Averaged Laytime

Averaged Laytime in Ship Chartering

Averaged Laytime is a laytime calculation method used in voyage chartering when the Charter Party expressly permits the time saved at one cargo operation to be set against the time exceeded at another cargo operation. It is most commonly relevant where loading and discharging laytime are stated separately, but the parties agree that the actual time used at both ends may be balanced before demurrage or despatch is finally calculated.

As a general rule, laytime for loading and laytime for discharging are calculated separately. Time saved during loading does not automatically extend the time allowed for discharging. Likewise, time saved at the discharge port does not automatically excuse delay at the loading port. The parties must include clear Charter Party wording if they want loading and discharging time to be combined, averaged, reversed, or treated as a single pool of time.

Without a specific Charter Party clause, each operation stands on its own. If the Charterer saves time at the loading port, the Charterer may be entitled to despatch if despatch is agreed. If the Charterer exceeds the allowed time at the discharge port, the Charterer may owe demurrage. The two results are not automatically netted against each other unless the contract allows it.

Where the parties want more flexibility, they may agree one of three common approaches:

Specify Number of Hours/Days
Averaged Laytime
Reversible Laytime

These approaches are important because they can materially change the financial result of a voyage. Demurrage is often higher than despatch. In many Charter Parties, the demurrage rate may be double the despatch rate or despatch may be payable at half demurrage. Therefore, the right to average time may be commercially valuable to Charterers because it allows saved time to neutralize excess time before monetary demurrage is calculated.

Shipowners and Charterers should draft laytime clauses with precision. A short phrase such as “laytime reversible” or “laytime to be averaged” can create significant consequences. If the wording is unclear, disputes may arise over whether the Charterer can offset time, when the election must be made, whether despatch has already been earned, whether demurrage has already started, and whether saved time has been waived or consumed.

Separate Laytime for Loading and Discharging

The starting point in laytime calculation is separation. Unless the Charter Party provides otherwise, loading time and discharging time are measured independently. If the Charter Party allows three days for loading and three days for discharging, the Charterer has three days at the loading port and three days at the discharge port. The Charterer cannot simply move unused loading time to discharge unless the contract says so.

This rule matters because each cargo operation may involve different commercial risks. Loading may depend on shipper readiness, cargo availability, berth congestion, weather, shore equipment, customs formalities, or terminal operations. Discharging may depend on receiver readiness, storage capacity, discharge equipment, port congestion, import documents, or inland transport. The Charter Party allocates these risks through laytime, demurrage, despatch, exceptions, and special clauses.

If the parties want one combined allowance, they should say so expressly. In some trades, especially tanker chartering, the Charter Party may state one total number of hours for loading and discharging combined. In that case, the parties do not calculate separate loading and discharge allowances unless the wording requires it. Instead, the total time allowed applies to both operations together.

Express Clause for Combined Laytime

In a Charter Party, Shipowners and Charterers may agree by an Express Clause that time for loading and discharging will be treated together. This clause may state that laytime is reversible, averaged, or allowed as a total number of hours for both operations. The legal effect depends on the exact wording.

For example, the Charter Party may provide “72 hours total laytime for loading and discharging” or “laytime for loading and discharging to be averaged” or “laytime reversible at Charterers’ option.” These phrases are not identical. Each should be understood according to the contract and the practice of the trade.

An express clause is important because the right to combine or balance time is not presumed. A Charterer who wants to use time saved at one port to cover excess time at another port must be able to point to contractual wording. Without such wording, separate demurrage and despatch calculations may apply.

What Is Averaged Laytime?

Averaged Laytime allows Charterers to offset time saved during one operation against time exceeded in another. The focus is on the time actually used, not first on the money payable for demurrage or despatch. The calculation compares total permitted time against total actual time used, or it allows excess at one end to be balanced against saved time at the other end, depending on the exact Charter Party wording.

The commercial advantage is clear. If loading finishes early but discharging takes longer than allowed, the saved loading time may be applied against the excess discharging time. If the saved time is enough to cover the excess, no demurrage is payable. If saved time is greater than excess time and despatch is payable under the Charter Party, the remaining saved time may produce despatch. If total time used exceeds total time allowed, demurrage may be payable on the net excess.

Averaged laytime does not automatically mean that demurrage and despatch amounts are netted financially. It usually means that time is balanced first. This distinction is important because demurrage and despatch rates may not be equal. If demurrage is paid at twice the despatch rate, calculating money separately can produce a different result from averaging time first.

Why Averaged Laytime Benefits Charterers

Averaged laytime often benefits Charterers because it gives operational flexibility. Cargo operations do not always proceed at the same speed at loading and discharging ports. A cargo may load quickly because cargo is ready and berth equipment is efficient, but discharge may be delayed by storage congestion, labour shortage, receiver delay, customs clearance, or weather. Averaging allows Charterers to use time saved at one end to protect themselves against time lost at the other end.

The financial effect can be substantial. Demurrage is commonly payable at a higher rate than despatch. If loading and discharging are calculated separately, Charterers may receive a smaller despatch amount at one port and pay a larger demurrage amount at another port. Averaging can prevent that result by balancing time before money is calculated.

Shipowners may resist broad averaging clauses because they reduce the likelihood of demurrage. Shipowners may prefer separate calculations, especially where port delays are expected at discharge. For this reason, averaged laytime is a matter of Charter Party negotiation.

Averaged Laytime Financial Example

Assume the demurrage rate is $20,000 per day and the despatch rate is $10,000 per day. The Charterers save six days at the loading port but exceed the allowed time by four days at the discharging port.

If loading and discharging are calculated separately, the Charterers receive $60,000 despatch for the six days saved at loading. At discharge, the Charterers pay $80,000 demurrage for four days exceeded. The net result is that the Charterers pay $20,000.

If averaged laytime is allowed, the Charterers apply four of the six saved loading days against the four excess discharging days. No demurrage is payable. Two saved days remain. If despatch is payable on the remaining saved time, the Charterers receive $20,000 despatch. The result changes from a $20,000 net payment by Charterers to a $20,000 receipt by Charterers.

This example shows why the phrase “time to be averaged” is commercially important. The parties are not merely changing the arithmetic method; they are reallocating the economic effect of fast and slow cargo operations.

What Is Averaged Laytime in Ship Chartering?

In ship chartering, laytime is the agreed time during which Shipowners make the ship available for loading or discharging cargo without additional demurrage. Laytime usually starts when the ship has arrived at the agreed place, is ready in the contractual sense, and a valid Notice of Readiness has been tendered and become effective, subject to the exact Charter Party wording.

Averaged laytime is a contractual method that treats loading and discharging performance together for the purpose of time balance. If the Charter Party gives five days for loading and five days for discharging, the total permitted time is ten days. If loading takes six days and discharging takes four days, the total time used is ten days. Under an averaged laytime clause, no demurrage is payable because the total allowed time has not been exceeded.

This arrangement helps Charterers manage operational uncertainty. A port that is slower than expected may be balanced by a port that performs faster than expected. However, the right exists only if the Charter Party clearly provides for averaging or an equivalent combined calculation.

Laytime calculation can become complex because the result may depend on Notices of Readiness, weather exceptions, working days, holidays, strikes, shifting, berth congestion, interruptions, laytime exceptions, demurrage clauses, despatch wording, and whether demurrage once started continues without interruption. Therefore, every calculation must follow the specific Charter Party and statement of facts.

Averaged Laytime Vs Reversible Laytime

Averaged Laytime and Reversible Laytime are closely related but should not be treated carelessly as identical in every Charter Party. Both methods give Charterers flexibility by allowing time at loading and discharging to be considered together in some way. The difference depends on the exact wording, the timing of the Charterer's election, and the legal effect of the clause.

Averaged Laytime generally means that time saved in one operation may be set against time lost in another operation. The calculation looks at the overall time position after the relevant operations have been completed. If total saved time exceeds total excess time, there may be despatch if agreed. If total excess time exceeds saved time, demurrage may be payable on the balance.

Reversible Laytime usually means that the laytime allowed for loading and the laytime allowed for discharging can be treated as one combined allowance, often at the option of the Charterer. If five days are allowed for loading and five days for discharging, the Charterer may use the combined ten days across both operations. The Charterer may use more time at loading and less at discharging, or the reverse, provided the total permitted time is not exceeded.

The practical distinction may depend on whether the clause requires an election and when that election must be made. Some clauses allow Charterers to decide whether to reverse or average time. Others treat the total laytime as automatically combined. Some may require the election before demurrage or despatch is calculated. The Charter Party must be read carefully.

In simple terms, non-reversible laytime keeps loading and discharging separate. Averaged laytime allows time saved and time lost to be balanced. Reversible laytime may create a single pool of time for both operations. The exact result depends on the contract wording.

Waiver or Loss of the Right to Average Laytime

Charterers may lose or waive the right to Average Laytime if their conduct shows that they have chosen not to use the averaging option or if they have already treated one operation as finally settled. For example, if Charterers deduct despatch from freight after loading on the basis that despatch has been earned separately, they may later face an argument that the saved loading time is no longer available to offset excess discharge time.

This issue depends on the Charter Party wording, the timing of payment, the parties’ conduct, and whether the right to average was preserved. A Charterer who wants to keep the option open should avoid acting inconsistently with that right. Shipowners should also be alert to whether Charterers have made an election or settled one part of the laytime account.

The safer practice is to state the method clearly in the laytime statement and supporting correspondence. If laytime is to be averaged, the calculation should show time saved, time exceeded, net balance, and the resulting demurrage or despatch.

Averaged Laytime Example 1

Assume a ship is chartered to load cargo at Port A and discharge at Port B. The Charter Party allows three days for loading and three days for discharging. The total permitted time is therefore six days if averaging is allowed.

Loading at Port A takes four days. This is one day more than the loading allowance. If loading were calculated separately, the Charterer would be one day on demurrage at the loading port.

Discharging at Port B takes two days. This is one day less than the discharge allowance. If averaged laytime applies, the one day saved at discharge offsets the one day exceeded at loading.

Total time used is four days for loading plus two days for discharging, which equals six days. Total time allowed is six days. No demurrage is payable and no despatch is payable unless the Charter Party gives a different result.

This example shows the core function of averaged laytime. One slow operation can be balanced by one faster operation.

Averaged Laytime Example 2

Consider the following Charter Party details:

Laytime for loading: 48 hours
Laytime for discharging: 72 hours
Demurrage: $2,000 per day

Actual time used:

Actual loading time: 72 hours
Actual discharging time: 36 hours

Under separate calculation, loading exceeds the allowed time by 24 hours. Discharging saves 36 hours. If averaging is permitted, the calculation should first combine the allowed time and actual time.

Total allowed laytime: 48 hours + 72 hours = 120 hours
Total actual time used: 72 hours + 36 hours = 108 hours
Net time saved: 12 hours

Because the total actual time used is 12 hours less than the total allowed time, no demurrage is payable. If the Charter Party provides despatch, despatch may be payable on the 12 hours saved. If there is no despatch clause, the Charterer simply avoids demurrage.

This method is clearer than dividing the allowed laytime by two, because averaged laytime normally balances the total allowed time against total time used unless the Charter Party states a different formula.

Averaged Laytime Example 3

Consider the following Charter Party details:

Laytime for loading: 24 hours
Laytime for discharging: 36 hours
Demurrage: $1,500 per day

Actual time used:

Actual loading time: 30 hours
Actual discharging time: 40 hours

The total allowed laytime is 24 hours plus 36 hours, which equals 60 hours. The total actual time used is 30 hours plus 40 hours, which equals 70 hours.

The Charterer has exceeded the combined allowed time by 10 hours. Demurrage is therefore payable for 10 hours if averaged laytime applies and no exceptions reduce the time.

To calculate the demurrage:

10 hours ÷ 24 = 0.4167 days
0.4167 days × $1,500 per day = approximately $625

The demurrage payable is approximately $625, subject to rounding and the exact Charter Party calculation method.

Averaged Laytime Calculation Example 4

Assume a ship is fixed to load at Port A and discharge at Port B. The Charter Party provides:

Laytime allowed for loading at Port A: 4 days
Laytime allowed for discharging at Port B: 3 days

Actual time used is:

Actual loading time at Port A: 5 days
Actual discharging time at Port B: 2 days

The correct combined calculation is:

Total allowed laytime: 4 days + 3 days = 7 days
Total actual time used: 5 days + 2 days = 7 days
Net result: no excess time and no remaining saved time

Therefore, if averaged laytime applies, no demurrage is payable. The extra one day used at loading is offset by the one day saved at discharging. This example demonstrates why the calculation should compare total allowed time with total actual time used, rather than incorrectly comparing total actual time with a mathematical average of the two allowances.

If the Charter Party contained exceptions such as weather working days, Sundays and holidays excepted, strikes, or other interruptions, those exceptions would need to be applied before the final result is reached.

Averaged Laytime Calculation Example 5

Assume a ship carries grain from Houston to Rotterdam. The Charter Party allows 72 hours for loading and 48 hours for discharging. Total allowed time is therefore 120 hours if averaged laytime applies.

Loading in Houston: The ship arrives on 1 June at 0800 hours. Due to port congestion, cargo operations start on 2 June at 1800 hours. Loading finishes on 4 June at 1200 hours.

For this simplified example, assume laytime starts when loading actually begins on 2 June at 1800 hours and ends when loading is completed on 4 June at 1200 hours.

Start of laytime: June 2, 1800
End of laytime: June 4, 1200
Total loading time used: 42 hours

Discharging in Rotterdam: The ship arrives in Rotterdam on 10 June at 2200 hours. Discharging starts on 11 June at 0600 hours and finishes on 13 June at 1000 hours.

Start of laytime: June 11, 0600
End of laytime: June 13, 1000
Total discharging time used: 52 hours

Average Laytime Calculation:

Allowed laytime for loading: 72 hours
Allowed laytime for discharging: 48 hours
Total allowed laytime: 120 hours
Total actual time used: 42 hours + 52 hours = 94 hours
Net time saved: 26 hours

In this example, the Charterer used 94 hours against 120 hours allowed. Therefore, no demurrage is payable. If despatch is agreed, despatch may be payable on 26 hours saved, subject to the Charter Party terms.

In real calculations, laytime may not start merely when loading or discharging begins. The valid tender of Notice of Readiness, laytime commencement clause, berth or port charter wording, free pratique, customs clearance, weather exceptions, holidays, and interruptions may all affect the result.

Averaged Laytime Calculation Example 6

Assume the Charter Party allows 72 hours total for a cargo operation. During the operation, several delays occur:

Weather delay: 10 hours
Mechanical breakdown: 5 hours
Port congestion: 8 hours
Customs inspection: 3 hours

This example should be treated carefully because not every delay is automatically deducted from laytime. Whether a delay counts or is excluded depends entirely on the Charter Party wording. Weather may stop laytime if the contract is based on weather working days or contains a weather exception. A mechanical breakdown may count or not count depending on whether it is caused by the ship, shore equipment, or another event. Port congestion and customs delays may count unless the Charter Party provides an exception.

If, only for illustration, all listed delays are contractually excluded, the total excluded time is:

10 hours + 5 hours + 8 hours + 3 hours = 26 hours

The effective counted time would then be reduced by 26 hours. However, it is not accurate to say automatically that "averaged laytime" equals 72 hours minus delays. Averaged laytime concerns balancing loading and discharging time. Delay exceptions concern whether particular periods count as laytime at all. These are related but separate steps in the laytime calculation.

A correct approach is:

Identify allowed laytime.
Determine when laytime starts.
Record all actual time used.
Apply contractual exceptions and interruptions.
Calculate counted laytime for loading and discharging.
If the Charter Party allows averaging, combine the results.
Calculate net demurrage or despatch.

How to Calculate Averaged Laytime Step by Step

A professional averaged laytime calculation should follow an orderly method. Laytime disputes often arise because parties jump directly to demurrage without checking the contractual sequence.

Read the laytime clause and determine whether loading and discharging are separate, averaged, reversible, or combined.
Identify the laytime allowed for loading.
Identify the laytime allowed for discharging.
Check whether despatch is payable and at what rate.
Check the demurrage rate.
Confirm when the ship became an arrived ship.
Confirm whether a valid Notice of Readiness was tendered.
Apply any notice time or laytime commencement period.
Calculate actual loading time used.
Apply loading exceptions and interruptions.
Calculate actual discharge time used.
Apply discharge exceptions and interruptions.
Add the permitted loading and discharge time together if averaging is allowed.
Add the counted actual loading and discharge time together.
Compare total allowed time with total counted time used.
Calculate demurrage on net excess time or despatch on net saved time if applicable.

This structure helps separate the legal questions from the arithmetic. The arithmetic is usually simple once the Charter Party has been interpreted correctly.

Averaged Laytime and Demurrage

Demurrage is payable when laytime has been exceeded and the Charter Party provides for a demurrage rate. With averaged laytime, demurrage is calculated only after saved time and excess time have been balanced according to the contract. The Charterer is not on demurrage merely because one operation exceeded its individual allowance if the other operation saved enough time to cover the excess.

However, once demurrage is reached on a net basis, the usual demurrage rules may apply. Some Charter Parties provide that once on demurrage, time runs continuously unless specific exceptions apply. Others contain exceptions that may interrupt demurrage. The wording must be checked.

Averaged laytime can therefore delay or prevent demurrage from arising. It can also reduce the amount of demurrage by allowing saved time to be credited first.

Averaged Laytime and Despatch

Despatch is the amount payable by Shipowners to Charterers when cargo operations are completed in less than the allowed laytime, if the Charter Party provides for despatch. Despatch is not automatic. It must be agreed.

When laytime is averaged, despatch is normally calculated after the combined or averaged time position is known. If loading saves time but discharging exceeds time, the saved time may first be used to cover the excess. Only the remaining saved time, if any, may qualify for despatch. This protects Shipowners from paying despatch at one end while also claiming demurrage at the other end, unless the contract requires separate calculation.

The despatch rate is often half the demurrage rate, but this is not a universal rule. The Charter Party may state a different rate or may provide no despatch at all.

Averaged Laytime and Reversing Laytime in Tanker Chartering

Tanker Charter Parties often use total hours for loading and discharging together. For example, a tanker charter may provide a single allowance of 72 hours for loading and discharging combined. This is similar in practical effect to combined laytime, although the exact terminology may differ.

Tankers frequently operate under strict terminal schedules, berth windows, pumping requirements, cargo documentation procedures, and inspection obligations. The use of combined hours can simplify the laytime account, but disputes may still arise over Notice of Readiness, free pratique, waiting time, shifting, pumping performance, berth availability, and whether delays count.

Dry bulk Charter Parties may more often state separate loading and discharge laytime, then add a reversible or averaged laytime clause if the parties want flexibility.

Important Charter Party Wording for Averaged Laytime

Common wording issues include:

Whether laytime is "to be averaged."
Whether laytime is "reversible."
Whether the option belongs to Charterers.
Whether Charterers must declare the option before loading, after loading, before discharge, or after completion.
Whether despatch is calculated separately or only on net saved time.
Whether demurrage exceptions apply after demurrage begins.
Whether time saved at one port can be applied to another port automatically.
Whether loading and discharging are given as one total time allowance.

These details should be negotiated before fixture. If the wording is left vague, the parties may interpret the clause differently after the voyage.

Common Mistakes in Averaged Laytime Calculations

Common mistakes include assuming averaging applies without an express clause, calculating money before balancing time, dividing total allowed time by two when the Charter Party requires total-time comparison, ignoring exceptions, failing to check whether despatch is agreed, and overlooking Charterers' possible waiver of the averaging option.

Another common error is using the word “vessel” generically when the Charter Party and laytime statement concern a specific ship. In ship chartering, the laytime account should identify the ship, ports, cargo, dates, notices, and operational times accurately.

Parties also make mistakes by failing to preserve evidence. A proper statement of facts, weather record, Notice of Readiness, port log, loading and discharge record, shifting record, and correspondence are essential to support the final laytime calculation.

Averaged Laytime Checklist for Charterers

Confirm that the Charter Party expressly allows averaged laytime.
Check whether the right to average belongs to Charterers.
Do not settle despatch at the first port if doing so may waive the right to average.
Keep accurate loading and discharge time records.
Check all exceptions and interruptions.
Calculate time first, not money first.
Apply saved time against excess time before demurrage.
Confirm whether despatch applies to net saved time.
Prepare a clear laytime statement.
Reserve rights if the calculation is disputed.

Averaged Laytime Checklist for Shipowners

Check whether the Charter Party permits averaging or separate calculations.
Confirm whether Charterers must elect averaging.
Review whether Charterers have acted inconsistently with averaging.
Verify Notice of Readiness and laytime commencement.
Check loading and discharge statements of facts.
Apply contractual exceptions carefully.
Calculate net time according to the Charter Party.
Check whether despatch is payable and at what rate.
Preserve evidence of delays and interruptions.
Challenge unsupported deductions from freight or demurrage.

Conclusion: Averaged Laytime

Averaged Laytime is an important laytime mechanism that allows time saved during one cargo operation to be balanced against time exceeded during another operation, but only where the Charter Party clearly permits it. Without an express clause, loading and discharging laytime are normally calculated separately, and time saved at one port cannot automatically protect Charterers from demurrage at another port.

The commercial value of averaged laytime is significant because demurrage and despatch rates are often unequal. By balancing time first, Charterers may avoid paying demurrage or may preserve a net despatch entitlement. Shipowners must therefore understand the financial effect of any averaging or reversible laytime wording before agreeing the fixture.

A correct averaged laytime calculation requires more than simple arithmetic. The parties must identify the allowed laytime, determine when laytime starts, apply exceptions, calculate actual time used, balance saved and excess time, and then calculate demurrage or despatch on the net result. Clear Charter Party wording and accurate operational records are essential. When drafted and calculated properly, averaged laytime provides flexibility while preserving a structured and fair method for allocating loading and discharging time in ship chartering.