Laytime Definition and Practices
Thank you for sticking through to Part 3 of the Bulk Ship Chartering Guide. We invite you to look at Part 1 to understand the three main forms of ship chartering, and Part 2 to understand the freight calculation and the factors affecting the ocean freight.
“Laytime”, “Demurrage”, and “Despatch” are often mentioned in the same breath. As they go hand in hand in giving a sense of time to the stage where the vessel cargo is loaded or discharged.
In Part 3 we explore Laytime, Demurrage, and Despatch, along with the calculations behind it, the important documents and certain clauses.
What is Laytime
Laytime is a set time given by the Shipowner to the Charterer in order to load and unload cargoes from the vessel, without the additional demurrage costs.
As we understand more about laytime, we will find that it is not the calculation of the actual days that is controversial, but the agreement to when the laytime should start calculating.
An experienced cargo owner should be able to ascertain the time required to load and discharge the cargo. Although granted that there are elements that are not entirely predictable, the given parameters should be sufficient to make a pretty accurate guess of how long loading/discharging should take.
It is the nitty-gritty that catches the charter party and shipowners off guard.
Time is of the essence, the shipowners are worried about the additional bunker costs for the idle ship and the opportunity cost of missing out of the next voyage charter. On the other hand, the charterer is worried about demurrage charges incurred from exceeding laytime.
Laytime vs Demurrage
As we mentioned previously, “Laytime”, “Demurrage” and “Despatch” are often mentioned in the same breath.
Demurrage in Bulk shipping, on the other hand, refers to the amount of damage paid once the laytime has lapsed.
Despatch is the reverse of Demurrage, whenever the charterparty has successfully finished loading/unloading within the allotted laytime, the shipowner will compensate the charterparty an agreed amount.
Not to be confused with “Laytime”, whereas laytime details the range of days/hours that are allowed to the charterer to load/unload cargo, “Layday” refers to the actual days that are calculated in laytime.
The parameters and definition of layday must be agreed by both parties involved. A “Day” can be defined in so many ways. Here are a few examples
|Working Days (WD)||Normal working days by law|
|Running Days (RD)||Days regardless of working hours or not|
|Weather Working Day (WWD)||A day or part of it that weather permits working|
|Weather Working Day of 24 Consecutive Hour||A day or part of it that 24 hours have lapsed sequentially and weather permits working.|
|Weather Working Day of 24 Hours (WWD)||A day or part of it that 24 hours have lapsed sequentially, regardless of the weather|
|Days all-purpose (DAPS)||Total days for loading/discharging cargo|
Lay/can apportion the right to cancel the charter agreement should the shipowner fail to arrive at a given time.
An example of a Lay/can clause could be worded as such
“Layday Feb 23rd/Cancellation Date March 10th”
This clause also hints that the Notice of Readiness document will be provided by the shipowner within the Lay/Can date. If the Notice of Readiness is prepared after March 10th, the charterer may exercise his right to cancel the charter.
Notice of Readiness
As the name suggests, the shipowner must issue a Notice of Readiness to the charterer, signifying that the vessel is berthed at the agreed location, and is ready for cargo loading/discharging.
But you may question, do we fully trust the notice of readiness?
After all, the shipowners stand to gain by issuing the Notice of Readiness before the vessel is actually ready, in order to start the clock and deducting free laytime.
By definition, the Notice of Readiness should and only be issued if the vessel is “ready in all aspects”. This means that the vessel is not only physically ready but also be legally permitted for loading/discharging cargos.
In Gencon 94’s definition, Notice of Readiness given also with an added grace period, or notice time prior to the actual readiness of the vessel, in order to give the charterer sufficient time to make the necessary arrangements.
The length of notice time given may vary depending on each charter agreement.
This is a document a shipper issues to the importer detailing the cargo value, and also the outstanding amount payable by the importer to the shipper. It also may include important information to arrange cargo transportation such as the INCOTERM.
Bill of Lading
The most common document used in logistics, as this document is used by the Shipper, Importer and the Transport Service Provider.
In the Shipper and importer’s perspective, this is also seen as a document of title. That said, once the importer identifies themself as the importer detailed in the Bill of Lading, the carrier is obligated to transfer the document of title to the said importer.
The appointed vessel operator will issue a receipt after the cargo loaded is accounted for by the tally clerks.
Coincidentally, a mate receipt is used as a reference guide to prepare the Bill of Lading. The Mates receipt is the vessel operator’s document, whereas the Bill of Lading is the shipper’s document
Cargo Manifest has all the details that are covered in the Bill of Lading, the difference is that the cargo manifest is a document used by the customs officer, the stevedores, and the carrier to identify the underlying cargo transported.
Calculation of Laytime
As a rule of thumb, shipowners have to meet several criteria before starting to count the laydays.
The vessel must be within the geographical and legal area of the port in the sense commonly understood by its user.
This means that even though the vessel has not berthed, once the Notice of Readiness has been issued and that the vessel is ready legally and physically to unload/load the cargo.
There are two distinct methods of calculating laytime, which is:-
- By number of days
- By volume loaded/discharged per day
The first method is straight forward, once we know the predetermined definition of Laydays, such as the ones tabled above, it is just simple arithmetics of subtracting the number of days used to load/unload cargo from the amount of laytime given.
The second method requires the calculation of tonnage loaded/discharged. It can either be:-
- Tonnage Calculation: 30,000 metric ton/day
- Hatch Calculation: 200 tons per hatch/day
The hatch mentioned refers to the compartment housing the cargo in a vessel. Dry bulk cargos are stored in hatches.
CD – Customary Despatch, where the charterer has the obligation to clear the ship as fast as possible.
Fast As Can – Under this term, the vessel’s performance of loading/discharging will be the sole responsibility of the shipowner. This is the complete opposite the Customary Despatch (CD) clause
ATUTC – All time used to count, the actual time the loading/discharging starts, which may differ from the laytime starting day
EIU – Even if Used, when loading/discharging is used on days not determined as a layday. I.e. Sundays
FHEX – Friday Holiday Excluded
FHINC – Friday Holiday Included
SATPMSHEX – Saturday Post Meridiem Sundays Holidays Excluded, Saturday after 12 noon, Sundays and Public Holidays are excluded
SHEX – Sunday Holidays Excluded
SHINC- Sunday Holidays Included
DFD – Demurrage/Free Despatch
DHD – Demurrage/Half Despatch – the Daily rate of despatch paid to charterer is half of the rate of demurrage
DDO – Despatch Discharge Only. Despatch is only available in discharging port
DLO – Despatch Loading Only. Despatch is only available in loading port
FD – Free of Despatch. No despatch agreed.
ATSBENDS – All Time Saved on Both Ends. Charterer is eligible for despatch paid in loading and discharging port.
BIMCO – Baltic and International Maritime Council
GENCON – General Purpose Voyage Charterparty
Wait a minute, this cannot be what is advertised as the complete guide to bulk ship chartering!
Yes, granted that there is so much information to cover in bulk ship chartering. We will do our level best to more information in more blog posts to come. Do stay tuned for more information about dry bulk ship chartering.
Shipbroking and Chartering Practice, 8th Edition, Plomaritou and Papadopoulos, 2018