Time charter

Under a time charter, the charterer hires the vessel for a

particular period of time.

The time could be in years, days or months.

The shipowner receives the freight on per day basis which is

settled every month or every quarter.

The time charter can be compared with the hiring a cab on

per hour basis.

In this type of charter…

 The fuel cost is borne by the charterer

 The ship is managed by the shipowner

 The maintenance of the ship is shipowner’s responsibility

 The crew costs are paid by the shipowner

 Port dues are paid by the charterer

 Agents at ports are appointed by the charterer

 The off-hire time would be for

 any deviation from the original track (For example for a crew
change, picking up stores or for some repairs, etc)

 Any stoppages at sea (For example for machinery breakdown

etc)

 Cargo tanks failed by the cargo surveyor and declared not fit
for loading
Our responsibility as seafarers is to keep the off-hires to as
close as possible to the zero hours.

For any off-hire, the vessel needs to send the off-hire report
which lists the total off-hire time and fuel consumed during
this off-hire time.
Speed of the ship

If you hire a cab on per hour basis, you would not expect it
to move slowly.

If it does, you would end up paying more money as it would

take more time to reach the destination.

Similarly, under time charter, the charterer would want the

ship to run at speed declared by the shipowner or agreed in
the charter party agreement.
It is the master’s responsibility to ensure that the ship always
maintains that speed.

But what if the vessel is experiencing rough weather and

master is not able to maintain the charter party speed?

The time charter party also have clauses for the weather
conditions.

So say, the vessel is required to maintain 13 knots of speed

when the wind speed is less than BF 6.

If the wind force is 6 or more, the speed for that period will
not count as under-performance of the ship.

This makes it so much important to note down the weather

conditions correctly in the deck log book as well as in the
noon report.

At the end of an agreed period (each voyage, quarter, half

yearly or yearly as agreed in charter party agreement) the
performance of the vessel with respect to speed will be
analyzed.

Fuel

Under a time charter, the fuel costs are covered and paid by
the charterer.
 The fuel supply is arranged by the charterer.

When the ship is delivered to the charter,

charterer/shipowner may carry out fuel oil survey to get the
actual fuel oil onboard at the time of delivery of the vessel to
the charterer.

This would be the fuel that shipowner has delivered to the

charterers at the time of delivery of the ship.

When the charterer hands over the vessel back to the

shipowner, the bunker survey is again carried out.

This will the fuel handed over by the charterer back to the
shipowner.

So let us say that

 Bunkers at the time of delivery were HFO: 400MT and DO:

100 MT

 Bunkers at the time of re-delivery were HFO: 250MT and DO:

50 MT

In this case, charterer needs to pay the shipowner for 150MT

of HO and 50MT of DO.
It would be another way around if the bunkers at the time of
redelivery are more than the bunker that was handed over to
the charterers at the time of vessel delivery.

Agents at load port and discharge port

When the vessel is under time charter, the agent at load port
and discharge port would be appointed by the charterers.

Shipowner or manager would have no role and relation with

the agents.

It is important for the master and ship staff to be aware of

this.

Usually, the agents are there to help ship staff but if the
vessel is on time charter, we need to be more cautious while
handling with an agent.

In a time charter, the loyalty of the agents lie with the

charterer and not with the ship staff or shipowners.

Masters must be aware that as the agent is being paid by the

charterer and not the shipowner, they may not go out of their
way to help the vessel.

This is particularly important in matters that lie under the

responsibility of the ship staff, shipowners or managers.
 For example, if the ship is detained by the PSC for some
reasons, the agent may not be that enthusiastic to clear the
vessel at the earliest as in this case the vessel will be off-
hired and the agent’s employer (charterer) would not be
loosing on anything.

This may not be the case with some professional agencies

but nevertheless, masters need to be aware of this.

Cargo under-performance

Under the time charter, the charterer may claim for under-
performance of the vessel and seek compensation from the
shipowner for loss in time.

The under-performance could be

 Delays in starting the cargo operation

 Loading of the cargo at less loading rate

 Discharging of the cargo at less discharge rate

 Stoppages during cargo operations from the ship staff

If the under-performance claim is justified and valid, then

there is not much we can do.
 But there would be occasions when it would actually be the
delay from the shore and which is being claimed to be ship
delay.

That makes it important to accurately issue these two

documents

 Statement of facts

 Letter of protest for any delays

Apart from that accurately recording all the timings in the

port log is important to support SOF and letter of protest.

For tankers, if any restrictions are put by the loading master

on the vessel’s capability to load or discharge, a protest must
be issued on this.

The restriction could be

 to maintain manifold pressure lesser than the vessel is

capable to maintain

 to discharge (or load) at a rate lesser than vessel can load

 shore provided a number of hoses lesser than vessel can

connect
The letter of protest would help the ship staff and shipowner
to prove that vessel under-performed because of the shore
side restrictions.

The time charter agreement (or the instructions to master)

provided onboard may have the minimum loading or
discharge rate vessel need to maintain.

This could be something like

Owners warrants that vessel can discharge at a rate of 500

m3/Hr and maintain 7 bars at the manifold in all conditions…
While the vessel needs to make sure that they comply with
this but they must not over-rely on these instructions.

For example, at a discharge port vessel achieved discharge

rate of 800 m3/Hr.

This does not mean that there is no need to issue a letter of

protest for any restrictions from the shore side.

Unclear, unreasonable and unsafe

instructions

While on time charter, the charterer may ask the master to

perform some tasks which may be unsafe or is not as per the
industry guidelines.
 I will list here two of such instructions that I personally came
across.

 Charterers asked to load a heated cargo adjacent to a cargo

which is heat sensitive.

 Charterers asked to keep the original bill of lading on board

during the voyage from load port to discharge port

You may come across other such requests. The master needs
to decline these requests.

If at all required, Master need to oblige to the requests only

when

 The charterer has provided a “letter of indemnity (LOI)” to

the ship owners or managers

 Instructions have been received from the shipowner or

manager to oblige the request

 It is safe to do so

Conclusion

From a commercial point of view, it is Master and ship staff’s

moral responsibility to ensure that shipowner profits from
owning and running the ships.
But there are no hard and fast written rules that hold good in
all situations.

This is particularly the case when a ship is chartered in

different ways.

It is important that we understand our responsibilities under

each charter party.

And it is important that we understand where the loyalties of

each party that we are interacting with lies.

The expenses of a shipping company fall into two categories. 1. The fixed daily costs: which arise
every day of the year, regardless of the movement or employment of the ship, and are typically
called daily costs in the shipping world. They can be listed as follows: depreciation, capital cost,
crewing, technical maintenance (including drydocking), insurance and general administrative
expenses. 2. The variable costs: which are the costs related to a voyage (sailing the ship, positioning
or even waiting to load or discharge a cargo). They can be listed as follows: bunker (fuel) costs, port
costs (including agent costs), canal transit fees, towage and pilotage. Even though they may occur
every day, they are not daily costs because they vary hugely as they relate to the service being
undertaken and in particular to the fuel consumption of the service undertaken. Waiting might
consume only 5 MT of bunker oil a day whilst the consumption of oil when sailing depends on
whether the ship is empty (ballast) or laden (with a cargo on board), how much cargo is on board and
the speed the ship is sailing. Indeed, consumption is also affected by weather conditions and
currents. In ballast, at low speed, in fair weather, the consumption might be as low as 30 MT per day
but laden, at high speed, in heavy weather, it could be closer to 100 MT per day. For commercial and
business management purposes the variable costs of any voyage are deducted from the Freight lump
sum (paid by the cargo owner) to derive a Net Freight amount because these costs are variable with
the particularities of the voyage performed, i.e. cargo size, distance, number of ports, etc. The Net
Freight amount can then be divided by the number of days that the voyage took to perform
(including the time and voyage expenses of positioning of the ship from the last port it discharged a
cargo to the port where it will take a new cargo) and this establishes a daily rate of income, which is
called the Time Charter Equivalent Earnings (TCE Earnings) which is expressed in USD/day.
The vessel and the master of the ship are the owner’s
representative at the action site (loading port or discharging
port). Ship Owner would know only know the information
that we provide them. They would use this information for
calculation of any demurrage due to the charterers. But for
the correct demurrage calculation, the information we
provide must be correct and we must not miss any important
information such as any delays. That make the statement of
facts (commonly called SOF) an important document. At the
least, statement of facts must include

 any delays from shore side or from ship’s side and

reason of delay

 any delays because of weather conditions

 Timings for the movement of the ship (such as times for

anchoring, anchor aweigh, pilot onboard, NOR Tendered
etc)

 Timings related to cargo operations (Commenced cargo

operation and completed cargo operation
Test yourself
The Capesize ore carrier Pedro T has been chartered to move iron ore from Saldanha
Bay to Rotterdam. Her details are as follows :
Her charter is for three laden trips (and therefore 2 ballast back-haul voyages) between
Saldanha Bay and Rotterdam.
The daily charter rate is $19500.
She will use 62 tons of heavy fuel oil a day when at sea or at anchor.
She will use 3 tons of marine diesel oil every day.
The charter of Pedro T will begin at 00:01 on 03 March on arrival off Saldanha Bay.
She is expected to anchor off Saldanha Bay for the first two days before she begins
loading. (Surveyors will also do pre-loading surveys during this time.)
She will berth in Saldanha Bay at 12:00 on 5 March
She will sail from Saldanha Bay at 12:00 on 07 March
She will arrive at Rotterdam at 12:00 on 29 March
She will be in Rotterdam for 6 days discharging plus one day for hold cleaning and minor
repairs
She will sail from Rotterdam at 12:00 on 5 April.
She will arrive off Saldanha Bay at 12:00 on 27 April.
Bunker costs : HFO $276 per ton
Bunker costs :  MDO $486 per ton
Port Costs: Saldanha Bay $30 000 per day
Port Costs:  Rotterdam $38 000 per day
Pilotage, tugs & berthing: Saldanha Bay $20 000
Pilotage, tugs & berthing: Rotterdam $40 000
Sundry costs for the voyage             $246 000
Note :   The first voyage begins with her arrival off Saldanha Bay and ends when she arrives
back off Saldanha Bay. (It includes all days that she was at anchor, days she spent in
Rotterdam and days at sea.)
1. Calculate the number of days she is expected to take to steam from Saldanha Bay
to Rotterdam.                                                            
2. Calculate the number of days that Voyage 1 is expected to take i.e. from her arrival
off Saldanha Bay to her return to Saldanha Bay.
3. Refer to details given above, For her first voyage, calculate :
3.1   the expected daily hire cost                                                                                       
3.2   the expected fuel costs
3.3   the expected port
costs                                                                                                           
3.4   the expected total costs for her first voyage                                                                
4. Calculate the expected total cost of Petros J’s voyages, i.e. two return voyages from
Saldanha Bay to Rotterdam and one loaded voyage to Rotterdam. Remember that
the charter ends on the last day when her holds are being cleaned in Rotterdam.
from the time a ship berths in a port, all efforts are geared to ensure that she sails as
soon as possible. Delays cost money as a ship pays port dues for the time she is in port.
Delays to cargowork can also cause additional costs if labour has to be kept on standby.
To minimize delays, all aspects of her port stay need to be arranged carefully.
Cargowork must be thoroughly planned so that work goes smoothly. Cargowork must get
under way as soon as possible after she berths. Cargowork must continue with as few
interruptions as possible. The best-suited cargo equipment must be used to ensure that
the rate of cargowork is maintained. (Some bulk cargoes, for example, can be
discharged by using vacuum discharge which will be much faster than using skips.) If
necessary, special equipment to handle cargo needs to be arranged before the ship
arrives e.g. a heavylift cargo may need a special crane to discharge the item. Land
transport arrangements for the cargo must be made well before the arrival of ship so that
loading and/or discharging is not interrupted by a shortage of railway trucks or road
trucks. Sufficient workers (stevedores) must be contracted to ensure that a lack of
manpower does not delay cargowork. If the cargo is weather-sensitive (e.g. bags of
cement; paper; sugar) a special watch will need to be kept if rain is expected, and
loading will need to stop immediately rain threatens, and resume immediately the rain is
over. If the ship also needs other services while in port (e.g. bunkering, repair work,
taking stores, crew changes, etc.) these should be arranged so that they are provided
while cargowork is underway. This saves time. Sometimes, weather will delay a ship
from sailing. Strong winds could disrupt container handling or cause a delay in sailing as
the pilot believes it is too dangerous to maneuver the ship in the wind. Rain will interrupt
loading or discharging of weather-sensitive cargo. A weather delay (e.g. wind causing
the stoppage of container handling) will mean that the ship may have to speed up to
reach her next port on time. To maintain a faster speed, the ship will use more fuel and
that will cost more money.