Demurage

Demurrage: When all permitted laytime is used before the completion of cargo operations, and the parties to a contract have foreseen this possibility, it is usual that a governing contract will provide for demurrage to be paid to the shipowners. The amount of demurrage is negotiated with the contract and is usually described as ‘$…per day’ or pro rata for part of a day. (Very occasionally demurrage might be described as ‘$ x cents per ton’ but in such a case it is vital to establish whether the ‘ton’ refers to a summer deadweight tonnage of the ship involved, or ‘per cargo ton’, or ‘per registered ton’, and whether metric or long, gross or nett). Usually address commissions and brokerages are deductible from demurrage payments, just as in the case of freight or deadfreight but this has to be clearly stated in the commission/brokerage clause(s). Demurrage is intended to reflect the daily running cost of a vessel, including port bunker consumption, and where applicable, a reasonable profit level. Shipping being a free market, however, and exposed to market forces and necessities, there may be occasions when shipowners accept low or negotiate high demurrage rates. Once laytime has been fully used, demurrage should normally run continuously, night and day, weekend and working period, with no interruptions until cargo work is completed unless the contract expressly provides otherwise – e.g. ‘shifting time from anchorage to berth not to count as laytime or as time on demurrage’. Normally, however, laytime interruptions such as bad weather, weekends and holidays, will not interfere with demurrage time, although breakdowns on a vessel affecting discharge will interrupt demurrage time. Given these exceptions, it can usually be said that the much used shipping expression: ‘once on demurrage, always on demurrage’ means what it says.