Shipbrokers and agents should be aware that no single issue occupies the minds of maritime lawyers more than the counting of loading and discharging time. The interpretation of Ship’s Laytime Time Counting splits into two distinct parts:
- When Laytime Begins to Count
- What Time Counts and What Does Not
When Laytime Begins to Count
When time begins to count is dependent on the tendering of the NOR (Notice of Readiness). It is the master’s legal responsibility to present the NOR (Notice of Readiness), the ship’s port agent is there to share that responsibility. Port agent’s responsibility is particularly critical when the NOR (Notice of Readiness) necessitates being presented while the ship remains at anchor awaiting a berth and the master is unable to deliver the NOR (Notice of Readiness) personally. No damage has ever resulted from presenting NOR (Notice of Readiness) too often or too early, but substantial economic damages can arise if NOR (Notice of Readiness) is presented late or presented not at all. A ship is considered to be money-losing when sailing without cargo in it or time spent at the port. Ships have to spend some time in port loading and discharging operations and, except when cargoes are scarce or if the shipowner requires time to complete some repair works, this time must be as short as possible for the ship to be profitable. Consequently, ship operators give close attention to the time the ship spends in port.
Ship Loading and Discharging Rates
Ship loading and discharging rates are agreed upon during chartering negotiations. Usually, ship loading and discharging rates are expressed in terms of the tonnes per day which we can calculate the number of days (hours) for loading and discharging operation. In many charter parties, the time of loading and discharging is simply stipulated as so many days (hours), although this can be stated in several ways. The time allowed for loading and discharging operations can be expressed separately for each port or a total time for all ports. The total time allowed will cover both loading and discharging operations. After the amount of time allowed has been agreed, we must concentrate on what days and parts of days will be used for loading and discharging operations.
In the tanker business, oil terminals employ a few employees, and oil terminals operate 24/7 for loading and discharging operations. On the other hand, a few dry bulk ports are highly mechanized and not very labor-intensive. At the highly-developed ports, when loading and discharging operation is to take place over the full seven days of a week, the fixture will be on SHINC (Sundays and Holidays Included) terms, usually referred to as running days. At the less-developed ports, with less mechanized cargo handling, the difficulty of manual labor arises and it is reasonable to fix on SHEX (Sundays and Holidays Excluded) terms because unless someone is prepared to pay overtime rates, the port laborers do not normally work on weekends or public holidays. Furthermore, many ports do not work on Saturdays. To address this situation, SHINC and SHEX are often amended to SSHINC (Saturdays, Sundays, and Holidays Included) and SSHEX (Saturdays, Sundays, and Holidays Excluded). Generally, the rate of cargo loading and discharging will be dictated by the cargo-handling devices available or demurrage/despatch expectations.
Usually, a charter party contains an Overtime Clause asserting that overtime is for the account of the party ordering it, accompanied by some qualifying conditions. Overtime Clause has nothing directly to do with time counting, however, loading and discharging operations outside normal hours can be arranged if someone is willing to pay. If overtime work is ordered, then there should be made some delicate adjustment of the time-counting clause, when the parties will negotiate around the excluded periods to establish whether or not time does count during such periods, even if used. Therefore, the charter party is amended by “only time actually used is to count as laytime“. The emphasis on “actually used” is to protect the charterer from having, for instance, the whole of a Sunday counting when the only four-hour shift was used for loading and discharging operations. Some charter party forms stipulate that “if any time is used that would otherwise be excepted, then it only counts as halftime”.
Charter party negotiations as to the rate of loading or discharging, SSHINC or SSHEX, even if used or time used to count, are crucial factors. Shipowners try to keep the port stay as short as possible and charterers try to limit the risk of demurrage. It is important to inspect and compare the time-counting clauses in different blank charter party forms. Additionally, it is important to distinguish the two expressions laydays and lay-time when reading charter party clauses
When Lay-Time Starts to Count (When Lay-Time Clock Starts Ticking)
All charter parties require that NOR (Notice of Readiness) has to be tendered and before NOR (Notice of Readiness) can be tendered, the ship must indeed be ready for loading and discharging operations and if it is not, then the NOR (Notice of Readiness) tendered will be void. Since NOR (Notice of Readiness) might be tendered before the ship is even alongside a berth, the master’s statement that the ship is ready must be taken on trust.
Some charter forms stipulate that NOR (Notice of Readiness) must be delivered during normal office hours. Charter party forms require that the NOR (Notice of Readiness) be in written form by email or by telex. Thereafter the NOR (Notice of Readiness) Clause stipulates how much time has to elapse, after the tendering of NOR (Notice of Readiness), before time starts to count.
Some charter party terms stipulate a reasonable time in which the shippers or receivers can prepare the labor and facilities for loading or discharging operations. Some charter parties still retain an extraordinary margin of time after tendering NOR (Notice of Readiness), a custom that dates back to the days before radio was widely used. Some charter party forms have time counting 24 hours after tendering NOR (Notice of Readiness) in other words 24 hours of free time before the clock starts ticking. Some charter party terms are amended to generate as much despatch money as possible.
NOR (Notice of Readiness)
Two essential factors must be satisfied before an acceptable NOR (Notice of Readiness) may be tendered. The ship has to an Arrived Ship and the Ship’s Readiness.
a- Arrived Ship
For a ship to be able to begin cargo operations, but not necessarily for time to start counting, it must be at the place where operations are to take place and the port and customs authorities should have given consent for operations to begin. When port authorities first started ordering ships to wait outside the port limits, there were many disputes concerning laytime. Charterers dispute that the ship could not have arrived if the ship was not even in the port.
The charter party term WIBON (Whether In Berth or Not) allows for the NOR (Notice of Readiness) to be tendered so long as the ship is at a place customarily used for ships to wait before navigating to its berth.
Some charter forms provide for the ship to present NOR (Notice of Readiness) if the berth is unavailable and specifically refers to a customary waiting place outside the port. If the ship has anchored some distance from the shore, Port Health (Free Pratique) and Customs may prefer to wait until the ship is nearer before boarding and giving it clearance. The chartering terms covering these two circumstances are WIFPON (Whether In Free Pratique Or Not) and WICCON (Whether In Customs Clearance or Not). Therefore, NOR (Notice of Readiness) is tendered WIBON, WIFPON, WICCON (WWW). During chartering negotiations, rather than quote WIBON, WIFPON, WICCON terms in full, it is customary practice to agree that (Notice of Readiness) can be tendered WWW.
b- Ship’s Readiness
The other element of the ship’s readiness is its physical condition such as hold’s cleanliness, dirt, smell, and infestation.
The most beneficial advice that can be given is to present NOR (Notice of Readiness) on arrival at the anchorage or pilot station. Hereafter, additional NOR (Notice of Readiness) can be sent every time an extra activity takes place. Additional NOR (Notice of Readiness) should be stated as follows: “NOR (Notice of Readiness) is given without prejudice to earlier NOR (Notice of Readiness) tendered on …”. If a NOR (Notice of Readiness) has been tendered too early it can be ignored, but a NOR (Notice of Readiness) tendered too late cannot be backdated. Master should tender NOR (Notice of Readiness) if the master has the right to do so. On no account should any instructions be taken about how or when the NOR (Notice of Readiness) is to be given be taken from the charterer that is contrary to those given by the shipowner without first checking with, and receiving approval from the shipowner. Ultimately, the NOR (Notice of Readiness) must always be in written form by email, telex, and fax. Being in written form is not restricted to hand delivery of a typed piece of paper. The ship’s port agent should be cautious that a verbal NOR (Notice of Readiness) is not acceptable. Some charter party forms are amended to insert the words and “accepted” in the NOR (Notice of Readiness) Clause. The acceptance of the NOR (Notice of Readiness) is not a legal requirement.
Demurrage and Despatch
The time to be allowed for loading and discharging operations is an important factor in the chartering negotiations. Certainly, shipowners must be recompensated if that time is exceeded, as it represents a breach of contract (Liquidated Damages). In most cases of breach of contract, the injured party appeals for a legal right to claim compensation for damages, but this procedure would be far too cumbersome. During chartering negotiations, shipowners and charterers agree upon a set amount per day as demurrage by which the charterers exceed the agreed time. In law, demurrage is referred to as “Liquidated Damages”. “Once on Demurrage, Always on Demurrage” indicates that demurrage is a penalty for having exceeded the stipulated time. Therefore, any conditions which, during the normal time, would stop the clock ticking such as bad weather, holidays, and strikes are no help once the ship is on demurrage. However, if there is a breakdown of the ship’s gear, demurrage to be suspended for the time taken for repairs
What Time Counts and What Does Not
Numerous events can cause the counting of laytime to be temporarily suspended. Typical of these would be the time taken to navigate from the anchorage to the berth if the ship had to spend time waiting for an available berth. This is fair if one considers that had the berth been available on arrival, the ship would have steamed straight past the anchorage to the berth and the passage time would not have counted as laytime.
The most common cause of laytime stoppage is bad weather. Several cargoes may continue to be loaded or discharged during rain or snow. Some cargoes such as grain would be damaged during rain or snow.
If the bad weather stops the operation on the ship at the berth, time stops to count. If the bad weather stops the operation on the ship at the berth and therefore delays the ships waiting for that berth at the anchorage, time stops to count also for the ships waiting for that berth. In the charter party, the wording used is “Weather Working Days” (WWD), which applies to ships whether on the berth working or waiting for the berth to become available. In the old days, if the shipowners needed to restrict the stopping of time only to the ship when it was actually being worked on the berth, then the shipowners inserted a clause read “Weather Permitting”. The English Court of Appeal overturned this simple method, therefore both phrases “Weather Working Days” (WWD) and “Weather Permitting” mean the same. It is required to insert explicitly in the charter party that stopping of time because of bad weather will affect only the ship on the berth if that is what the shipowners and charterers have agreed.
Practically all charter party forms allow the time to stop counting if there is a strike of workers employed directly or indirectly in loading or discharging the ship. Generally, a special provision is inserted in a charter party as a separate Strike Clause to cope with what is going to be a lengthy strike.
Time to stop counting if there is a breakdown of machinery or other incidents beyond the control of the charterer. But, the “beyond the control of the charterer” expression may be challenged if the machinery is directly or indirectly owned by the shippers or receivers.
All the factors discussed above that allow the time to be extended are overlooked if the ship is already on demurrage and every minute, including Sundays, holidays, bad weather delays, strikes, and so on, will all count except the breakdown of the ship’s gear.
Damages for Detention
Some charter party forms limit demurrage to a specific number of days after which, instead of demurrage, the shipowner can seek damages for detention. Generally, demurrage would be linked to freight rates. But, after lengthy delays the freight rate agreed for the charter may no longer be a real representation of the market reality. Consequently, after the time allowed for demurrage had been exceeded, the shipowner would be able to recalculate the actual level of loss incurred as a consequence of the delay and claim that amount through the courts. Some charter parties include the Damages for Detention Clause, which is usually deleted, and the demurrage rate applied to all time lost.
Despatch Money can be viewed as a bonus paid by shipowners to the charterers if less than the contracted time has been used. Practically, all charter parties include a Despatch Clause, the rate of Despatch Money is usually the half that agreed for Demurrage.
Laytime Saved Vs All-Time Saved
In most cases, despatch is only payable on Laytime Saved (Working Time Saved). For instance, if the time allowed expired on a Monday at midnight and the charterers completed at midnight on the previous Thursday and weekend working was not allowed for in the charter party (SSHEX), the shipowner would have to pay two (2) days’ despatch money. Some charterers insist that the despatch money should be paid on All-Time Saved. If All-Time Saved has been agreed, then in the example above the claim would be four (4) days’ despatch money. Despatch Money is common in large dry bulk carriers. Generally, Despatch Money is not paid in tanker charters and is seldom paid in the shortsea (coaster) charters.
In some dry bulk trades, charterers deliberately negotiate an extremely slower loading or discharging rate to secure a considerable Despatch Money. There is nothing illegal or even immoral about this, but a port agent needs to be aware of this practice and shipowners may be forewarned about the rational handling rate that will be achieved. So, shipowners make the necessary adjustments to voyage estimates.
Statement of Facts (SOF) and Timesheet
There has to be a detailed calculation to determine the amount of demurrage or despatch money. This calculation is set out formally on a pre-printed form which is called a Timesheet. Customarily, the Timesheet is prepared by the shipowners.
The facts that are used to prepare a Timesheet almost always have to come from the port agent in the form of a Statement of Facts (SOF). Some agents print their Statement of Facts (SOF) form, while other agents use a standard form such as the BIMCO Statement of Facts (SOF) Form.
The date and time of every stage of the cargo operation are recorded in the Statement of Facts (SOF). The Statement of Facts (SOF) records:
- when the ship arrived
- when NOR (Notice of Readiness) tendered
- when loading and discharging operation commenced
- public holidays
- all stoppages (bad weather, breakdown of machinery, strikes, industrial disputes, etc.)
Masters record relevant details in the Ship’s Logbook so that can be cross-checked to avoid any disputes. The Port Agent should complete the Statement of Facts (SOF) in time to get the master to check, sign and stamp the Statement of Facts (SOF). Port Agents must never omit important details in the Statement of Facts (SOF). Port Agents could find themselves in a difficult position if it was proved that vital details were omitted from the Statement of Facts (SOF). Port Agent’s omission of critical details in the Statement of Facts (SOF) could be costly to a shipowner who would seek recompense from the negligent agent. If the negligent agent enters erroneous records in the Statement of Facts (SOF) regardless of whether erroneous records are deliberately intended to mislead or simply erroneous through negligence, the shipowner would seek recompense from the negligent agent. As the name indicates, it has to be the Statement of Facts (SOF).
The port agent should know how the information in the Statement of Facts (SOF) is to be utilized. For instance, the charter party may stipulate that the laytime should be reversible, which means is that time saved at the loading port is credited to the discharging port time. The charter party may stipulate “Total 3 Days All Purposes” if the cargo is loaded in 1 day, which would leave the discharging port with 2 days to complete the discharging operation. If the ship uses more than the total time at the loading port and goes on to demurrage, the Statement of Facts (SOF) becomes important evidence. Many charter parties give the shipowner a lien, which is a legal right to hold the cargo as security against payment of demurrage. If there has been demurrage incurred at the loading port, the shipowner may completely refuse to begin discharge until that demurrage payment is received. Alternatively, the shipowner may ask the agent to find a storage place ashore where the cargo can remain until payment is settled.
Some charter parties stipulate so many tonnes per hatch rather than a fixed total number of hours or total tonnes per day. For example, a charter party clause may state that the rate of loading is to be “300 tonnes per workable hatch per day”. Shipowners, charterers, and shipbrokers should be careful because insignificant changes in the wording can make a significant difference to the outcome. When it is known that a per hatch clause is operating, the port agent should record in the Statement of Facts (SOF) accurately when each hatch is completed.
When Port Agent is recording the Statement of Facts (SOF), remarkable care must be applied with any laytime stoppages of cargo operations, particularly if laytime stoppages are caused by external factors such as bad weather, strikes which is reasonably straightforward. However, other laytime stoppages might give grounds for disputes between the shipowner and the charterer. Therefore, accurate recording of the facts by port agents is important.
If the ship’s cranes are used for loading and discharging operations, instead of shore cranes, and a fault develops in one of them, then the time that unit is out of action has to be recorded so that the principals can agree that the stoppage is not to be counted as laytime and that time in port will be prolonged.
If the shore cranes are used for loading and discharging operations, the situation might be complicated:
- shore cranes owned by the shipper or receiver
- shore cranes owned by an independent terminal operator
If the shore cranes belong to the shipper or receiver, the charterer can hardly claim an extension of laytime because of their broken shore cranes. Frequently, the shore cranes are owned by an independent terminal operator so that under some charter party forms, a breakdown of the shore cranes is beyond the control of the charterers, so an extension of laytime can legitimately be claimed.
The Port Agent must not only record laytime stoppages precisely but must be quite certain that the reason given is based only on the facts. The ship’s master may have limited information about the port’s infrastructure. So, the ship’s master must be supported by the local expertise of the port agent. If the Port Agent wants to preserve their international reputation, the Port Agent must inform the facts.