Despatch Money in Ship Chartering Explained: Despatch vs Demurrage, Laytime, WTS, ATS, and DHD

Despatch (Despatch Money) in Ship Chartering

Despatch (Despatch Money) is the sum payable by the Shipowner to the Charterer when the ship completes loading or discharging before the agreed laytime has been fully used. In voyage chartering, laytime is the period allowed to the Charterer for cargo operations without paying demurrage. If the Charterer uses more than the agreed laytime, demurrage is payable to the Shipowner. If the Charterer uses less than the agreed laytime and the charterparty provides for despatch, the Shipowner pays despatch money to the Charterer.

Despatch is the commercial opposite of demurrage. Demurrage compensates the Shipowner for delay after laytime has expired. Despatch rewards the Charterer for finishing cargo operations earlier than required. The principle is simple, but the calculation can become complicated because despatch depends on the charterparty wording, the laytime clause, the Statement of Facts, weather exceptions, holidays, port working rules, and whether the calculation is based on Working Time Saved or All Time Saved.

In a voyage charter, the freight agreed for the voyage normally includes an allowance for the time that the ship will spend at loading and discharging ports. Shipowners include this expected port time in voyage estimation. If the Charterer uses all the agreed laytime, the voyage proceeds as estimated. If laytime is exceeded, the Shipowner earns demurrage. If laytime is saved and despatch has been agreed, the Charterer receives a payment for the time returned to the Shipowner.

What is Despatch Money in ship chartering?

What is Despatch Money in ship chartering? Despatch Money, also known as dispatch money or simply despatch, is a contractual reward paid by the Shipowner to the Charterer for completing cargo loading or discharging before the laytime expires. It is not an automatic right. It must be included in the charterparty or clearly agreed in the fixture recap.

The despatch rate is usually expressed as a daily amount. It may also be calculated pro rata for hours or parts of a day if the charterparty allows it. The most common arrangement is that despatch is paid at half the demurrage rate, but Shipowners and Charterers may agree any rate they consider commercially suitable.

Despatch encourages efficiency. A Charterer that prepares cargo, stevedores, port documents, receivers, customs procedures, cargo surveyors, and terminal coordination properly may complete cargo operations faster. The Shipowner benefits because the ship leaves port earlier and can proceed to the next voyage sooner. The Charterer benefits because the saved time is converted into money.

Commercial Purpose of Despatch Money

Despatch Money serves as an incentive for the Charterer to avoid unnecessary delay. In dry bulk shipping, port time may be one of the largest uncertainties in a voyage estimate. A ship may wait for cargo readiness, berth availability, weather, stevedores, documents, inspectors, customs clearance, or receivers. If the Charterer organizes these matters well, despatch can reward that effort.

Despatch also helps align the interests of Shipowners and Charterers. The Shipowner wants the ship released quickly because a ship earns money when it is productively employed. The Charterer wants enough time to perform cargo operations without pressure. Despatch creates a middle ground: the Charterer is allowed laytime, but if the Charterer saves it, the Charterer shares in the value of the saved time.

In some trades, despatch may strongly influence port behavior. Cargo interests may push terminals to work faster, prepare documents earlier, reduce stoppages, and avoid waiting time because early completion has a direct financial benefit.

Despatch vs. Demurrage

Despatch vs. Demurrage is one of the key distinctions in laytime and voyage chartering. Demurrage is paid by the Charterer to the Shipowner when cargo operations take longer than the agreed laytime. Despatch is paid by the Shipowner to the Charterer when cargo operations finish before the expiry of laytime and the charterparty provides for despatch.

Demurrage is compensation for detention. Despatch is a reward for early release. Demurrage increases the Shipowner’s voyage income after delay. Despatch reduces the Shipowner’s gross voyage income but may still improve the overall commercial result if early departure allows the ship to earn the next freight sooner.

Typically, Despatch is half of the Demurrage Rate (DHD Despatch Half Demurrage). This means that if demurrage is USD 24,000 per day, despatch is USD 12,000 per day. However, this is not a rule unless the charterparty says so. Despatch may be half demurrage, equal to demurrage, a separately agreed amount, or not payable at all.

What is Despatch and Demurrage in Ship Chartering?

What is Despatch and Demurrage in Ship Chartering? Despatch and demurrage are financial mechanisms connected with laytime. They measure whether cargo operations were completed faster or slower than the agreed time allowance.
  1. Despatch: Despatch is the financial reward payable by the Shipowner to the Charterer when loading or discharging finishes before laytime expires, provided the charterparty contains a despatch clause.
  2. Demurrage: Demurrage is the agreed amount payable by the Charterer to the Shipowner when loading or discharging exceeds laytime.
Both concepts are calculated from the same factual foundation. The parties must know when laytime started, what time counted, what time was excepted, when cargo operations were completed, and whether the charterparty uses separate, reversible, or average laytime.

What is DHD (Despatch Half of Demurrage) in Ship Chartering?

DHD (Despatch Half of Demurrage) is a chartering abbreviation meaning that despatch is payable at half the demurrage rate. If demurrage is USD 18,000 per day and despatch is DHD, the despatch rate is USD 9,000 per day. If pro rata calculation is allowed, an amount can also be calculated for hours or fractions of a day.

DHD is widely used because it balances the interests of Shipowners and Charterers. The Charterer receives a meaningful reward for efficiency, while the Shipowner does not pay the full demurrage rate for time saved. The Shipowner still obtains the commercial advantage of early release.

DHD must be read together with the method of calculation. DHD on Working Time Saved may produce a much smaller payment than DHD on All Time Saved. Therefore, the phrase “despatch half demurrage” is not complete unless the charterparty also states how saved time is measured.

Calculating Despatch

Calculating Despatch requires identifying the amount of time saved and multiplying it by the agreed despatch rate. The basic formula is:

Despatch Money = Time Saved × Despatch Rate

However, the real calculation depends on the charterparty. The parties must identify the commencement of laytime, the laytime allowed, the time used, excepted periods, completion time, and whether despatch is calculated on Working Time Saved or All Time Saved. If the laytime clause is complicated, the despatch calculation will also be complicated.

Accurate records are essential. The Statement of Facts and time sheet are the main documents used to calculate despatch. They should record arrival, Notice of Readiness, berthing, commencement of loading or discharging, stoppages, weather delays, holidays, completion, documents, and sailing.

There are two methods for calculating Despatch:

  1. Despatch on Working Time Saved (WTS): This method counts only working laytime saved. Non-working periods that would not have counted as laytime are normally excluded.
  2. Despatch on All Time Saved (ATS): This method counts the full calendar time saved between actual completion and the time when laytime would have expired. It may include Sundays, holidays, and other excepted periods.
The difference between WTS and ATS can be financially significant. A ship that completes cargo operations on Friday may generate a larger ATS claim if laytime would otherwise have expired after a weekend or holiday. Under WTS, those excluded periods may not count.

Despatch on Working Time Saved (WTS) Vs Despatch on All Time Saved (ATS). What is the difference of WTS and ATS?

Despatch on Working Time Saved (WTS) Vs Despatch on All Time Saved (ATS). What is the difference of WTS and ATS? The difference is whether excepted or non-working time is included in the saved time calculation. WTS includes only working laytime saved. ATS includes all time saved.

Despatch on Working Time Saved (WTS):

  • Despatch on WTS calculates the payment by reference to working laytime saved.
  • It excludes Sundays, holidays, bad weather, and other periods that would not have counted as laytime.
  • It focuses on the time that could actually have been used for cargo operations.
  • It is usually more favourable to Shipowners than ATS.
Despatch on All Time Saved (ATS):
  • Despatch on ATS calculates the payment by reference to all calendar time saved.
  • It includes weekends, holidays, and excepted periods unless the charterparty states otherwise.
  • It rewards the Charterer for releasing the ship early in real time.
  • It is usually more favourable to Charterers than WTS.

What is Despatch on Working Time Saved (WTS)?

What is Despatch on Working Time Saved (WTS)? Despatch on Working Time Saved is a calculation method under which the Charterer receives despatch only for the working laytime that has been saved. If laytime excludes Sundays, holidays, bad weather, or certain port stoppages, those excluded periods are not counted as despatch time.

WTS asks how much usable working laytime was returned to the Shipowner. It does not simply count the number of calendar days between completion and the theoretical end of laytime. For this reason, WTS normally produces a lower despatch amount than ATS.

WTS is common where Shipowners want to reward efficient cargo work but do not want to pay despatch for days that would not have counted against the Charterer in any event.

Despatch on Working Time Saved (WTS) Example 1

Despatch on Working Time Saved (WTS) Example 1 involves a bulk carrier carrying grain. The charterparty allows 8 working days for loading and 6 working days for discharge. Despatch is payable at USD 8,500 per day on WTS.

Loading is completed in 6 working days, saving 2 working days. Discharge is completed in 5 working days, saving 1 working day. One Sunday falls after completion, but Sundays are excluded from laytime.

Total working time saved:

2 working days + 1 working day = 3 working days saved

Despatch Money:

3 days × USD 8,500 per day = USD 25,500

The Sunday is not counted because the calculation is based on Working Time Saved.

Despatch on Working Time Saved (WTS) Example 2

Despatch on Working Time Saved (WTS) Example 2 involves a Supramax ship carrying fertilizers. The charterparty allows 5 working days for loading and 5 working days for discharge. Despatch is payable at USD 7,200 per day on WTS.

Loading is completed in 4 working days, saving 1 working day. Discharge is completed in 4.5 working days, saving 0.5 working day. A holiday occurs after completion, but that holiday is excluded from laytime.

Total working time saved:

1 day + 0.5 day = 1.5 working days saved

Despatch Money:

1.5 days × USD 7,200 per day = USD 10,800

Despatch on Working Time Saved (WTS) Example 3

Despatch on Working Time Saved (WTS) Example 3 involves a Handysize ship carrying bagged rice. Laytime is 4 working days for loading and 4 working days for discharge. Despatch is payable at USD 6,000 per day on WTS.

Loading is completed in 3 working days, saving 1 working day. Discharge is completed in 3.25 working days, saving 0.75 working day. A rain period after completion would have been excluded from laytime, so it is not counted.

Total working time saved:

1 day + 0.75 day = 1.75 working days saved

Despatch Money:

1.75 days × USD 6,000 per day = USD 10,500

What is Despatch on All Time Saved (ATS)?

What is Despatch on All Time Saved (ATS)? Despatch on All Time Saved is a method under which the Charterer receives despatch for the full calendar time saved between actual completion and the time when laytime would have expired. ATS values the real time by which the ship is released early.

ATS is more favourable to Charterers because it may include Sundays, holidays, weather-excepted periods, and other non-working time. The Charterer’s argument is that the Shipowner receives the whole period of early release, not only the working portion. The Shipowner’s concern is that ATS may create a large payment where completion occurs before a weekend or holiday period.

ATS should be used only where both parties understand the financial result. It should be clearly stated in the charterparty.

Despatch on All Time Saved (ATS) Example 1

Despatch on All Time Saved (ATS) Example 1 involves a Panamax ship carrying coal. Laytime is 10 days for loading and 10 days for discharge. Despatch is payable at USD 6,500 per day on ATS.

Loading is completed in 8 days, saving 2 days. Discharge is completed in 9 days, saving 1 day. Because the calculation is ATS, all calendar time saved is counted.

Total time saved:

2 days + 1 day = 3 days saved

Despatch Money:

3 days × USD 6,500 per day = USD 19,500

Despatch on All Time Saved (ATS) Example 2

Despatch on All Time Saved (ATS) Example 2 involves an Ultramax ship carrying steel products. Laytime is 7 days for loading and 7 days for discharge. Despatch is payable at USD 9,000 per day on ATS.

Loading is completed in 5.5 days, saving 1.5 days. Discharge is completed in 6 days, saving 1 day. A Sunday falls within the saved period, but ATS includes it.

Total time saved:

1.5 days + 1 day = 2.5 days saved

Despatch Money:

2.5 days × USD 9,000 per day = USD 22,500

Despatch on All Time Saved (ATS) Example 3

Despatch on All Time Saved (ATS) Example 3 involves a bulk carrier carrying sugar. The charterparty provides 6 days for loading and 6 days for discharge. Despatch is payable at USD 7,500 per day on ATS.

Loading is completed in 4 days, saving 2 days. Discharge is completed in 5 days, saving 1 day. All saved time is included.

Total time saved:

2 days + 1 day = 3 days saved

Despatch Money:

3 days × USD 7,500 per day = USD 22,500

Despatch Example 1 in Ship Chartering

Despatch Example 1 in Ship Chartering involves a bulk carrier carrying coal. The charterparty allows 6 days for loading and 6 days for discharging. Despatch is payable at USD 5,500 per day for time saved.

The ship loads in 4 days, saving 2 days. The ship discharges in 5 days, saving 1 day. Total time saved is 3 days.

Despatch Money:

3 days × USD 5,500 per day = USD 16,500

Despatch Example 2 in Ship Chartering

Despatch Example 2 in Ship Chartering involves a dry bulk ship carrying wheat. The charterparty allows 5 days for loading and 7 days for discharge. Despatch is payable at USD 8,000 per day.

Loading is completed in 4 days, saving 1 day. Discharge is completed in 5.5 days, saving 1.5 days. Total saved time is 2.5 days.

Despatch Money:

2.5 days × USD 8,000 per day = USD 20,000

Despatch Example 3 in Ship Chartering

Despatch Example 3 in Ship Chartering involves a ship carrying bulk sugar. The charterparty allows 9 days total laytime for loading and discharging combined. Despatch is payable at USD 6,750 per day.

The Charterer completes all cargo operations in 7 days. Total saved time is 2 days.

Despatch Money:

2 days × USD 6,750 per day = USD 13,500

When is Despatch Payable?

Despatch is payable only when the charterparty provides for it. If there is no despatch clause, the Charterer should not assume that early completion creates a right to payment. The contract must state the entitlement.

The charterparty should answer the following questions:

  1. Is despatch payable?
  2. What is the despatch rate?
  3. Is despatch based on WTS or ATS?
  4. Is despatch payable at loading, discharge, or both?
  5. Is laytime separate, reversible, or average?
  6. Is despatch calculated pro rata?
Where wording is incomplete, disputes are likely. A clear despatch clause prevents arguments after the voyage.

Despatch and Reversible Laytime

Reversible laytime allows time saved at one port to be used at another port. If the Charterer saves time at the loading port, that time may be available at the discharge port before demurrage starts. In this situation, despatch may be calculated only after the total loading and discharging laytime account is completed.

Reversible laytime can prevent an unfair result where the Charterer receives despatch at one port but later causes delay at another. The final account determines whether time has actually been saved overall.

Despatch and Average Laytime

Average laytime allows the performance at loading and discharging ports to be balanced according to the charterparty wording. Time lost at one port may be set against time saved at another. Despatch may then depend on the final average result.

Average laytime and reversible laytime are not identical. The parties must identify the exact laytime structure before calculating despatch. Incorrectly treating separate laytime as reversible, or reversible laytime as separate, can change the amount payable.

Despatch and Notice of Readiness

Notice of Readiness is important because laytime normally cannot start until a valid notice has been tendered and the ship is ready in accordance with the charterparty. If the Notice of Readiness is invalid, the laytime clock may start later, which may affect despatch.

A ship may be commercially present at the port but not legally ready. Reasons may include failure to obtain free pratique, unclean holds, absence from the agreed place, lack of required clearance, or failure to meet charterparty readiness conditions. If laytime starts later, the amount of time saved may be reduced.

Despatch and Statement of Facts

The Statement of Facts is the primary factual record for despatch calculations. It should accurately record arrival, anchoring, berthing, Notice of Readiness, commencement of laytime, start of loading or discharge, stoppages, weather, holidays, shifting, completion, documents, and sailing.

If the Statement of Facts is inaccurate, despatch may be wrongly calculated. Port agents, masters, terminal representatives, and Charterers’ representatives should ensure that all relevant events are recorded clearly. Weather stoppages and holiday periods are particularly important where WTS is used.

Despatch and Time Sheets

The time sheet converts the Statement of Facts into the laytime account. It identifies when laytime starts, what periods count, what periods are excluded, whether laytime has expired, and whether demurrage or despatch is payable.

A proper despatch time sheet should state the laytime allowed, time used, time saved, despatch basis, rate, pro rata calculation, and final amount. It should also show how exceptions were treated. Without a clear time sheet, even a simple despatch claim may become disputed.

Despatch and Weather Working Days

Weather working days are frequently used in dry bulk chartering. If the charterparty provides for weather working days, laytime may count only when weather permits cargo operations. This can affect despatch because bad weather may extend the theoretical expiry of laytime.

Under WTS, weather periods that would not have counted as laytime are usually excluded from despatch. Under ATS, those periods may be included if they fall between actual completion and the time laytime would otherwise have expired. Therefore, the same weather record can produce different despatch results depending on the agreed basis.

Despatch and Sundays, Holidays, SHEX, and SHINC

SHEX means Sundays and Holidays Excluded. SHINC means Sundays and Holidays Included. These abbreviations can have a major effect on despatch. If laytime is SHEX and despatch is WTS, Sundays and holidays may not count as time saved. If despatch is ATS, they may count.

Local holidays must also be considered. A holiday in the loading port may not be a holiday in the discharge port. Some ports have religious holidays, national holidays, port holidays, or special non-working days. Accurate local information is necessary for correct despatch calculation.

Despatch and Bulk Cargo Trades

Despatch is common in dry bulk trades where cargo operations can be accelerated by planning and coordination. Grain, coal, fertilizers, ores, cement, salt, sugar, steel, and agricultural products may be carried under charterparties containing despatch provisions.

In bulk sugar trades, despatch may be commercially important because fast completion allows the ship to move quickly to the next employment. In grain trades, despatch may be affected by rain, cargo inspections, fumigation, terminal readiness, and documents. In coal and ore trades, terminal rates may be more predictable, but berth congestion and equipment breakdowns can still influence the calculation.

Despatch in Tanker Chartering

In tanker chartering, Despatch Money is uncommon. Tanker charterparties often provide laytime in hours, and the market practice usually focuses on demurrage rather than despatch. If the tanker finishes within laytime, no demurrage is payable, but despatch is usually not paid unless expressly agreed.

Standard worldscale freight practice commonly provides a fixed laytime allowance for loading and discharging combined. The parties may negotiate different hours depending on ship size, cargo type, terminal operations, and trade. However, tanker despatch remains unusual compared with dry bulk despatch.

Despatch and Voyage Estimation

Shipowners should include possible despatch exposure in voyage estimation. A voyage that appears profitable on gross freight may produce a lower net result if despatch is payable. The estimate should consider whether the ports are fast, whether despatch is WTS or ATS, whether the rate is DHD, and whether laytime is reversible.

Charterers should also evaluate despatch. If the Charterer controls the cargo flow, terminal coordination, or discharge arrangements, despatch may reduce the effective cost of transport. In some trades, a Charterer may accept a higher freight rate if a strong despatch clause is available and fast operations are expected.

Despatch and Freight Negotiation

Despatch can influence freight negotiation. A Shipowner may agree to a despatch clause if the freight rate and demurrage rate justify the risk. A Charterer may request despatch if the Charterer expects efficient cargo operations. The final bargain should be assessed as a whole.

For example, a lower freight rate with no despatch may produce a different result from a higher freight rate with ATS despatch. The parties should compare the full economic outcome, not only the headline freight rate.

Common Despatch Disputes

Despatch disputes commonly arise when the charterparty wording is incomplete or port records are unclear. Frequent issues include:
  1. Whether despatch is payable at all.
  2. Whether despatch applies at loading, discharge, or both.
  3. Whether despatch is calculated on WTS or ATS.
  4. Whether laytime is separate, reversible, or average.
  5. Whether Notice of Readiness was valid.
  6. Whether Sundays and holidays count.
  7. Whether bad weather periods are included.
  8. Whether completion time was correctly recorded.
  9. Whether document delay affects the calculation.
  10. Whether despatch is calculated pro rata for hours.
The best protection is clear wording, accurate Statements of Facts, reliable time sheets, and prompt review by the parties after completion of cargo operations.

Practical Despatch Clause Checklist

  1. Confirm whether despatch is payable.
  2. State the despatch rate clearly.
  3. Confirm whether despatch is DHD.
  4. Confirm whether the basis is WTS or ATS.
  5. State whether despatch applies at loading, discharge, or both.
  6. Clarify whether laytime is separate, reversible, or average.
  7. Clarify whether time is calculated pro rata.
  8. State how Sundays and holidays are treated.
  9. State how weather interruptions are treated.
  10. Require accurate Statements of Facts.
  11. Identify who prepares the laytime calculation.
  12. State when despatch is payable.
  13. Clarify whether despatch may be deducted from freight or offset against demurrage.

Practical Example: DHD with WTS

A ship is fixed with demurrage at USD 18,000 per day and despatch at DHD on Working Time Saved. The despatch rate is therefore USD 9,000 per day. Laytime allowed is 10 working days. Cargo operations are completed after 8 working days. One Sunday occurs before laytime would have expired, but Sunday is excluded from laytime.

Working time saved is 2 days. The Sunday is not counted because the basis is WTS.

2 days × USD 9,000 per day = USD 18,000

Practical Example: DHD with ATS

A ship is fixed with demurrage at USD 18,000 per day and despatch at DHD on All Time Saved. The despatch rate is USD 9,000 per day. Laytime allowed is 10 days. Cargo operations are completed after 8 days. A Sunday falls within the saved period.

Because despatch is ATS, all calendar time saved is counted. If the total saved time is 3 days including Sunday, the calculation is:

3 days × USD 9,000 per day = USD 27,000

This example shows how the difference between WTS and ATS can produce a meaningful financial difference.

Conclusion: Despatch in Ship Chartering

Despatch (Despatch Money) is a fundamental laytime concept in voyage chartering. It rewards the Charterer for completing loading or discharging before laytime expires, provided the charterparty includes a despatch clause. It is closely connected with demurrage because both concepts measure the financial consequences of port time.

The most important despatch issues are the rate, the method of calculation, and the laytime structure. A clause that provides despatch on Despatch on Working Time Saved (WTS) may produce a different result from a clause providing despatch on Despatch on All Time Saved (ATS). DHD, reversible laytime, average laytime, weather working days, SHEX, SHINC, and pro rata wording can all affect the final amount.

For Shipowners, despatch should be included in voyage estimation because it may reduce net freight income. For Charterers, despatch can reward efficient cargo operations and reduce the effective cost of the voyage. For both parties, clear charterparty wording and accurate port records are essential.

Despatch is simple in theory but detailed in practice. A well-drafted despatch clause turns early completion into a clear and predictable commercial result, protecting both Shipowners and Charterers from unnecessary disputes.