When the employment of the ship has been decided, Ship Operations Department acts not only as the link between the ship and the shipowners but also between the ship’s charterers and other cargo interests. Ship Operations Department has four (4) principal duties:
1- Ship Operations Department ensures that the Master knows and understands precisely what is anticipated of him and his ship
2- Ship Operations Department observes the voyage, with the view of minimizing the costs and maximizing the revenue
3- Ship Operations Department lookout for possible obstacles and disputes and to try to resolve them before they get out of hand
4- Ship Operations Department act as a clearinghouse for information within the ship manager’s offices so that everyone comprehends all they oblige to know about what the ship is doing, to be able to do their tasks
After the ship is chartered out for a business, here below details should be passed to the Ship Operations Department by the shipowners or by their chartering shipbrokers:
1- Cargo size and cargo details
2- Loading and Discharging Ports. Port restrictions, if any.
3- NOR (Notices of Readiness) that are required to be given to the Charterers, Shippers, Consignees, Agents
4- Any special instructions that need to be given to the ship’s command about the cargo
Furthermore, this information must be relayed to the ship’s Master without delay. Ship Operations Department should receive a copy of the charter-party so that comprehensive details of what has been agreed can be examined. Ship Operations Department should notify the relevant items to the Master.
Ship Operations Department contact with the agents at the loading port. Agents should be asked to provide:
1- Pro-forma Disbursement Account (DA)
2- Confirmation of any restrictions at the port or berth which may affect the ship
3- Information as to probable berthing and loading prospects
4- Supplementary important information
The Ship Operations Department should have contacted the agents while the ship is under negotiation, however this is not always possible. Concurrently, the Ship Operations Department should liaise with the relevant departments within the ship management company to ensure that:
1- The crew members’ mails and cargoes are despatched to the ship
2- Spare parts ordered and awaiting despatch are transferred to the ship
3- Crew changes are organized thoroughly in advance.
4- Arrangements for classification surveys and renewal of certificates are made if required and appropriate
5- Stores and lubricants are transferred to the ship
6- CTM (Cash to Master) is arranged in advance. Customarily, crew members draw part of the salaries in the currency of the country at which the ship is calling so that they have cash to spend onshore.
When the ship arrives at the loading port the Ship Operations Department keep in close touch with the agents to ensure that:
1- NOR (Notice of Readiness) has been tendered and accepted
2- Loading operations are proceeding as quickly as possible
3- Ship Master’s requirements are expeditiously met and any spares are delivered on board the ship
4- An appropriate sum has been remitted to the port agents to cover the disbursements and CTM (Cash to Master)
5- Port agents understand and will comply with any instructions which the Shipowner and Ship Manager might have concerning Bills of Lading (B/L)
When the ship is sailed, the Ship Operations Department will repeat all these procedures for the discharging port operations.
In the case of a time charter (TC), the procedures will differ inconsiderably from those for a voyage charter (VC) specified above. The Time Charterers will be issuing voyage instructions to the ship so that it is most important to ensure that the Ship Master is advised who those Time Charterers are, including the details of any manager or agent who is authorized to issue instructions on their behalf. The Ship Master must also be informed of the length of the period and the intended trade. Usually, shipowners prohibit certain cargoes such as dangerous and dirty cargoes, and certain politically or geographically hostile areas. The Ship Master needs to know about these to respond punctually if the Ship Master receives contrary orders from the Time Charterers. The most crucial information will be the place of and arrangements that have been agreed for the delivery of the ship to the Time Charterers together with the name of the agents who will represent the shipowners at the time of that delivery.
Ship Voyage Planning
Ship Operations Department plans the movement of the ship from the loading port to the discharging port. This plan can be divided into two (2) parts:
1- Ship Bunkering
2- Ship Routing
1- Ship Bunkering
Today, most ships run their Main Engines (ME) using VLSFO (Very Low Sulfur Fuel Oil) for normal running. Normally, Auxiliary Engines (AE) operate separately from the Main Engine (ME). Mostly, Auxiliary Engines use MGO (Marine Gas Oil). MGO (Marine Gas Oil) may also be used in older Main Engines (ME) for starting and warm-up or when maneuvering. When the ship is in port the main engines are shut down so that the consumption of fuel used reduces but most of the Auxiliary Engines (AE) have to run all the time so there is still MGO (Marine Gas Oil) consumption. If the ship is using its onboard cranes to load/discharge the cargo, there will be a higher MGO (Marine Gas Oil) consumption to supply the extra electricity required. Fuel for the ship’s Main Engines (ME) and Auxiliary Engines (AE) is still referred to as BUNKERS. Bunker is a phrase dating back to the earliest days of steamships when coal for the engine was stowed in compartments called Bunkers. From that came Bunker-Coal which was shortened to Bunkers and the name remained to be used when ships changed from burning coal to burning oil under their boilers and so on to this day. Although the oil is now consumed in an internal combustion engine, the name Bunkers is still convenient and unambiguous jargon. Old phrases in shipping die-hard for instance, when a person considers how rare steamships now are but shipping market professionals still refer to a ship’s progress at sea as STEAMING and the act of leaving port as SAILING. Ship Bunkering cause delay to the ship and require extra port expenses unless bunkering is performed concurrently with loading or discharging operation. The ship might deviate from her course to approach the bunkering port and a pilot may have to be taken. If bunkering is an anchorage, the bunker barge has to be awaited. If bunkering is at a jetty, the ship has to be securely moored before hoses can be connected. Moreover, bunker quantity should be checked before and after bunkering by sounding the tanks. Even at an efficient bunkering port where the fuel itself can be pumped very fast, a bunkering call sometimes takes around 12 hours. Therefore, great attention should be paid to the ship bunkering as it may make quite a difference to the voyage with prudent bunker buying. The price of bunkers fluctuates significantly throughout the world and a balance has to be made between the quantity of bunker and the quantity of cargo lifted.
Ship Bunkering Example
40,000 DWT Bulk Carrier. Constants 350 tonnes. Freshwater 100 tonnes.
Consumption 24 tonnes VLSFO (Very Low Sulfur Fuel Oil) plus 2 tonnes MGO (Marine Gas Oil) per day. At the start of the voyage at loading Port A, the ship has Bunkers ROB (Remaining on Board) of 400 tonnes VLSFO (Very Low Sulfur Fuel Oil) and 90 tonnes MGO (Marine Gas Oil). Bunkers are available at Port L. At discharge Port D, no bunkers are available at reasonable commercial prices. Port N, for loading the next cargo, where bunkers are available at commercial prices, is 14 days steaming away.
On the voyage from Port L to Port D, the ship passes Port B where bunkers are cheap but Calling Charges are $4,000, and Delay Costs $6,000.
At Loading Port L $550 VLSFO $600 MGO
At Bunkering Port B $520 VLSFO $560 MGO
Shop Voyage Time:
Loading Operation 3 days
Steaming Port L to Port B 15 days
Steaming Port B to Port D 10 days
Discharging Operation 20 days (Shore Gear)
Steaming Port D to Port N 14 days
Ship Manager has two (2) options:
Option 1: Bunkering at loading Port L
VLSFO bunkers needed:
Steaming 15 + 10 + 14 days = 39 days
Plus Safety Margin 6 days = 45 days
45 days x 24 tonnes per day = 1080 tonnes
Less bunkers on board =400 tonnes
680 tonnes VLSFO
MGO bunkers needed:
Steaming 39 days + Port Time 23 days = 62 days
Plus Safety Margin 6 days = 68 days
68 days x 2 tonnes per day= 136 tonnes
Less bunkers on board=90 tonnes
46 tonnes MGO
Cost of bunkering at Port L
VLSFO 680t x $550= $374,000
MGO 46t x $600= $27,600
Total Cost= $401,600
Cargo Uplift Calculations:
Ship 40,000 tonnes DWT
Less Constants 350 tonnes
Less Freshwater 100 tonnes
Less VLSFO 1,080 tonnes
Less MGO 136 tonnes
DWCC available 38,334 tonnes
Option 1: Bunkering at Port B
Bunkers are used to get from Port L to Port B so:
On arrival at Port B the ship will have:
VLSFO ROB (Remaining On Board) at Port L 400 tonnes
Less used (15 days X 24 tonnes per day) 360 tonnes
VLSFO ROB (Remaining On Board) at Port B 40 tonnes
MGO ROB (Remaining On Board) at Port L 90 tonnes
Less used (18days X 2 tonnes per day) 36 tonnes
MGO ROB (Remaining On Board) at Port B 54 tonnes
Assume these to be sufficient quantities to give an adequate Safety Margin for the voyage Port L to Port B.
Bunkers required to complete the voyage Port B to Port D and on to Port N:
VLSFO (Very Low Sulfur Fuel Oil):
Steaming 10 + 14 days = 24 days + Safety Margin 3 days = 27 days
27 days x 24 tonnes per day 648 tonnes
Less VLSFO ROB (Remaining On Board) 40 tonnes
VLSFO 608 tonnes
MGO (Marine Gas Oil):
Steaming 24 days + Port time 20 days = 44 days
Plus Safety Margin 3 days = 47 days
47 days x 2 tonnes per day = 94 tonnes
Less MGO ROB (Remaining On Board) 54 tonnes
MGO 40 tonnes
Cost of bunkering at Port B
VLSFO 608 tonnes x $520=$316,160
MGO 40 tonnes x $560= $22,400
Sub Total= $338,560
Calling Charges= $4,000
Cargo Uplift Calculations:
Ship 40,000 tonnes DWT
Less Constants 350 tonnes
Less Freshwater 100 tonnes
Less VLSFO 608 tonnes
Less MGO 40 tonnes
DWCC available 38,902 tonnes
Bunker weights are taken as those on board at the time of sailing from Port B because this will be when the ship will have the maximum quantities on board. Therefore, it can be seen by bunkering at Port B the shipowner not only saves $53,040 on the bunkers but also increases the DWCC of the ship by 568 tonnes.
These laborious calculations are the only way to set the best bunkering policy. However, there are many voyages when these bunkering estimates would be inappropriate, for example when the ship passes no main bunkering port or where substantial deviation is required to reach one. Nevertheless, bunkering estimates are well worth doing if the ship’s voyage will take her past one of the main bunkering ports such as Rotterdam, Las Palmas, Cape Town, Jeddah, Singapore, New Orleans, Los Angeles
The bunker market is highly volatile due to supply and demand. Not only do bunker prices vary from port to port but also prices from different suppliers within a port differ. A ship manager will have to keep a watchful eye on the worldwide bunker market which comprises three (3) factors:
A- Bunker Cost
B- Bunker Availability
C- Bunker Quantity
A- Bunker Cost: Bunker Cost has been constantly changing, and to keep track of these changes the Ship Operations Department has to check constantly with all the major bunker suppliers. This process is a time-consuming one, and if the ship manager does not buy large bunkers throughout the year, the ship manager might well find it more convenient to employ one of the specialist bunker brokers. A ship manager should always bear in mind that the large oil companies do not necessarily offer the cheapest bunkers. Small independent bunker suppliers might offer more competitive bunker prices.
B- Bunker Availability: unusual bunker delays might occur from time to time at major bunkering ports. These delays can be caused by several factors such as extraordinarily heavy demand, breakdown of one or more of the bunkering barges, or shortage of bunkers. Ship managers should keep an eye on potential delays as any lengthening of the bunkering operation could make bunkering at that particular port uneconomic.
C- Bunker Quality: concertedly with the cost of bunkers goes the quality. Regrettably, today with the increasing sophistication of the refining of petroleum products, the residual oil, which is the main basis of bunker, is becoming poorer in quality. Substandard quality not only means the likelihood of a higher consumption but also might cause engine breakdowns. Therefore, ship managers should pay attention to the specification of the bunkers and double-check that the bunkers supplied are the same quality as the bunkers ordered. Today, many shipowners are employing the services of an independent quality analysis service such as FOSBAS (Fuel Oil Bunker Analysis and Advisory Service and VFQT (Veritas Fuel Quality Testing). Ship managers should advise the officers in the ship’s engine rooms to be equally quality-conscious because they are the ones on the spot where the bunker supply is made. Especially, the Bunker Quality is critical when a ship is on a Time Charter (TC). Under Time Charter (TC), the supply of bunkers becomes the Time Charterer’s responsibility and so the ship manager loses direct control over Bunker Quality. Time Charterers are eager to keep costs to the minimum and Time Charterers are not directly concerned with the long-term condition of the engines.
2- Ship Routing
The world is sphere-shaped and therefore the ship has to travel around the surface of the sphere, following a course, a Great Circle, which on an ordinary chart using the Mercator Projection would show as a curve. Furthermore, this has to be added the effect of tides, currents, prevailing winds, and the occasional storm. Both tides and currents can have important effects on a ship’s performance. Ship Master plans the ship voyage so that he can take the full benefit of tides and currents, even to the extent of deviating from what would seem to be the normal course. A ship may spend several days hitting into an opposite current moving at a similar speed. A storm may strongly affect a ship’s performance not only forcing it to slow down, even to the point of zero progress, but also increasing the risk of damage to the ship and the cargo. if possible, a shipmaster alters the ship course in advance to avoid sailing too close to a storm. To assist the shipmaster in planning the ship voyage to take maximum benefit from tides and currents while at the same time avoiding areas of seriously adverse weather, there are now several Weather Routing Services. Weather Routing Services are specialist companies, staffed with experts in meteorology and navigation. Weather Routing Services’ experts have a continuous stream of weather information being fed into computer systems. If ship managers decide to enroll the ship with Weather Routing Service for a particular voyage, the shipmaster provides the details of the planned voyage, and Weather Routing Service returns with their recommended best route. As the voyage proceeds, the shipmaster frequently reports to the Weather Routing Service and informs the ship’s position and the weather. This information, consolidated with related reports from other ships in the region, allows the Weather Routing Service to revise their advice. The Weather Routing Service’s recommended route might be longer in miles than a direct route but in terms of time taken, fuel consumed and damage avoided, the Weather Routing Service’s recommendations should always prove preferable. Weather Routing Service has the advantage of having available far more weather information supported by satellite observations. Nowadays, Time Charterers insist upon the ship for enrolling with a Weather Routing Service for every voyage. Weather Routing Service provides an objective control if the shipmaster the most expeditious course. One benefit of Weather Routing Service to both shipowners and time charterers is that it provides independent evidence if there are arguments about speed and consumption which are normally based on fair weather. Moreover, ship managers should ensure that they have a solid knowledge of fundamental climatology. For instance, ice obstructs the Great Lakes and the St. Lawrence Seaway during winter months, and a close watch has to be kept on a ship’s position if the ship is steaming to such regions late in the season. Legal arguments as to whether a ship is off-hire or on-hire while trapped for several months are futile if the Time Charterers have gone bankrupt in the meantime. Ice also closes many ports in the Baltic Sea, Alaska. Hudson Bay is closed for a longer time than it is open. Frequently, winter weather can be dangerous in the North Atlantic where storms might cause severe delays or hull damage. Furthermore, there are a variety of storms in tropical areas. Monsoon gales and torrential rains around the Indian sub-continent in June, July, and August might severely interrupt cargo operations. The cyclonic storms are known as Hurricanes in the Caribbean area (between August and October), and in the South Pacific (between December and March). Typhoons in the Far East any time between May and January but more likely between July and October. In the southern Indian Ocean, such storms are simply called by their meteorological name Cyclones, which are at their worst between November and May and some catastrophic wave formations occasionally result off the coast of Southern Africa. Off the west coast of Australia, the Cyclones (Willy-willies) are at their most severe between January and March.
Ship Hire and Freight
Ship Operations Department ensures that all hire and freight are collected and receipts are issued on time per the terms of the charter-party.
Ship Hire: is the income derived from a Time Charterer. Ship Hire is customarily paid every 15 days, in advance. Time Charterers may make numerous deductions from the Ship Hire, all of which must be stipulated in the charter-party. Ship Hire deductions include:
A- Commissions due to the shipbrokers
B- Amounts paid by the charterers to cover shipowners’ expenses at the ports
Customarily, the first hire payment the charterers add the amount of the Bunkers Remaining on Board (ROB) at the time of delivery of the ship. From the last hire payment, the charterers subtract the amount of the Bunkers Remaining on Board (ROB) on redelivery. Ship Operations Department confirms that the agents at the port of delivery arrange for a Bunker Surveyor to perform a careful check on the quantity and quality of bunkers on board at that time. Bunker Surveyor must be approved by both shipowners and charterers, otherwise there would have to be two Bunker Surveyors. One Bunker Surveyor represents shipowners, and one Bunker Surveyor represents charterers. Two Bunker Surveyors must reach an agreement on the quantity and quality of the bunkers. The same procedure has to be performed at the time of redelivery.
Time Charters stipulate that the ship has to be redelivered in the same good order and condition, fair wear and tear excepted, as the ship was at the time of delivery. At ship delivery, and more importantly, at ship redelivery, the status of those parts of their ship over which the time charterers have had control needs to be recorded such as damage caused by grabs are of critical importance. After redelivery, final accounts will be drawn up and settlement made. The ship manager ensures that any balance in the shipowner’s favor is settled by charterers without any delay.
When drafting up a Ship Management agreement, a precise conclusion has to be reached as to whose job it is to Vet Time Charterers (Vetting).
There are infrequent occasions when a Time Charterer will concede an expressly attractive rate during negotiations, take the ship on charter, pay the first hires with flawless promptness, load the ship with a full cargo and issue Freight Paid Bills of Lading (B/L), get the freight from charterers and disappear. No matter how unfair it may appear, the ship is obliged to transport such cargo to its destination without any recourse to the cargo owners and so the venture will be at a considerable loss to the shipowners. There is no straightforward answer to this problem, skilled and experienced chartering shipbrokers are all about to overcome and assist shipowners in the shipping market.
Freight is the income received from a voyage charter or liner services. Freight is paid for the carriage of a quantity of cargo from one port to another. On the other hand, Time Charter Hire is an agreed sum for the use of the entire ship and is based upon the period of employment. Customarily, freight rates are expressed as so many dollars per ton of actual cargo carried. The exception is in the case of a Lump Sum Freight, where an agreed amount is paid in exchange for allowing the charterer to load as much as the charterer requests within the limits of the ship’s cubic capacity and DWCC (Deadweight Cargo Carrying Capacity).
Liner Freights are distinctly complex because the ship carries many hundreds or even thousands of unique consignments during the voyage.
Customarily, Liner Freight is charged on each container carried, and while there has been considerable simplification in Liner Tariffs in recent years.
In liner shipping, there are various freight rates according to the nature of the cargo carried often linked with special contract arrangements with regular shippers. Container services add further complications in that the agreement with the shipper or consignee may or may not include a door-to-door element which can mean the line becoming involved in inland rail or road haulage. Generally, liner trade ships are managed by an in-house ship management department that has a separate division dedicated to controlling the calculation and collection of liner freights.
Ship Operations Department has an indispensable role in Tramp Shipping. The importance of understanding when and where freight is to be reimbursed and controlling that charterers comply with the charter-party, cannot be overstated.
In Tramp Shipping, when the freight will become payable is stipulated in the charter-party:
A- Freight Fully Prepaid on or within a specified number of days of signing Bills of Lading (B/L)
B- Freight Proportionally Prepaid (customarily 90% or 95%) within a specified number of days of signing Bills of Lading (B/L)
C- Freight Paid BBB (Before Breaking Bulk i.e. before the commencement of discharge)
D- Freight Paid on right and true delivery
Any balances are settled with the demurrage and despatch.
If the charterers fail to load the full amount of cargo that is agreed under the charter-party, Deadfreight arises. Deadfreight is the agreed freight on the missing tonnage less any expenses which the shipowner would otherwise have had to pay on that quantity. Expenses such as stevedoring (if stevedoring is on the shipowner’s account) or port costs (if port costs are levied on cargo quantity).
Calculating Demurrage and Despatch
In Voyage Charters, the charterers are given a specific time (Laytime) to complete loading and discharging operations. Laytime is fully negotiable by charterers and shipowners. Laytime can either be expressed as a certain number of days or an undertaking to load and discharge at the rate of so many tons per day. If the charterers’ cargo operations take longer than the given laytime, then the shipowners receive Liquidated Damages in the form of Demurrage at a negotiated sum per day. Shipowners seek to have a daily rate of demurrage somewhat greater than the daily running cost of their ship to reflect the damages concept. However, when the opposite happens and the charterers complete the cargo operations in a shorter time than allowed for by the Laytime then, in most dry-cargo charter-parties, charterers receive a reward in the form of Despatch at an agreed sum which is usually half the demurrage rate for every day saved or pro-rata. Despatch is hardly, if ever, included in tanker charter-parties. Numerous disputes arise between shipowners and charterers in calculating the Laytime used and consequently the amount of Demurrage or Despatch payable. These disputes can start with the first arrival of the ship, that is the point when the ship is an Arrived Ship. However, many disputes may continue throughout the cargo working because of delays from weather, holidays, breakdowns etc. Laytime Clauses in the charter-party must be as unambiguous as possible. Loading Port Agent and Discharging Ports Agent must be instructed about tendering Notice of Readiness (NOR). Loading Port Agent and Discharging Ports Agent must inform the ship managers as soon as they have performed so that the ship manager can monitor this important factor in the time counting scenario. The Notice of Readiness (NOR) must always be in writing. Charter-party stipulate what the ship has to do before the ship can be an Arrived Ship. There may be requirements about the ships’ geographic position within the port or at the berth and where the latter are not available that the ship is in the nearest place that the ship can safely get’ In some charter-parties, such as grain charter-parties, a stringent level of cleanliness is required before the ship can claim to be ready to load. Until these requirements are satisfied the charterers may refuse to accept the Notice of Readiness (NOR). Ship Master and Ship Agent should never delay presenting Notice of Readiness (NOR) because of any dispute about Notice of Readiness (NOR) validity. The simple rule is when in doubt present the Notice of Readiness (NOR). If Notice of Readiness (NOR) is not accepted or disputed the Notice of Readiness (NOR) can continue to be represented. The legal authorities can fight about whether the timing of the Notice of Readiness (NOR) was correct but if the Notice of Readiness (NOR) presentation was delayed, then so much of the argument is lost. Notice of Readiness (NOR) defines at what point the time starts to count i.e. when the meter starts ticking.
What is Turn Time (TT)?
Charter-party may have numerous elements of excepted time such as Turn Time (TT) which states that time will not commence to count until a period of some hours has elapsed after the presentation of the Notice of Readiness (NOR). Turn Time (TT) dates back to the days when the first intimation the charterers had of the arrival of the ship was when her signal flags became visible through a telescope and time was needed to arrange the berth, labor etc. Turn Time (TT) may be deemed to be an anachronism today when radio enables a ship’s time of arrival to be estimated within minutes, however, traditional notions die hard in shipping.
What are SHEX and SHINC?
Charter-party may be negotiated based on SHEX (Sundays and Holidays Excepted), or SHINC (Sundays and Holidays Included). SHINC (Sundays and Holidays Included) is more common at ultra-modern bulk terminals. A SHEX (Sundays and Holidays Excepted) clause may be modified by the words Unless Used (UU) and a time counting clause may or may not agree to time counting sooner if work commences before the Turn Time (TT) has expired. Most Notice of Readiness (NOR) clauses require that notice be given in-office hours but the charterers could well start work say, on Friday evening, work right through the weekend, and have completed before Notice of Readiness (NOR) can even be tendered. In Muslim countries F (Friday) is added on charter-parties, FHEX (Fridays and Holidays Excepted), or FHINC (Fridays and Holidays Included).
In some cases, the ship is ready but the charterer’s berth is not available and one will begin to see that the whole subject of demurrage and despatch is a minefield. Time spent in analyzing charter-party clauses relating to all aspects of time counting will never be time wasted. There are various essentials about time counting which are dealt with during negotiations including:
WIPON (Whether In Port or Not)
WIBON (Whether in Berth or Not)
WIFPON (Whether in Free Pratique or Not)
The phrase Free Pratique dates back to the days when serious diseases, epidemics transferred around the world in ships. Still, in some ports, a ship is commanded to fly a yellow signal flag on arrival; boarding a ship showing that flag being forbidden until the Port Health Authorities had been on board and granted a clean bill of health, at which time the ship would be declared to be In Free Pratique. Nowadays, in most ports, the ship is questioned by VHF radio about any obvious diseases on board and so long as there is none and the ship has not arrived from somewhere where some virulent disease is widespread, the ship will be granted Free Pratique by radio. However, granting Free Pratique by radio is not yet universal and the port agent’s information is important.
Customarily, the Port Agent is instructed to provide a Statement of Facts (SOF) in which the date and time of every stage of the cargo operation is recorded. Not only such information as when the ship arrived, when the Notice of Readiness (NOR) was tendered, when loading or discharge actually commenced, which days were public holidays, etc. but Statement of Facts (SOF) also record such things as stoppages due to bad weather, breakdown of machinery, industrial disputes, etc.
Ship Master records similar details in the ship’s log as a cross-check with Statement of Facts (SOF). Theoretically, the agent would get the Statement of Facts (SOF) is countersigned by the Ship Master and the Superintendent of the loading or discharging berth. Whether this is accomplished or not, it is from the Statement of Facts (SOF) that the Ship Manager produces the Time Sheet which demonstrates the amount of demurrage or despatch due to be paid. In calculating a Time Sheet, the Ship Manager or Shipbroker go through the Statement of Facts (SOF) in conjunction with the charter-party clauses and as each fact is set down the time worked is shown in one column and the amount of time which will count as Laytime Used in a separate column. A running total of Laytime Used should be kept because the method of calculation changes when the time allowed is used up and the ship goes on demurrage. The expression “Once on Demurrage, Always on Demurrage” means that no matter what times are excepted from normal Laytime such as Sundays, holidays, stoppages due to bad weather, etc. no time is excepted once the allowed time is used up. This means that the Time Sheet presents when the laytime expired and from that point on, every minute of every day until the loading or discharging operation is finished counts for demurrage regardless of whether they are holidays, rainy days, or even when the port is out on strike.
Calculating Despatch is slightly different depending upon the expression of the charter-party. Usually, the charter-party stipulates that “Despatch on Laytime (or Working Time) Saved” which means that all the excepted periods for calculating laytime will apply when calculating time saved. For instance, if the charterers completed loading or discharging operation on Friday evening but the time allowed did not expire until midday Tuesday under a SHEX (Sundays and Holidays Excepted) charter, then the shipowners would pay the charterers a day and a half’s despatch. Shipowners consider this fair and just on the basis that the calculation of time saved should be the same as for the time used. Infrequently, however, the charterers succeed in negotiating “Despatch on All-Time Saved”, claiming that the ship has been saved the time and what is good for demurrage is good for despatch. Regardless of the advantages of the two cases, if Despatch is on All-Time then all the time from completion to when laytime expires will count for Despatch.
The chartering shipbrokers involved in the negotiation of the charter will be rewarded by a commission or brokerage. Ordinarily, shipbrokers’ commission or brokerage is at the rate of 1.25% to each shipbroker. There may be more than one or two shipbrokers, or a chain of shipbrokers may be involved if the origin of the business is very remote from the shipowner’s location. Shipbrokers’ Commission is payable under a Time Charter on the Total Hire paid and under a Voyage Charter, on the Gross Freight. In Voyage Charter-parties, the Shipbrokers’ Commission Clause show it to be payable on Freight, Deadfreight, and Demurrage. Shipbrokers’ Commissions are never payable on Despatch.
Address Commission (ADDCOM)
In shipping businesses, another common deduction is Address Commission (ADDCOM). Generally, Address Commission (ADDCOM) is 3.75% and is payable to the charterers themselves, not to a shipbroker and the exact reason for Address Commission (ADDCOM) may be obscure, however traditions die hard in the shipping world. Apart from lingering in a business from tradition, Address Commission (ADDCOM) is often a convenient way for a subsidiary company in an exporting group to receive its share of the income from the trade. Address Commission (ADDCOM) also covers the expenses of the in-house chartering department.
In Lieu of Weighing (ILOW)
In shipping businesses, another deduction one may encounter is not a commission at all, but is an amount, customarily 1%, In Lieu of Weighing (ILOW). Lieu of Weighing (ILOW) expression indicates, the deduction is made because the charterers are willing to pay Freight on the Bill of Lading (B/L) quantity less 1% rather than weigh the cargo at discharging port and pay freight on the outturn weight. The chances of the charterers ever opting to weigh the cargo out are remote in the extreme and this deduction is another example of a shipping tradition that continues without logical reason.
There is always need to be close liaisons between the Chartering Shipbrokers and Ship Managers. In the case of in-house ship-management, those making the commercial decisions and authorizing shipbrokers to negotiate could well be part and parcel of the Ship Operations Department.