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Shipping Cost Charter Party

Shipping Cost Charter Party

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Published by Varun Bhaskaran

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Published by: Varun Bhaskaran on Jun 29, 2012
Copyright:Attribution Non-commercial


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• Agenda
– Part 1. Introduction, Nomenclature, Major shipping companies
– Part 2. Charter - Voyage, time and

– Part 3. Deck maintenance – Part 4. Engine room and maintenance – Part 5. Communication system and others

• Chartering is an activity by which, a charterer (who will normally be the owner of the cargo) will get into an agreement with shipowner or shipbroker for transporting the cargo at certain price known as Freight rate.

• A charterer may also be a party without a cargo who takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate, or even makes a profit by re-letting the ship out to other charterers.

• Freight rates are prices at which cargo is moved from one point to other. • Freight rates may be on - Per-ton basis over a certain route or - Per-day basis for the duration of charter. - Nature of Cargo being shipped (Value of goods, Perishable etc.,)

• Freight rates for Bulk Carriers and Tankers would be on tonnage basis. • Freight rates for Containers would be on volume basis. • Both Tonnage and Volume data would be used to arrive at Freight rates.

• Depending on the type of ship and the type of charter, normally a standard contract form called a charter party is used to record the exact rate, duration and terms agreed between the shipowner and the charterer.

Types of Charters
• • • • Voyage Charter Time Charter Bareboat Charter Demise Charter

Charter Party Members
• Charterers Vs • Ship Owner / Ship Operator / Ship Management Company / Ship Brokers (Shipbrokers are specialist intermediaries between shipowners and the charterers.)

Voyage Charter
• Voyage Charter – Charterer pays per ton basis. • Vessel costs like fuel costs, navigation costs, salary of crew will be paid by Owner • Vessels can ply between two ports or can touch many ports. • Initial Start Port and Final Destination Port will form end points for Voyage Charter. • A Voyage Charter may contain sub-voyage charters.

Voyage Charter - Contd
• The entire ship is chartered for the transport of a full cargo, and this can be detailed out as: - for a well determined voyage - for a voyage to go and return - for a series of specific voyages - for a round trip with different harbours and the right for the charterer to load and discharge

Time Charter
• Charterer pays for fixed time period. • Vessel owner will take care of Fuel costs, Navigations costs, salary of crew. • Cargo Management Company would decide upon ports, routes etc.,

Time Charter - Contd
• Period time charter - the charterer can make as many trips during that period with the ship as he possibly can. • Trip time charter - only a single trip can be made just as under a voyage charter but at time charter conditions. • Under a time charter the ship owner is only responsible for the nautical and technical operation of the ship whereas the charterer is responsible for the commercial operation of the ship. • It follows that under a time charter, the fixed costs of the ship are for the account of the owner and the variable costs are for the account of the time charterer.

BareBoat Charter
• Charterer hires vessel for entire period. • Charterer pays for all expenses. • It is indirect way of acquiring vessel at the end of charter period

Demise Charter
• Charterer takes full control of Financial and Legal responsibility

Latest Trends in Charter
• Cross Charter – Ship owners can also be part of charterer for part of the ship. • Storage Chartering – Ships are chartered for Storage of goods.

• The agreement between Shipowner and Charterer is normally termed as Charter party where all clauses would be detailed out.

Costs in Shipping Operations
• Running Costs • Variable Costs

Running Costs
• Running costs investment Capital Interests Depreciations • Running Costs - Operating costs Manning Costs Stores Costs Repairs and Maintenance Costs Insurance Administration costs

Variable Costs
• Vessel's voyage costs – Fuel • Port voyage costs Ports and Light dues Tugs and Pilotage Costs Canal dues (Suez, Panama etc.,) Agency fees Costs linked to the arrival and sailing of the ship. • Cargo handling costs Cost for Stowing of Cargo Claims

Cost Comparison
Expenses Heading Depreciation interest on Capital finance charges Insurance on Hull/Machinery Voyage Charter Time Charter BareBoat Charter Owner Owner Owner Owner Owner Owner or Charterer

Survey Classification
Maintenance and Repair General Costs Stock, Supply Crew Crew Wages Lub.Oil Fresh Water Fuel Oil Harbor dues Loading charges Discharging charges Stowage Charges Cleaning of Holds Damage to Cargo

Owner Owner Owner Owner Owner Owner Owner Owner Owner or Charterer Owner or Charterer Owner or Charterer Owner or Charterer Owner or Charterer

Owner Owner Owner Owner Owner Owner or Charterer Charterer Charterer Charterer Charterer Charterer Charterer Owner or Charterer

Owner or Charterer
Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer Charterer

Bill of Lading
• Charterer takes full control of Financial and Legal responsibility • A bill of lading (referred to as a BOL,or B/L) is a document issued by a “carrier” to the “consignee”. • Bill of Lading is a document which acknowledges that specified goods or cargo have been received on board. • Bill of Lading will also specify Port of Destination. • Carrier is normally a ship's master or a company's shipping department. • Consignee is the party to which the cargo has been scheduled to be despatched.

Bill of Lading
• It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (a bill will be described as clean if the goods have been received on board in apparent good condition and stowed ready for transport) • It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense. • Like a cheque, it may be endorsed affecting ownership of the goods actually being carried. • It is separate from any contract for the sale of the goods to be carried, however it binds the carrier to its terms, irrespectively of who the actual holder of the B/L, and owner of the goods, may be at a specific moment.

Types of Bill of Lading
• • • • Straight Bill of Lading Order Bill of Lading Bearer Bill of Lading Surrender Bill of Lading

Straight Bill of Lading
• It is a Non-Negotiable Bill of Lading • It states that the goods are consigned to a specified person and it is not negotiable free from existing equities, i.e. any endorsee acquires no better rights than those held by the endorsor. • If the carrier holds a security interest over the goods for unpaid debts, the endorsee is bound for the same. Although, if the endorsor wrongfully failed to disclose, the endorsee will have a right to claim damages for failing to transfer an unencumbered title.

Order Bill of Lading
• It is a negotiable bill of lading. • This bill uses express words to make the bill negotiable, e.g. it states that delivery is to be made to the further order of the consignee using words such as "delivery to A Ltd. or to order or assigns". • Consequently, it can be endorsed by A Ltd. or the right to take delivery can be transferred by physical delivery of the bill accompanied by adequate evidence of A Ltd.'s intention to transfer.

Bearer Bill of Lading
• This bill states that delivery shall be made to whosoever holds the bill. • Such bill may be created explicitly or it is an order bill that fails to nominate the consignee whether in its original form or through an endorsement in blank. • A bearer bill can be negotiated by physical delivery.

Surrender Bill of Lading
• Under import documentary credit the bank releases the documents on receipt from the negotiating bank but the importer does not pay the bank until the maturity of the draft under the relative credit. • This direct liability is called Surrender Bill of Lading (SBL), i.e. when we hand over the bill of lading we surrender title to the goods and our power of sale over the goods.

Issues on Bill of Lading
• In most cases, bill of lading is not a document of title, and it simply identifies that a particular individual has a right to possession at the time when delivery is to be made. • Problems arise when goods are found to have been lost or damaged in transit, or delivery is delayed or refused. • Mostly, Consignees would not form part of Contract of Carriage (Charter party) • Above can be avoided using „Subrogation‟ – to give the consignee the same rights of action held by the consignor.

Indian Shipping Companies
• • • • • • Shipping Corporation of India Barber Shipping Great Eastern Shipping Essar Shipping Sanmar Shipping Varun Shipping

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