A Ship on Time Charter : Here

is All a Seafarer need to know

Written by Capt Rajeev Jassal on April 28, 2019

Most of the seafarers consider shipping business as a

difficult subject.

Not that it is so much difficult. But because it is not

something we deal with day in day out.

We know how much we need to know to get the days to

go on.

And this was perfectly Ok until a few years back.

But now, each minute matters and each hour of off-
hire need explaining.
That makes it so much important for we seafarers to
understand shipping business.

Today in this blog, we will discuss about time

charter and what seafarers need to be aware of when
the vessel is under a time charter.

Ship Charter

Shipowner buys a ship to earn a hire by letting someone

(the shipper) use the space on their ship to carry cargo
from one place to other.

In the ideal world, the shipper has the cargo and should
directly contact a shipowner for transporting their cargo.

In the real world, it is difficult.

Why?

When we need to buy land, it is difficult to find a direct

seller. Same goes for the seller for whom it is difficult to
find a direct buyer.

We approach a property dealer who has a number of

sellers as well as buyers for different properties.
Middleman is required quickly and easily find what we
need.

In the shipping business, that middleman is called

“Charterer”.

Of course, charterer does not just make the shipper

meet shipowners.

In fact, they themselves hire the ship and arranges to

fill the space of the ship with cargoes from one or many
shippers.

And if a shipper manages to find a ship on its own then

the shipper becomes the charterer too.
 Different types of ship chartering

Irrespective of who the charterer is, there are different

ways a ship can be hired.

 The ship can be hired for one voyage

 The ship can be hired for a particular time

 The ship can be owned for a particular time period

Every stakeholder has different responsibilities under
each type of charter. Let us discuss each type of
charter.

Time charter

Under a time charter, the charterer hires the vessel for

a particular period of time.
 The time could be in years, days or months.

The shipowner receives the freight on per day basis

which is settled every month or every quarter.

The time charter can be compared with the hiring a cab

on per hour basis.

In this type of charter…

 The fuel cost is borne by the charterer

 The ship is managed by the shipowner

 The maintenance of the ship is shipowner’s

responsibility

 The crew costs are paid by the shipowner

 Port dues are paid by the charterer

 Agents at ports are appointed by the charterer

Time charter party agreement

Similar to the voyage charter party agreement, for time

charter the shipowner and charterer would have a time
charter party agreement.

In most of the case, this time charter party agreement

would be provided to the ship.
 In the agreement copy provided to the ship, the figures
and data like freight rate, etc may have been deleted to
maintain confidentiality.

Alternatively, the ship may be provided with a different

document which may be called “Charterer’s instructions
to Master”.

The master must read these instructions carefully and

highlight the key instructions for follow up.

At the minimum, the key instructions to look for are…

 The charter party speed as per time charter party

agreement.

 Instructions for notification in case of ship-shore cargo

discrepancy

 percentage of ship-shore cargo figure discrepancy

allowed

 Instructions for notifications in case of an incident

Off-Hires

Under a voyage charter, the vessel has been hired for

the voyage.
The charterer would not be concerned about any delay
because of the vessel as it is the vessel and shipowner
that would lose that time.

Consider the case of hiring an Uber.

If you have hired the cab at a pre-agreed rate, you

would not be so much worried about the time the cab
takes to reach the destination.

But what if you have hired the cab on per hour basis?

You do not want the cab to stop in between

unnecessarily.

Same goes for the time charter.

The charterer is paying the shipowner per day basis

(pro-rata) and any delay by the ship is a loss for the
charterer.

This loss of time because of the ship is called “off-hire”.

This is the time for which the vessel is not on hire and
so the name “off-hire”.
 The off-hire time would be for

 any deviation from the original track (For example for a

crew change, picking up stores or for some repairs, etc)

 Any stoppages at sea (For example for machinery

breakdown etc)

 Cargo tanks failed by the cargo surveyor and declared

not fit for loading
Our responsibility as seafarers is to keep the off-hires to
as close as possible to the zero hours.
For any off-hire, the vessel needs to send the off-hire
report which lists the total off-hire time and fuel
consumed during this off-hire time.

Sometimes time charter party agreement may allow

certain hours of off-hour per instance which will not be
charged to the shipowner.

For example, it could be something like this in a time

charter party agreement…

If the owners manage to keep the off-hire time for one

instance to less than 3 hours, this would not count as
off-hire and no reimbursement need to be paid to the
charterers by the shipowner…
For example, if the cargo tanks were failed by the cargo
surveyor and after corrective action by the ship staff if
the tanks were passed within 3 hours then there would
not be any off-hire.

In any case, the master needs to create an off-hire

report for all the off-hires and send it to the
shipowner/ship manager for approval.
Ship managers would then forward (or ask the master o
forward) the off-hire report to the charterers.

Speed of the ship

If you hire a cab on per hour basis, you would not
expect it to move slowly.

If it does, you would end up paying more money as it

would take more time to reach the destination.

Similarly, under time charter, the charterer would want

the ship to run at speed declared by the shipowner or
agreed in the charter party agreement.

It is the master’s responsibility to ensure that the ship

always maintains that speed.

But what if the vessel is experiencing rough weather

and master is not able to maintain the charter party
speed?

The time charter party also have clauses for the

weather conditions.

So say, the vessel is required to maintain 13 knots of

speed when the wind speed is less than BF 6.

If the wind force is 6 or more, the speed for that period

will not count as under-performance of the ship.

This makes it so much important to note down the

weather conditions correctly in the deck log book as well
as in the noon report.
At the end of an agreed period (each voyage, quarter,
half yearly or yearly as agreed in charter party
agreement) the performance of the vessel with respect
to speed will be analyzed.

Fuel
 Under a time charter, the fuel costs are covered and
paid by the charterer.

The fuel supply is arranged by the charterer.

When the ship is delivered to the charter,

charterer/shipowner may carry out fuel oil survey to get
the actual fuel oil onboard at the time of delivery of the
vessel to the charterer.

This would be the fuel that shipowner has delivered to

the charterers at the time of delivery of the ship.

When the charterer hands over the vessel back to the

shipowner, the bunker survey is again carried out.

This will the fuel handed over by the charterer back to

the shipowner.

So let us say that

 Bunkers at the time of delivery were HFO: 400MT and

DO: 100 MT

 Bunkers at the time of re-delivery were HFO: 250MT

and DO: 50 MT

In this case, charterer needs to pay the shipowner for

150MT of HO and 50MT of DO.
It would be another way around if the bunkers at the
time of redelivery are more than the bunker that was
handed over to the charterers at the time of vessel
delivery.

Agents at load port and discharge port

When the vessel is under time charter, the agent at load

port and discharge port would be appointed by the
charterers.

Shipowner or manager would have no role and relation

with the agents.

It is important for the master and ship staff to be aware

of this.

Usually, the agents are there to help ship staff but if the
vessel is on time charter, we need to be more cautious
while handling with an agent.

In a time charter, the loyalty of the agents lie with the

charterer and not with the ship staff or shipowners.

Masters must be aware that as the agent is being paid

by the charterer and not the shipowner, they may not
go out of their way to help the vessel.
 This is particularly important in matters that lie under
the responsibility of the ship staff, shipowners or
managers.

For example, if the ship is detained by the PSC for some

reasons, the agent may not be that enthusiastic to clear
the vessel at the earliest as in this case the vessel will
be off-hired and the agent’s employer (charterer) would
not be loosing on anything.

This may not be the case with some professional

agencies but nevertheless, masters need to be aware of
this.

Cargo under-performance

Under the time charter, the charterer may claim for

under-performance of the vessel and seek
compensation from the shipowner for loss in time.

The under-performance could be

 Delays in starting the cargo operation

 Loading of the cargo at less loading rate

 Discharging of the cargo at less discharge rate

 Stoppages during cargo operations from the ship staff

If the under-performance claim is justified and valid,

then there is not much we can do.

But there would be occasions when it would actually be

the delay from the shore and which is being claimed to
be ship delay.

That makes it important to accurately issue these two

documents

 Statement of facts

 Letter of protest for any delays

Apart from that accurately recording all the timings in

the port log is important to support SOF and letter of
protest.

For tankers, if any restrictions are put by the loading

master on the vessel’s capability to load or discharge, a
protest must be issued on this.

The restriction could be

 to maintain manifold pressure lesser than the vessel is

capable to maintain
 to discharge (or load) at a rate lesser than vessel can
load

 shore provided a number of hoses lesser than vessel

can connect

The letter of protest would help the ship staff and

shipowner to prove that vessel under-performed
because of the shore side restrictions.

The time charter agreement (or the instructions to

master) provided onboard may have the minimum
loading or discharge rate vessel need to maintain.

This could be something like

Owners warrants that vessel can discharge at a rate of

500 m3/Hr and maintain 7 bars at the manifold in all
conditions…
While the vessel needs to make sure that they comply
with this but they must not over-rely on these
instructions.

For example, at a discharge port vessel achieved

discharge rate of 800 m3/Hr.

This does not mean that there is no need to issue a

letter of protest for any restrictions from the shore side.
 Unclear, unreasonable and unsafe
instructions

While on time charter, the charterer may ask the master

to perform some tasks which may be unsafe or is not as
per the industry guidelines.

I will list here two of such instructions that I personally

came across.

 Charterers asked to load a heated cargo adjacent to a

cargo which is heat sensitive.

 Charterers asked to keep the original bill of lading on

board during the voyage from load port to discharge
port

You may come across other such requests. The master

needs to decline these requests.

If at all required, Master need to oblige to the requests

only when

 The charterer has provided a “letter of indemnity (LOI)”

to the ship owners or managers

 Instructions have been received from the shipowner or

manager to oblige the request
 It is safe to do so

Conclusion

From a commercial point of view, it is Master and ship

staff’s moral responsibility to ensure that shipowner
profits from owning and running the ships.

But there are no hard and fast written rules that hold
good in all situations.

This is particularly the case when a ship is chartered in

different ways.

It is important that we understand our responsibilities

under each charter party.

And it is important that we understand where the

loyalties of each party that we are interacting with lies.