What is Laytime? What is Demurrage? What is Despatch?

What is Laytime?

The amount of time the ship is expected to be in port, mainly for loading and discharging the cargo, is agreed upon, and this is known as Laytime.

 

What is Demurrage?

If the ship is delayed due to the charterers or other causes that could reasonably be said to be the charterer’s responsibility, then the shipowner may be entitled to claim compensation in the form of Demurrage.

Demurrage is payable by the charterer, who is in breach of the charterparty terms and is therefore under an obligation to compensate the shipowner.

Demurrage is the payment of liquidated (pre-arranged) damages for keeping the ship in port for loading or discharging purposes for a longer period than the agreed time.

Demurrage rates are based on the ship’s Daily Running Cost or the Time Charter Equivalent.

 

What is Despatch?

If the loading or discharging operation is completed earlier than expected, the shipowner pays Despatch to the charterer at a daily rate which is usually half the equivalent daily rate for demurrage but this only applies in dry cargo chartering. There is no Despatch in tanker chartering.

 

What is Laytime’s Commercial Purpose?

Laytime is the amount of time which the owner and charterer agree it will take to load and discharge the cargo carried on board the vessel. When negotiating a charterparty, the owner will calculate how much freight they require to compensate them for performing the voyage. A key factor is how long the voyage will take to perform, that is, the approach voyage, loading, the carrying voyage and discharging.

Usually, shipowner usually has no control over the loading and discharging, and therefore the charterer will accept an obligation to load and discharge the cargo within a fixed time called laytime.

Therefore, the commercial purpose of lay time is to compensate the shipowner for the time spent by the charterer loading and discharging the cargo over which the owner has no control. If, for example, the shipowner had calculated his freight on the basis that time spent loading and discharging would take four days, but the charterer in fact spent eleven days, the shipowner would have made no profit, and would have probably made a loss, from the employment of the ship for that voyage.

 

The shipowner always remains the carrier and when the master signs the bills of lading, they are signed on behalf of the shipowner. This means that in the event of any claims for shortages or other discrepancies in the cargo, the shipowner is responsible and not the charterer. The exception to this is when the bill of lading states that certain cargoes are carried, for example, on deck at charterer’s risk.