1. Lesson: Maritime Commercial Management Week: 4 ITU Maritime Faculty
LAYTIME and DEMURRAGE
Lesson: Maritime Commercial Management
Week: 4
ITU Maritime Faculty
CII Institute of Logistics by Prof Anandhi

2. Objectives of the chapter
What is laytime
Starting laytime
- Arrived vessel
- Readiness
- Notice of readiness
Exception to laytime
General exceptions
Demurrage and despatch
Laytime calculations
Charterer’s defences

3. Laytime (GENCON 94)
* (a) Separate laytime for loading and discharging
The cargo shall be loaded within the number of running days/hours as indicated in Box 16, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count. The cargo shall be discharged within the number of running days/hours as indicated in Box 16, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count.

4. Laytime (GENCON 94)
* (b) Total laytime for loading and discharging
The cargo shall be loaded and discharged within the number of total running days/hours as indicated in Box 16, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count.

5. Laytime (GENCON 94)
(c) Commencement of laytime (loading and discharging)
Laytime for loading and discharging shall commence at hours, if notice of readiness is given up to and including hours, and at hours next working day if notice given during office hours after hours. Notice of readiness at loading port to be given to the Shippers named in Box 17 or if not named, to the Charterers or their agents named in Box 18. Notice of readiness at the discharging port to be given to the Receivers or, if not known, to the Charterers or their agents named in Box 19.

6. Laytime (GENCON 94)
(c) Commencement of laytime (loading and discharging)
If the loading/discharging berth is not available on the Vessel's arrival at or off the port of loading/discharging, the Vessel shall be entitled to give notice of readiness within ordinary office hours on arrival there, whether in free pratique or not, whether customs cleared or not. Laytime or time on demurrage shall then count as if she were in berth and in all respects ready for loading/ discharging provided that the Master warrants that she is in fact ready in all respects. Time used in moving from the place of waiting to the loading/ discharging berth shall not count as laytime. If, after inspection, the Vessel is found not to be ready in all respects to load/ discharge time lost after the discovery thereof until the Vessel is again ready to load/discharge shall not count as laytime. Time used before commencement of laytime shall count.
* Indicate alternative (a) or (b) as agreed, in Box 16.

7. Calculation of Laytime
Risk of delay during the sea voyage in voyage chartering normally rests with the owners.
The risk of delay during a vessel’s periods in port for loading and discharging cargo (laytime) can be shared in different ways between the owners and the charterers.

8. Calculation of Laytime- Demurrage
The fundamental idea of calculating laytime is that the charterers have a certain permitted time to use on the loading and / or discharging of the vessel.
If this time is exceeded charterer must pay compensation called demurrage.
Sometimes it is also agreed that the owners will compensate the charterers if the ship is loaded and/or discharged before the agreed time expires, in which case the compensation paid is called “dispatch”.

9. Demurrage
Demurrage at the loading and discharging port is payable by the Charterers at the rate stated in Box 20 in the manner stated in Box 20 per day or pro rata for any part of a day. Demurrage shall fall due day by day and shall be payable upon receipt of the Owners' invoice. In the event the demurrage is not paid in accordance with the above, the Owners shall give the Charterers 96 running hours written notice to rectify the failure. If the demurrage is not paid at the expiration of this time limit and if the vessel is in or at the loading port, the Owners are entitled at any time to terminate the Charter Party and claim damages for any losses caused thereby.

10. Arrived Ship
it is important to be able to establish when the sea voyage is at an end and when the rules applying to the ship’s stay in port come into effect.
The vessel must reach the agreed destination before she can be considered as an arrived ship.

11. Fixture Note
SUBS TO BE LIFTED W/I 24 HRS AFTER FULLY FIXED - LOADING 1 SP 1SB AAAA SPLIT - DISCHARGING 1SP 1SB AAAA ALIAGA - CARGO: ABT 2500MT HMS1/2 STEEL SCRAP, SF ABT 95 WOG NON OILY, NON DANGEROUS, NO HEAVY PIECES, NON RADIOACTIVE, NO TURNINGS. - L/C LOADING 900 SSHEX EIU - DISCHARGING 1250 SSHEX EIU - NON REVERSIBLE LAYTIME - FREIGHT USD FIOS LUMPSUM - 95 PCT PCT OF FRT LESS COMM TO BE PAYED 2(TWO) BANKING DAYS AFTER SIGNING BEFORE RELEASING "CLEAN ON BOARD" B/L MARKED «FREIGHT PAYABLE AS PER CHARTER PARTY», OR «FREIGHT PREPAID» IN CHOPT, IN ANY CASE BBB - FRT PREPAID BSL TO BE KEPT UNDER AGENT CUSTODY TILL OWNERS RECEIPT OF SWIFT COPY AS PROOF OF IRREVOCABLE FREIGHT PAYMENT - 5% BALANCE WITH DESPATCH/DEMURRAGE IF ANY TO BE SETTLED W/I MAX 7 RUNNING DAYS AFTER COMPLETION OF DISCHARGE AND PRESENTATION OF LAYTIME CALCULATION + S.O.F AND N.O.R BY FAX. - CARGO QUANTITY TO BE DETERMINED AS PER DRAFT SURVEY BE, AND OWNERS WILL BE RESPONSIBLE FOR DELIVERED QUANTITY OF CARGO AS DETERMINED BY JOINT DRAFT SURVEY. OWNERS MAY DELEGATE MASTER TO REPRESENT THEM FOR JOINT DRAFT SURVEY BENDS. THE DRAFT SURVEY FIGURE TO BE MENTIONED IN B/L. - CHARTERERS INTENTION IS TO SEND B/L IN SHIP'S BAG - DEMM USD 2500 PDPR/HD BENDS - NOR TO BE TENDERED ON VESSELS BERTHING UNLESS BERTH OCCUPIED WHEN MASTER CAN TENDER NOR ON ARRIVAL TO ROADS BASIS W/W/W/W VIA RADIO/TLX/CABLE W/ I OFFICE HRS ALL ENDS (MON 08-FRI17) AT ALL ENDS - LAYTIME FOR LOADING TO COMMENCE AS PER GENCON 8/14 CLAUSE FOR DISCHARGING SHALL COMMENCE AT HOURS NEXT WORKING DAY IF NOTICE GIVEN DURING OFFICE HOURS. - CARGO TO BE LOADED/ DISCHARGED BY SHORE CRANES AT CHARTERERS ACCT. - TIME FROM FRI 17:00 OR DAY BEFORE HOLIDAY TILL ON MONDAY OR DAY AFTER HOLIDAY NOT TO COUNT BENDS - TIME USED BEFORE COMMENCEMENT OF LAYTIME NOT TO COUNT - ONCE ON DEMURRAGE ALWAYS ON DEMURRAGE - FREIGHT DEEMED EARNED ON SIGNING BS/L DISCOUNTLESS AND NON RETURNABLE SHIP AND/OR CARGO LOST OR NOT LOST. - HOLIDAYS AS PER BIMCO CALENDER 2011 ONLY. - DRAFT SURVEY TIME AND COST TO BE FOR CHARTERERS ACCT - ANY TAXES/DUES ON CARGO/FREIGHT FOR CHARTERERS ACCNT. - ANY TAXES/DUES ON VESSEL (EVEN CALCULATED ON CARGO QUANTITY) FOR OWNERS ACCNT. - FOR DISPUTES WHERE THE TOTAL AMOUNT CLAIMED BY EITHER PARTY DOES NOT EXCEED THE AMOUNT OF USD 10,000.-, THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE SMALL CLAIMS PROCEDURE OF THE LONDON MARITIME ARBITRATORS ASSOCIATION. - CHTRS AGENT BENDS they will name here their agents - OTHERWISE AS PER CHARTRS EXECUTED C/P PROFORMA 3,75% ttl comm.

12. It is more advantageous from the owner’s perspective to have the destination described in general terms (e.g. “said vessel shall proceed to X town”) rather than in more precise terms (e.g. “said vessel shall proceed to berth 2 at the free port of X town”). The first example describes a “port charterparty,” while the second describes a “berth charterparty”. However, it is important to note that it is sometimes difficult to get laytime running under a port charterparty because it is not always clear what is required for the vessel to be considered as arrived.

13. Notices, Notice Time and Readiness
The master gives notice of readiness when the vessel has arrived
The original intent of notice time was to provide the charterers (or the shipper or receiver) with a certain amount of time to arrange for loading or discharging after they had been made aware of the ship’s arrival and readiness

14. Readiness
Readiness includes both physical readiness and legal readiness. Physical readiness means that the vessel will be clean and ready to take the intended cargo on board or to discharge the cargo that is already on board. Legal readiness means that the ship will have completed all the formalities (customs clearance etc.) necessary for the commencement of loading or discharging.

15. Time Allowed
The time allowed for loading and discharging is usually fixed in the charter-party, either by a number of days or hours or by a rate per day.

16. Time Counting and Exceptions
Laytime will actually begin counting when all the prerequisites for it to start running have been met. The principal rule is that once laytime has started to run, it runs seven days per week, 24 hours per day,

17. Demurrage and Despatch
The demurrage rate is the compensation owners are entitled to when loading and/or discharging is not completed before the allowed time expires. The demurrage rate is usually agreed to a certain amount per 24 hours or pro rata.

18. Once on Demurrage, Always on Demurrage
The well-known expression “Once on demurrage, always on demurrage” means that exception clauses do not apply to demurrage unless they are clearly worded so as to have that effect. In most cases, this means that when laytime expires and the vessel is on demurrage, all the time thereafter (24 hours per day, seven days per week) shall count regardless of weather hindrances, holidays, etc.

19. Despatch Money
Despatch is the reverse of demurrage. In other words, it is payment by the owners of compensation to the charterers for loading and/or discharging the vessel in a shorter amount of time than the allowed laytime. Despatch is not used as commonly as demurrage. In cases where the charterer is entitled to dispatch, the rate is often 50 per cent of the demurrage rate.

20. Timesheets
After a fixture has been made and the vessel has commenced performance of the charter, "post-fixture activities" become important. These include liaison between the shipowner and the charterer on various issues but most important, on issues concerning Laytime calculating requires a familiarity with a Timesheet and perhaps also a statement of facts. The purpose of calculating laytime is not only to calculate the time during which the vessel is made available to the charterer for loading and/or discharging but also to calculate demurrage or despatch if there is time lost or saved.

21. Timesheets
Category of laytime - separate calculations for loading and discharging ports or options to the charterer for reversing or averaging laytime; two time sheets may still be required.
Method of calculating laytime - for example, "per workable hatch per day", "Sundays and holidays excepted, unless used" ...

22. Timesheets
Exceptions to laytime - for example, weather working days, Sundays and Holidays excepted and strikes, winch breakdowns ...
Commencement of laytime - the laytime clause in the charterparty will state the notice period (if any) after the valid Notice of Readiness is given. The charterparty clauses stipulating laytime, demurrage and despatch are of extreme importance. Extracts from actual charterparties will be used in the examples, with modifications of quantities and loading and discharging rates in order to round off the calculations as far as possible.

23. Thank you