Dry Bulk Freight
Dry bulk freight is the income earned by a Shipowner for carrying dry bulk cargo by sea under a charterparty. In commercial practice, freight is not only a rate quoted during negotiations. It is a complete financial arrangement that determines how the Shipowner will be paid, how the Charterer will calculate transport cost, what risks attach to payment, what deductions may be made, and what additional claims may arise if the full cargo is not supplied or if loading and discharging take longer than allowed.The Shipowner’s commercial objective is to earn enough revenue from the ship to cover capital cost, operating cost, voyage cost, risk, and profit. The Charterer’s objective is different. Charterers want to move cargo at the lowest realistic unit cost while still securing safe, reliable, and timely transportation. These competing interests explain why the freight clause, hire clause, commission clause, laytime provisions, payment terms, lien wording, and risk allocation must be drafted with care.
In dry bulk chartering, income can arise under two principal forms of employment. Under Voyage Chartering, the Shipowner normally earns Freight, may earn Deadfreight if cargo is short-shipped, and may earn Demurrage after the calculation of Laytime. Under Time Chartering, the Shipowner earns Hire for the time during which the ship is at the Time Charterer’s disposal. Both systems require careful calculation because the headline freight or hire rate rarely tells the whole economic story.
A Shipbroker must therefore look beyond the rate. The correct voyage or time charter result depends on freight basis, cargo quantity, payment timing, bank details, currency, commissions, address commission, freight tax, freight risk, Bill of Lading wording, off-hire clauses, bunker adjustments, ballast bonus, additions, deductions, and post-fixture accounting. A small drafting omission can produce a large commercial dispute.
Voyage Chartering Income
Voyage charter income is mainly derived from freight. The freight may be calculated per metric tonne, per long ton, per cubic metre, on a lumpsum basis, or by another agreed method. The amount depends on the cargo quantity loaded or delivered, the freight rate, the terms of payment, and any additions or deductions negotiated in the charterparty.Voyage chartering also exposes the Shipowner to risks that do not arise in the same way under time chartering. The Shipowner may have to pay port charges, bunkers, canal dues, agency fees, loading or discharging expenses depending on the terms, and may also face delay risk if laytime and demurrage provisions do not fully protect the Shipowner. Freight must therefore be evaluated as part of a complete voyage estimate rather than as a simple revenue figure.
Risk of Loss of Freight
Risk of Loss of Freight: The risk of losing freight depends on when freight is legally earned, not merely on when money is physically paid. If the charterparty does not provide otherwise, freight is traditionally understood as the reward payable when the cargo arrives at destination and is ready for delivery in merchantable condition. In that situation, freight is normally earned on delivery, and a receiver is not usually entitled to take delivery without tendering the freight due.Where freight is earned only upon delivery, the risk before safe delivery remains with the Shipowner or Carrier. If the ship and cargo are lost before arrival, the Shipowner may lose the right to freight unless the contract shifts that risk. This is why the party exposed to the risk should consider Freight Insurance. The cost of such insurance depends on factors such as the age of the ship, voyage route, cargo, trading area, weather season, and general maritime risk.
Dry bulk Shipowners often try to change the traditional position by negotiating that freight is earned on loading or payable on shipment. If the charterparty states that freight is deemed earned as cargo is loaded, the commercial risk moves toward the Charterer. If the cargo is later lost, the Charterer may still have to pay or may not be able to recover freight already paid, depending on the wording. In that case, the Charterer may need insurance to protect against paying freight for cargo that is never delivered.
The Risk of Loss of Freight must be separated from the payment date. A clause may state that freight is payable within five banking days after signing and releasing the Bill of Lading. That does not automatically mean freight is finally and irrevocably earned. If the underlying risk remains with the Shipowner, freight already paid may have to be returned after a Total Loss of Ship and Cargo. To avoid that result, some Shipowners insist on wording such as Freight Deemed Earned, Discountless And Non-Returnable Ship And Or Cargo Lost Or Not Lost (FDEDANRSAOCLONL).
Standard forms may allocate this risk differently. GENCON 1976 traditionally links payment to delivery of cargo unless amended, so the risk of loss of freight is generally with Shipowners. MULTIFORM uses wording under which freight is deemed earned as cargo is loaded and is non-returnable, so the risk is generally with Charterers. GENCON 1994 offers an option between prepaid freight and freight on delivery, making it important for the parties to select and complete the payment clause properly.
For practical chartering purposes, the wording should answer three questions clearly: when is freight earned, when is freight payable, and is freight returnable if the ship or cargo is lost? If these questions are not answered, expensive disputes may follow.
Where Freight Payable
Where Freight Payable: Modern freight payment is rarely made by cheque or physical delivery of funds. Shipowners normally require cleared funds in a nominated bank account by a specified time. Therefore, a charterparty must identify not only when freight is payable but also where the payment must be received.Freight is usually paid by wire transfer. Even wire transfers can be delayed by cut-off times, intermediary banks, currency checks, compliance controls, weekends, public holidays, time zones, or incorrect payment instructions. For this reason, the charterparty should state the receiving bank, account details, currency, beneficiary, payment deadline, and whether payment is considered made when sent by Charterers or when received by Shipowners.
Some charterparty forms leave the details of When and Where Freight Payable to be completed by the parties. For example, forms such as AMWELSH and OREVOY provide spaces where the parties may insert the agreed arrangements. These boxes should never be treated casually. Missing bank details or unclear payment timing can affect cash flow, lien rights, release of Bills of Lading, and post-fixture relations.
When Freight Payable:
Freight may be payable at different stages depending on the agreement. Common arrangements include:1- Freight Payable in Advance: “Fully Prepaid”
2- Freight payable during the voyage: “Within Five Banking Days of Signing and Releasing Bill of Lading”
3- Freight payable when the ship reaches the destination: “Upon Right and True Delivery”
4- Freight payable at destination before discharge begins: “Before Breaking Bulk (BBB)"
Freight can also be paid in instalments. A common structure may require 90% freight after Bill of Lading signing and release, with the remaining 10% payable after discharge together with Demurrage, Despatch, or other final adjustments. This structure gives the Shipowner early cash flow while allowing the Charterer to retain a small balance for post-discharge settlement.
Payment timing should be coordinated with Bill of Lading release, cargo documents, letters of credit, and any lien rights. A Shipowner who releases freight-prepaid documents without receiving funds may lose practical leverage. A Charterer who pays too late may delay document release and affect the sale contract. Therefore, freight timing is both a legal and commercial issue.
How Freight is Calculated:
How Freight is Calculated: In dry bulk voyage chartering, freight is usually calculated by reference to the quantity of cargo loaded. The rate is often expressed in United States Dollars per metric tonne or per long ton. In some trades, freight may be based on volume, cubic capacity, lumpsum, or outturn quantity at discharge.The first question is how the cargo quantity will be established. Frequently, quantity is determined by Shore Measurement, producing the Bill of Lading (B/L) Weight. This figure becomes the basis for freight calculation where the charterparty so provides. Shore figures may be generated from weighbridges, belt scales, silos, terminal records, or other port measurement systems.
Where shore equipment is unreliable, unavailable, or disputed, the Bill of Lading (B/L) Tonnage (Intaken Weight) may be calculated by Ship’s Draft Survey. A draft survey estimates cargo intake by measuring the ship’s drafts, applying hydrostatic data, and adjusting for ballast, bunkers, freshwater, stores, and density of water. Draft surveys are common in bulk trades, but they require care and cooperation.
Discrepancies between shore figures and draft survey figures are not unusual. Minor differences may be commercially acceptable, but substantial differences should be investigated immediately. The issue may involve inaccurate shore scales, wrong density correction, ballast movement, water in holds, incorrect hydrostatic data, trim correction, or human error. Because some cargoes have high value, even a small percentage difference may represent significant money.
Some charterparties calculate freight on Cargo Outturn Quantity at the discharge port. Outturn may be determined by shore weighing, discharge terminal records, or a discharge draft survey. If the freight basis is outturn, the parties should specify who appoints the surveyor, how the survey is conducted, what documents are binding, and whether the ship’s crew must assist. The ship should not pump ballast, transfer bunkers, or change weights during the survey unless properly recorded.
Certain dry bulk cargoes may lose weight during the voyage through evaporation, moisture loss, drying, drainage, or handling. In such cases, Charterers may prefer freight based on outturn, while Shipowners may prefer freight based on loaded quantity. Sometimes the Charterer is given an option to use loaded figures or discharge figures.
An alternative is a deduction from the Bill of Lading weight, such as 0.5% In Lieu of Weighing (ILOW). This avoids the time and expense of weighing at discharge by allowing an agreed reduction. Although this practice still exists in some trades, In Lieu of Weighing (ILOW) is now less common than it once was.
Freight Currency
Freight Currency: Most voyage charter freight in international dry bulk business is paid in United States Dollars because the US dollar remains the principal currency of international shipping. Bunker prices, freight indices, ship sale values, loan obligations, and many voyage calculations are also commonly dollar-based, which makes the currency practical for global transactions.In Short-Sea Shipping (Coaster Chartering), local currencies may be used more often, especially where cargo, parties, ports, and banking systems are located within the same region. However, currency risk must still be considered. If the Shipowner’s costs are mainly in US dollars but freight is payable in another currency, exchange-rate movement may affect the voyage result.
Cargo Size
Cargo size is one of the most important elements in a freight calculation. Sometimes the Shipowner agrees to lift an exact quantity, such as 50,000 metric tonnes of barley in bulk. In practice, exact quantities are often difficult because the ship's lifting capacity depends on draft restrictions, load-line zones, bunkers, freshwater, stores, weather, port depth, cargo stowage factor, and safety requirements.For this reason, charterparties often include a margin. A cargo may be described as 50,000 metric tonnes 5% More or Less in Owner’s Option (MOLOO). This gives the Shipowner the right to load between 47,500 and 52,500 metric tonnes, subject to safety and contract terms. If the margin is More or Less in Charterer’s Option (MOLCO), the Charterer decides within the agreed range. The party holding the option controls the final quantity, so the economic consequence can be significant.
When the option belongs to the Charterer, the Shipowner should calculate the voyage on the minimum quantity unless there is a reliable reason to expect more. If the Shipowner calculates profit on the maximum quantity and the Charterer declares the minimum, the voyage result may be disappointing.
The word about may also be used before a cargo quantity. For example, about 20,000 metric tonnes of steel normally means a reasonable margin, often treated commercially as around 5%, depending on the trade and context. By contrast, Without Guarantee (WOG) is weaker wording and indicates that no firm guarantee is given. It should be used carefully because uncertainty over cargo size can create serious freight and deadfreight issues.
A charterparty may state a range such as 50/55,000 metric tonnes. To avoid ambiguity, the range may be described as Minimum/Maximum. The wording should also identify whether the final declaration is in Shipowners’ option, Shippers’ option, or Charterers’ option.
Shipowners normally want to maximise the ship’s cargo intake, but the Master must never compromise safety. Two major constraints are:
- DWT (Deadweight Tonnage)
- Load-Line Zones
Calculating Freight
Some cargoes are difficult to calculate precisely before loading. Their stowage factor, moisture content, broken stowage, packing method, cargo shape, or trimming requirement may make the final intake uncertain. In these cases, the parties may agree alternative freight bases.1- Lumpsum Freight: Under a lumpsum freight arrangement, the Charterer pays one agreed amount for the voyage regardless of the exact cargo loaded, subject to the charterparty and the ship’s safe capacity. The Charterer then has the incentive to maximise cargo intake because the freight does not increase with each additional tonne. The Shipowner’s income is fixed, so the Shipowner gains no extra freight from carrying more cargo unless the contract provides otherwise.
2- Cubic Freight: Where cargo is awkward, irregular, voluminous, or difficult to measure by weight, freight may be based on cubic capacity. The calculation may refer to the Available Cubic Capacity of the ship’s holds or to the Cubic Quantity of Cargo Loaded. This method may be useful for light cargo, project cargo, packaged cargo, timber, or cargoes where volume rather than weight limits the ship’s carrying ability.
The best method depends on the cargo and trade. If weight is the limiting factor, a per-tonne rate is usually logical. If space is the limiting factor, a cubic method may be more appropriate. If the cargo quantity is uncertain and the Shipowner wants revenue certainty, lumpsum freight may be preferred.
Deadfreight
If the Charterer fails to provide the full cargo required by the charterparty, the Shipowner may claim Deadfreight. Deadfreight compensates the Shipowner for freight lost because cargo space or deadweight capacity was not used as agreed.Deadfreight is not simply the freight rate multiplied by the missing cargo quantity. It is a damages claim based on the freight the Shipowner would have earned, less expenses that would have been incurred in earning that freight, such as stevedoring cost where applicable. Any benefit obtained by the Shipowner from the unused capacity, such as loading extra bunkers or substitute cargo, may also have to be allowed for.
Deadfreight is normally added to freight earned. It may also be subject to Shipbrokers’ Commissions if the charterparty expressly provides for commission on deadfreight. Shipbrokers should ensure this entitlement is clearly written into the commission clause.
Freight Taxes
Many countries levy taxes on freight earned from cargo shipped from their ports. Such taxes are more common in export trades and in developing countries, although local rules vary widely. The legal liability for Freight Tax often falls on the Recipient of the Freight, which usually means the Shipowner or Disponent Shipowner receiving the money.In practice, Freight Tax may be included in the Port Disbursement Account (PDA) and collected through the port agent. For voyage estimation, Shipowners must identify whether freight tax applies before fixing the cargo. If no allowance is made, the tax can reduce voyage profit significantly.
The charterparty should state which party ultimately bears Freight Tax. Even if the local authority initially levies the tax on the freight recipient, the commercial burden can be transferred to the Charterer by clear wording. Without such wording, the Shipowner may have to absorb the cost.
Some countries have bilateral agreements providing full or partial exemption from Freight Tax for ships registered in certain countries or for freight beneficiaries resident in certain countries. These rules must be checked carefully. An exemption may depend not only on the flag of the ship but also on the residence or tax status of the freight beneficiary.
For example, a German flag ship may not qualify for exemption if the freight beneficiary is a Panama company, even if German citizens own that company. However, if the ship is time chartered to a German resident company acting as Disponent Shipowner for the voyage, an exemption may be available. The exact position depends on local law and the applicable treaty.
Shipbrokers should check Freight Taxes with reliable port agents, tax advisers, or the BIMCO (Baltic International Maritime Council) Freight Tax Booklet. Freight tax should never be treated as a minor afterthought.
Bill of Lading (B/L)
The Bill of Lading (B/L) is central to freight payment and cargo delivery. In sale contracts financed by a Letter of Credit (L/C), the credit may require the Bill of Lading to be marked Freight Prepaid. A buyer receiving such a document is entitled to assume that freight has been paid.It is dangerous and potentially fraudulent to mark a Bill of Lading (B/L) as Freight Prepaid if freight has not actually been paid or has been paid only partly. A Shipowner who releases a freight-prepaid Bill of Lading before receiving freight may be treated as acknowledging receipt of freight. This can seriously damage the Shipowner’s ability to recover the unpaid amount later.
If freight has not been paid, safer wording may be Freight Payable as per Charterparty, provided that wording is consistent with the sale contract, letter of credit, and charterparty. Where the Bill of Lading must be marked prepaid, the prudent course is for the Shipowner to retain the Bill of Lading (B/L) marked Freight Prepaid until cleared funds are received.
Most voyage charterparty forms give the Shipowner or Carrier a lien over cargo for unpaid freight and deadfreight. However, this lien may become ineffective where the Shipowner has already issued and released a Freight Prepaid Bill of Lading (B/L). Once the lawful holder presents the document, the Shipowner may have to deliver the cargo despite the internal non-payment problem.
Charterers sometimes offer a Letter of Indemnity (LOI) asking the Shipowner to issue a freight-prepaid Bill of Lading before receiving freight. Some Shipowners accept such a Letter of Indemnity (LOI), but careful Shipowners usually require the LOI to be countersigned or guaranteed by a first-class bank. Even then, the Shipowner should consider the legal and practical risk carefully.
Shipbrokers' Commissions on Freight, Deadfreight, Demurrage
A Shipbroker's income in voyage chartering is normally calculated as a percentage of Gross Freight payable to the Shipowner. The Shipowner usually pays the brokerage to all brokers involved in the fixture, unless the parties agree a different collection arrangement.Shipbrokers may also be entitled to commission on Deadfreight and Demurrage, but the entitlement should be clearly stated. A Shipbroker’s right to receive commission on Deadfreight must be expressly stipulated in a Charterparty. The same principle applies to demurrage: a Shipbroker’s right to receive commission on Demurrage must be expressly stipulated in a Charterparty.
Demurrage may arise after laytime calculation. It compensates the Shipowner for time used beyond the agreed laytime. Because demurrage can be substantial, especially in congested ports or difficult cargo operations, commission entitlement should be dealt with clearly at the fixture stage.
Shipbroker income is often called Brokerage. This should be distinguished from Commission (COM) and Address Commission (ADDCOM). Address Commission is a discount negotiated by Charterers and deducted from freight, deadfreight, and sometimes demurrage. It is traditionally common in dry cargo business but is rarely seen in tanker chartering.
Shipbrokers' Commission Levels
In Deep-Sea Dry Bulk Markets, Shipbrokers' Brokerage is commonly 1.25% of Gross Freight, Deadfreight, and Demurrage for each broker involved. If two brokers are involved, total brokerage may be 2.5%. If three brokers are involved, it may be 3.75%, and so on, depending on the fixture terms.Sometimes Charterers deduct the Shipbrokers’ Brokerage Amount from freight and undertake to pay one or more brokers directly. This must be documented clearly so that the Shipowner, Charterer, and brokers understand who is responsible for payment and when brokerage becomes due.
A Shipbroker regularly and exclusively employed by a particular Shipowner or Charterer may accept a lower brokerage, such as 1%. If the broker also undertakes extensive post-fixture work, claims handling, laytime assistance, document coordination, and operational support, the brokerage may be higher, such as 2%, depending on the agreement.
In Short-Sea Dry Bulk Markets, Coaster Shipbrokers’ Brokerage is often around 2.5% of Gross Freight, Deadfreight, and Demurrage. This higher percentage reflects the smaller absolute value of short-sea fixtures. Coaster Shipbrokers may do as much work as deep-sea Shipbrokers, but the freight amounts are usually lower.
Address Commission (ADDCOM)
Address Commission (ADDCOM) is a negotiated deduction from freight or hire, usually in favour of the Charterer. Some Charterers do not claim Address Commission (ADDCOM) and the charterparty records 0%. Others may negotiate 2.5%, 3.75%, 5%, or another figure depending on bargaining strength and market conditions.In dry bulk chartering, Total Commission means the total of Address Commission and brokerages. The figure may be as low as 1.25% or may reach 7.50% or more in particular trades. In deep-sea dry cargo business, total commission commonly falls around 3.75% to 5%. Some trades, such as sugar, have traditionally carried higher total commission. Humanitarian or institutional cargoes may have special commission arrangements.
Because commissions directly reduce the Shipowner’s net revenue, they must be included in voyage estimation. A freight rate that looks profitable before commission may become marginal after brokerage, address commission, freight tax, port costs, and cargo expenses are deducted.
Shipbrokers' Brokerage
Shipbrokers' Brokerage may appear attractive when viewed as a percentage of gross freight, but broker income follows the freight market. When freight rates are low, brokers must often work harder to fix business, while the commission earned on each successful fixture is smaller. Many negotiations fail, and brokers receive nothing for failed fixtures despite the time, communication, market research, and expenses involved.Some charterparty forms provide limited protection for brokers if an agreed fixture is not performed. For example, GENCON contains wording allowing part of the brokerage on estimated freight and deadfreight as compensation for work and expenses in cases of non-execution. The exact entitlement depends on the form and the clauses agreed by the parties.
Under English law, the Rights of Third Parties Contracts Act 1999 strengthened the position of Shipbrokers in some circumstances. Before the Rights of Third Parties Contracts Act 1999, Shipbrokers could face difficulty suing for unpaid brokerage because they were not parties to the charterparty between Shipowner and Charterer. Today, where the charterparty wording gives the broker enforceable rights, the broker may be able to claim directly.
It is still essential that the broker’s entitlement is written into the charterparty signed by both principals. If the brokerage clause is missing or unclear, payment disputes become more likely. Shipbrokers should also consider professional indemnity insurance and membership of recognised organisations such as the Baltic Exchange or BIMCO (Baltic International Maritime Council).
Some Shipowners pay brokerage promptly. Others are slow, especially where freight has not yet been collected or where disputes exist. Charterers may also negotiate that 100% of Address Commission (ADDCOM) and sometimes brokerage are deductible from advance freight. These arrangements should be checked before the fixture is concluded.
FONASBA International Brokers Commission Contract Form
FONASBA International Brokers Commission Contract Form provides a separate contractual framework between the Shipowner and Shipbroker for commission payment. FONASBA (Federation of National Associations of Shipbrokers and Agents) produced this standard form, and it is recommended by BIMCO (Baltic International Maritime Council).The value of the FONASBA International Brokers Commission Contract Form is that it creates a direct contract under which the Shipowner agrees to remunerate the Shipbroker for commission due under the relevant charterparty. This can give the Shipbroker a clearer legal route to recover unpaid commission under English law.
Time Charter Income
Time charter income is different from voyage charter income. In voyage chartering, the Shipowner earns Freight for carrying a specific cargo on a specific voyage. In time chartering, the Shipowner earns Hire for making the ship available to the Time Charterer for an agreed period. The Time Charterer then directs the commercial employment of the ship within the limits of the charterparty.Under time chartering, the Time Charterer normally pays bunkers, port charges, canal dues, cargo-handling costs, and voyage expenses, while the Shipowner continues to pay crew wages, technical maintenance, insurance, stores, and capital costs. This division of cost changes how income and risk are analysed.
How Time Charter Hire is Calculated
How Time Charter Hire is Calculated: Time Charter Hire is usually expressed as a daily rate, such as USD 30,000 per day pro rata. If a ship is on hire for 30 days and 12 hours, the period is 30.5 days. At USD 30,000 per day, the gross hire would be USD 915,000.Commonly, Time Charter Hire is paid semi-monthly in advance. At USD 30,000 per day, a 15-day advance hire payment would be USD 450,000. A full 30-day period would produce USD 900,000 gross hire. The pro rata principle applies to part days unless the charterparty provides a different calculation.
An alternative method is to calculate hire by reference to the ship’s DWT (Deadweight Tonnage) per calendar month. For example, a 100,000 Summer DWT bulk carrier earning the equivalent of USD 30,000 daily may be expressed as:
USD 900,000 / 100,000 SDWT = USD 9 per SDWT tonne per calendar month
A Calendar Month is not always the same number of days. For calculation purposes, an average calendar month is often taken as 30.4375 days. Using that factor:
100,000 SDWT x USD 9 per tonne / 30.4375 = USD 29,568 daily
This explains why a daily hire rate and a DWT-per-calendar-month rate may produce slightly different results. ASBATIME Charterparty Form Clause 4 allows either method of hire calculation, depending on what the parties agree.
When Time Charter Hire is Payable
When Time Charter Hire is Payable: Time Charter Hire is usually payable in advance, either monthly or semi-monthly. Advance hire protects the Shipowner's cash flow and reduces credit exposure. If the Time Charterer does not pay on time, the Shipowner may have contractual rights, including possible withdrawal of the ship, subject to the charterparty and applicable law.ASBATIME Clause 5 provides for Semi-Monthly in Advance payment. In practice, many time charters use payments every 15 days in advance, which avoids problems created by months of 28, 29, 30, or 31 days. At the end of the charter, when the remaining period is shorter than a full 15 days, Charterers may resist paying more than the estimated balance due. Most time charter forms allow hire for the balance to be paid day by day if required by Shipowners.
Where Time Charter Hire is Payable
Where Time Charter Hire is Payable: Like voyage freight, time charter hire must be transferred to the agreed bank account in time. If hire is late, the Time Charterer may be in breach of the contract and the Shipowner may have a right to withdraw the ship from the Charterer's service.Withdrawal is a serious remedy and is not always straightforward. The Shipowner may need to comply strictly with the charterparty wording. If late payment is minor or caused by a banking mistake, the Time Charterer may have protection under an Anti-Technicality Clause.
An Anti-Technicality Clause prevents unfair or opportunistic withdrawal for small or accidental payment failures. It usually requires Shipowners to give a formal notice to Charterers and allows a Grace Period during which Charterers may correct the default. This is especially important in strong freight markets, where a Shipowner may be tempted to withdraw a ship fixed at a low rate and refix at a higher rate.
A well-drafted time charter should remove uncertainty. It should state that hire is payable in advance at agreed intervals, identify the receiving bank, specify the payment deadline, and define the consequences of late payment. Since banks may delay or misroute funds, the Anti-Technicality Clause protects Charterers from losing the ship when the failure is unintentional and quickly remedied.
Ballast Bonus
Ballast Bonus: A ship may have to sail in ballast to reach the delivery point for a time charter. The Shipowner may therefore negotiate a Ship Positioning Bonus to compensate for time, bunkers, canal tolls, or other expenses incurred before delivery. This lump sum is commonly called a Ballast Bonus.A similar issue may arise at redelivery. If the Time Charterer redelivers the ship in a Poor Position with limited employment prospects, the Shipowner may try to negotiate a Ship Redelivery Positioning Bonus. Whether such a payment is agreed depends on market conditions and bargaining power.
The delivery Ballast Bonus is usually payable with the first hire payment. A key negotiation point is whether the Ballast Bonus is paid as Gross Ballast Bonus, subject to Address Commission (ADDCOM) and brokerage deductions, or as Nett Ballast Bonus. Market practice varies. Often, ballast bonus is agreed nett of address commission but gross of brokerage.
Ship Bunkers:
Ship Bunkers: When a ship is delivered into time charter, Charterers normally take over the Bunkers Remaining on Board (ROB) at delivery and reimburse Shipowners for their value. The Bunkers Remaining on Board (ROB) payment is usually made with first hire.On redelivery, the process is reversed. Charterers estimate the Bunkers Remaining on Board (ROB) at redelivery and deduct the corresponding value from the final hire payment, or the parties settle the balance after survey figures are available. On-hire and off-hire surveyors are commonly appointed to measure bunkers, check condition, record draft, and establish delivery or redelivery facts. Adjustments are then made once the reports are issued.
The price basis for bunkers should be agreed. It may be the same price as on delivery, the last paid invoice price, market price at the port, or another contractual figure. If the charterparty is unclear, bunker disputes may arise.
Ship Delivery and Ship Redelivery:
Ship Delivery and Ship Redelivery: Delivery marks the moment when the time charter period begins. The time charter clock starts, hire begins to accrue, and associated payments such as First Time Charter Hire, Bunkers Remaining on Board (ROB), and Ballast Bonus become payable according to the charterparty.On-hire and off-hire surveys are therefore important documents. They should be signed and witnessed by the Ship Master, port agents, surveyors, and, where available, the Time Charterer’s representative or supercargo. Survey reports should be circulated promptly to all parties so that hire, bunker, and condition adjustments can be made.
The charterparty should also state whether delivery and redelivery times are recorded in Local Time (LT), Greenwich Mean Time (GMT), UTC, or another standard time. If the charterparty is silent, English law may treat the period as actual elapsed time, as if a stopwatch begins at delivery and stops at redelivery. This avoids manipulation through time zone changes.
If Local Time is used, one party may gain or lose time when the ship crosses time zones. To avoid arguments, it is usually better to specify a standard time such as Greenwich Mean Time (GMT) or UTC for time charter calculations.
Additions to Time Charter Hire
Additions to Time Charter Hire: In addition to ordinary hire and any ballast bonus, the Time Charterer may have to reimburse Shipowners for other expenses incurred for Charterers' benefit. These may include:1- Stevedores’ Meals
2- Supercargo Accommodation
3- Gratuities Paid on Time Charterers’ Behalf
4- Radio Message Expenses
5- Cleaning the Ship’s Holds
Most time charterparty forms require the ship to be redelivered in good order and condition, fair wear and tear excepted. If the ship’s holds were clean on delivery, the Time Charterer may have to Clean the Ship’s Holds before redelivery. The ship generally remains on hire while this work is carried out unless the charterparty provides otherwise.
Hold-Cleaning may sometimes be performed by the crew during the ballast passage to the next loading port. In other cases, it requires shore labour, cleaning chemicals, freshwater, equipment, or specialist teams. Charterers may negotiate the right to redeliver without Final Hold-Cleaning, usually in return for a lumpsum cleaning payment to the Shipowner.
Time Charterers are also responsible for damage caused by stevedores, servants, agents, or cargo interests acting for them, subject to the charterparty wording. Minor damage may not justify delaying the ship for immediate repairs. The parties may agree a cash settlement so that the Shipowner can repair the damage later during drydock or a suitable maintenance period.
Deductions from Time Charter Hire:
Deductions from Time Charter Hire: Time Charter Hire may be reduced by several categories of deduction. These must be clearly supported by documents and calculated according to the charterparty.1- Address Commission (ADDCOM) and/or Brokerage
Time charter hire is often subject to deductions for address commission and brokerage. The agreed percentages should be stated clearly. If the rate is not clear, hire statements may become disputed.
2- Port Disbursements: In time chartering, Shipowners often do not appoint a separate port agent for their own account. Instead, they rely on the Time Charterer’s port agent to arrange owner-related payments such as CTM (Cash to Master), crew expenses, chandlery, medical attendance, courier fees, or minor owner’s matters. Charterers may then deduct these advances from hire.
Some time charter forms reward Charterers for arranging these payments by allowing a commission on advances. For example, ASBATIME may allow a 2.50% commission on certain advance payments. The clause should be read carefully because not every item is necessarily deductible in the same way.
3- Domestic Bunkers: Older charterparty wording, such as NYPE 1946 Clause 20, refers to fuel used for cooking, condensing water, grates, and stoves. Although the language comes from an earlier era, English law has recognised that the principle may still apply to modern diesel-engined ships. Charterers may therefore negotiate an allowance for a Ship’s Domestic Bunker Consumption for heating, lighting, cooking, domestic services, and similar purposes.
The quantity should be agreed during negotiations. Once agreed, the domestic bunker allowance is usually deducted from hire. Modern charterparties may deal with this more directly, but if they do not, the parties should clarify the position to avoid disputes.
4- Ship Off-Hire: A ship may be placed Off-Hire when she is unable to provide the service required under the time charter for reasons falling within the off-hire clause. ASBATIME Clause 15 gives examples of circumstances that may allow a Time Charterer to place the ship Off-Hire. Common causes include main engine breakdown, cargo gear failure, deficiency of crew, drydocking, deviation for owner’s purposes, or delay caused by the Shipowner’s responsibility.
An Off-Hire Clause should define the events that stop hire, the period to be deducted, and whether bunkers consumed during off-hire are for Shipowners’ or Charterers’ account. Even a well-drafted clause can create disputes where the beginning and end of off-hire are difficult to identify, especially if the ship is at sea, delayed indirectly, or deviates from route.
Ship Poor Performance
Poor Performance may also create a hire deduction or damages claim. Time Charterers may allege that the ship failed to perform according to the warranted Speed and Bunker Consumption figures stated in the charterparty. These warranties normally apply only in good weather and under specified conditions.Modern dry bulk ships can operate at different combinations of speed and fuel consumption. A Time Charterer may require higher speed to meet a laycan, avoid congestion, or satisfy a sale contract. Alternatively, the Charterer may instruct economical steaming to save bunkers. The ship’s actual performance must be compared with the warranted figures under the correct weather, sea, current, and operational conditions.
In performance disputes, the Shipowner may argue that adverse weather, currents, fouling, waiting, routing, or Charterer’s instructions affected performance. The Charterer may argue that the ship consumed too much fuel or failed to maintain promised speed. Ship’s logbooks, noon reports, weather routing data, engine records, and independent weather analysis become important evidence.
The parties may agree to refer performance disputes to a weather-routing company such as Oceanroutes or Fleet Weather. The routing company may assess weather conditions, currents, distances, speed, and consumption to determine whether the ship underperformed and, if so, the financial adjustment due.
In tanker time chartering, bonus provisions may sometimes reward a tanker that performs better than the charterparty warranty. In dry bulk time chartering, the focus is more often on deductions for underperformance, but the parties are free to negotiate performance incentives if desired.
ASBATIME Lines 190 to 195 deal with Deviation from the ship’s planned course. Shipbrokers should understand Ship Deviation Calculations because off-hire, extra time, and extra bunker consumption may have to be quantified precisely.
Ship Deviation Example
Ship Deviation is normally calculated by comparing the time and bunkers actually used during the deviation with the time and bunkers that would have been used if the ship had proceeded directly as instructed by Time Charterers. The difference represents the off-hire time and extra bunker cost, subject to the charterparty.Assume a ship deviates from Point X to a drydock for emergency repairs and then proceeds to Point Y. The direct distance from Point X to Point Y is 360 nautical miles. The distance from Point X to drydock is 360 nautical miles, and the distance from drydock to Point Y is also 360 nautical miles. The ship remains in drydock for 6 days. The charterparty speed is 15 knots, and bunker consumption at sea is 30 tonnes IFO (Intermediate Fuel Oil) per day.
At 15 knots, the ship covers 360 nautical miles per day:
15 knots x 24 hours = 360 nautical miles per day
Ship Deviation Calculation:
Point X to Drydock: 360 NM = 1 day
Drydock to Point Y: 360 NM = 1 day
Time in Drydock: 6 days
Total actual deviation period: 8 days
Less direct Point X to Point Y: 360 NM = 1 day
Total Off-Hire = 7 days
Ship Bunker Consumption:
IFO Point X to Drydock: 30 tonnes
IFO Drydock to Point Y: 30 tonnes
Total actual sea deviation consumption: 60 tonnes
Less bunker consumption for direct Point X to Point Y: 30 tonnes
Extra Bunker Consumption: 30 tonnes
This Ship Deviation Example is deliberately simple. In real cases, the calculation may have to consider port time, manoeuvring, waiting, weather, different speeds, canal delays, pilotage, low-sulphur fuel, auxiliary consumption, off-hire bunkers, and whether the deviation was for Shipowners’ or Charterers’ purposes. The principle remains the same: compare the actual time and bunkers with the time and bunkers that would have been used on the direct contractual route.
Practical Importance of Accurate Freight and Hire Calculation
Dry bulk freight and time charter hire calculations are not merely accounting exercises. They determine whether a fixture is profitable, whether a claim is valid, whether a broker earns commission, and whether one party may deduct money from another. Freight and hire disputes often arise after the commercial negotiation is complete, when the parties discover that the wording does not match their expectations.For voyage charters, the main financial risk areas are cargo quantity, freight payment timing, freight tax, deadfreight, demurrage, commissions, Bill of Lading wording, and cargo measurement. For time charters, the main financial risk areas are hire payment timing, late payment, off-hire, bunkers on delivery and redelivery, ballast bonus, performance claims, domestic bunkers, port disbursement deductions, and final account settlement.
Shipbrokers play an important role in preventing disputes. A broker should ensure that the recap and charterparty clearly identify all payment items, commission percentages, freight basis, hire basis, options, deductions, taxes, and documentary requirements. A well-drafted fixture is easier to perform and easier to settle.
Summary
Dry Bulk Freight is the principal income earned under a voyage charter, while Hire is the principal income earned under a time charter. In Voyage Chartering, the Shipowner may also earn Deadfreight and Demurrage after calculation of Laytime. In Time Chartering, income is normally calculated on a daily pro rata basis and paid in advance.The Risk of Loss of Freight depends on when freight is legally earned. If freight is earned only on delivery, the risk may remain with the Shipowner or Carrier. If freight is deemed earned on shipment and non-returnable, the risk may shift to the Charterer. Clauses such as Freight Deemed Earned, Discountless And Non-Returnable Ship And Or Cargo Lost Or Not Lost (FDEDANRSAOCLONL). are used to make the position clear.
Freight calculation depends on cargo quantity, measurement method, currency, timing, and contract wording. Cargo quantity may be based on Shore Measurement, Bill of Lading (B/L) Weight, Ship’s Draft Survey, Cargo Outturn Quantity, or agreed deductions such as In Lieu of Weighing (ILOW). Cargo size options such as More or Less in Owner’s Option (MOLOO), More or Less in Charterer’s Option (MOLCO), about, Without Guarantee (WOG), and Minimum/Maximum must be used carefully.
Freight Tax, Bill of Lading (B/L) wording, Freight Prepaid clauses, Letter of Indemnity (LOI), brokerage, Address Commission (ADDCOM), and the FONASBA International Brokers Commission Contract Form all affect the final amount received. Shipbrokers should ensure that their commission rights on freight, Deadfreight, and Demurrage are expressly recorded.
In time chartering, Time Charter Hire is commonly payable Semi-Monthly in Advance or every 15 days in advance. Late hire payment may lead to withdrawal rights, but an Anti-Technicality Clause may give Charterers a Grace Period to correct accidental default. Delivery and redelivery surveys, Bunkers Remaining on Board (ROB), Ballast Bonus, additions, deductions, Off-Hire, Poor Performance, Speed and Bunker Consumption claims, and Ship Deviation Calculations must all be handled carefully.
Dry bulk freight and hire accounting requires precision. Clear charterparty drafting, accurate measurement, careful post-fixture management, and disciplined documentation protect Shipowners, Charterers, and Shipbrokers from unnecessary disputes and ensure that the commercial result reflects the agreement actually made.