Charter Vessel for Bulk Shipment

Ocean Freight Bulk Shipment through Chartered vessel

Manufacturing companies who has plant and other production infrastructure normally use chartered vessel for their raw material to ship from Shipper. The reason behind is as follows.

1. Huge volume required for yearly consumption of plant/factory

2. Reduce shipping cost on bulk purchase

3. Reduce on cost on raw material

4. Pre caution against the shutdown of plan due to any unforeseen reasons 

5. Raw material might be produced on seasonal requirement

It will be easier to understand ocean freight shipment through chartered vessel with a real time example. The complete process as follows.

? A customer has plant which will produce Chlorine Liquid and caustic Soda Lye for his local and Overseas Customers

? Plant required one of its raw material Industrial Salt 40000 MTN per year

? Customer will source Supplier/ Sipper

? Shipper will contact Charter parties / Ship brokers for competitive price and excellent service

? Shipper will submit best offer to customer

Main clauses in chartering offer that submitted to the customer are as follows.

Lay Days

Lay days can be defined as the days kept aside in a ship’s voyage schedule for loading and unloading of the cargo. Lay days represent the time at which a ship must reach the charterer for cargo operations. Lay days are decided on the basis of the type and amount of cargo. Larger loads might needs several lay days, which are defined in the shipping contract. If a particular ship is not able to reach the charterer in the defined lay days, it is required to pay a penalty/fine.

Lay days are always planned in advance so that all the required operations are carried out in the specified time. Lay days are defined in different ways such as:

1. Running days – Includes consecutive days including weekends and holidays

2. Working days – Includes consecutive days excluding weekends and holidays

3. Weather working days – Includes days on which the weather permits to continuous work of cargo loading and unloading

Lay time

Lay time can be defined as the amount of time allowed to a ship in a voyage charter for loading and unloading of cargo at a port. If a ship fails to complete the work during this allotted time and the ship is required to stay at a port for a longer time, then demurrage (fine) is incurred to the ship owner.

The fine is often paid by the charterer to the ship owner as the former wants to use the ship for longer than decided time. However, if the charterer requires less than the defined lay time, the ship owner might be required to pay to the charterer. These terms are pre-defined by the charter party dealing with the whole process.

Demurrage 

If the Charterer fail to complete the loading or discharging cargo operation within the agreed period of lay time charters are in breach of the charter party and charters will be required to liquidated damage to the ship owner in respect of the breach. Liquidated damages are calculated on the basis of the time spent in excess of the agreed lay time and are called Demurrage. 

Dispatch

Ship owner may include an incentive clause in the charter party whereby the charterer complete the loading and discharge in shorter period than is agreed then charterer may be entitled to receive Dispatch money. Usually Dispatch rate will be half the demurrage rate.

We can visualize demurrage and dispatch in a real time scenario as follows.

? Shipper and customer agreed 10 days lay time to offload 40000MTN Industrial Salt

? If offloading not completed in 10 days customer need to pay to shipper USD 3000/per day as demurrage

? If offloading completed in 6 days’ time then shipper has to pay to customer USD 1500/per day

? Customer will arrange enough stevedoring equipment trucks to offload and transport salt to customer’s site

? Customer will push stevedore and truckers to provide more trucks and equipments.

Next step is arranging documents by shipper. Commercial Invoice, Packing List and Certificate of Origin will be prepared in coordination with customer.

Next step documents confirmed by customer.

Then Customer has to nominate Vessel Handler in POD

Note: We always need to reach an agreement with Vessel agent that they can issue Delivery Order with out original B/L but against copy of B/L. Its because of the short transit time chartered vessel have on their voyage.

Next step is customs clearance process and approval from Customs in POD. Customs has a rule by which we need to deposit 2% of the Commercial Value of Invoice then without original documents customer can proceed for customs clearance.

We need to be in contact with Vessel Agent to know about which berth will allocate for our vessel.

Once vessel arrived and ready to discharge then there must be a survey from 3rd party Surveyor onboard before discharge to know the quantity of salt/raw material.

Sample of the salt will be tested in Lab before offloading salt.

Complete the discharge

Vessel departure

Payment for Vessel Agent, Stevedore and Trucking Company

Payment completion for customer.