Dry Bulk and Tanker

Shipping, Time Charters,

BLs
Dry Bulk Shipping
• Dry bulk shipping refers to the movement of
significant commodities carried in bulk: – the so-
called major bulks (such as iron ore, coal, grain),
together with ships carrying steel products (coils,
plates and rods), lumber or log and other
commodities classified as the minor bulks.
• Other cargo ships include OBO’s (ore/bulk/ ore
carriers or Combination Carriers), which are vessels
able to trade alternatively dry and wet cargoes.
Dry Bulk Shipping
• The importance of the dry cargo industry is crucial. Without
it, global trade and industry could not exist.
• The international steel industry, for example, could not
function without an efficient and cost effective maritime
industry transporting the raw materials – coal and iron ore,
as well as the means to ship the finished product around
the world.
• At average home, the unseen links with the dry cargo
industry are clearly noticed. Toasting a piece of bread
involves metal components in the toaster – manufacturing
processes using ores and aluminum, grain used in the bread
and coal-generated electricity providing the power.
Tanker Shipping
• All of us will have come across liquid bulk cargoes in
everyday life in one from or another. From gasoline
to fuel our cars, to fruit juices and cooking oil for
consumption in the home, it’s difficult to live the
lives we live today without them.
• These free-flowing liquid cargoes, which also include
crude oil, liquefied natural gas and chemicals, are
not boxed, bagged or hand stowed. Instead, they are
poured into and sucked out of large tank spaces,
known as the holds, of a Parcel Tanker.
Differences between Tanker
Chartering and Bulk Chartering
Charter Party Disputes
• Laytime and Demurrage Claims: 
• Disputes pertain to areas concerning the delay in
loading and discharging of cargo.
• From failures to provide cargo, to incorrect NORs’, the
impact of mechanical faults on-shore or on-board, and
problems discharging.
• Bunker claim: 
• Bunker Contamination claims,
• Dispute as to who is responsible for bunkering (or delays
incurred by bunkering)
Charter Party Disputes
• Off-hire claims: Disputes often arise in relation to
when and whether a vessel is on-hire or off-hire
during a charterparty fixture.
• When a vessel is off-hire, hire is interrupted;
meaning hire is not payable by the charterer.
Therefore, distinguishing when a vessel is off-hire is
important and ultimately the terms of the
charterparty will govern this.
Charter Party Disputes
• Cancellation and termination claims: Charterparties
often have a clause setting out circumstances in
which a charterparty can be cancelled or
terminated, without repercussions. Disputes often
arise due to Incorrect interpretation .
• Cargo claims: Disputes in relation to them come in
all shapes and sizes.
• They arise from issues with the Bill of Lading, liens over
cargo, or involve cargo being damaged, lost, abandoned,
mis-declared, contaminated or otherwise.
Charter Party Disputes
• Hull fouling and damage claims: As vessels pass
through cold and tropical waters and spend time at
anchorage or whilst bunkering, hull fouling can
occur.
• Disputes as to who is responsible for cleaning the
hull, or who should pay for the cleaning, are often
not clear from the charterparty terms.
• Fouled hulls can lead to other issues too, for
example, speed and performance issues.
Charter Party Disputes
• Unsafe Ports: These can be complex cases when a
party alleges the systems in a port are so poor it
makes a port or berth unsafe.
• Dealing with these disputes, often involves an
indemnity issue.
• The terms of a charterparty will govern the way
disputes must be handled, if they cannot be
resolved.
Deductions from freight and hire
• Any deductions from freight should be made only if
there is express agreement in the charterparty, for
example, Address Commission or Brokerage
Commission, Cash to Master etc.
Deductions from freight and hire
• Address Commission is typically dealt with in
charter parties as an agreed deduction from freight,
some charterers argue that the Address
Commission is used to ‘pay for’ their shipping
department therefore there is no industry standard
as to what the level of Address Commission will be.
• In the dry cargo trades we see some as high as 5%
and in the tanker trades frequently 1.25% but
sometimes higher.
Deductions from freight and hire
• In tanker charterparties covering the crude oil and dirty product
trades, where the nature of the cargo is a heavy or sticky liquid
containing sediment such as sand, it is common to include a Cargo
Retention Clause, which gives the right to the charterer to make a
deduction from freight.
• A typical clause would read as follows: In the event that any cargo
remains on board upon completion of discharge, Charterer shall
have the right to deduct from freight an amount equal to FOB port
of loading value of such cargo plus freight due with respect thereto
provided that the volume of cargo remaining on board is liquid,
pumpable and reachable by vessel’s fixed pumps as determined by
an independent surveyor. Any action or lack of action in accordance
with this provision shall be without prejudice to any rights or
obligations of the parties.
Deductions from freight and hire
• A similar clause giving the charterer the right to deduct an
amount from freight on a tanker charter party is the ‘In Transit
Loss Clause’ which is sometimes included in charterers terms.
• An example of the clause is given here: ‘(A) In transit loss not
to exceed 0.5% of the Bill of Lading quantity. In transit loss
shall be calculated as the difference between: (1) The gross
volume calculated as on board at the completion of loading
and (2) The gross volume calculated as on board prior to
commencement of discharge (B) In the event a shortage
exceeding 0.5% is found then charterers have the right to
deduct from freight the value of the quantity in excess of the
0.5%’.
Excepted Period
• Period during which any time used to load or
discharge does not count for the purpose of
calculating demurrage or despatch, other than by
prior agreement (see Unless used). Such periods
must be expressly stated in the Charter-Party and
may include weekends; public holidays and time
used shifting from anchorage to berth.
• It should be noted that, once laytime has expired,
time counts during excepted periods in the
calculation of demurrage.
Time Charters
• The timecharter is an agreement to hire a particular
vessel or vessels for a certain period during which
the timecharterer is responsible for the commercial
operation of the vessel.
• The Charterer arranges for payment of bunkers,
port and canal dues, fixing the cargo and arranges
for requisite voyage orders to be given to the
vessel.
Time Charters – Offhire clause
• Usually specifies that where there is a loss of time
on account of non readiness of the vessel, the
charterers will have the right to put the vessel off-
hire from the commencement of such loss of time
until it is again ready and in an efficient state to
resume service.
• In cases wherein there is a loss of time due to
factors beyond the vessel’s control, the vessel is not
offhire and time to count.
Time Charters – Final Voyage
• When charterers are planning the last voyage for the
vessel, they need to take into consideration where and
when it has to be redelivered under the agreement in
the charter.
• Note that charterers have the continued use of the
vessel only if it is ballasting to redelivery port or is on a
laden voyage, which could incur a subsequent ballast
to a redelivery port.
• Charterers are not entitled to extend the base period
because of off-hire incidents that may have occurred
during the charter unless it is expressly agreed.
Time Charters – Payment of Hire
• Hire can be described as financial payment to the
owners for leasing the manned and equipped vessel to
the charterers.
• Hire shall be paid from the moment the ship is
delivered to the charterers until it has been
redelivered to the owners on termination of the
charter period.
• Charterer pays hire in advance and can only recover
hire in respect of idle time if they can show that time
was lost for one of the causes specified in an off-hire
clause.
Time Charters - Bunkers
• This clause states that charterers shall accept and pay
for the bunkers as on board at the time of delivery and
likewise owners shall accept and pay for bunkers as on
board at time of redelivery at the current market prices
at the relevant ports.
• It is important to bear in mind that supply of bunkers is
the charterers responsibility.
• The Quality is very much a concern of the owners.
• More oftern than not, the charterer only states the
maximum viscosity limit for the bunkers to be suppled.
Time Charters – Performance
clause
• It is to the charterer’s benefit to maximise the
employment of the vessel.
• The sea performance is to be warranted by the
owners in terms of speed and consumption.
• If in service the vessel does not achieve the declared
performance, the charterer needs a redress.
• These performance clauses may include pumping
rates and other aspects of port performance, but the
most significant features are speed and bunker
consumption.
Frustration of Charter Party
• It is an event that significantly changes the nature of the
contractual rights, in a way not contemplated by the parties at
the date of execution, making it unjust to hold the parties to their
contractual obligations.
• It must be something which is not a default of either party and
something for which the contract does not make provision.
• It must be more than pressure from the expense or onerousness
of the contract.
• Common examples of frustration
• the total loss or commercial destruction of the chartered vessel;
• requisition or detention of the ship for an extended period of time;
• the voyage route may have become illegal, impossible or radically
different.
Bill of Lading
• Charterer takes full control of Financial and Legal responsibility
• A bill of lading (referred to as a BOL,or B/L) is a document
issued by a “carrier” to the “consignee”.
• Bill of Lading is a document which acknowledges that specified
goods or cargo have been received on board.
• Bill of Lading will also specify Port of Destination.
• Carrier is normally a ship's master or a company's shipping
department.
• Consignee is the party to which the cargo has been scheduled
to be despatched.
Bill of Lading
• It is a receipt signed by the carrier confirming whether
goods matching the contract description have been received
in good condition (a bill will be described as clean if the
goods have been received on board in apparent good
condition and stowed ready for transport)
• It is also a document of transfer, being freely transferable
but not a negotiable instrument in the legal sense.
• Like a cheque, it may be endorsed affecting ownership of
the goods actually being carried.
• It is separate from any contract for the sale of the goods to
be carried, however it binds the carrier to its terms,
irrespectively of who the actual holder of the B/L, and
owner of the goods, may be at a specific moment.
Types of Bill of Lading
• Straight Bill of Lading
• Order Bill of Lading
• Bearer Bill of Lading
• Surrender Bill of Lading
Straight Bill of Lading
• It is a Non-Negotiable Bill of Lading
• It states that the goods are consigned to a specified
person and it is not negotiable free from existing
equities, i.e. any endorsee acquires no better rights
than those held by the endorsor.
• If the carrier holds a security interest over the
goods for unpaid debts, the endorsee is bound for
the same. Although, if the endorsor wrongfully
failed to disclose, the endorsee will have a right to
claim damages for failing to transfer an
unencumbered title.
Order Bill of Lading
• It is a negotiable bill of lading.
• This bill uses express words to make the bill
negotiable, e.g. it states that delivery is to be
made to the further order of the consignee using
words such as "delivery to A Ltd. or to order or
assigns".
• Consequently, it can be endorsed by A Ltd. or the
right to take delivery can be transferred by physical
delivery of the bill accompanied by adequate
evidence of A Ltd.'s intention to transfer.
Bearer Bill of Lading
• This bill states that delivery shall be made to
whosoever holds the bill.
• Such bill may be created explicitly or it is an order
bill that fails to nominate the consignee whether in
its original form or through an endorsement in
blank.
• A bearer bill can be negotiated by physical delivery.
Surrender Bill of Lading
• Under import documentary credit the bank
releases the documents on receipt from the
negotiating bank but the importer does not pay the
bank until the maturity of the draft under the
relative credit.
• This direct liability is called Surrender Bill of Lading
(SBL), i.e. when we hand over the bill of lading we
surrender title to the goods and our power of sale
over the goods.
Issues on Bill of Lading
• In most cases, bill of lading is not a document of title,
and it simply identifies that a particular individual has
a right to possession at the time when delivery is to be
made.
• Problems arise when goods are found to have been
lost or damaged in transit, or delivery is delayed or
refused.
• Mostly, Consignees would not form part of Contract of
Carriage (Charter party)
• Above can be avoided using ‘Subrogation’ – to give the
consignee the same rights of action held by the
consignor.
Post Fixture activities
• Checking the recapitulation of terms and informing
master,
• Checking voyage orders and informing master,
• Performance monitoring under terms of charter-party,
• Laytime calculations,
• Off-hire calculations,
• Voyage calculation follow-up and demurrage claims,
• Calculate and invoice charters for payment of freight on
behalf of principals,
• Claims handling,
Post Fixture activities
• Assisting owners and brokers with information to
conclude fixtures,
• Appointing agents and handling disbursements,
• Checking pro-forma D/A and arranging advance
payment,
• Checking and settlement of D/A,
• Evaluating and nominating bunker suppliers,
• Keeping track of vessel? ROB and checking figures,
• Checking bunker invoices and remitting in due course.