Despatch (Despatch Money)
Despatch (Despatch Money) is an agreed amount of money payable by the shipowner to charterers if the ship completes loading or discharging before the laytime has expired. Laytime is the free period of time within which the ship must be loaded and discharged before the charterer must pay demurrage. In voyage chartering, an element of the freight agreed for the voyage has contributed to the cost of laytime and the charterer has effectively paid the shipowner to be able to use that time (laytime) without further payment.
Shipowners add up the cost of the laytime into voyage estimations and shipowners expect the time to be used with no additional income unless laytime is exceeded and the ship earns demurrage. Despatch (Despatch Money) is a mechanism to encourage the charterer to load and discharge faster. In other words, to load and discharge the ship before laytime is exceeded so that any unused laytime is paid back to the charterer in the form of Despatch (Despatch Money). By encouraging charterers with despatch money, shipowner should gain by completing the voyage early and embarking on the next voyage sooner thereby earning his next freight much quicker. Usually, the rate of despatch is half the rate of demurrage. However, shipowners and charterers are free to agree any other rate during negotiations.
In tanker chartering, Despatch (Despatch Money) is very rare due to the result of the shorter laytime periods agreed in tanker trade. If a tanker completes loading and discharging with laytime to spare, no despatch money is paid by shipowners to charterers as a result. In tanker chartering, according to worldscale freight terms, laytime is 72 hours for both load and discharge. However, shipowners and charterers can agree their own laytime duration which normally varies from 12 hours for small tankers through to 96 hours or more for larger tankers.
Calculating despatch is finding the time saved between completion of loading/discharge and the expected time of completion of loading/discharge according to the laytime agreed.
In despatch calculations there are two (2) methods:
- Despatch on Working Time Saved (WTS)
- Despatch on All Time Saved (ATS)
In order to calculate Despatch on Working Time Saved (WTS), only the time from the completion of loading to expiry of demurrage excluding any periods excepted from the lay time will be taken into account. For example, Despatch on Working Time Saved (WTS) Laytime allowed – 10 days Sundays and Holidays Excepted. Ship completes discharge on Friday having used only 7 days laytime out of an allowance of 10 days. Time saved in this case and despatch payable on 3 days. On the other hand, Despatch on All Time Saved (ATS) means that the calculation includes any periods excepted from the laytime. For example, Despatch on All Time Saved (ATS) Laytime allowed – 10 days; Sundays and Holidays Excepted. Ship completes discharge on Friday having used only 7 days. Sunday is excluded and Monday is a Holiday so laytime would have expired the following Wednesday giving rise to despatch of 5 days. Chartering a ship on Despatch on All Time Saved (ATS) basis could increase the payment due to the charterer. Despatch on All Time Saved (ATS) also require the port agent to keep a record of events after the ship has sailed so that an accurate calculation can be made taking into account the exceptions agreed in the charter-party.
Dispatch: Dispatch is the opposite of demurrage and refers to money paid by the shipowner to the charterers as a reward for completing loading or discharging) operations prior to the expiry of laytime.
Dispatch is important in some particular trades such as bulk sugar, where time is of the essence for the shipowner to complete loading or discharging operations and embark on another journey. The rate at which dispatch is paid is usually half the demurrage rate.