion made by parties interested in the Coasting Trade, the Act allowed such parties f reedom of Contract so t he Act allowed such parties f reedom of Contract so long as the Contract was not embodied in a bill of lading but was contained in a receipt which had to be marked clearly as a “non-negotiable

document”.

Under

the

1971

Act,

however,

this

exemption has disap peared and even Coast ing Shipments if carried under a bill of lading will be subject to the Rules even t hough strict application of the rules does not demand this.

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Live Animals Under the 1924 Act the parties concer ned in the carr iage of live animals were f ree to contract on agreed terms; in other works, the Act had no application to the carr iage of live animals. However, where the contract is contained in or evidenced by a bill of lading or receipt which expressly provides that the 1971 Act will apply, then this shall include contracts f or the carr iage of lie animals. In t his r espect t he 1971 Act in f act goes beyond the demands of the Rules.

Deck Cargo Here again, if a contract is contained in or evidenced by a bill of lading or receipt which expressly prov ided that t he Rules shall apply, then this shall include contracts f or the carriage of deck cargo. However, as was the posit ion under the 1924 Act, deck cargo means cargo which, by the Contract of Carriage, is stat ed as being carried on deck, and is so car ried. If in such circumstances the bill of lading is clearly claused to the eff ect that cargo is carried on deck “at shipper ‟s risk and liabilit y” then, in those circumstances, a shipowner would be exempt f rom liabilit y if loss or damage occurred to the ca rgo.

Voyages Covered Under t he 1924 Act, voyages covered by the Rules were f rom ports in the United Kingdom and Northern Ireland only. However, this has been amended by t he Hague -Visby Rules to the eff ect that the Rules will apply to ever y bill of lading r elating to the carriage of goods between ports in t wo diff erent States, as f ollows : -

1.

Providing the bill of lading is issued in a Contract ing State

2.

The carriage is f rom a port in a contract ing State

3.

The Contract cont ained in or evidenced by the bi ll of lading

provides that the Rules or legislat ion of any State giving ef fect to them are to gover n the contract, whatever may be the nat ionalit y of the ship,

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the carrier, the shipper, the consignee or any other interested person.

Seaw orthiness Bef ore the Hague (Carriage of Goods by Sea Act, 1924) were introduced, the Common Law position was that ther e was implied in ever y contract of Carriage of goods by sea an absolut e w arranty that the vessel was seaworthy at the “ commencement of the voyage” and also at the commencement of each “subsequent stage‟ of the voyage. Only the most clear and unam biguous language in a bill of lading could exclude this implied warranty. The ref erence to the commencement of each “subsequent stage” of the voyage brought into considerat ion what was termed as the “ Doctrine of Stages” which meant in ef f ect that a ship had to be seaworthy at the commencement of each particular stage of the voyage. For example, a vessel pr oceeding in ballast as opposed to having cargo on board or a voyag e which necessitated the vessel having a long down -river passage prior to setting of f across the open sea. Dif f erent seaworthiness considerat ion would apply depending on the suit on of the voyage contemplated.

The 1924 Act and subsequent ly the 1971 Act cat egor ically about the absolute warranty of seaworthiness in all contracts t o which it applied. Shipowners, however ar e st ill under a legal obligation to exercise due diligence to make a vessel authorit y in all respects and to make

cargo

compartments

f it

f or

the

reception

of

cargo.

But

a

shipowner will not be liable f or losses due to unseaworthiness, unless due to want of due diligence.

Obligation to Issue a Bill of Lading W hen cargo is deliver ed into the custody of a shipowner, that shipowner is obligated to issue a bill of lading, on demand, to the shipper, giving f ull part iculars of the goods accepted and, or course, their apparent order and condition. It is apparent that once cargo had been accepted into the cust ody of the shipowner and the bill of lading issued, then the particulars of that bill constit ute “prima f acie” evidence that the cargo has in f act been received by the carrier. This obligation to issue the bill of lading dos not

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indeed depend on t he goods having been loaded on boar d the vessel. As we have seen, bills can, in f act, be issued prior to actual shipmenht on board a vessel and this is done by carriers issuing a recived f or shipment bill of lading. But when goods are f inally loaded on board, a shipper may demand a shipped bill of lading to replace this.

The obligations of the Shi pper It is important that in the preparat ion of a bill of lading, a shipper f urnishes f ull particulars of cargo to be shipped, by ensuring that all details noted thereon are accurate. The shipper must f ulf il, an obli gation by which he will indemnif y the carrier in the event that there is any loss or damage ar ising f rom any inaccuracy in the particulars pr ovided by him. This ensur e that the shipper is liable, the carrier must show t hat, in the event of subsequent loss or damage, this loss or damage was indeed caused t hrough the actual f ault or neglect of the shipper, or his ser vants.

From Loading to Discharge A shipowner has certain obligations also towards the cargo prior to loading it on board t he vessel, and also f ollowing its dischar ge f rom the vessel. However, the Act leaves the shipowner f ree to contract on any agreed terms in respect of the transit of the goods prior to loading and subsequent to discharge. It is only f or the actual period of the voyage itself that the “Hague-Visby Rules” will apply.

General Average The “Carriage of goods by a Sea Act, 197” states expressly that the parties to the Contract are f ree to make any reasonable arrangements with regard to the applicat ion of General Average, normally stated in charterparties, f or example, as “General Average to be adjusted in London in accordance with the York -Antwer p Rules, 1990‟. In eff ect, the Rules have no applicat ion to General Average.

Dei vation In every contract it is implied that a vessel shall proce ed on her voyage without departure from her proper course as described in the contract,

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and if she does, she will, in effect, deviate f rom contractual terms unless such deviation is f ully jusiticable.Under Common Law, deviation f rom a contrcted voyage will only be allowed when saving or attempt ing to save human lif e. This position was changed by the introduct ion of the Hague and Hague- Visby Rules, whereby any deviat ion in saving or attempting to save lif e or property at sea, or indeed any reasonable deviati on, would not be deemed to be an inf ringement or breach of the Rules or of the contract of carriage. The carrier would not be liable f or any loss or damage resulting f rom that situat ion. W hether a deviation is said to be “reasonable” is in ever y part icular case a question of f act and must be considered in accordance wit h the particular circumstances in

ever y

case.

Limitation of Li abilit y In the Carriage of Goods by Sea At 1924 (Hague Rules), the Limit ation of liabilit y provisions available to a shipowner were that, unless the value and natur e of the goods wer e declared and inserted in the bill of lading bef ore the goods were actually shipped on board, liabilit y was limited to # 100,000 per package or unit. T he parties to a contract wer e, however, f ree to in sert a higher lim it if they so wished, but a shipowner was unable to restrict his liabilit y to any amount less than $ 100,000. This lim it ation had been ef f ective sinc e1924 and since that time great steps f orward had been t aken within the shipping industry with regard to the methods of carrying cargo by sea. These new and modern methods included such concepts as container izat ion, pallet isat ion and roll -n roll-off methods of loading and discharge.

In the light of this moder isat ion it was decided that as well as the limitation of liability itself being too low, the limitation of liability provisions were outdated and need amending. These amendments took place following the intrudction of the Hague-Visby Rules and were brought into English Law by the Carriage of Goods by Sea Act, 1971. These amendments provided for the f ollowing: -

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1.

In any event ther e shall be no liability in respect of loss or

damage to goods unless legal act ion is commenced wit hin one year of their deliver y or of the date when they should hav e been delivered. It being permissible to ext end this per iod should the part ies so agree.

2.

Recourse act ions may be br ought by the plaint iff af ter the

expiration of the one year time lim it, within the time limit allowed by the Law of the Court seized of t he case.

This meant, of course, that, depending upon the Law of the country under which the claim was being brought then, if that jurisdiction provided for a time limitation period in excess of the one year time limit laid down in the Hague-Visby Rules, such time limit, as defined by the Law of the Country would prevail.

Under the Hague rules and theref ore the 1924 Act the lim itation of liabilit y was $100 per package or unit . Inf lation overtook this small level of compensat ion to such an ext ent that the Bri t ish Mar itime Law Associat ion produced a voluntar y agreement in 1950 called the „Gold Clause Agreement ‟, which doubled the limit of compensat ion to $300. (This agreement nat urally ceased to exist when UK Ratif ied the Hague Visby Rules). Under Hague-Visby, the aim was t o protect the limitat ion f rom inf lation by relating it to a manuf actured‟ currency called the Gold (or Poincare) f ranc and the rules stipulated the exact weight and degree of f ineness of the gold. The new rate was 10,000 of these gold f rancs. Subsequently (started in 1981 but not internat ionally accepted until 1984) a protocol was agreed to replace the gold f rancs with what it calls „units of account ‟ but which are more f amiliarly known as Special Drawing Rights (SRD‟s) which are another „manuf actured‟ currency by the Int ernational Monetar y Fund and f or which a rate of exchange is published each day in the f inancial press. Theref ore, if we look specif ically at how these special drawing rights aff ect the Hague Visby Rules the alter ation can be ex plained as f ollows : -

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(a)For the equivalent of 10,000 Poincare Francs substitute “666.67 units of account”. (b)

For the words, “30 Poincare Francs per kilo” subst itute “2

units of account per kilo”. The Merchant Shipping Act, 1981 which gave eff ect to this charge, specif ies f or the purposes of the schedule to the Car riages of Goods by Sea Act, 1971, as amended the value, on a part icular day, of one “Special drawing right” shall be treated as equal to such a sum in Sterling as the Intenational Monetar y Fund have f ixed as being the equivalent f or that particular day.The limitation of liabilit y provisions have been added to by the introduct ion of an alternative limit to the package of unit using weight per kilo as a basis f or limitat ion. It must be pointed out that the basis of limitat ion giving the higher r esult shall be adopted f or application to claims. It is deemed under the Rules that the total amount recoverable in respect in respect of any claim is to be caculated by ref erence to the value of the goods at the time and place at which the goods are discharged f rom the when deciding, in situat ions where the method of consolidat ing cargo is by container, pallet or other sim ilar article of transort, whether the limitation of liabilit y is to based on “per packag e” or “unit” or indeed or “weight”, this is to be decided by r ef erring to bill of lading itself . If the packages or units are actually enumerated in the bill of lading as being packed inside the container, then the “unit” basis of limitat ion will be adopte d, other wise the container itself will be the basis of limitat ion.

Dangerous Cargo T he provisions of the Hague -Visby Rules relat ive to the carr iage of dang erous cargo are ver y much similar to the conditions contained in t he “ Merchant Shipping Act, 1984”. I f any dangerous cargo is shipped on board a vessel without the knowledge or consent of the master or the carrier then the Act would allow the carrier to take appropr iate action to have the cargo landed or indeed dest royed at the shippers‟ expense should an y loss or damage be sustained to those goods. Similar ly if , during the course of a voyage, danger ous cargo

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becomes a danger to the ship and t he crew, even in circumstances where the cargo has been shipped on board in proper and legal f ashion, then the mast er of the vessel is entit led to take act ion to destroy or dispose of such carg o as he deems f it and the carrier will not incur any liabilit y whatsoever other than an obligation to contr ibut e in General Average, if any.

“Himalaya

Clause”

The

Hague-Visby

Rules

have

int roduced

a

completely new Article and the intent ion of this was to add to the rules, provisions in order that any ser vants or agents of the carrier wouls be entit led to benef it f rom the def einit ions and lim its of liabilit y present ly available to the cariers. Such ser vants or agents of the carrier would not, however, be able to avail themselves of these provisions if it were to be proved that any loss or damage resulted f rom an act or omission of the servant, or agent, done with intent to cause dam age or with knowledge that dam ag would probably result.

The clause gets its name “Him alaya” as t his was the ship involved in the case of Adler V Dickson (1955) when a passenger injur ed herself on a badly secured ladder but f ound that the conditions on the passenger

ticket

prevented

per

f rom

taking

action

against

the

shopowner under their contractual agreement so shipowner under their contractual agreement so inst ead t he successf ully sued the capt ain under t ort. The “Himalaya” clause expressly prevents this by stipulat ion that

ser vants

of

the

owner

have

the

same

limitat ion

of

liabilit y

protection as the shipowner under the B/L. Pr ior to the Hague -Visby Rules, this clause had to be specif ically written in to the contract of carriage.

Rights and Immuni ties There ar e considerable r ights available t o a shipowner wit h exemptions or immunities f rom liabilit y. A number of these including unseaworthiness, deviation and lim itation of liabilit y provisions have already been examined in som e detail. However, there are man y other exemptions: -

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a)“ Act, neglect or default of the Master , Mariner, Pilot of ser vant to the Carrier in the navigation or in the management of the ship”. This exemption f irm liabilit y musdt be considered ver y caref ully and a com parison made bet ween f aul ts or errors in the navigation of the vessel as opposed t o f aults or errors in the management of the vessel. Obviously, related to navigation, such errors would r ef er to navigational errors possibly result ing in collision or in grounding and may result in the shipowner being able to avoid liability by pleading the ref erred except ion. W ith regard to the exception related to act, neglect or def ault of the Master, etc.,

in the management of

the ship, then this is

somewhat complicat ed in that it must be decided what situation woul result in an error in the management of the ship as opposed to act, neglect or def ault of the Mast er, Mar iner, etc. in the management of the cargo itself . A distinction must be made, theref ore, bet ween “ want of due care of the cargo” a nd “ want of due care of the vessel by itself indir ectly aff ecting cargo”.

b)“Fire, unless caused by t he actual f ault or privit y of the Carrier”.This except ion is an unqualif ied exempt ion f or loss or damage arising out of f ire. It is however , subject to t he f act that the f ire had not bee caused by the actual f ault or pr ivity of the carrier and the burden of proof is on the carrier in tis rspect.

c)“Perils, dangers and accidents of the sea or other navigable waters”.This is a somewhat dif f icult exception f or a shipowner to take advantage of particular ly as he must produce evidnce that the damage was caused by such a peril of the sea and was without the shipowner‟s negligence of f ault. It would also have to be proved that the vessel had encountered abnormally b ad weather caused by f reak conditions in respect of which t here would probably be structural damage t o the vessel as well. Of course the vessel is expected to meet the normal hazards and weather condit ions at sea in any case so that any evidence would

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have to substant ive extremely abnormal conditions at sea in any case so t hat any evidence would have to substant ite extr emely abnormal condit ions.

d) “ Act of God”W ith reagard to this except ion, a shipowner would have t o prove that the loss or dam age arose with out human inter vention. It is a situation whereby an ocureence may take place without human inter vention and one which could not have been prevented by any amount of human f oresight or care of a reasonable nat ure.

e)“ Act of War”. This would appear to be sel f -explantor y and can be def ined as to mean losses due to war or hostile situations. It would include the phrase “Queen‟s Enemies”.

f )“ Act s of Publi c Enemies”. It may be suggested that this covers enemies of the Queen, or of the State to which the carrier belongs.

g)“ Arrest or restraint of Princes, Rulers or Peopl e, or seizure under

legal

process”. This

except ion

would

include

f orcible

interf erence by a St ate and they include such things as blockage of discharg, embargo or arrest of ships by the action of a St ate.

h)“Quarantine Rest rictions”. Under this section the shipowner may expect to avoid liabilit y f or loss f or damage to cargo caused through quarantine of the vessel.

i)“ Act or omission of the Shipper or Ow ner of the goods, his Agent or Represent ative .If it can be proved under this exception that any act or omission on the part of a shipper was dir ectly responsible f or the loss or damage t o the cargo then the carrier can be relieved f rom liabilit y.

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j)“Strikes, or lock -outs or stoppage or restraint of labour f rom w hatever

cause,

w hether

partial

or

general”. Most

of

this

statement is self -explanator y but it would also include an y “boycott”.

k)“Riots and Ci vil Commotions ”.This particular except ion would include any local disturbance in r espect of which is include d lawlessness and/or violence.

l)“Saving or attempting to save life or propert y at sea”. At has already been discussed in this lesson, with regard to the effects of deviation, this exception gives the shipowner the right to deviate from the terms of the contract for the said purposes.

m)“Wastage i n bulk or w eight or any other loss or damage arising from innerent defect, qualit y, or vice of the goods”.

n)“Insufficiency of packing or inadequenacy of marks”. he above referred exceptions all relate to defences available to the shipowner for the quoted losses and need little further comment.

p).“Latent defects not discoverable by due diligence ”.This except ion may be best explained by ref erring to the case of Brown & Company Nitrate Producers steamship Company (193 7). In this case cargo was damaged due t o leakage through rivets, used in the construction of the vessel, which was latent in nature. Despite caref ul investigations such leaks could not be discover ed be

the

shipowner

in

the

exercise

of

due

diligence

and

consequently wer e not liable f or the damage sustained to the cargo.

q)“An y other cause arising w ithout the actual fault of privit y of the Carrier, or w ithout the fault or neglect of the Agents or

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servants of the Carrier , The burden of proof shall be on the person claiming the benef it of this exception to show that neither the actual f ault or privit y of the Carrier nor the f ault or neg lect of the Agents or ser vants of the Carrier contributed to the loss or damage”.

This exception can be ref erred to as the “ Cat ch-All Clause” and is there to pr otect the carrier f rom responsibilit y f or loss of damage, of whatever nature that may be, which has not already been specif ically covered by the Rules, providing, of course, that such loss or damage did not arise wit h the f ault or privit y of the carr ier or with the f ault or neglect of the agents or other ser vants of the carrier.

The Hamburg Rules The object of the Hague and Hague - Visby Rules was to spell out the responsibilit ies and liabilit ies of the part ies, particularly t he carr ier, in an internat ionally acceptable way. I n the process, the liabilit ies of the carrier have been limited and in so doing they are in eff ect saying to the shipper “Tis is the point where m y insurance of your g oods ends so this must be the point wh ere yours must start”.This is not so onerous as it might at f irst sound because it is a f act of lif e that the premium charged to a shipper f or his gods and trade, which would be well known to his insurer, will inevitably be lower than the prem ium insurers would have t o Cemand f rom the carrier to cover all the dif f erent types or goods that a ship might carry. As the cost of insurance, like any other expense, eventually has to be passed on to the shipper, it is bound to be cheaper f or the chipper to do his own insurance. The Rules help all concerned because they know the point at which their r isks begin and end.

The

United

Nat ions

Council

f or

Trade

and

Development

(UNCTAD) which is unashamedly on t he side of the less developed nations of the wor ld, f elt that t he Hague- Visby Rules were weighted too much in f avour of the carriers most of whom, it seemed to UNCTAD, were operated by the developed nations. In 1978, theref ore the U.N.

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published a draf t convent ion ent itled t he Hamburg Rules which will come into operat ion when t went y states r atif y it. At the time this lesson is being prepared there do st ill insuf f icient coun tries want the Hamburg Rules to apply.Not surprisingly there is, in the Hamburg Rules, a clear shif t of liabilit y on to the carrier as well as incre ased levels of compensation f or the merchant. The f ear generally expressed is that, f irst, the exporters and importers will be no better off because the carriers will have to pass on their increased costs. Secondly, and more important ly, the clauses in the Hague Rules have stood the test of time in the law counts throughout the wor ld and the Hague -Visby Rules did not alter the f undamentals. The Hamburg Rules, however , introduce vast untried areas of potential legal dispute and in the words of the cynic “If he Hamburg Rules come in, the lawyers will be laughing all the way to the bank”.

Self Assessment Questions

1.

W hy was it necessary to amend the Hague Rules and introduce the Hague-Visby Rules?

2.

W hat voyages are cover ed by the Hague - Visby Rules?

3.

How is t he lim it of compensation calculated under the Hague Visby Rules?

4.

W hat is the purpose of a “Himalaya” Clause?

Time Charter Cargo Claims The rights and responsibilit ies enumerated in t he notes about the Hague Rules and t he Hague -Visby Rules apply to carriers and cargo owners/shippers whether or not the vessel is employed on voyage or on t imecharter t erms and conditions. However, where t imecharter applies, there is a complication because the “carrier” can be def ined a either the timecharterers in the role of “disponent owner”, or the actual owners themselves. Indeed som e claims can arise

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due to def ault by the timecharterers whilst others may be entirey the ship‟s f ault.

Accordingly, and in order to avoid any misunderstanding where simultaneous

dual

negotia t ions

m ight

be

carried

out

bet ween

an

aggrieved cargo -owner and both the actual and t he disponent owners, a code of practice has grown up around the New York Produce Time Charterparty, into which it is common to incorporate the „Inter Club New York Produce Exchange Agreement‟, a copy of which is included as Appendix 8.5.The „Inter Club Agreement‟ was last amended in 1984 and sets out what is to happen in the event that cargo claims are lodged against the carr ier. It also sets out the r esponsibilities and li abilities in the relationship bet ween the t imechart erer and the shipowner.It is important to take the time t o read and understands the Inter -Club Agreement, especially if becoming involved with timechart ering, and particularly to realize the signif icance o f the inclusion or absence of the words “and responsibilit y” in Clause 8 of the NYPE C/P and/or the words “Cargo claims” in the second setence of Clause 26.

Time Bars Under English law ther e is a one year tim e lim it f or charterers and/or cago owners to bri ng claims against carriers or shipowners. This may, however, be exceeded in certain circumstances under the terms of the „Arbitration Act, 1950‟, if an English arbitrat ion applies and if the claimant can show t he court that „undue hardship‟ might other wise occur. Generally t hough, one year time lim itations means what it says f or charterers, although many f eel it t o be unf air that

shipowners

ar e

not

prevented

from

bringing

claims

against

charterers in similar circumstances. However, in regard t o the Inter Club Agreement ‟, there is a provision in respect of a time -bar in which claims ar e subject t o a t ime -bar of two years, no matter whether they are made by owners or by charterers.

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Test Questions

Having completed Lesson Eight, attempt the f ollowing and submt your essays to your Cour se Tutor.

1.

An original bill of lading is not available upon the arrival of M.V. “SANDERLI NG” at a W est Af rican Port to discharge 20,000 tonnes bagged rice.

Discuss the likely cause of this sit uation and the pr actical steps which may be taken to resolve the problem.

2.

Suggest a situat ion (imaginar y) where the “ Himalaya” clause could pr ovide protection and another sit uation where it would not help at all.

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Date ….

Messrs …………….. Port …………..

Dear Sirs, This will ser ve as m y authorization to sign by and on my behalf the Bill(s) of Lading which the Shipper may prent to you f or cargo loaded on board M.V. ………….. under my command. This signature may only be given af ter ensur ing that the f ollowing items ar e proper ly inserted and ar e corr ect : Name of the carr ier; name of the vessel name of the shipper and of the consignee; loading portl discharging port (or when „f or orders‟ the position where discharging port or ders can be obtained); descript ion of cargo, quantit y, number, weigh t, marks and superf icial r ecognizable condition; terms of freight paym ent; place and date signed; number of signed, or iginal bills of lading. Please note that you do not have authorit y to sign any bill of lading which does not specif ically incorporat e the terms, conditions and except ions of the charterpart y dated ……. and/or The Hague/Visby Rules (or legislation of similar ef f ect. On no account should “f reight prepaid” bills to issued without the express authorit y of my owners, to whom you should ref er on this or on any other matter concerning the signing and issuing of the bills. As to the condition of the goods, the statements the main have to correspond with the signed mate‟s or tally clerk‟s receipts, and where no such receipt is issued, t o m y personal remarks, which I will bring to your attention in writing if the goods received cannot be truthf ully descr ibed as being in “APPARENT GOOD ORDER AND CONDITION”. Your are not ent itled to sign a bill of lading other than in “APPARENT GOOD ORDER AND CONDITION” or with my personal remakrs. The cargo weight should be qualif ied by “W EIGHT UNKNOW N”. Receipt Conf irmation: Date & Place: ……………. Signature & Stamp: ……………….. Yours f aithf ully, Master M. V. “…………..” cc: Owners.

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To ……………. The owners of M.V. ………………….

Dear Sirs, M.V. “………………” Goods ………………….. No. ………. Descr ipt ion ………… Marks ……………..

The above goods ar e shipped on the above vessel by Messr s …………. But the relevant bills of lading have not yet arrived.

W e hereby request you to deliver such goods to ….. withou t product ion of the bills of lading.

In consideration of your complying with our request we hereby agree as f ollows : -

1.

To indemnif y you, your ser vants and agents and t o hold all of you

harmless in respect of any liabilit y, loss or damage or whatsoever nature which you m ay sustain by r eason of deliver ing goods to ……. in accordance with our request.

2.

In the event of any proceedings being commenced against you or

any of your ser vant s of agents in connection wit h the deliver y of the goods as af oresaid to p rovide you or them f rom time to time with suff icient f unds to def end the same.

3.

If the ship or any ot her ship or property belonging to you should

be arrested or detained or if the arrest or detent ion thereof should be threatned to provide such bail or o ther secur it y as may be required to

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prevent such arrest or detention or t o secure the release of such ship or propert y and to indemnif y you in respect of any loss, damage or expenses caused by such arrest or detention whether or not the same may be justif ied.

4.

As soon as all or iginal bills of lading f or the above goods have

arrived and/or come into our possession, to produce and deliver the same to you whereupon our liabilit y hereunder shall cease.

5.

The liabilit y of each and ever y person under this inde mnit y shall

be joint and several and shall not be condit ional upon your proceeding f irst against any per son, whether or not such person is part y or liable under this indemnit y.

6.

This indemnit y shall be construed in accordance wit h English Law

and each and ever y person liable under this indemnit y shall at your request submit to the jurisdict ion of the high court of justice of England.

Yours f aithf ully,

Signed …………….. Duly authorized and on behalf of …………………… Name and address …………………… company to whom …………………… goods delivered

W e join in the above guarantee ………………………………………… ………………………………………… ………………………………………… For the ……………….. Bank

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Manager.

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CH APTER- 9

WORLD TR ADES

Introduction It is essential that those engaged in dr y -cargo charter ing have a good work ing knowledge of relevant wor ld trades and t he maritime environment in which they operate. Already in this course, we have touched upon numerous aspects of the subject and the book “CARGOES” acts as a link bet ween these papers and the actual commodit ies in volved in dr y-cargo trades.This lesson aims to set out essent ials,

although

daily

working

eff iciency

in

this

important

commercial shipping activit y will be greatly enhanced by the use of : -

A)

A Mar it ime At las (such as Lloyd‟s Mar itime At las” or “The

Ship‟s Atlas”).

B)

A set of Mar itime Distance Tables (such as “Reed‟s”).

C)

A book on Marit ime Commodities (f or example “ Cargoes” –

the second volume in the “ SEA TRADING” series, and which you have been given wit h this Course.

D)

A Load-line Map (sometimes contained in Mar itime Atlases.

E)

An Institut W arranty Limits Map (also sometimes contained

in Marit ime At lases).

F)

A book on Part Inf ormation (Lloyd‟s and Fairplay each

publish such a book, whilst ther e is also a sim ilar publication by “Shipping Guides”, the publishers of “Th e Ship‟s At las”).

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G)

Shipping

magazines

and

newspapers,

also

your

dail y

newspaper. Have an enquir ing mind and seek out the location and activities of a strange port, the use of an unf amiliar comm odit y, its carriage requirem ents, etc.

The Dry Cargo Tramp Trade s There ar e many dr y-cargo tramp trades – some

international,

some

local.

Because

of

the

diver siy

of

the

background of those taking this course (where, f or example local trades aff ecting those in the Easter n Mediterranean will not particular ly af f ect or interest those involved in local trades around Japan and Korea and vice versa) the intention of the f ollowi ng pages is t o concentrate on internationality important trades routes and commodit ies. This will be tackled in t wo stages. First f rom the aspect of a commodit y ( perhaps of most int erest to a charterer or trader in that commodit y), and secondly f rom the aspect of type/size of vessel (i.e. f rom the ship owner‟s, ship operator ‟s viewpoint) .

You should set yourself the task of reading f ixture and market reports that appear in shipping publicat ions and, f rom these, you will lear n of some of the major ports involved in the shipment and deliver y of any part icular commodit y, as well as the speed of cargo handling at ports involved and the pref erred size of vesse l.

Cargoes

for

Ships

The

three

major

seaborne

trade

dry -cargo

commodit ies (in ter ms of volume) are ir on ore, coal and grains – in that order. You have lear ned about the ships that carr y such cargoes earlier in t his Course, as well as about the commodit ies themselves f rom “CARGOES”.

It

is

now

necessar y

to

complete

that

data

wit h

considerat ion of the actual trades arranged around these three major commodit ies.

Iron Ore : Ore in its var ious f orms comes mainly f rom developing nations, such is Brazil, Venezuela, W est and South -East Af rica and India, also f rom advanced nations such as Australia and Canada and, to

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a lesser extent, f rom Scandinavia. The receiving end of such voyages is almost always one of the major indust rialized countries, such as in Europe,

the

United

States

of

America,

or

Japan.However,

raw,

unref ined ores are f requently partly processed int o commodit ies such as sinter, pig iron, pellets or concentrates, of ten at processing plants in developing nat ions, bef ore bein carried onwar ds in other ships to their eventual destinat ions.

The advantages of this f irst processing stage taking place in the countr y of origin ar e theef ore threef old. The export ing country earns vital f oreign exchange as a result of the added value, the importing countr y saves the c ost of this pr ocessing stage and the ir on content of the cargo is considerably increased thus saving f reighting costs.In the modern port of shipment f or iron ore, cargoes are loaded at great speed, usually by a chutef ed by conveyors, with the ore dr opped f rom gret height. Trimming is rarely requir ed in modern bulkcarriers as installat ions are usually f lexible enoug h to distr ibut e the cargo f airly evenly in cargo holds during loading. You will of ten f ind the stipulat ion in charter ing negotiations that the ca rgo has to be „spout trimmed‟ at loading port. Because of the speed at which large bulkers are loaded, they require the f acilit y to change trim r apidly t o preser ve t heir saf ety, and high capacit y ballast pumps ar e usually f itted f or this pur pose. Also f requent draf t checks may be required as the vessel nears f ull cargo, and allowance should ideally be made f or the time taken on such sur veys in the charterparty layt ime clauses

Discharge of iron ore in all except the smallest ports is handled by sophist icated equipment, although the one common element is the grab. Having said that, it is not possible to describe the many systems available,

which

vary

f rom

the

com mon

slewing

crane

to

highly

speciaised transport ers. To some extent , the method used will depend on the t ype of inland transport being used, but the appet ite of the steel industr y is voracious, and speed of turround is essent ial. Consequent ly, it is not unusual f or cargoes in excess of 200,000 tonnes of iron ore to

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be

loaded

and

discharged

within

a

f ew

days,

perhaps

at

rates

approaching 50,000 tonnes daily.

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The system utilized f or weighing cargo during discharge is equally, although a large proportion goes through hoppers where it can be weighed in transit . Major sources of iron -ore exports are: -

Brazil

Ponta do Ubu, Tubarao, Sebetiba Bay Venenulala Orinoco ports

Maur etania

Nouadhibou

Liberia

Monr ovia

South Af rica

Saldanha Bay

India

New Mangalor, Mornugoa

Australia

Dampier, Cap, Lambert

Canada

Seven Island

Sweden

Lulea

Nor way

Nar vik

It is diff icult to p redict f uture development in the iron ore trades, because a number of nations possess ver y large reser ves but these have yet to be exploited. This is largely due to the cost and the inaccessibilit y 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 polit ical will of the countries concerned us to whether they wish to take advantage of the high technolog y available internationally.The two important consumers of co al f rom the chartering aspect are those int ending to use it as a primar y f uel and the electr icit y industr y natur ally t he biggest in this group. The other is the steel industr y which converts the coal into coke f or use in blast f urnaces.

Coal is f ound in va r ying quantit ies on all conteinents and in m any countries. The areas which produce an exportable surplus, however, are led by the United States of America, Australia, South Af rica, Canada, Russia and China. Exports f rom the United Kingdom (once a major exporter) have dwindled almost to ext inction, and Polish exports are f ar less than a deade age. However, new sources are being exploited, with Venezuela, Colombia and Indonesia seeming set to become major players in this market arena.The patters of shipment a re dict ated by t he

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consumpt ion of the main industrial centers of the wor ld, wit h Japan and the EEC nations pr edominant in this respect. However, the volume of imports

does

not

necessar ily

bear

any

relation

to

the

overall

consumpt ion of coal because, in W es tern Eur ope, f or example, a large portion of requirements is obtained f rom indigenous sources. Japan is f ar less f ortunate in this respect, needing to import much load and ir on ore to ser ve its industrial requirements.

Geographical ane econom ic f actors als o play their part, with the result that Europe receives it major impor ts f rom the United St ates, with Japan and the Far East relying more on sources in Australia, W estern Canada, China and Eastern Russia and, to a certain exent, South Af rica.W hen consideri ng the demand f or coking coal and iron ore, it will become obvious how the health of the tramp market depends on the success or f ailures of the steel industry. In theor y, theref ore, a recession in steel making would automatically have a knock -on ef f ect on the demand f or bulkcarrier space. But , as always, the situation is not necessarily so simple. Often at such t imes, it is f ound that a counter balance is provided by, say, an increase in demand f or grain.

The main ports of loading f or coal in the United Sta tes are in the area known as Hampton roads, part icular ly the ports of Norf olk and Newport

News,

as

well

as

nearby

Baltimore

and

Philadelphia.

Signif icant quantit ies also or iginate in the huge Mississippf River basin, being exported via New Orleans and Mobi le, in the United States Gulf , also via Long Beach and Los Angeles from the United States West Coast.The traditional Australian coal exporting ports are in New South Wales, comprising Newcastle, Port Kembla and Gladstone, but during the past decade hugh deposits have been exploited in Quensland, and ports such as Hay Point and Abbots Point have been established, trading to and from these ports being facilitated by the discovery of deepwater navigation channels (eg Hydrographers Passage) through the Great Ba rrier Reef.

South Af rica has greatly enhanced its exhortation potent ial by the

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opening of the specialized Richar ds Bay term inal near Dur ban, whilst Canada now has t he rort of Robertsbank, near Vancouver. Russia exports f rom the Black Sea but import antly, as part of an expanding trade, via the Far Eastern port of Vostochny (near Vladivostock), handily placed to m eet the demands of Japan and Korea. China is also developing its coal exports, mainly f rom northern Chinese Ports, such as Qinghauangdao (Chinwangtao ), but coal exports are set to become increasingly important f rom Asian nat ions with Indonesia gearing up its product ion and export f acilit ies and coal occasionally exported also f rom Vietnam.

India, once an important exporter through its eastern por t of Calcutta, now r equir es internally all the coal it can produce and is an important customer f or Australian coal, which is usually transported to India in ships hitted with self -dischar ging capabilities to over come inadequate port f acilit ies on the sub -contin ent.The f uture of coal is reasonably bright despite its main disadvantage when compar ed wit h oil as a primar y f uel in that the transpor tation of coal f rom souce to consumer is more complex. To this must be added the need f or more sophist icated appliances f or burning it (many power stat ions have to grind coal to f ine dust bef ore putting it into the f urnace) and then ther e is an ash disposal problem. Nevertheless, coal is obtainable f rom so many diff erent areas that it canot be used as a polit ical weapon as w e have seen happen with oil.

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 wit h 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 natur e, of higher capital value and thus we are back again to cost. It may well be that exper iments with transportat ion in slurr y f orm, or other methods of liquif lying coal may be successf ul and permit tankers to carr y coal, although there are many problems to be overcome bef ore this will be commonplace, if ever.

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It

is

not

possible

to

generalize

on

methods

of

inland

transportat ion of coal either pr ior to shipment or af ter deliver y although, in view of the large quantities handed, probably r ail or canal transport will be utilized. Like so many bulk commodit ies, one major problem is that of storage space and, since land in industr ial ar eas t ends to be expensive, it is usually vital that such space is kept to a minimum. This necessitates an ef f icient system of co -operat ion bet ween t he mines, inland transport, the loading f acilities and ship owner, perhaps being more vital in respect of coal industr y than any other. It is, in f act, generally supposed t hat the expression “ subject st e” or iginat es f rom the coal trade, when it became necessar y f irst to secure a ship on t his “subject” bef ore f inalizing the whole operation to pr ovide that vessel with her cago.

Petroleum coke tends to be considered as part o f the coal „market‟ but, as the name implies, it is in f act a by -product of oil ref ining. It is export ed f rom those areas where major ref iner ies exist in particular f rom both coasts of the USA including the US Gulf ; Europe and Japan are the major importers .It is produced in various grades depending upon the design of the ref inery and is not the most popular of cargoes with owners. Some t ypes are granular (up to about 5mm) and are rather oily whilst others are ver y f ine which cause a dust problem.It has seve ral uses because it is a source of almost pure carbon and one of its pr incipal applications is in the manuf acture of electrodes f or use in the ref ining of aluminium.

Grain. As it applies to ocean transport, grain includes wheat , rye, corn, sorghums, barley, oats rice and oilseeds (the latter akthough not technically „grain‟ is considered such f rom a chartering point of view).A pattern of grain trading has emerged during the 20 t h century, main producers being China, Russia, India. The United Stats, Canada, France and Argent ina. 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

291 Go to Index Page

EEC, North Af rican countries and the Middle East, Brazil and, above all, Russia. I n addition, there are specif ic emergency trades developed to areas of the wor ld where local f amines and disaster s occur, of ten organized by the W orld Food Agency, par t of the United Nat ions.

The largest phenonmenon of the post- war decades, however , has been an ever -growing trend in f ormer developing nations, as their prosper it y has increased, to r ef use to be content eat ing bread, rice or maize as a staple diet and t o seek instead meat, or meat products, poultry and eggs . This evolution; translated into transpor tation and grain logist ics, has created f undament al changes in trade.Cattle and poultry f eeds ar e m ainly supplied by corn, sorghum, bar ley and other coarse grains, in addit ion to soyabeans and other oilseeds, and a combination of them all by way of derivatives such as meals, expellers and oilcakes. The main exporters of these products are the United States, Argentina, Brazil and Thailand. Among the heaviest importers; Russia, the EEC, Japan, China and Taiwan.

In the main grain loading ports of the world, the cargo is br ought to sea boad t erminals by r ail, road or barge. The sphisicated and developed nations have an internal net work of country elevators, which are in eff ect collect ing points f or local har vest ing cente rs. These are linked

to

the

seaboard

with

an

int ensive

bulk

grain

transport

inf rasructure – rail sidings, specialized grain hopper railcars, bulk grain road

transport

or

special

grain

bar ges

where

river

transport

is

appropr iate.W here storage is inadequat e, surplus stocks ar e held in a var iet y of alternative f acilities, temporarily modif ied and pr essed into ser vice – eg redundant f actories.Terinals at sea ports are mostly modern and use extremely highspeed elevators, equipped to unload inland transport and t ransf er the commodit y int o ships.

Any port congest ion, which seems a r ecurring problem in grain, is due to greater dem ands being placed on the internal and seaboard elevator capacities than can possibly be accommodated, due of ten to

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commercial pr essur es or to grain pr ice structures. W hen one realizes than an average loading rate in North American ports, f or exam ple, is bet ween 10,000 and 20,000 daily, it can be seen that the m ajor cause f or congestion is not in a capacit y of the shore equipment.As f ar as discharging

is

concerned,

methods

var y

considerably.

In

more

developed nations, for example the EEC and Japan, dischar ge may be perf ormed by stat ic or traveling section unloaders. Some, however, may be bucket elevator type. Conveyor belts are used to transsh ip the grain f rom oceangoing vessel coasters or to inland transport t o store in associated grain silos.

In Venezuela and parts of South Korea discharge of grain may be eff ected by use of portable Buhlers ( SKT machines) held vertically into the vessel‟s hol ds by the ship‟s gear, and discharged direct to road transport.The usual method that is employed by Russia and by many developing countries is that of discharging by crane and clamshell grabs into hoppers on the decks, f eeding direct to road transport, or f rom hoppers to sacking machines, with the bars being stacked in adjoining warehouses. There ar e also portable suckers (Vacuvator type), small pneumatic vacuum cleaner type machines on wheels, lif ted on to a vessel by shore cranes or ship‟s gear, and moved on deck f rom hold to hold. In some ports using this m ethod, the gran can eit her be bagged by hand on the dock and stacked in a warehouse or stored there in bulk. Vacuvat ors are powered either by int ernal combust ion engines or by electricit y.

In some of the more primitive ports, clamshell grabs are f itted to ship‟s gear and grain discharged in bulk as already descr ibed when using shore canes. There are still some ports where grain is sacked in the holds and discharged by sling (either by shore cranes or shi p‟s gear) – and of ten the case wit h aid cargoes to f amine – aff ected areas.Ports through which grain is export ed include : -

United

Stat es:

Mi ssissippi

River

delta,

Houston,

Balt imore,

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Norf olk, Seattle, Por tland. (Oregon) Canada : Thunder Bay (Great Lakes), Churchill (Hudson Bay), Montreal, Quebec, Sorel (Upper St Lawrence River), Seven Islands, Baie Comeau (Lower St. Lawrence River). Australia : Fremantle, Bunbur y, Esper ance, Adelaide, Port land, Geelong. Argentina : Rosario, Buenos Aires, Bahia Blanca. Brazil : Santons, Rio Grando do Sul. France : Rouen, Le Havre.

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W here nations with poor inland f acilities are involved – and this is usually the case with aid cargoes – bags are f requently the onl y practicable method of moving grain about. Consequent y, the gra in may be loaded in bulk and bagged later at the destinat ion port, or bagged at the start of the journey, in the loading port itself . Usually also these bags are of the size that can be conveniently moved by manpower alone – eg 50 kilos each. Charterparties will of ten include a clause that extra bags are to be carried (usually free of charge) in case of demage or splitting of bags when they are moved, as well as in some cases, the carriage of needless and twine, so that bags can be filled and fastened, to pr event spillage of their contents.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 traken 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.

Agricultural Products These are var ied and, indeed, an ent ire chapter is devoted to such commodit ies in “CARGOES”. From a volume point of view, per haps the most signif icant ar e sugar and tapioca.Sugar is carried in sea -going vessels in eit her its raw bulk state – usually cane sugar but ver y occasionally beet sugar – f rom an area of product ion to a ref ining site ( eg Tate & Lole cane sug ar f rom Maurit ius or Fij i to the Silvertown Ref iner y on the River Thames, London); or ref ined, usually bagged sugar, f rom a ref inery to a consuming nation. Man y exporting nations of bulk raw sugar employ mechanical installat ions when the product is carried on a moving band bef ore dropping through a spout into a vessel‟s holds. Somet imes spreaders ar e used to distribute the sugar in those holds, thereby impr ovin g the trimming and obtaining a better stow.

Discharge of bulk, raw sugar is ef f ected by grabs, the contents being dropped into hoppers that empt y on to a moving band via a weigh

295 Go to Index Page

tower

int o

the

refiner y,

storage

area,

or

onward

transportation

vehicle. Many t ropical areas pr oduce and export bulk sugar – eg f rom the Car ibbean and the North Coast of the South Amer ican Continent (eg Barbados and Geor getown, Guyana); f rom the islands of the Indian Ocean ( Maurtius and Reunion); f rom Southern Af rica (eg Swaziland) v ia ports such as Durban; f rom Bangkok, Thailand; f rom Fij i; f rom the Philippines; f rom Queensland ( Australia) ; and f rom razil (eg Santos or Recif e). Major importers include the United Kingdom, France and the United Stat es of America.

Tapioca is another pro lif ic tropical plant, although f or seaborne purposes, by f ar the largest exporter is Thailand; exports being through the port of Bangkok (to 26 f eet f resh depth of water) or, more f requently given the size of vessels engaged in this trade, via Kohsichang, downr iver of Bangkok, wher e large ships can load. A Thailand rank only seventh in terms of wor ld production but, f rom an export ing point of view, has 80 percent of the market, much of its exports destined f or EEC animal f eed purposes. W ith constant worldwi se pressure to reduc or eliminate altogether grants and subsidies to f armers, this trade may change dramat ically, but whilst the EEC is geared t o maintaining grain prices at high levels to prot ect dom estic producers, it will remain economically attractive for European animal feed compounders to substitute cheap imports of protein and energy feedstock such as tapioca for eventual food for pigs and cattle, rather than use the more expensive locally grown grain.

W hereas

large

vessels

-

commonly

panamax

or

cape size

bulkcarriers - are used f or the transportation of tapioca f rom Thailand to the EEC, ot her nations in the area - eg Malaysia and I ndonesia commonly use handy-sized bulkcarriers of around 20/ 40,000 dwt. to carry a var iet y of agricultural products in e ach shipm ent (usually separated “naturally” hold by hold) f or such as copra derivat ives, tapioca, etc.) the reasons being t wof old.

First, the shore -based

industr y is not so m echanised is in Thailand and, secondly, the ports

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are not so deep -draf ted and wel l-equipped with loading equipment as is Kohsichang. In f act, a vessa1 engaged in the carriage of “agri -prods” f rom Indonesia may need to load at several ports to obtain a f ull cargo.

Forest Products This is the name given generally to any wood derived product. Just like the other trad7es, f orest products can be divided into those appertaining to raw materials and processed goods.

Raw Materials : Much data will be f ound in the relevant chapter in “CARGOES” but, in trading terms, raw f orest products can be su bdivided

bet weet

r oundwood

(logs),

sawn

t imber,

pulpwood,

and

woodchips. The main receivers of these diverse mater ials are Europe, the

Fa

East

and

North

America,

with

around

half

the

world‟s

requirement, being met from North American and Scandinavia, or ig ins; although there is a throwing log trade from the W est Coast, of South America where Chile is a major exporter.

Those areas supply principally sof twood and we have to turn to tropical and sub -tr opical areas, such as Central America, Guyana, Brazil, W est Af rica, I ndia, Burma, Malaysia and Indonesia f or hardwood sources. Ther e is no set pattern f or hardwoods as, unlike sof twoods which are f ast growing and so can be produced as a crop in readily accessible ar eas, hardwood trees are dot ted around various f or ests, are more

diff icult

to

locate,

having

to

be individually felled and

transported to an exporting locat ion. Consequent ly, hardwoods tend t o be shipped as liner parcels, although there are f ull cargoes in this commodit y, principally f rom W est Af ri ca and f rom the River Amazon basis.

Sof twoods are f requently sawn bef ore shipment and an increasing amount moves in sawn condit ion direct to a convenient distr ibut ion place in an importing areas, rather than to sawmills located in those receiving regions. N othing is wasted and the sawdust and general remains f rom sawm ills - termed “woodchips” - are also in demand f or

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var ious wood products - eg paper, chipboard, linerboar d, etc. - and a major trade exists in this commodit y f rom the W est Coast of North America to Japan.

Incidentally, the expressions „har dwood‟ and „sof twood‟ relate more to the type of tree rather than strictly to the actual hardness or other wise of the wood. For example, Balsa wood which is the sof test and lightest of all woods is technically a „hardwood‟. Conversely, Columbian pine which is a f avour ite mat erial f or the part of a quay that has to take the shock of a ship coming alongside is actually a „sof twood‟.The f uture of the hardwood tr ade is not clear because there is enormous pr essure f ro m conser vat ionists to reduce its use. Most hardwoods take many decades to grow to maturit y so that much of such timber being exploit ed is, to all intents and purposes, a non -renewable resource

and

such

trees

are

a

vital

element

in

reducing

the

„greenhouse ‟ ef f ect.On the other hand, sof twoods, which are the f irs, larches

and

pines,

tend

to

lo

„f armed‟

under

strict ly

controlled

conditions so that in most producing areas the total amount is being increased rat her than the reverse.

Processed Material : Here there is a very wide var iet y, ranging f rom plywood through to newsprint.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 m ain exporting areas are Canada (both East and W est) and

Finland.

Naturally,

winter

conditions

can

cause

disruption,

particularly when ice af f ects the St. Lawr ence River and t he Gulf of Bothnia. As a result , those vessel‟s engaged in this trade need to be ice-strengthened. Alt hough unaf f ected by the ice diff icult y, W estern Canadian exporting t erminals are f requently beset by heavy r ainf all and newsprint has to be kept dry at all costs.

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Linerboard: A product in heavy demand f or the packaging and carton manuf acturing industries - is supplied mainly f rom North America, especially the US Gulf and the W est Coast, also f rom Scandinavia.

Fertilisers: There can be Little doubt of the importance of the various raw materials and f inished products covered under this head ing when one realises that twent y. Five years ago India,, with it s massive populat ion, was heavily reliant on the outside world f or supplies of grain. It is now quite rare to see grains being imported into that nation, a circumstance brought about almost s olely by the use of f ertilisers. Sim ilar improvements in agricultur e through the use of f ertilisers may be f ound in most developing countries.

The three main chemicals required f or plant growth are nitr ogen, phosphate and potash. All three occur naturally, but nitrogen, is usually manuf actured today as a by - process of the oil and chem ical industries. Chile is the main source of nitrates and this natural commodity is still in demand because of its other const ituents, such as iodine.Sulphate of Ammonia

and

Am monium

Nitrate

ar e

examples

of

manuf actured

nitrates, and a valuable agent in their product ion is sulphuric acid, a product which also f inds a use in a large number of other m anuf acturing processes. Although there ar e specialised molten -sulphur carriers an d tankers capable of transporting sulphur ic acid, by f ar the majorit y of sulphur is moved in dry - bulk state arid converted into sulphur ic acid “on-site”.

Sulphur is obtained naturally in many parts of the wor ld – particularly f rom Sicily (Gela) and f rom W e stern France (Bayonne), whilst the US Gulf was once a major exporter. Now, however, much sulphur is obtained as a by-pr oduct of the oil and gas industr ies and f orms a major expert f rom W estern Canada, f rom Poland and Northern Germany, f rom Libya and Syr ia in the Mediterranean, and f rom the nations of the Arabian Gulf .Some importers use it to up -grade their own pr oducts. For example, Morocco enhances the quality of its exploitat ion of vast

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natural phosphate deposits by using imported sulphur to m anuf acture stronger

and

more

valuable

di - ammonium

(DAP)

and

t riple -super

phosphate (TSP).

Phosphate is f ound all around the Af rican coastal nations from Togo (Kpeme) in W est Af rica northwards via Senegal ( Dakar) and Morocco (Casablanca, Jorf Lasf ar, Saf i), to Tunisia (Sf ax and Gabes), which latter national also engaged in the manuf acture and export of Ammonium

Nitrate. Other

prolif ic

exporters

of

phosphat e

and

its

derivatives are Jordan (via Agaba) and Egypt (El Hamrawein), certain of the Pacif ic Islands

(eg Christmas Island) and also the South Eastern

United States (f rom 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 mon o-ammonium phosphate ( MAP) may be exported via the port of Kokkola.Potash can be shipped naturally (especially f rom Israel, Jordan and f rom Canada), or as manuf actured potassium chlor ide.

In addition to sources of nature f ertilisers, many nations engage in

the

prof itable

business

of

manufacturing

f ertiliser

compounds,

especially urea, am monium phosphate and nitro phosphat ic kompound (NPK). Such cargoes will f requently be found quoted f rom origins in the EEC.

(eg

ex

Ant werp,

Rotterdam

and

Hamburg);

f rom

Pola nd

(Gdynia/Gdansk), and f rom Rumania ( Constanza), whilst many of the oil-producing nations located in the Mediterranean, Ar abian gulf , and South East Asia, and the USSR use their f acilit ies to manuf acture exportable ur ea as a by - product f rom oil ref ining.A ll these f ertilisers, whether natural or manuf actured, need care in handling, alt hough most can be carr ied in saf ety whether bagged or in bulk, giving rise to the o t-encount ered expression “BHF” – “bulk harmless f ertilizers”.

Part of the reassurance of th e word „harmless‟ dates back to the early days of transporting ammonium nitrat e in bulk bef ore such

300 Go to Index Page

processes as „calcining‟ this material had been perf ected. W ithout this treatment, a large quantit y of ammonium nitrate in bulk can, under certain

condit ion s,

become

spontaneously

explosive

which

was

tragically proved when a US Gulf port was almost destroyed many years ago. This problem is now so well understood that ver y many f ertilisers are completely „har mless‟ f rom the dangerous cargo point of view. However, the I MDG code should always be ref erred to especially if more than one t ype is to be loaded because some other wise harmless f ertilisers are incompatible one wit h another.Of course, ship owners need to be awar e of the non -dangerous harm that certain f er tilisers can do. Some can have a damaging eff ect on the paint work in the holds whilst others can cause severe corrosion to unprotected steel.

Steels: Under this heading is a considerable var iet y of cargoes, ranging f rom material such as bars, rods and bea ms, through to plat e, coils and pipes. As may seem obvious, steel products emanate m ainly f rom the major industrialised nations both f or cross -trading to others and f or the developing nat ions. However, there is a major trade around semi processed mater ials such as pig -iron concentrates, direct -reduced iron, etc. wherein developing nations (eg Br azil , Chile and Peru) have a role to play.Fr om the other end of manuf acturing processes come scrap metals which also form an important seaborne commodit y, the scrap being recycled in t he steel industry and f orm relatively inexpensive ready

material

around

which

some

steel

industries

have

been

developed.The trade today is concentrat ed ver y much upon the route bet ween the United States East and W est coasts to Japan, Ko rea and Taiwan ( where modern electric f urnaces used f or steel -making may have a 100% scrap, f eed instead of ore). There are, however, man y other routes, with ships of all sizes f rom short -sea/coastal up to handy sized coop-sea bulkcarriers.

Minerals: Other than iron-or e and nat ural f ertilisers, ther e are ver y many other minerals carried at sea, some f orming an important volume trade. One such is bauxite, the staple constituent of the alum inium

301 Go to Index Page

industr y, the raw m aterials being expor ted in

large „quantities

f rom

W est Af rica (Guinea) and f rom Brazil in particular, to various aluminium wor ldwide – eg in Canada, Venezuela and the UK/Eire.

smelters

Ref erence t o Chapter Eleven of “CARGOES” lists many seaborne minerals, and, f rom those pages, one can gain an ide a of exporting and importing regions where this is appropr iat e.

Ships for Cargoes: Dr y-cargo vessels can be divided into various size and t ype categories, of which those of major importance are: -

Cape-size: These1 vessels (of around 100,000/200,000 tonnes d wt) are,

of

course,

limited

ver y

much

by

port

restrictions

and

they

concentrate on cargoes of iron -ore or coal on long -haul runs, operating principally f rom loading areas in Austr alia, South Af rica, Brazil, W est Af rica and t he Unit ed States and Canada, dis charging mainly in the Far East and Europe.Not all vessels operat ing in this size category are pur e dry-cargo vessels; many combination carriers - pr incipally “VLOOs” (Ver y Large Ore -Oilers) transf erring into the oil trades when the opportunit y ar ises or o ut of the oil trade when f reight levels are uninviting.

Panamax : These ships of around 55,000/70,000 dwt are arguably the new “ workhorses” of the dr y cargo trades and many port f acilit ies have been

upgraded

in

recent

years

to

accommodate

ships

of

these

dimensions.This process is continuing (eg Iraq‟s deepening of the channels to and f rom he ports of Khor Al Zubair and Um m Qasr to around 12 metres) and as it develops, so the range of commodit ies these vessels regularly engage in carr ying can widen st ill f ur ther. Most Panamaxes are pur e bulkcarriers, although they have to compete with OBOs in the Atlantic when economic circumstances dictat e, and the availabilit y or other wise of these “ invaders” f rom the oil industr y can have a pr of ound eff ect upon the stat e o f the dr y -cargo market.

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The main trades f or Panamaxes an the “big three” o bulk coal, iron or e and grain - although one f inds Panamaxes car rying other commodit ies, notably bulk phosphate, tapioca f rom Thailand (along with cape size vessels), and bauxite. Thus these vessels will be f ound worldwide, although their market divides into var ious regions :

a)

The Atlant ic Basin

b)

The Pacif ic/Indian Ocean Basin

c)

From Atlantic to Pacif ic/Indian

d)

From Pacif ic/Indian t o Atlantic

Of these it is usual to f ind the highest returns being paid for cargoes f rom the At lantic to the Pacif ic/Indian Oceans with t he lowest in the reverse direct ion, this imbalance created by normally higher f reight levels f or trans -At lantic trades over trans pacif ic trades. A major trade route comprises that of grain f rom the US - Gulf to Japan and this rate is a major contributor to the f reight f utures market operated by BI FFEX (The

Baltic

International

Freight

Futures

Exchange)

and

a

ready

barometer of the health of the dr y -cargo market. In r ecent years f reight rates have f luctuated f rom as low as US $10.00 up to US $30.00 per ton f or this particular trade and this alone serves as a ready indicator of the volatilit y of the dry -cargo f reight market, and f or Panamax rates in particular.

These

Handy-Size: bulkcarriers

-

those

are

really

around

t wo

categories

20/ 30,000

dwt

and

of

“handy -sized”

those

bet ween,

30/55,000 dwt. The larger category emulates the trading pattern of Panamax bulkers, but adds to its list of carriageable commodit ies the major trade of steels and scr ap, and f orest products. As a r esult, many of these vessels are relat ively sophisticated, wit h a var iet y of deck gear

303 Go to Index Page

of up to around 25 tonne cranes, etc. The smaller vessels even

wider

range

have

an

of commodities and are in especial demand f or

regions of the wor ld with restricted dimensions - eg the Gr eat Lakes. There is no regular pattern f or these smaller bulk carriers as can be identif ied f or their larger competitors, and they tend to be f ound in all parts

of

the

wor ld

commodit ies. Around

en gaged

in

handy -sized

t he

carriage

bulk

of

carriers

any what

number is

of

termed

“parceling” has developed, and f requently operators will hir e ships of this t ype and size to load various commodit ies in adjacent holds f rom a var iet y of nea rby ports to another, general destination - eg Australian minerals to Europe.

Tw eendeckers : Most modern deepsea t weendeckers range in size around 20,000 deadweight, although there are st ill ver y many vessels in this market of around 12/18,000 tonnes dwt. T his latt er f leet is generally

ageing,

however,

and

their

modern

counter parts

are

f requently better described as “multi - pur pose” having the abilit y to f old tweendecks to convert to and compete with smaller bulkcarriers. The modern versions of this categor y are in demand f or liner tr aff ic f rom1 the Far East and f or the more sophist icat ed trades ex Europe, whilst the older versions are the true “tramps” of today‟s dr y -car go market, scour ing the world‟s oceans f or whatever prof itable cargo is around f requentl y engaged in the carriage of bagged f ertilizers, grains and agricult ural products and occasional bulk commodit ies - eg sugar.

However, just as t weendeckers compete f or the cargoes that might other wise be the exclusive domain of smaller bulkcarriers, so those bulkcarriers can be used f or what were once considered exclusive tweendeck “liner” trades, as more and more of the liner trades that remain af ter the deprivat ions associated with container isat ion develop more of “parceling” attitude to the ser vices they advertise, f or which bulkcarriers are perfectly suitable.

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Short Sea : Enterpr ising modern short sea owners are not necessar ily restricting themselves to coastal trades, and it is not uncom mon to f ind small vessels of less than 10,000 tonnes trading f ar a f ield f rom their normal oper ating area. In f act they provide a valuable alter native shipment means to parceling f or those shippers and trader s seeking a more personal involvem ent in the carriage of their commodit ies. This process has been aided by a genera l m ove to ship smaller commodit y parcels

and

by

t he

removal

of

cr ewing

restrictions

by

var ious

governments. There is no r eason why it should not become more common in the year s ahead f or smaller vessels to be f ound around the world in a purely “tramp” capa cit y, having been enticed away f orm their normal waters by an attractive f reight.

Revision Exercise Students should now return to the Appendices at the end of Lesson Three and by using the inf ormation in this lesson, re read the reported f ixtures, placing t hem where possible in the context of identif iable trades.

305 Go to Index Page

Trading

Restrictions Quite

apart

f rom

the

commercial

aspects

of

marrying ship and cargo, those engaged in the dr y - cargo chartering market must bear in mind certain other f actors which af f ect trade, namely :-

a)

Navigational

b)

Polit ical

c)

Labour

d)

Ports

Navigational Restriction : Obviously, climat ic inf luences aff ect trade and a clear example is that ice will int errupt voyages at certain times and seasons of the year. This seabor ne trading to and f rom the Great Lakes of North America is not possible bet ween Januar y and March. Trading to the Nort hern Balt ic is at the ver y least dif f icult during that period and voyages to and f rom the Hudson Bay are possible only bet ween July and O ctober each year.The re are many other hazards to be borne in mind, however, eg Monsoons in certain areas at certain times ; Hurricanes or Typhoons at others.

Close attention must also be paid to the route bet ween loading and discharging port (s). Does it ent ail t he crossing of load- line zones? W ill these af f ect cargo intake? Does it entail expensive pilotage? Or passing, round an obstacle such as the Magellan Straits or Cape Form, or navigating via a Canal? Has the cost and r isk of this element in the voyage been calculated?

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Major canals and water way af f ecting dry -cargo trades are :

Suez Canal Panama Canal St Lawrence Seaway/Great Lakes Syst em Magellan Straits/Cape Horn Cape of Good Hope Malacca/Lombok/Sunda Straits Straits of Hormuz Red Sea/Gulf of Aqaba -Eilat Torres Straits/G reat Barrier Reef Kiel Canal/Skaw Pent land Firth Dover Straits/English Channel Straits of Gibralt ar Dardanelies/Bosphoro is Consult your maritime atlas to f amiliar ize yourself wit h the locat ion of these places.

At the same time, to locate the f ollowing lan dmarks used in dry-cargo trading - particularly as deliver y/redeliver y posit ions in time charters: -

Cape Passero (Sicily ) Cape Finisterre (N. W . Spain) Ushant (France) Dakar/Douala (W est Af rica) Baton Rouge (River Mississippi) Rosar io, Santa Fe (Argentine ) Muscat (Arabian Sea/Persian Gulf )

307 Go to Index Page

Dondr a Head (Sr i Lanka) Ref erence to the Port Inf ormation books will provide details of canal and water way size restrict ions also the equipment that needs to be f itted on a vessel bef ore transit. Cert ainly vessels t imech artered f or either trip or per iod charters involving any of these canals or water ways should include clauses in which the ship owners/operators conf irm that the

vessels

reasonably

conf orm

to

local

r equirements

and

have

appropr iate f ittings. In the case of the Panama and Suez Canal, include the Canal Gross and Nett Registered Tonnages which dif f er f rom the usual NRT and CRT and upon which transit tolls are based.

Political

Restricti ons :

Most

shipping

people

t end

to

have

an

“international” and a “commercial” view of the world and its events rather than a polit ical one. Nevertheless, the ports of certain nations are

not

popular

calling

places,

because

of

f uture

repercussions

aff ecting vessels and their owners/operators as a result of trading there.

It

is,

there f ore,

common

practice

to

list

certain

political

exclusions in t imecharter parties and those engaged in voyage trading should also be especially caref ul in f ixing cargoes to or f rom those nations. Example ar e : -

Israel: Because of likely black -list ing by Ar ab nat ions f or f uture trading. As a result it is common practice f or time charterer s and f or those engaged in voyage business involving Ar ab nat ions, to negotiate and to insert in charterparties an “Arab boycott clause”, under which the ship owner conf irms that his vessel is not boycotted ( blacklist ed) by Ar ab nations as a result of previous visits to Israel.

Libya: Under Libyan law, all document s appertaining to ships and or cargoes must be translated into Arabic. Thus trading with Libya involves heavy extra costs for translat ions. Additionally, Libyan customs are likely to search vessels f or any sign of goods or equipment involving nations

(eg

Israel)

of

which

they

disapprove

and,

if

such

are

discovered, impose heavy f ines against t he vessel. Consequently, Libya

308 Go to Index Page

is riot a popular calling place. ( A single carton of Israeli f ruit juice in the galley has been known to cause trouble) .

South Afri ca:

Several nations (eg Indian and Bangladesh) ref use to

trade to South Af rica because of its “apartheid” legislat ion . This af f ects not only vessels involved in some way with ship owners or charterers of those nat ions, but also precludes trading bet ween t hose states and South Af rica. Consequently, t here is an of f icial embargo in place against cargoes f rom those nat ions ending up in Sout h Af rica and vice ver sa, even if carried in ships f lying the f lags of nations not taking part in the boycott of South Af rica.

Cyprus ports under Turkish control : Greek f lag ships have been prohibited by their Gover nment f rom trading to tho se port s since the Turkish invasion of Cyprus some years ago. Similarly, the Greek Gover nment is not willing to perm it vessels to call at Greek ports af ter trading to Turkish -controlled Cyprus. As a direct consequence, Greek f lag ships are not always welco me „to trade to Turkey itself and, although little of f icial ruling is declar ed over this by the Turkish Gover nment, it will be f ound that some Turkish -bound cargoes are not f ixable in Greek tonnage.

Cuba: The USA has relaxed its ban on vessels trading to C uba, although Cuba is still ment ioned in some charter parties as an exclusion “f or vessels that have traded to Cuba since 1962....”. The restriction is gradually being lif ted since it is a relic of a bygone age, but can st ill cause occasional pr oblems.

North Korea: The comments that, apply to Cuba apply equally to North Korea, although with the recent ly est ablished dialogue bet ween the t wo Koreas, one again hopes that this restriction will soon be conf ined t o histor y.

309 Go to Index Page

Vietnam: A relic of the Vietnamese W ar, gradually Vietnam is becoming internationally rehabilitated and hopef ully another trading restriction will be consigned to the diplomat ic wastepaper bin.

Iraq & Kuw ait : W hilst preparing this Lesson, the cr isis in t he Arabian gulf is in f ull f low. Hopef ull y it will be set tled peaceably and t he present embargo on goods to and f rom Iraq and occupied Kuwait will be removed. In the meantime, an appropriate clause m ight be needed in a charter part y.There are other ports where local pr oblems occur of a polit ical nature. In certain cases it may not be wise to have on board crew members of particular nat ionalit ies. Even the nat ionalit y of the eventual owners of a vessel may, creat e problems despite the actual f lag the vessel f lies being acceptable. For example, Libe r ian f lag ships and vessels owned by Liber ian cor porat ions are not welcom e in Syr ia. Many Greek -f lag ships (that are welcome) are in f act owned by Liber ian corporat ions, which precludes them f rom trading wit h Syr ia.

It is vital that those engaged in int ern at ional trading keep abreast of the news and especially internat ional news. There is little that one reads about in daily newspapers that will not have at least an indirect eff ect, of international shipping. This is especially so in polit ical and in econom ic matters.Also tr y to avoid being inadvertent ly im polite. If a nation renames a port, f or example, it would be good manners t o address communications to the new name. Hence “Saigon” is now Known as “ Ho Chi Minh Cit y”. Polish people pref er “Swinoujscie” to be so named rather than the Germanic “Swinemunde”. “Hamburg” and “Rostock” are now part of “Germany” not “W est Germany” or “East Germany”. Iranian people pref er the Gulf to be called the “Persian gulf ” rather than the “ Arabian Gulf ”, whilst citizens of Ba hrein would pref er the latter.

Labour restrictions : Also contained in the “trading exclusions clause” will be nations enter ed because of labour rather than political restrict ive f actors.

Prominent

among

these,

ar e Australia and

New Zealand

310 Go to Index Page

(usually collec t ively termed as “Australasia”) and “ Scandinavia”. (Be caref ul with this lat ter expression as some people consider that the term “Scandinavia” includes “Finland” and other s (especially Finns) do not.The reason f or these exclusions is t hat the nations invol ved in t hese two areas ( including Finland) are str ongholds of the International Transport W orkers Federat ion

-

known as the “ITF”.

This is an

international organisation set up to assist seamen to maint ain wages and condit ions at certain levels. The ITF dem ands that ship owner s internationally should comply wit h these restrictions but, in general, the ITF

is

concer ned

mainly

wit h

vessels

f lying

so -called

“f lags

of

convenience” (eg Panamanian or Liber ian), as they allege that the conditions of the cr ews aboa rd such vessels is f requently below those standards set by the ITF.

In those nations listed above, the ITF (supported) by local unions) may have t he power to hold vessels until the wages and condit ions are brought up to their requirements, including “back -pay” to which the crew may become ent itled. Thus, f or vessels f lying f lags of convenience, Australasia, Scandinavia and Finland are usually excluded.Another stringent union requirement in Australasia and Finland, and in certain parts of Scandinavia, is tha t dr y-cargo vessels must be f itted with hold ladders conf orming to a certain st yle and dimensions, as def ined by the W aterside W orkers‟ Federat ion. These r equire that, f or ever y six metre drop in the ladder, a resting platf orm must be constructed. It is no t always necessar y providing, that cargo compartments are completely clean and when loading bulk cargoes t hat can be “poured” into those compartments, f or vessels to have those ladders of that design.

However, if there is any problem wit h cargo holds and t he workers are required to descend int o the compartments, they will do so only if the ladders conf orm to the established design.Australasian W aterside Unions ar e ver y strong and dictatorial. For ships discharging in Australia, f or example, and then reloadi ng, it is almost certain that the unions is will insist on cleaning holds af ter discharge and prepar ing

311 Go to Index Page

them f or the next cargo - at a considerable cost - f ar more than would normally be paid to t he ship‟s crew. Not only that, but the vessel will be delayed in port whilst the work is carried out. This can be another reason why Australasia is f requently an excluded area f or ships, no matter what f lag they f ly.

312 Go to Index Page

Port Restrictions : Once again ref erence to Port Inf ormation books is essent ial to gauge just what is involved in a prospect ive voyage. Many ports have “hidden” restrictions that one only discovers by appropr iate ref erence. Douala ( Cameroon) f or example, is what is termed a “neap port”, where t idal levels change dr amatically over ever y week or so, meaning that at cert ain t imes a vessel may be pr event ed f rom berthing f or some days due to insuff icient water. Saf i (Morocco) has a harbour bar which, at t imes when Atlant ic Ocean roller waves are predominant, means extreme diff icult y f or ships of certain dr af ts in enter ing the port. Particular berths in Genoa (Italy) have an air -draf t restriction – not a physical restr icat ion, but one nonetheless rigorously imposed by the port author ities because of the danger to aircraf t overf lying the port area to and f rom G enoa airport. Many ports on the west coast of South America are badly aff ected f rom time to time by steep waves causing ranging damage to ship and/or berth. In Butter worth ( Malaysia) berthing prior it y is given to gas tankers, so much so that a partly disch arged or loaded vessel may have to leave the berth to the gas tanker, returning only af ter the tanker has completed its cargo operations.

Port restrict ions are not necessar ily only dimensional. The hours that

ships

are

“ worked”

by

port

labour,

holidays,

et c.

all

need

considerat ion. BI MCO (The Balt ic and I nternational Marit ime Council) publish an annual “ Holiday Calendar” listing wor ldwide national and local holidays and port working hours – a valuable tool in any shipping off ice.Port costs also var y widely. The charges in some ports are subsidised in or der to attract business, whilst others have to be self support ing and prof itable. The costs vary enormously, of ten not only bet ween adjacent countries, but bet ween ports in the same countr y.

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Let us take as a n example a Panamax bulkcarrier that might trade to var ious European countries and the approximate port charges that might be imposed assuming, or course, that exactly the same ship, f lag 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

As the reader can see, quite a dispar it y. The secret, of course, of avoiding unpleasant surprises is to check bef ore f ixing. One means is f rom

ref erence books,

such as produced

by BI MCO

and others.

Alternatively, and the means f avoured by many in the industry, via a local port agent.Apart f rom port costs, anot her charge that might be encountered is that of f reight taxes. T hese can be extremely hig h Syria imposes something like 13% of f reight, Turkey not f ar behind at over 10%. These ar e imposed on the r ecipient of the f reight - not the organisat ion paying, although it may be deducted at source by local law. To complicate matters, there are bilate ral agreements bet ween nations over the imposit ion of f reight taxes, so that not all ship owner s/operat ors ar e required to pay, or need to pay only a part of the total cost to the ships of “non -approved nations”.

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Most f reight taxes are imposed against the vessel‟s f lag, but some against the nation of the recipient of the f reight - ie perhaps a disponent owner in the case of a time -chartered vessel. As f or port costs, f orewarned is f orearmed and allowance f or this deduction can be included in the cost ing of t he exercise when consider ing the business. BI MCO again publish a usef ul aid – an annual bock on worldwide f reight taxes an exemption theref rom. Otherwise it is anot her message to the local port agent.

Self Assessment Questions

1.

Using your atlas, locate :

i) Cape Passero, ii) Skaw, iii) Torres Straits

iv) Dar danelles

2.

The f ollowing ports all have certain rest rictions which should be

taken int o account when contemplat ing f ixing vessels t o them . W hat are they :-

Buenaventura Toledo Calcutta Bangkok Churchill

3.

W hat is the maximum draf t in the St. Lawr ence Seaway?

4.

What is the “new” Chinese name for the Port of Whampoa?

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Time Time is vit al to the work of a dr y -cargo shipbroker, whether working under time - constraints when negotiating charters; maintain ing contact

with,

f or

example,

principals,

brokers

or

ship‟s

masters;

calculating timechar ter durat ion; or est ablishing estimated dates of arrival of ships.However, it is import ant to understand how time is “calculated”.

On a global basis,

“Time” can be s aid t o start at the Greenwich

Mer idian, which passes close to central London and which is taken to be zero degrees or 0°. From this star ting point, imaginary lines of longitude are drawn, west wards and east wards, f or 180° each making a total of 360° f or a complete circumf erence of the globe. Thus, if three hundred and sixt y m eridians (or lines of longitude) ar e drawn f rom pole to pole at equal int ervals, they will be 1° of longitude apar t. Starting f rom the Greenwich Mer idian and traveling east wards (toward s India), time “advances” one hour f or ever y 15° of longitude. Thus, a complete circle of the Earth coming back to the starting point of the Greenwich

by 24 hours, or by one day. W es twards f rom Greenwich (towards the United St ates) will have the r everse effect.

One hour will be lost f or

ever y 15° and upon returning to the Greenwich Meridian, one day will have been “ lost”.

W here those tracing eastwards and west wards passages meet “half way round” it t he 180° meridian ( in the central Pacif ic Ocean) is located the imaginar y Internat ional Date Line (or “IDL”) f or short, which is not completely straight, taking minor deviations so as not to bisect small islands or af f ect land masses.Thus, by traveling east wards cross the “eastern hemisphere” f rom the Greenwich Meridian, local t ime 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 f or short). Moving in the opposi te direction f rom the Greenwich Meridian across the “ western hemisphere”, one “loses” 12 hours in reaching 180° west.

316 Go to Index Page

Consequently, the date is one day earlier to the east of the “ IDL” than to the W est and this, of course, aff ects vessels trading trans Pacif ic. A ship proceeding east wards f rom Japan towards the North American Cont inent will theref ore “gain” one day upon crossing the IDL. Ships transmitting in the opposit e direction will “ loss” one day. It is important to take this into considerat ion when ca lculat ing estimated dates or arrival and canceling dates involving voages across the Pacif ic Ocean.But wherever ships are in the wor ld, if traveling generally east war ds or west wards, small time dif f erences are eliminated by adjusting

clocks

and

watches

by

one

hour,

either

f orwards

or,

back wards, when passing f rom one time “zone” to another, these time zones being identif ied in the wor ld map of any good atlas.

Most mer idians are straight, but some, like the IDL are “ bent” here and ther e so as to make all one countr y (or state in t he USA) in the same zone. So exactly how is dr y - cargo chartering aff ected by “time”?Per haps

most

important ly

dur ing

charter ing

negotiations.

Ignoring daylight saving schemes (such as the UK‟s “summer time”, when t ime is advanced by on e hour f rom GMT) when it is 1200 hours in London it is 0700 hours in New York and 2100 hours in Tokyo. Thus, in any of these centres a dr y -cargo executive is in the middle of the working day when one of his count erpar ts is bet ween br eakfast and the off ice and another is thinking of going to bed.

There is thus litt le point in making f irm off ers wit h reply times where there is litt le chance of principals being contactable. Cases of emergency are another matter and all shipping people t end to be prepared to sa cr if ice sleep and convenience at one time or another.It is, of course, vital to state in f irm off ers not only what the off er expir y time is, but in whose t ime it is to be expressed. “Reply 1200 hour s” could be misinterpreted. “Reply 1200 hours London time” is clear. More easily overlooked can be the time f actor aff ecting time charter deliver ies and redeliveries. Let us assume that a vessel delivers on tim echarter in London f or a trip t o Bombay, where she will redeliver. Let us also

317 Go to Index Page

assume that the voyage wil l take exactly 30 days (720 hour s) and the daily hire rate of the vessel is US $ 9,000

If the time charter party st ipulates that deliver y and redelivery are to be calculated in „local‟ tim e, the ef f ect would be that the vessel will remain „on hire‟ f or som e f ive hours in excess of the actual t ime taken (see the chart below) - and this can be of benef it to a vessel‟s owners, who will undoubtedly claim extra hire of US $1, 875 f or those f ive hours. On the ot her hand, a vessel proceeding on the same terms in t h e reverse direction will „lose‟ f ive hours of hire – an advantage, theref ore, to her t ime charterer s.Those interested in equit y will doubtless ask why a timecharterer should pay more hire than f or the period a ship actually spends on t imecharter, or as shi power receive less than the t ime a ship is hired out. In this t hey would echo curr ent English Law on t he subject, which has established the pr inciple of “elapsed t ime” – per haps more easily underst ood by most of us as “stop -watch time”.

To understand elaps ed time, one has to assume that a stop - watch is started the moment a ship delivers and time runs continuously (less any of f-hire per iods) until it is halted upon redeliver y. The time that has accumulated is the elapsed t ime and is the legal per iod on hire, unless the parties have specif ically agreed in their contract to be bound by local times f or delivery and/or redeliver y.Another way of achieving a timecharter period based on elapsed or stop - watch t ime is to apply a „standard‟ to deliver y and redeliver y, such as G MT. The effect of this approach as an alt ernative to local time is illustrated below. The important thing is to specif y in a time charterparty whether local time or GMT is to apply t o deliver y and r edeliver y times. If the charterpart y remains sile nt on t his aspect, in t he event of a legal dispute the result depends on t he legal code which applies to the contract, and there can be var ying results. A recent Amer ican ar bitrator, f or example, f ound that in the event of silence in the charterpart y, loca l time would be deemed to apply. English Law, as explained above, would specif y actual

318 Go to Index Page

„elapsed‟ time, or time established by a common standard such as G MT at both ends of a timecharter.

319 Go to Index Page

(West)

Timecharter Duration

Fax

London

30 days

Bomb

Delivery (A) 1200 hrs.

Redelivery (Owner “gains” 5 Hours)

1700 Hrs. Local T

Local Time (B) 1200 hrs. GMT

(Equity)

Redelivery (C) 0700 Hrs.

1200 Hrs. Delivery

(Owner “loses” 5 Hours)

1200 hrs. Local

Local time (D) 1200 hrs. Gmt

(equity)

1200 hrs

Salinit yShipping executives should be able to understand how salinit y calculations are perf ormed as they may expect to encount er ports where the cargo intake needs to be calculat ed, and where the pr evailing wat er may be salt, f resh or brackish (a mixt ure of both). As you know, a vessel in f resh wat er will be deeper draf ted than if she wer e in more buoyant salt water. Salinit y af f ects many trades, f or example the Panama Canal is a f reshwater canal, and the available draf t so expressed.Fortunately, the calculation is re latively simple, given the “f resh water allowance” (FW A) of a vessel, usually shown on the ship‟s capacit y plan and the densit y of the prevailing water in the port or canal (obtainable f rom port inf ormation books or f rom the local port agent).

Assum ing, f or example, that the vessel‟s FW A is 200 mm and the brackish water densit y is 1015 kg/m3, the application of the f ollowing f ormula provides : -

320 Go to Index Page

RW A x (Densit y of Sea Water – Density of Brackish Water) Densit y of Sea Wat er – Densit y of Fresh Water

Theref ore:

Increased Draf t

=

200mm x (1025 – 1015 1025-1000

Theref ore:

Increased Draf t

=

200mm x 10 25

Theref ore:

Increased Draf t

=

2000 25

=

80mm

Self Assessment Questions

1.

If it is Monday noon in Tokyo what day/t ime is it in New York?

2.

How many degrees of longitude represent one hour gained (or lost)?

3.

W here would you expect to load Kaolin and what precautions should be taken in its carriage?

4.

What commodities would you expect to be carried in a “reefer”?

Test Question The m.v. “W HIMBREL”, a Lakes f itted, geared bulkcarr ier, perf orms the f ollowing loaded voyages: HOLLAND

-

CREAT LAKES

GREAT LAKES

-

VENEZUELA

U.S. GULF

-

W .C. MEXICO

U.S. W EST COAST

-

JAPAN

321 Go to Index Page

JAPAN

-

GERMANY

State the number of days the vessel would reasonably take t o perf orm each laden voyage and ballast leg; give the name of one loading and one discharging por t in each area; stat e a probable cargo and cargo size, (each cargo m ust be diff erent) that the vessel could load on each voyage and suggest suitable bunkering ports.

Appendix 8: 5a

INTER-CLUB NEW YORK PRODUCE EXCH ANGE AG REEMENT ( As amended May, 1984)

Preamble: Memorandum of Agreement (hereinaf ter ref erred to as “the Agreement”) as to the apportionment of liabilit y f or cargo claims arising under

t he

New

York

Pro duce

Exchange

Char ter

bet ween

Assurancef oreningen Gard, Assurancef oreningen Skuld. The Britannia Steam Ship Insurance Association Limit ed. The Liverpool and London Steamship Protect ion and Indemnit y Association Limited. The London Steam-Ship O wners‟ Mutual Insur ance Associat ion Limited, Newcast le Protection and Indemnit y Associat ion. T he North of England Protect ing & Indemnit y Association Limited. The Standard Steamship O wners‟ Protection and Indemnit y Associat ion Limited. The Standar d Steamship Owners‟ Pr otection and I ndemnit y Associat ion (Bermuda) Limited. The Steamship Mut ual Under writ ing Association (Bermudal) Limited. The Sunderland Steamship Protecting & Indemnit y Association, Sver iges Angf artygs Assurans Forening. The United Kingdom Mutual Steamship Assurance Association (Bermuda) Lim ited and The W est of England Ship

O wners

Mutual

Protect ion

and

Indemnit y

Associat ion

(Luxembourg) (hereinaf ter together ref erred to as “the part ies”).

(1) Application and Interpret ation of the Agreement Subject to the undermentioned conditions the formule as set forth in Clause 2 shall apply in

322 Go to Index Page

respect of Charters on the New York Produce Exchange form entered into after the 1 st June 1984.

(i)It shall be a condition precedent to settlement under t he Agreement that the cargo cl aim , including any legal costs incurred ther eon, shall have been proper ly settled or compromised and the cargo carried under a bill or bills of lading incorporating the Hague or Hague -Visby Rules or containing terms no less f avourable. Ex gratia settlement s made f or business or other r easons where there is no legal liabilit y to pay the claim shall be bor ne in f ull by the part y by whom the payment is made and f or the purpose of this Agreement no regard shall be had to such payments.

(ii)

(a)For the Agreement to apply, the cargo responsibilit y clauses in

the New York Produce Exchange Charter must not be materiall y amended. A mater ial amendment is one which makes the liabilit y f or cargo claims, as between O wners and Charterers, clear. In particular the addit ion of the words “and discharge” in Clause 8 shall not be deemed to be a material amendment.

(b)However the addit ion of the words “and responsibility” with ref erence to the words “ under the super vision” in Clause 8 together with the addition of the wor ds “car go claims” in t he second sentence of Clause 26 shall render the Agreement inoperat ive. The addition of these t wo amendments, or t he addition only of the words “cargo claims” in Clause 26, without any other material provision in the Charter shall mean that Owners shall bear all cargo claims subj ect to Charterers‟ contribution under the Berth Standard of Average Clause/Charterers‟ Contribution Clause (1971), if applicable.

(c)If the only material amendment is the addition of the words “ and responsibilit y” wi th ref erence to the words “under the supervision” in Clause 8, it is agreed by the part ies hereto that it shall mean that the

323 Go to Index Page

apport ionment of cargo claims as set out in Clause 2 shall be varied in the f ollowing manner : -

324 Go to Index Page

Claims f or loss of or damage to cargo due to unseaworthiness

and

claims

f or

condensation

damage result ing solely f rom improper ventilation

100% O wners

Claims f or damage (including slackage/ullage) due to

bad

stowage

or

handling,

and

claims

f or

condensat ion damage resulting other wise tha n f rom improper vent ilation

50% Charter ers

Except as provided in the second paragraph of Clause

(2),

short

50% Owners

deliver y

claims

(including

pilf erage) and claims f or overcarriage

50% Owners 50% Charter ers

(iii)The Agreement shall apply regardless o f the place of Arbitrat ion or the legal f orum and whether or not the Charter contains a Clause Paramount incorpor ating therein the Hague or Hague -Visby Rules and/or the Berth Standard of Average Clause (other wise known as t he General Standard of Claim Clau se)/Charterers‟ Contribution Clause (1971).

(iv)Any claims pursued under t his Agreement by or on behalf of either Charterers or O wner s should be not if ied to the ot her part y in writ ing as soon as possible but in any event wit hin t wo years f rom the date of discharge or the date when the goods should have been discharged, f ailing which any r ecover y shall be deemed to be waived and t ime barred. Such not if ication should record bill of lading details and t he nature and amount of the claim.

(v)W here

the

Charter

co ntains

the

Berth

Standard

of

Average

Clause/ Charter ers Contr ibut ion Clause (1971), such clause is to be applied af ter liabilit y has been apportioned in accordance with Clause (2) or Clause (1)( ii)( c) as the case may be and Charter ers‟ contribution

325 Go to Index Page

under su ch clause shall be per cargo voyage and not per bill of lading or parcel of cargo not withstanding anything to the contrar y contained therein.

(vi)W here Sub -Charters are involved the Agreement, unless the part ies hereto other wise agr ee in any specif ic case, shall be applied in stages starting with the part y who f irst settles the cargo claims. For example in the case of a single sub -charter, if the cargo claims ar e set tled by the Sub- Charterers, t he said claims shall f ir st be apport ioned bet ween the Sub- Charterers and the Charterers in accordance with the Agreement, the Charterer s being treated f or the purpose as if they were the “Owners”, the balance f alling to Charterers‟ account thereaf ter being apport ioned bet ween the Charter ers and Owners in accordance wi th the Agreement.

(vii)The Agreement is not binding on Members but in all cases the parties will recommend without qualif icat ion its acceptance to Members

(2) Apportionment of Cargo Claims

In all cases where the Agreement applies cargo claim s shall be apport ioned as hereunder: -

Claims f or loss of or damage to cargo due to unseaworthiness

100% O wners

Claims f or damage (including slackage/ullage) due to bad stowage or handling

100% Charterers

Except as provided in the succeeding paragraphs of this

clause,

shor t

deliver y

claims

(including

pilf erage), claims for overcarriage, and claims f or condensat ion damage

50% Owners 50% Charter ers

326 Go to Index Page

As regards short deliver y and overcarr iage claims, where there is clear and irref utable evidence that the shortage or overc arr iage, as the case may be, was due to act, neglect or def ault on t he part of Owner ‟s or Charterers‟ ser vants or agents, then the part y whose ser vants or agents were at f ault shall bear the claim in f ull. Thus if there is corroborated eye witness evidence t hat the shortage was due to pilf erage by a stevedore, the claim will f all 100% to the account of Charterers, but if by a crewmember, then 100% to O wners, subject in the latter case to Charterers‟ contribution under the Berth Standard of Average Clause/Ch arterers‟ Contribution Clause (1971).

Claims f or condensation damage shall be apportioned as pr ovided in the f irst paragraph of this clause, except where ther e is clear evidence that the damage was due solely to bad stowage in which event such claims shall f all 100% to Charterers‟ account but where there is clear

evidence

that

the

damage

r esulted

solely

f rom

improper

ventilat ion, such claims shall be borne 100% by O wners.

(3)Extension of Ag reement It shall be open to the parties to apply in whole or in part the Agreement if they so desire not withstanding that it is not str ictly applicable by reason of any of the matters set f orth in Clause 1.

(4)Duration The Agreement shall cont inue in f orce until varied or terminated. Any variation to be ef f ective must be a pproved in wr iting by all the parties but it is open to any Association to withdraw f rom the Agreement on giving to all the other part ies not less than three months‟ wr itten notice thereof , such withdrawal to take eff ect at the expirat ion of that per iod. Af ter the expir y of such notice the Agreement shall nevertheless conti nue as between all the parties, other than the party giving such notice who shall remain bound by and be entitled to the benefit of this Agreement in respect of all cargo claims arising o ut of charters commenced

327 Go to Index Page

prior to the expiration of such notice.For example if the Standard Association gave written notice of withdrawal from the Agreement on the 1 st of January 1985, it would be bound to apply the Agreement in respect of cargo claims arising out of charters commenced at any time on or befor e the 31 s t March 1985.

(5)Operation Nothing

herein

cont ained

shall

af f ect

any

settlement

already concluded bet ween the part ies t o this Agreement.

328 Go to Index Page

CH APTER- 10

DISPUTES AND PROFESSION AL INDEMNITY

It

is

inevitable

that

there

will

be

disagreements

bet ween

contracting partners f rom time to time, although most diff erences will be settled amicably and with a m inimum of trouble and expense. A f ew disputes, though, will cause much more dif f icult y and it may be t hat outsiders well- versed in commercial law will need to be called in to provide independent settlement.

In such cases it is important to

establish the legal code that will apply, since laws var y f rom place to place, and dif f erent decisions might be reac hed on the same set of circumstances depending on the jur isdiction that is to apply. W e have seen f rom earlier Lesson mater ial how the place of residence of the contracting parties t he place where the contract was “made”, or specif ic ref erence to a particu lar place or applicable law may each have a bear ing on where a dispute should be considered, debated and settled.

Consequently, it is advisable to specif y in a charterpart y or other shipping contract the legal code that is applicable f or the ref erence of any disputes t hat m ay ar ise – eg “English Law to apply” – and to spell out the f ormat of any legal hearing – i.e. whether disputes are to be ref erred to Court or, as it almost always the pref erence of those engaged

in

shipping

contracts,

to

Mar itime

Arbitra tion.

Much

of

international shipping is conducted in the English language and, given the long histor y of deepsea trading during the f ormulative years of commercial shipping over recent centuries by the Brit ish nation, it f ollows that a wide ranging and ada ptable commercial legal code has evolved which many citizens of the world of non -Br itish background select in time of dispute. Thus it is quite common to f ind, f or example, a Greek Shipowner and a Japanese Charterer resolving a dr y cargo charterpart y dispu t e bef ore a London Arbitration based, of course, on

329 Go to Index Page

English Law. Equally, m ight a South American Cargo Receiver and a Scandinavian Ship Operator have a dispute hear d bef ore a judge in the English Commercial Court.That is not t o say that other codes do not f ind internat ional f ayour, and there ar e important arbitrat ion centres in New York (The Society of

Mar ine Arbitrator s) and in Par is (the

arbitrat ion

International

f acilities

of

the

Chamber

of

Commerce),

although by f ar the largest number of shipping disput es are conducted in London under the terms of English Law.

Accordingly, there have grown up in London t he Head Off ices of numerous P & I Clubs; the London Mar itime Arbitrators Associat ion, and a

larger

number

of

lawyers

specializing

in

shipping

disputes.

Consequently, companies and individuals from the world over look to London and to English law f or guidance on the draf ting of shipping contracts and f or resolving disputes thereunder.

The English Courts . A shipping disput e that is to be resolved in the English Courts would be ref erred to a judge in the Commercial Court in the f irst inst ance, t he Commercial Court being part of the Queen‟s Bench Division of the High Court, in London. Many times the dispute will end with judgement at that stage, although it may be possible to appeal against the ver dict t o the decision of a panel of judges sitting in the Court of Appeal and, similar ly, against their judgement to the higest Court in England, the House of Lords. All this is expensive and likely t o be time consum ing however, as a consequence of which, most parties selecting English Law opt in their contract f or any disputes to be ref erred to Mar itime Arbitrat ion in London.

English

Maritime

Arbitration.

Although

the

practice

of

shipping

arbitrat ion is not restricted to its members, most active London -based maritime ar bitrators are f ull members of the London Mar it ime Arbitrator s Associat ion, an association presently numbering around f if ty mar itime arbitrators. Their backgrounds are extremely diverse and, to place the signif icance of this organizat ion into per spective, its member s bet ween

330 Go to Index Page

them publish around 500 “awar ds” annually, receiving around 4000 “appointments” each year, probably more than all other maritime arbitrat ion centers added together. These disputes cover a wide range of subjects, including charterpart y, bill of lading, sale and purchase, ship operat ion, shipbuilding, commodit y and oil trading contracts.

W hereas in some jurisdictions arbitrator s may in eff ect be able substant ially to disr egard any stem of la w, LMAA members (and ot her English

arbitrators)

are

bound

to

and

consistent ly

apply

English

commercial and maritime law. As we have seen, this code of law is now so highly developed as t o be widely r egarded and applied as if it wer e the int ernat ional law o f commerce and shipping. It continues to deveop in or der to meet changing needs largely due to the possibilit y of appealing f rom decisions – “awards” – of arbitrators, mainly in those cases where commercial public interest is involved. Under the English Arbitrat ion Act, 1950, as amended by the Arbitrat ion Act, 1979, as amended by t he Arbitration Act, 1979, appeals are restricted, but those that are granted are heard in the Comm ercial Court (see above) whose judges have great experience in commer cial and mar itime ar bitrat ion, a f actor that often f acilitat es equitable compromise in disputes of this nature.

The idea of “arbitration” was or iginally conceived as a dist inctly non- legal met hod of solving disputes and the ar bitrator s pref erred and chosen weremen wit h a commercial background rather than with legal qualif icat ions. It was thought that they would lend „straight-laced‟

mind

to

the

disputes

on

hand

f airer and less

and

interpret

the

provisions of the relevant charterparty or other commecial agreement without being strict ly concerned with the legal niceties and sheer accuracy or non -accuracy of the lang uage used in the charterpart y wording. One of the best known of all arbitrat ion clauses Centrocon

Arbitration Clause

–

requires the

appointment

of

– t he men

“engaged in the shipping and/ or grain trades” and who are “ Members of the Baltic Exchange” , and, of course, where the charter part y is peculiar

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to a particular trade, this is a most reasonable and logical stipulat ion. Nevertheless, over the years, some might say inevitably, the procedure of arbitration has gradually assumed a legal f lavour.

W hen a charter part y call f or each par ty to appoint their own arbitrator (and if they are unable to agree, an “umpire” of the mutually appointed), it might be thought that ther eis a tendency towards the arbitrators being advocates f or their appointers. This, however, is a misconceived

idea

since

an

arbitrat ion

is

a

pr ivate

judge

ruling

impartially bet ween the parties whether sitting as sole arbitrator or as member of a larg er tribunal. However, t he f ormalit y of the concept of arbitrat ion must not be underest imated. Though it may have been intended or iginally t o have a non -legal f lavour, it must nevertheless retain something of the judicial since it is af ter all an alter native , in f act the only alter native in the absence of an amicable solut ion between t he parties themselves, to court proceedings. Although the agreement to arbitrate any disput e may originally be an or al agreement bet ween the contracting parties it is usual and advisable f or the agreement to be contained in wr iting either as an expr ess clause in t he charterpart y contract (see Mult if orm Clause 30 & NYPE Clause 17) though it is unlikely that a court of law would grant a stay of proceedings in f avour of arbitration.

Such ar bitrat ion clauses can, and f requently do, contain a time lim it within which appointments of arbit rators should be made and the leading case of the „Ion‟ (1971 Lloyds 541) provides a court r uling as to what happens when an arbitration clause provisi on of 3 months time lim it (Centrocon) conf licts with the 12 month (Clause Paramount – Hague Rules) pr ovisions which applied to the same contract. The Hague Rules lim itation per iod prevailed.W hether an arbitration clause in a charterpart y can be binding upo n the innocent holder of a bill of lading issued pursuant to a charterpart y is dependent entirely upon the incorporat ing

wor ds

in

the

bill

of

lading,

when,

if

suff icient ly

comprehensive, could entit led shipowner/carrier to compel a bill of

332 Go to Index Page

lading holder to arbitrat ion under an arbitrat ion agreement (or vice ver sa).

An arbitrat ion agreement to be binding and to have the protection aff orded by t he Unit ed Kingdom‟s Arbitration Acts, 1950 and 1979, must be in wr iting and should be explicit in its terms. Thus a charterpart y clause with wording such as “ Arbitration, if any, to be held in New York” is not a binding agreement to arbitrate. It merely agrees to arbitrate in a certain named place if there is agreement to arbitrate at all – a ver y dif f erent thing. An ag reement to arbitrat e, being contractual in nature, must f or this reason be precise, umambiguous and clear in its terms and wording. The United Kingdom Act gives a def init ion of an arbitrat ion agreement

as

a

“ wr itten

agreement

to

submit

present

or

f uture

dif f erences to arbitr ation, wet her an ar bitrator is named or not”. How wide in scope the agreement to arbitr ate is, depends again on the actual wording of the clause. If it contains such words as “all matters in dif f erece” the scope is of course extremely co mpr ehensive, but the more commonly used wording in marit im e contracts – “disputes arising out of the contract” – would by its „f ace value‟ sense exclude a dispute as to whet her the contract was ever entered into in the f irst place.

The inclusion of an arbi trat ion agreement in a charterpart y does not automat ically exclude the jurisdiction of a Court of Law t o tr y disputes.

Despite

being

a

party

to

an

arbitrat ion

agreement

an

aggrieved part y in a charterpart y agreement is not barred f rom taking legal action t hrough the machiner y of the law. W hat occurs in such a situat ion is that the Court has a discretionar y power to decide whether it will “stay” proceedings in f avour of arbitration or whether it will tr y the issue.It should be remembered that even if the Cou rt stays pr oceedings in f avour of arbitration, their inter vention may become inevitable as a means of enf orcing any arbitration awar d that may eventually be made, or alternatively to set side an award when there may have been misconduct of an ar bitrator or umpire or the award has been f or some reason “ improperly secured”, or simply t here has been an “error on the

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f ace of the award”. To elaborat e on this last phrase an error of law on the f ace of the award has been descr ibed as some legal proposit ion contained in the award, or documents incorporat ed into it, which is the basis of the award and which can be said to be erroneous. The error, however, must appear on the f ace of the award other wise the Courts have no discretionar y power to set aside.

W ho may be ap point ed an arbitrator? Certainly not a madman, an idiot, an inf ant or an outlaw. These are r ecognized disabilities. An „able‟ arbitrator is a person of „suf f icient skill‟ in t he matter under dispute and is not impeded legally or naturally‟ f rom giving good sound j udgement. The category of persons may be limited and defined as indeed it is in the Centrocon Arbitration clause where the idea is to appoint persons versed in the shipping and/or grain trades. It is important, naturally to be impartial and have no bias, interest or leaning towards one or the other party. This is a ground for disqalification. If, of necessity, an arbitrator becomes a witness in the arbitration, this is also ground for disqualif ication. The produce to be f ollowed in arbitration proce edings in chronological order is as f ollows. First, the ar bitrator(s) must be appointed by the parties to the dispute and accept the appointment. Secondly the arbitrator(s) may wish to meet wit h the parties to the dispute inf ormally prior to an off icial hear ing. Thirdly, t he matter goes to a hearing, the t ime and place being the choice of the ar bitrator(s) unless other wise specif ied. Alternat ively, if the parties choose, the matter may be r esolved on „documents alone‟.

Each part y‟s counsel may be present at a hear ing, at their opt ion, provided suf f icient notice is given to the opposing part y. All evidence must be f ully heard and t he ar bitrators have absolute r ight to decide whether evidence is admissible or not. Great care should be exercised since the wr ong admission of evidence could be such a fundamental mistake as

to lead eventually to the setting aside of the arbitrat ion

award. Af ter conclusion of the hear ing the arbitrators must pr epare the „Award‟ which is the document containing their decision. The a ward is f inal and f or this reason must be clear, unambiguous and decisive.

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The ref erring of a dispute to arbitrators is known technically as the „ref erence‟. Distinction should be made bet ween the „costs‟ of the ref erence and the „costs‟ of the awar d. Basi cally, these are in the discr etion of the arbitrators. The costs of the ref erence include all those general and special expenses incurred in the course of enquiries either by the parties or by their legal advisers. The costs of the award are the remunerat ion and expenses due to the arbitrat or and which he has a right to demand as a condit ion pr ecedent to his delivering his award. The usual rule r egarding costs is that they „f ollow the event‟. That is to say that the part y which is unsuccessf ul bears all the costs. The arbitrator may, however, in his discr etion var y this and may, f or example direct that each part y bears his own costs ( i.e. his own costs of the ref erence) and half the costs of the award.

The 1979 Act abolished the „case stat ed‟ procedure origi nally introduced by Sect ion 21 of the 1950 Act. In sweeping away this procedure the new Act also r emoved the right to have an arbitrat ion award set aside because of an error of fact or of law on the f ace of the award. This was a long standing right under t he Common Law. It was due

to

the

strength

of

this

right

that

Marit ime

Arbitrators

have

tradit ionally giveh the „reasons‟ f or their award in a separ ate document f or the inf ormation of the parties, not t o be considered as an off icial part of the awar d itself .

The new Act introduced a new procedure of Appeal exclusively concerned with an error in Law. To some extent also there is st ill lim ited latitut e given to an Arbitrator or either of the parties, if , during the course of the arbitrat ion proceeding a dif f ic ult quest ion of law arises, to apply to the High Court for an answer. The question, however, must be of real importance substantially af f ecting the rights of one or both parties and one which “m ight potentially mean substant ial saving on the parties‟ costs ”.

W hen the Act f irst became eff ective it was thought generally that

335 Go to Index Page

an appeal f rom an award would be t he except ion rather than the rule but it soon became apparent that it was the other way round. Losing parties r ushed to appeal. The result of this was th at it has now becomed

dif f icult

to

get

leave

to

appeal.

The

vast

majorit y

of

applications have been turned down. It is important, theref ore, to regard the Arbitrators as the f inal arbit ers (particular ly so if the parties jointly expressed their wishes to t hat ef f ect in the wording of the arbitrat ion agreement), unless the f indings were so obviously wrong that, in the interests of justice t hey have to be corrected. For a judge to reverse t he decision of an arbitr ator on pur ely t echnical points of little sign if icance to the real issues, was not what the dr af ters of the legislation had in mind.

One

guideline

suggested

was

that

if ,

f or

example,

the

charterpart y clause in dispute was a „one -of f ‟ contract which was unlikely to ar ise again, leave to appeal should b e denied unless the arbitrator was so obviously wr ong in his decision that it would be inequitable not to disturb his awar d.

One section of the 1950 Act which has remained unaff ected by the 1979 Act, allows relief in certain circumstances when one part y ha s strictly raised against the other the tim e bar, due t o the f ailure by the other part y to appoint his arbitrator wit hin the time allowed (perhaps this is a f eature of what Lord Denning meant when he said the law was about justice and not strictness). If t o stand f irm on the time bar would cause the other party undue hardship, then the Court is em power ed t o ext end the t ime at it s discret ion. In the VIRGO case (1978 2 Llyods) the Court of Appeal said that it would be qite wr ong if shipowner/is P & I Club, could prof it f rom their own laxness/ inact ivit y dur ing investigation of a claim, by „leaping in and scream ing time bar ‟. The time bar cannot be applied absolutely and strict ly if to do so would result in undue hardship, whether the time bar itself is regarde d as totally ext inguishing the claim or as merely barr ing the remedy.Can an Arbitrator award interest ? Yes, he is cloaked with the same author it y as any commercial judge and is given ample discret ion, provided that it is just and equitable to do so.

336 Go to Index Page

Interest is in ef f ect compensation f or a person who is being kept f rom his money. W hat should be the interest rate? Should it be the lending or the borrowing rate? I.e. should the part y be compensat ed because he has had to borrow money to meet a commitment which he would not have had to borrow had be been timely paid the capital sum due to him or because he has been robbed of the opportunity to t imely invest the capital sum due to him and thus earn interest? One view has been that a suitable rate of interest shou ld be the m inimum lending rate of interest should be the minmum lending rate plus 1% to arrive at a reasonable borrowing rate (W allersteiner v Moir – 1975 IQB 373).

Note part icular ly the Techno Impex case (1981 1 Llyods) which conf irms that the Ar bitrator ‟ s discretionary power in r elation t o awarding interest includes even situations where the principal sum has actually been paid bef ore or af ter the arbirat ion has been commenced or bef ore or af ter the ward has been made. Thus it seems that Arbitr ators have power to award inter est where, e.g. the respondent has paid up only at the „eleventh hour ‟ bef ore the award the made.

Any doubt as to the correct rate of interest should be resolved in the light of any f actors relevant to the currency in which the award it self is made.In many ways, ar bitrators are even more qualif ied t han judges to award int erest, since arbitrators ar e commercially minded men and what is mor e commercially or inentated than the concept of int erest?The practice and procedures f or marit ime ar bi tration in London have become highly developed and have been condif ied into the “ LMAA T erms”, the latest

version

in

1987

part icular ly

encouraging

speed

and

early

hear ings, the power of arbitrators to order the pr ovision of securit y f or costs, and to order rectif ication of a cont ract in certain circumstances.

There is now also a codified small claims procedure to simplify smaller cases, and which limits costs to a fixed, modest sum, whilst concilation and mediation procedures are also possible.It may also be usef ul to note that the LMAA recommends a particular arbitr ation clause f or insertion into

337 Go to Index Page

contracts, and this is reproduced in Appendix 10 :1. The LMAA Clause does not refer to the small claims procedure, but parties to shipping contracts are not precluded from adding an extra sentence to their arbitration clause, such as “Not withstanding the above condit ions, all disputes up to a value of $25,000 are to be dealt with under t he terms and condit ions of the LMAA Small Claims procedure, 1989”.

Self Assessme nt Questions

1.

W here are the main Mar itime Ar bitrat ion centers?

2.

W hat are names of the arbitrat ion associat ions in London and in New York?

3.

In London, to wher e would one appeal f ollowing an Arbitr ation Awar d and on what grounds?

4.

W hat is the date of England‟s lat est Arbitration Act?

Protection and Indemnity Associations (P & I Clubs)

Much has been ment ioned about P & I Clubs in var ious lessons in this Course, and the activities of these organizat ions permeate almost ever y sect ion of the dry -cargo sh ipping industr y. But what exactly ar e they?There are several t ypes of Club, although by f ar the largest and f inancially strongest sector are Shipowners‟ Protect ion and Indemnit y Associat ions, mutual non -pr of it making organizations which provide insurance cover f or shipowners and operators which is complementar y to the insurance cover placed on the insurance market, and which was discussed br ief ly in Lesson Eight. Although there is no precise dividing line bet ween the cover af f orded by insurance companies an d that provided by P & I Clubs ( in f act pandi insurance (pandi = P & I) is also available to a limit ed degree f rom the insurance market, whilst clubs

338 Go to Index Page

tradit ionally provide one quarter of a shipowner ‟s collision insurace liabilit y), in gener al terms it migh t be said that Lloyds under wr iters and insurance companies insur e ships and cargoes, whilst shipowners P & I Clubs insur e their liabilit ies.

Two

of

the

f actors

which

contr ibut ed

to

the

f ormation

of

shipowners‟ P & I Clubs wer e the additional r isks which sh ipowner s had to assume f ollowing the almost universal acceptance of the Hague Rules

( which

we

also

learned

about

in

Lesson

Eight),

and

the

reluctance of under wr iters to accept m ore than thr ee -quarters of an owner ‟s liabilit y f or damage done to another ship

in a collision.

Accordingly owners associated together on a mutual basis, forming the direct ing boads of the Clubs, whose managers are mostly prof essional legal partnerships with legal exper ience. Subscr ipt ions ( or „calls‟) are made annually based on the tonnage entered and on the record of the party involved. A high claims r ecord should mean that the calls will be levied at a higher rate than f or an ent ered owner with a low claims record. If f orecasted claims are higher than expected, supplementar y calls will need to be levied to enable the Club to pay its way.

„Protection‟ would deal with matters such as : - One quarter of owner ‟s collision liabilit y; personal injur y; cr ew liabilit ies; damage to piers; and removal of wrecks.„Indemnit y‟ would involve : - loss of or damage to cargo, a ship‟s proportion of General Average; and customs‟ f ines.A third section of cover – „Freight, Demurrage and Def ence‟ – would be concerned with the enf orcement of legal proceedings f or collect ion of f reight and hire; conduct of at ions and arbitrations, and general legal advice to members.

Some shipowners‟ Clubs seek to attract Charterers and Operat ors as members whilst specialized Charter ers P & I Clubs exist t o provide a range of ser vices f or charterers such as cover f or costs and expenses incurred in asserting or def ending court actions or arbitr ations ( i.e. Def ence

cover)

and

indemnit y

f or

liabilities

towards

shipowners,

339 Go to Index Page

disponent

owners

and

cargo

owners

under

voyage

and

time

chartepart ies ( i.e. Liabilit y cover).

The third Club t ype – Prof essisonal Indemnit y Insurance – exists f or the benef it of Shipbrokers and Agents, providing services f or members acting in the exercise of their pr of ession as agents in chartering, sale and purchase of ships, port agency, f reight f orwarding, liner

agency,

travel

agency,

airbroking,

bunker

broking

and

ship

management, this cover is available f rom one specialist club, based in London – the shipbrokers Agents and Managers Mutual Insurance Associat ion (SAMI A) – brought about by the merger of the Trans port Intermediar ies Mutual (TI M) and Charterers Internat ional Ship Brokers and Agents Club (CISBA).The cover is designed to assist in the recover y

of

brokerages

and

port

disbursement,

and

indemnif ies

members against err ors, omissions and negligence, includ ing breach of warrant y of authority, a subject discussed in detail earlier in this Course. Somewhat similar cover may be obtained on the Lyoyds market and f rom a f ew insur ance companies.

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In their „Non Mandatory Rules f or Shipping Agents‟ UNCTAD require an appropr iate level of liabilit y insurance whilst it is mandator y f or Members of the Balt ic Exchange and f or Company Members of the Institute of Chartered Shipbrokers to have sat isf actory “prof essional indemnit y” insurance cover.

Unknow n Carterers and Ow ners By far the majorit y of charterers, operators, shipowners, brokers and agents are honest, although in most cases shrewd and keen to take the maximum advantage of trading opportunit ies. In f act, the f unctioning of this most complex of markets depends

to

a

great

extent

upon

mutual

trust.Consequently,

an

unscrupulous trader or shipowner does have the opportunit y to exploit the trust of others (albeit br ief ly). It is ther ef ore imperative that shipowners encountering previously unknown charterers and charterers uncertain about the credent ials of a new shipowner should investigate the others‟ background.

Can the newcome provide a bank ref erence and/or guar antee bef ore completing business? Are others who have conducted business with t hem bef ore prepared to off er r ecommendation? Have they come to the not ice of bodies such as BI MCO, The Baltic Exchange, or the International Marit im e Bureau (the br anch of the International Chamber of Commerce, dealing with unscr upulous activit ies)? W hat has „market gossip‟ to say abou t them?

Professional Survi val Shipping can be a lot of f un and an entertaining career. But it can also be commercially dangerous. It is essential to lear n f rom experience, to arm oneself with knowledge, and to develop guide and abilit y, at the same t ime gai ning a reputat ion f or integrity. If all this can be allied to obtaining a prof essional qualif ication, such as that of f ered by the Institute of Chartered Shipbrokers, so much the better.Allt his may seem a tall or der. But like any ot her objective it needs to be analysed and a means of achieving these aims planned out. That done, it will not appear an unattainable goal.

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First one needs to acquire knowledge, not only of day to day market events but also of more basic data. A good start in this direction will be membership of various bodies, either individually or as an employee of a corporate entity. Valuable shipping organizations involved in dry-cargo shipping include : -

1)

The Baltic Exchange (open now to “associates” who do not necessarily attend daily who may be resident outside the UK).

2)

Institute of Chartered Shipbrokers – both individual and corporate – the f ormer through examination and leading to f ellowship status which

qualif ies

the

individual

to

be

termed

a

“Char tered

Shopbroker”.

3)

The Baltic I n ternat ional Marit ime Council – open to shipping organizat ions and pr oviding valuable expertise and f acilites t o the international shipping community.

4)

International Marit ime Bureau – one of Shipping‟s „Police‟ f orces – there to pr otect it s members f rom d ealing with less desir able corporat ions and individuals.

5)

P & I Clubs – an essent ial f or owner s and charterers alike – although it is surprising how many charterers still carr y on wit hout the protect ion of a P & I Club behind them.

6)

Prof essional Indem n it y Club – becoming more and more essential f or such as brokers and ship managers.

Secondly, despite a possibly busy wor k -schedule, time should

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always be f ound to be s wide -read as possible. Apart f rom reading your local shipping press (such as Lloyd‟s Lis t in the UK), it is important also to keep up to date with both industrial and inter national news in or der to be prepared f or its impact upon she shipping wor ld.

In addit ion, build up a personal and/or a corporate librar y of such textbooks that are direct ly relevant to your business act ivities, always keeping alert f or new books or new editions of existing ones.

Some of the organizat ions listed above (eg BI MCO) publish regular magazines as part of their membersip whilst others (eg Lyod‟s of London Press) i ssue per iodical reports on mar itim e af f airs such as current law cases.All of this, however, is of title protect ion, if great care is not exercised in daily trading and especially in the draf ting of contracts. Here the charterpart y librar y r ef erred to ear li er in this course will assist but there is little sust itute f or exper ience and wi de -reading into adapt ed contract clauses.Finally, it helps greatly to operate in an eff icient, encouraging environment, br inging us to the important topic of off ice organizat i on.

Office Organisation There are some of f ices with low overheads which regularly

produce

a

high

income

and

turnover

with

limited

staff

numbers. On the other hand, there are over -staf f ed organizations, which perf orm badly. It is not that staff in either gro up work particular ly harder than in the other, although personal mot ivat ion is an important f actor. The main difference comes down to „organisation‟.

In the dr y-cargo m arket with its var iety of „players‟ ranging f rom shipowners to charterers, from traders to operators, and f rom brokers to agents, diff erent sectors require diff erent oragnisat ion t echniques. Consequently, it is dif f icult here to do more than to generalize, except to mention that wit h computer ization, many of the labour and t ime demanding task s can now be tackled far more eff ectively. It should thereore be an essential dut y of anyone given t he r esponsibilit y f or

343 Go to Index Page

off ice administrat ion to consider caref ully and regular ly how essent ial activities may be better perf ormed, at the same time giving st aff an interest ing and responsible opportunit y to conribute to the over all aims of the company.

For shipowners, of f ice personnel numbers can be related to the number of vessel units at sea in or de to assess whet her or nor administrat ion staff is being kept to reasonable proport ions. Obviously, with a small f leet of , say, less than f ive ships, off ice personnel per vessel will probably be at a higher ratio than is necessar y f or a larger f loeat.W ith a large f leet it is possible that eff ective control f rom the ver y top of the organization may be weakened unless stringent reporting procedures are laid down and adhered to. One way of exercising eff ective individual

control „f leets‟

is

to within

creat e the

teams

of

administrators

whole,

thereby

doing

operat ing away

with

departmentalizat ion that would other wise be required and which tends to create unnecessary rivalr ies, rather than to build up a mor e healthy, competit ion amongst internal “f leets”, which is to be encouraged.

W hether department alized or divided into f leet units the activities which need adequat e cover age mirror ship -management duties, such as operat ions charter ing, port captaincy, technical, insurance, storing and provisioning and accountancy.The size of shipbr oker‟s organsation depends on the number f clients they ser vice by they charterers, operators or shipowners. The more clinets, the more brokers. The more brokers the more back -up staff such as those engaged in post -f ixture and accountancy roles.

The introduct ion of desk -top personal computers in s hipbroking has largely elim inat ed secretarial assistance, in the more technically advanced shipbrokers‟ of f ices but ther e are st ill t wo major areas of dif f iculty tending to prevent a truly t horough computer ized system. The f irst is the diff icult y of prepar ing charter parties, near ly all f orms being based on paper of odd dimensions and in old -f ashioned pr ined text that

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is f requently amended during negot iations, calling f or accuracy of precise delet ions and insertions when dr af ting.

Secondly, although the f acs imile machine and ef f icient courier ser vices have reduced if not ent irely eliminated the necessit y f or junior staff to spend much time running errands outside shipbroker‟s off ices, those off ice juniors still employed f ind more and more of their time spent “f eeding” com puters wit h tonnage position data – including ship character ist ics, wher eabouts and availabilit y – all designed to speed t he identif icat ion of potentially suitable vessels f or charterers seeking tonnage.

It would seem that a central bur eau to whom shipowners could pass details of available t onnage and f rom whom enlist ing sipbrokers could extract appropriate data would be the answer to this problem. This, however, overlooks the demand for secrecy, both f rom owners who wish to disguise f rom the g eneral market the availability of some or all of their ships, and secondly f rom the more eff icient br okers who do not wish to give away their advantage. In f act, the last thing that any shipbroker wants is f or charterers and owners to communicate dir ectly, as this will reduce demand f or shipbr oking service.

The administration of a charterer‟s off ice depends ver y much on the size and t ype of charterer. W hat many shipping personnel t end to overlook, however, is that a shipcharter ing department of a charterer may be a ver y small and perhaps insignif icant part of the organizat ion as a whole. I n many such organizations the major role is in marketing their products. W ith steel works, f or example, the supply of a power source such as coal – important though it may be to the well-being of the company – may rank ver y low in order of corporate prior it y. Sim ilarly with trader s, where the Lion‟s share of prof its is to be made in successf ul buying and selling of products rat her than in shipment activities.Some such compan ies recognize the need to be eff icient in chartering as in all other corporate activit ies and hire talented and

345 Go to Index Page

eff ective staff to perf orm these dut ies. O thers, however, rely heaily on outside shipbroking expertise. The f ormer will obviously tend to be mor e highly staff ed than the latter.

Putting your Know ledge Int o Effect It is continually sur prising that f or such

a

prof essional

and

long -established

activit y as

int ernational

shipping, contract clauses ar e f requently poor ly -draf ted and open to var ious inter pr etation. Here are t wo real examples of such clauses that the wr iter of this course encountered in recent weeks, one f or a time charter and the other f or a voyage charter : -

1) The time charter example

“This timecharter is f or 18 months, with

Charterers‟ opt ion of a f urther 12 mont hs, to be declared minimum 3 months pr ior expir ation of f irst period. Plus or minus 1 mont in Charterers‟ opt ion on f inal period”.It is clear that no later t han f if teen months into the charterpart y period the Charterer has to dec lare whether the option t o extend the charter by a f urther t welve months is to be exercised or not. It is also clear that, having declared t hat opt ion, the Charterer can r edeliver the vessel somewhere bet ween 29 and 31 months af ter deliver y on to timechart er.

W hat is not clear is what happens if the Charterers do not declare the extension opt ion. It is almost impossible to redeliver a vessel af ter exactly eighteen months, unless the vessel is kept idle f or some time f ollowing complet ion of her discharge imm ediately previous to the expiration of eighteen months. This m ight mean leaving the vessel idle f or some days, if not weeks. Yet on t he f ace of it that is what the clause requires the Charter ers to do. There is no „one month more or less‟ to be applied to the straight eigheen mont hs per iod. This may me legally implied. Equally it may not. It is an example of a poor ly draf ted clause.

2) The voyage charter example “The cargo to be loaded at Pusan (South Korea) and discharged at Bangkok and Port Kelang”. The Charterers ordered the vessel f irst to Port Kelang and then t o Bangkok

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to discharge, lightening at Port Kelang down to Bangkok draf t. The Owners insisted on discharging f irst at Bangkok (lightening locally at Kohsichang) and then complet ing at Port Kelang, b ecause this would save them extra steaming and bunker consumpt ion. Study the atlas and you will see what the argument was all about.No mention was made in the charter part y of discharging in geographic rotat ion, nor was t here any clause making discharge port rotat ion in Charterers‟ or in O wner‟ option.There is apparently no legal precedent in English Law which indicates who was r ight or wrong, but advice ranged f rom discharging in the order as shown in the charterpart y ( but if this was so what would the owner say if discharge was to be at Bangkok and Bombay

- and

Bombay was f irst mentioned?) to ref erence to standard textbooks which ref er to the “reasonable, direct rout e”. Is it “reasonable” to allow f or lightening at Bangkok or to disregard this?

None of us s hould believe that we are not capable of drawing up clauses that are equally pot entially dif ficult to interpr et. W e are all liable to do so. But we must all guard against t his to the best of our abilit y unless we wish to end up in ar bitr ation or a court of law!

Test Question

The relelvant clauses of a voyage charterparty read as

f ollows : -

Clause 7 : “Cargo to be discharged at the aver age rate of …. Tones per weather working day of 24 running hours. Time from noon Saturday, or a day pr eceding a holiday, thr ough to 0800 hours Monday, or the day f ollowing a holiday excepted, unless used ( when actual t ime used to count)”.

Clause 9 : “Time at discharging port to commence at 0800 hours on the working day f ollowing the day Master has tendered vessel‟s not ice of readiness t o dischar ge to Receivers during business hours, whether in

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berth or not, whether in f ree pratique or not, whet her cust oms clear ed or not. Business hours are 0800 hours to 1700 hours on weekdays, and 0800 hours to noon on Satur days”.

The vessel arr ived of the discharge port on a Saturday at 1345 hour and the Master tendered not ice immediately. The vessel berthed at 1415 hours and commenced discharge at 1500 hour s. Thereaf ter discharge progressed more or less continuously (except f or meal breaks, shif ting along the berth, and occasional shor e crane repairs) through to completion of discharge on the f ollowing Friday.

The Statement of Facts shows that t he port agents accepted the not ice of readiness on Sat urday at 1345 hours.

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Owners maintain that, i n accor dance with Clause 7, layt ime commences with commencement of discharge and that time actually used during the weekend counts as layt ime. Charteter s maintain that, as per Clause 9, no time counts as layt ime bef ore Tuesday 0800 hours, whether the vessel was discharging or not.

Prepare a wr itten submission of either (A) Owner ‟s or ( B) Charterer ‟s case f or presentat ion to the arbitrator ( your Course Tutor) appointed to resolve the dispute. Explain (1) why you believe your Principal‟s point of view is corr ect and (2) why, in your opinion, the other side is wrong.

(NB. You will not lose any marks if your Course Tutor disagrees with your opinion. W e merely want to give you the opportunit y and practices of thinking about a t ypical dispute, providing a logical

and well-

reasoned argument and expressing it clearly in wr it ing – the type of activit y shippint people engaged in dr y - cargo chartering have to do in their ever yday work).

Self Assessment Questions

1.

W hat types of dr y cargo would an owner try to avoid even though

they are not act ually classif ied as “ Dang erous” and why?

2.

The Owner of a general cargo vessel negotiates with a Line

Operator to permit the carriage of any IMO Dangerous Goods up to a maximum of 1000 tonnes, excepting Classes 1, 2, 6, 7 and 9. W h at type of dangerous goods is permitted f or carriage?

Test Question

Toxic W astes have been much in t he news in recent mont hs. W hat are the problems associated with the carriage of toxic wast es, and to whom should shipowners look f or advice bef ore contract ing to carry such a

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cargo?

MOCK EX AMI N ATIO N

DO NOT turn to the next page unt il you have f ollowed the suggestions set out below.

Over leaf is a sample exam inat ion paper. In your own inter est do not look at it yet but instead do the same revision of the cou rse as you would do f or any examinat ion.

On completing your revision, put away your notes, have pens and papers

ready

and

set

aside

three

hours

when

you

will

not

be

interrupted, in other words cr eate as near as possible exam ination room conditions.

Carr y out the instructions on the question paper and send your answer s to your tutor f or marking. (Note your start and f inish time on the f ront answer paper).

Arbitration Clause

As the advantages which it is believed the Terms will offer become more widely known, parties may wish to consider t he use of an arbitrat ion clause which expressly provides f or the proceedings to be subject to t he L. M. A.A. Terms.A suggested f orm of clause is set out below. It pr ovides f or the constitut ion of a tribunal if the part ies do no t agree upon a sole arbitrator. The clause can readily be modif ied if the pref erence should be f or a tribunal composed of two arbitr ators, with power to appoint an umpire if they disagree.

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Agreement upon a sole arbitrator has obvious econom ic attractions, particularly in the case of arbitrations on documents or where the amount at stake is modest.It would be in the parties inter est normally to appoint persons who are U.K. Pr esident and thus readily available to participate in an arbitration to be held in Lo ndon.

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L.M. A. A. ARBI TR ATION CL AUSE

All disputes or dif f erences ar ising under or in connect ion with this contract which cannot be amicably r esolved shall be ref erred to arbitrat ion in London.Unless the part ies agree upon a sole arbitrator, one arbitrator sh all be appointed by each part y. In the case of and arbitrat ion on documents, if the t wo arbitrators so appointed are in agreement their decision shall be f inal. In all other cases the arbitrators so appointed shall appoint a third arbitr ator and the ref ere nce shall be to the three man tribunal thus constitut ed.

If either of the appointed arbitrators ref uses to act or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place. If one party fails to appoint an arbitrator, whether originally or by way of substitution for two weeks after the other party, having appointed his arbitrator, has (by telex or letter) called upon the defaulting party to make the appointment, the President for the time being of the London Maritime Arbitrators Association shall, upon application of the other party, appoint an arbitrator on behalf of the defaulting party and that arbitrator shall have the like powers to act in the reference and make an award (and, if the case so requires, the like duty in relation to the appointment of a third arbitrator) as if he had been appointed in accordance with the terms of the agreement.

This contract is governed by English law and there shall apply t o all proceedings under this clause the Terms of the London Mar i t ime Arbitrator s

Associat ion

current

at

the

time

when

the

arbitrat ion

proceedings were commenced. All appointees shall be mem bers of the Associat ion.

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EX AMI N ATION P AP ER – S AM PLE P APE R

DRY C ARGO CH AR TERI NG COURSE

Time Allowed – Three hours

Answer any FI VE questions. All quest ions carry equal marks.

1.

Your company has an obligation to transport several cargoes f rom the Great Lakes to Europe. Pr epare a proposal f or your Board

of

Director

recommending

timecharter

to

f ulf il

this

commitment.

2.

Consider in deta il all the f actors which have to be taken into considerat ion in the carriage of bagged rice.

3.

Select one of the following areas and wr ite a market report of about 35 words to either a Shipowner or to a Charterer (state which) : -

4(a)

(a)

US Gulf /Japan grain

(b)

North Sea and Baltic Sea

(c)

Pacif ic Coast of South America

(d)

Australasia

From the f ollowing data f or the bulk carrier “ MUSCOVY”, which

loaded 73, 000 tonnes of coal in bulk, calculate layt ime and result ing demurrage or dispat ch :

-

arrived r oads

Thursday 4th

0300

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-

berthed

0500

-

notice tendered and accepted

0900

-

commenced loading

0600

-

completed loading

-

sailed

Monday 8th

1600 1700

W orking hours : 0600/1400 and 1400/2200 throughout Stoppages :

Saturday

6th : 1300/1900 – st ormy weather

Sunday

7th : 0700/1130 – loading belt breakdown

Monday

8th : 1330/1400 – dr af t check

Vessel f ixed on FIOT terms with relevant clauses reading : -

“Time to count f rom 1400 hours if notice of readiness to lead tendered within of f ice hour bef ore noon and f rom 0600 hour s next wor king day if notice tendered wit hin ordinar y of f ice hours af ter noon. If loading commences bef ore notice expires, half such time used to count as layt ime”.

“Cargo to be loaded at an average rate of 20,000 tonnes per weather working day of 24 consecut ive hours, Sundays and holidays inclusive”.

“Demurrage US $10, 000 daily/half dispatch on laytime saved”.

(b)

Explain the signif icance of the layt im e clause except ing time

count ing f or any br eakdowns caused by reasons “Beyond charterer ‟ s control”.

5.

A “clean” bill of lading is of paramount importance to Shippers.

Discuss.

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The Mast er of my “ SHELDUCK” wishes t o clause a bill of lading in respect of rusting and indentation of steel cargo brought f or ward f or loading, but the Shippers ask h im to load the goods and leave the bill “clean”, off ering a letter of indemnit y holding Master and Ship owner s harmless in case of claims brought against them by Receivers. Advise the Mast er.

6.

Analyse

the

basic

division

of

responsibilities

bet ween

Ship

owner s and Charterers under a dr y -cargo time charterpart y.

7.

You are the Disponent O wner of the OBO “TEAL” open in

Balt imore and described as : -

-

66,000 tonnes sdwt on 45 f t. sswd

-

2,491,000 cubic f eet grain

-

f wa : 12 inches

-

tpi :

-

constants : 500 tonnes

-

13 knots on 45 tonnes IFO (180 c/s) plus 3 tonnes DO dail y

175

laden at sea – 41 tonnes plus 3 tonnes when in ballast. -

port consumpt ion : 3 tonnes DO daily.

-

daily hire cost : US $10,000

Your period t imecharter of the vessel is coming t o an end, and in order to redeliver to her Owners “DOP safe port UK/ CONTINENT or in Charterers‟ opt ion, upon passing Cape Passero or Skaw westbound” you are considering the f ollowing cargo, which you believe you can f ix as f ollows : -

-

50,000

tonnes

(5%

m oloo)

Green

Delayed

Petcoke

(stowing maximum 47 cubic f eet per tonne). -

Lake Char les (40 f eet swsd)/Iskenderun

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-

15,000 tonnes shine load/10,000 tonnes shex discharge

-

$15.00 per tonne f iot – 5% total commission.

Calculate the nett daily return this f ixing opportunit y will pr ovide. You will need the f ollowing data : -

-

Dist ances : Balt imore/Lake Char les

1,600 n miles

Lake Char les/Iskenderun 6,500 n miles Iskenderun/Cape Passero -

Bunkers :

1,000 n miles

Remaining on board at Baltim ore – 500 IFO/75 DO Saf ety Sur plus : allow 200 IFO and 30 DO (do not charge these to the estimate)

-

Prices (delivered)

IFO

DO

Remaining on boar d

$125

$125

Balt imore

150

250

Lake Char les

145

250

Iskenderun

175

275

Port costs : Lake Char les

US #31,000

Iskenderun

$39,000

For the purpose of this calculat ion the only draf t restriction applies at Lake Charies : the “TEAL” uses summer marks throughout; assume the vessel is cleaned and ready to load dry cargo and any inf ormation not provided is requi red.

8.

The coaster “W IDGEON” arrives at her loading port the morning

bef ore laydays com mence, but her holds are prepared and her Master tenders notice of his vessel‟s readiness in all respect s to load. However,

the

loading

berth

is

occupied

and

the

Charte rers‟

represent atives ref use to accept the not ice f or the “W IDGEON” on the

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basis that the Master is not entit led to tender not ice bef ore his vessel‟s laydays.

Advise the parties.

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