SHIP TERMINOLOGIES – ORGANIZATIONS &

CHARTERING

By -Kevin JosephMBA (Energy Trading)

CHARTERING

Chartering is an activity within the shipping industry.

The definition of a charterer is a person who reserves a ship or other mode of transportation for the personal use of others.

Depending on the type of ship and the type of charter, normally a standard contract form called a charter party is used to record the exact rate, duration and terms agreed between the shipowner and the charterer.

In case the charterer owns the cargo:

He employs a shipbroker to find a ship to deliver the cargo for a certain price, called freight rate.

Freight rates may be on a per-ton basis over a certain route (e.g. for iron ore between Brazil and China), in Worldscale points (in case of oil tankers) or alternatively may be expressed in terms of a total sum - normally in U.S. dollars - per day for the agreed duration of the charter.

In case of a charterer without a cargo:

He takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate, or even makes a profit in a rising market by re-letting the ship out to other charterers.

SHIP BROKINGShip broking is a financial service, which forms part of the global shipping industry.

Shipbrokers are specialist intermediaries/negotiators (i.e. brokers) between shipowners and charterers who use ships to transport cargo, or between buyers and sellers of ships.

Some brokerage firms have developed into large companies, incorporating departments specialising in various sectors, e.g. • Sale and purchase• Dry cargo broking• Tanker broking• Container broking• Ship broking Training

• The principal shipping and shipbroking centres are London, New York and Singapore.

• Tokyo has a longstanding tradition in shipping/shipbroking, which is now more focused on Japanese domestic trade.

• It was commonplace for shipbrokers to cover more than one discipline, although nowadays the vast majority of shipbrokers specialise.

• The Institute of Chartered Shipbrokers sets educational standards throughout the industry, fellowship of which is considered a great honour.

SHIPPING AGENCY

• A shipping agency or shipping agent is the designation for a person or agency responsible for handling shipments and cargo at ports and harbors worldwide on behalf of shipping companies.

• These agents are referred to as port agents or cargo brokers.

• There are several categories of shipping agents such as: port agents, liner agents and own agencies, each rendering specific services depending on the shipping company they represent.

Roles:

• Shipping agents will quickly and efficiently take care of all the regular routine tasks of a shipping company.

• They ensure that essential supplies, crew transfers, customs documentation and waste declarations are all arranged with the port authorities without delay.

• They also provide the shipping company with updates and reports on activities at the destination port so that shipping companies have up-to-the minute information available to them at all times while goods are in transit.

Responsibilities of shipping agents include:

• ensuring a berth for the incoming ship• arranging for the pilot and the tugs if necessary• drawing up the documents for the customs and harbour

services• assisting the master in making the necessary contacts with the

local authorities and the harbour authorities• arranging for the necessary ship fresh water / provisions• arranging for the necessary doctor for the crew any medical

assistance• arranging for storage bunkers if these are needed• arranging for the necessary repairs• conveying instructions to and from the ship owner• organizing the supply, transport and the handling of the goods• organizing the necessary contacts with the stevedores• collecting freights, cargoes• contacting shippers and the receivers of the goods

In the case of damage to cargo or the ship, the shipping agent also makes the necessary arrangements (at the request of the ship's master or owner) with the insurance company, and for nautical inspections and the services of experts or surveyors, etc.

AAAA - Always Accessible Always Afloat

It is a term in Charter-Party which stipulates that the charterer must not order the ship to a port or berth where she would touch the bottom or perhaps be unavailable at any time due to tidal variations.

ADDCOM - Address CommissionIt is a payment made by vessel owners to charterers;

It is stated in the charter party as a percentage of the amount paid in freight.

Address commission does not require any particular services on the part of the charterers, and amounts therefore to a slight reduction in the freight rate.

The reason for this system is sometimes said to be that the charterer's shipping department for bookkeeping purposes must show some kind of income from their activities

A charter made without provision for address commission is said to be free of address.

COA - Contract of Affreightment

Contract of Affreightment is usually a contract for the carriage of a specified type and quantity of cargo, covering two or several shipments and running over a long period.

In the COA it is the cargo and not the vessel that has a central position.

The vessel owner undertakes to provide cargo-space (at a specified time, and for a specified freight) to the merchant who is liable for payment whether or not the cargo is ready for shipment.

This contract addresses issues associated specifically with a vessel, its crew, and the routes on which it will be plied.

Not Always Afloat But Safe Aground(NAABSA)

Meaning:It is a marine term used to describe berths in tidal waters.

There are areas and ports where water depth is restricted but, the bottom being soft mud, it is customary for ships to safely lie on the bottom.

As the time of the rotation of the moon round the earth is not an exact day, the times of tides vary.

This can be calculated precisely so that almost all the world ports publish tide tables.

Such tables can be of vital interest to shipping because the rise and fall of tides determines how deep the water will be in the port area during the course of the day and so dictates when ships can reach the port and when the water is too shallow to accommodate the ship's draft.

In some ports, the draft is deep enough at high water to allow the ship to enter but when the tide falls the ship goes aground, hence the abbreviation mentioned in the chartering terms NAABSA - Not Always Afloat But Safe Aground.

 

The effect of neap tides can have a serious effect on NAABSA ports because a ship near the upper limit of the permitted draft may enter without difficulty on a reasonably high tide but may become trapped for several days if the neap tide occurs while the ship is at that berth.

Dead Weight All Told(DWAT)

It states the total amount of weight that a ship may carry before it passes the waterline, including the weight of: cargo, water, crew, fuel, food and anything else that is not part of the ship and is not counted in its' light displacement.

Dead weight all told = (Loaded displacement)-(light displacement)

Weight of cargo, stores and water, i.e. the difference between lightship and loaded displacement.

Its commercial importance is that it represents the total weight a ship can carry which includes cargo, fuel, stores, fresh water etc.

Deadweight Cargo Capacity(DWCC)

This indicates the potential earning capacity of a ship, but it is not a figure that is cast in stone.

When quoted in a ship's description it assumes that the maximum quantity of stores and bunkers are on board.

In practice the operator may increase the DWCC by carrying less bunkers.

APS - Arrival Pilot Station It is a Location often used as the place of delivery of a

ship by the shipowner to the charterer at the commencement of a time charter. The hire charge commences from the time of arrival.

‘Delivery point' of a vessel in any time charter negotiation is a MAJOR point of discussion and choice can come down to the prevailing market conditions at that particular time.

All charterers try and get APS delivery because that means they only start paying hire at the load port (ie arrival pilot station) while All shipowners try and get DOP delivery (dropping outward pilot station at last port of discharge - previous voyage) because it means the charterer pays from the moment the ship leaves the last discharging port of the previous contract.

Voyage charter party used for shipments of coal from Welsh ports, United States.

The AMWELSH 93 has been officially approved by the Board of Governors of ASBA(Association of Ships and Broke Agents) and has been adopted by the Documentary Committee of BIMCO as a "Recommended" Form

Few of the clauses –

• Clause 1 - Loading Port(s)/Discharging Port(s) the word "dock" used in the AMWELSH 1979 has been replaced by the word "berth"

• Clause 2 - Freight Payment Similarly as with the AMWELSH 1979, it is left to the parties to agree on the various details regarding freight payment, currency, time and place for payment, etc

• Clause 3 - Notices & Loading Port Orders. For many mining products, including coal, it applies that cargoes often travel a long distance from place of origin or production site to port of shipment; for that reason, advance notice of the date of the vessel's expected readiness to load is of great importance to shippers/charterers

AMWELSH – AMERICANISED WELSH COAL CARTERPARTY

Gencon

(“BIMCO”) Uniform General Charter, or “GENCON”, is the standard form voyage charterparty most commonly used worldwide.

GENCON 1994 consists of two parts.

Part I is the “box form” which all the necessary information can be conveniently inserted and seen by the parties. The details to be inserted in this part are freely negotiable and may be traded back and forth.

Part II contains all the standard terms and conditions which are usually non-negotiable, though it is common for the parties to amend some of the printed clauses by way of attaching a rider which overrides them or incorporates the standard terms into a negotiated fixture note.

Refer document in folder.

There are 26 boxes in total in Part I boxes 1 to 7 describe the identity of the parties and the

details and capacity of the vessel. Boxes 8 and 9 describe the present position of the vessel

and the expected date when the vessel is ready to load the cargo.

Boxes 10 to 11 provide information of the loading and discharging ports

Box 12 describes the type and quantity of the cargo to be loaded and whether “full and complete” or “part” cargo

Boxes 13 and 14 give details of the freight rate (per tonne,lump sum or other basis), freight payment currency and method.

Box 16 states the “laytime”, i.e. the amount of time available to the charterers free of charge for loading and discharging operations.

Boxes 17 to 19 give particulars on the identity of the shipper and the agents in the loading and discharging port.

Box 20 states the “demurrage rate” which is the penalty rate payble to the owners if the charterers exceed the agreed time in loading/ discharging the cargo.

Clause 21 sets out the cancelling date which means if the vessel is not ready to load on that date the charterers may cancel the charter party.

General Average shall be adjusted in London unless otherwise agreed in Box 22 according to an international convention called “York-Antwerp Rules 1994”.

Box 23 states the freight tax payable if it is for the owners’ account.

Box 24 states the brokerage commission and the person to whom it is payable.

Lastly, Boxes 25 and 26 state the law and place of arbitration and whether there are any additional clauses agreed between the parties

Part II of GENCON 1994 provides the standard terms and conditions

clause 1 - introductory clause gives the owners an unfettered right to refuse to put their vessel at the named

port and instead load

clause 2 – owners’ responsibility Clause 2 provides that the owners are responsible for loss of or damage to the

goods or for delay in delivery of the goods only in cases where the loss, damage or delay has been caused by the personal lack of due diligence on the part of the owners or their manager to provide a seaworthy vessel and to secure that she is properly manned, equipped and supplied, or by the personal act or default of the owners or their manager.

clause 3 – deviation Clause 3 provides that the owners have an unfettered right to call at any port or

ports in any order, to tow and/ or to assist vessels, and to deviate from its course for the purpose of saving life and/ or property.

clause 4 – payment of freight freight can either be “pre-paid” or “paid on delivery”

clause 5 – loading/ discharging Clause 5(a) provides that all the risks, liabilities and expenses associated with

the loading, stowage, trimming, tallying, lashing and discharging of the cargo shall be borne by the charterers solely.

Clause 5(b) states that the owners shall provide free use of the vessel’s cargo handling gear, if any, and the necessary motive power, unless the parties otherwise agree; and provide free of charge cranemen/ winchmen to operate the cargo handling gear, unless prohibited by local regulations

Clause 5(c) provides that the charterers shall be responsible for damage (beyond ordinary wear and tear) to any part of the vessel caused by stevedores

clause 6 – laytime Clause 6 states that the cargo shall be loaded/ discharged within the time

frame in a weather permitting condition, excluding Sundays and holidays

clause 7 – demurrage demurrage at the loading anddischarging port is payable by the charterers

upon receipt of the owners’ invoice. If it is not paid accordingly, the owners shall give the charterers 96 hours to rectify, exhausting which the owners can terminate the charterparty and claim damages.

clause 8 – lien(legal claim) owners have a lien on the cargo and all sub-freights payable in respect of the

cargo for freight, deadfreight, demurrage, claims for damages and for all other amounts due under the charterparty. the owners will be entitled to obtain security up to an amount of a reasonably calculated claim, including the costs of recovery

clause 9 – cancelling clause if the vessel is not ready to load on the cancelling date the charterers shall

have the option to cancel the charterparty. clause 10 – bills of lading gives the owners an express right of indemnity from the charterers for issuing

bills of lading at the charterers’ request and as a result of which the owners may assume greater liabilities than under the charterparty.

ARA – Antwerp/Rotterdam/Amsterdam.

Major coal importing ports innorthwest Europe.

Arbitration Agreements Arbitration agreement is a written agreement

between the parties to a dispute or to designate a particular arbitrator to resolve their disputes arising out of a particular business relationship.

It calls for a mandatory arbitration before an arbitrator.

An Arbitration agreement is usually legally binding. For example : Companies often require employees to sign an arbitration agreement which prevents the employee from suing the company in court.

ARBITRATION AGREEMENT (sample) "__________20______

It is hereby mutually agreed between___________________________*1 and ___________________________________*1 for the settlement of any and all disputes arising out of or in connection with _________________________________ *2 that :*3

The disputes shall be submitted to the Tokyo Maritime Arbitration Commission (TOMAC) of The Japan Shipping Exchange, Inc. for arbitration in Tokyo.*4

The arbitration proceedings and all other related matters shall be conducted in accordance with the Rules of Maritime Arbitration of The Japan Shipping Exchange, Inc. (the "TOMAC Rules").

The award given by arbitrators appointed in accordance with the TOMAC Rules shall be final and binding upon the parties.

Other arbitration agreements, if any, with regard to such disputes shall become null and void upon the making of this agreement.

_____________________________*5 _________________________________ *5________________________________ _________________________________________________________________ _________________________________ "

Explanation of Arbitration Agreement

(Note 1.) Indicate the names of the parties.

(Note 2.) Write down sufficient information to allow determination of fundamental issues like the type of contract in dispute, and where the dispute took place.

(Note 3.) Indicate below the particulars of the agreement to arbitrate.

(Note 4.) International arbitration is only conducted in Tokyo.

(Note 5.) All parties should sign the agreement and indicate a specific address. In the case of a corporate party, a representative must sign and the name and address of the corporation should be indicated. It is customary to align the signatures horizontally one next to another, not vertically, one over another.

Arbitration Clauses

It is a Provision which includes in, certain construction, insurance, labor, sale, or other types of contracts, requiring settlement of disputes through arbitration instead of litigation.

Often the procedure to be followed in arbitration is also laid down in the same document.

AS - Along Side

Free Alongside Ship

It is an agreement between a buyer (importer) and a seller (exporter) in which the seller is responsible for the transportation and risk of the good until it is within reach of the ship's crane, at which point the buyer assumes responsibility for both.

That is, the seller does not bear the expense or risk of actually loading the good onto the ship.

The buyer is responsible for clearing the good through customs in both the home country and the country of delivery.

Association of Ship Brokers and Agents (ASBA)

ASBA is an independent membership trade association, established in 1934 that brings together member Ship Brokers, Agents  and Affiliates with offices in the United States and Canada.

ASBA aims to inculcate The ideals and standards of professional conduct

and practices. Define customs of the business To establish and maintain uniformity in commercial

usages To adjust controversies and misunderstandings To promote the common interests of those business

establishments which are engaged in business as ship brokers and agents.

ASBA Members

Ship Brokers (Dry Cargo, Tanker, and Sale & Purchase)

ASBA Certified Agents Affiliate Members (Ship Owners, Operators,

Charterers, Tug Companies and Maritime Lawyers)

www.asba.org/about/code-of-ethics-2/

ADDITIONAL WAR RISK INSURANCE(AWRI)• This is an extra amount paid to the owner of a time-

chartered vessel if the ship is ordered to a port or an area in which war or hostilities are taking place and the ship owner's insurers require an additional insurance premium for the vessel to be considered to be covered against risks in that place. 

• When tankers-are fixed to carry oil cargoes from or to a place where war or hostilities are taking place, hull insurers quickly impose additional war risk premiums on ships travelling to the areas of hostilities.

• In the shipping business, it should be made clear in the charterparty as to which party will bear the cost of the AWRI premium.

• If there is no clause in the charterparty and the charterer orders the ship to a war danger area, the owner may very well attempt to demand reimbursement of premiums from the charterer.

Average LaytimeLaytime:Time allowed by the shipowner to the voyage charterer to carry out the cargo loading and/or discharging operations; laytime may be expressed as a certain number of days or number of tons of cargo loaded/unloaded per day.

In other words, the period of time agreed between the parties during which the owner will make and keep the vessel available for loading or discharging without payment additional to the freight.

Average laytime:Laytime in which loading and discharging times are calculated separately and any time saved in one operation is allowed to offset the additional time used in the other.

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