Traders and operators will often talk about laytime. But what does laytime refer to? Let’s explain what it means in simple terms.
When is Laytime relevant?
Laytime is only relevant to voyage charter vessel fixes, not at time-charter.
Under the voyage charter party shipowner undertakes to carry charterers’ cargo (the agreed quantity of the agreed commodity) on one or several consecutive voyages on the named vessel between the named ports.
The charterer is obliged to provide cargo in exchange for the agreed amount and pay the freight. Usually, freight is counted either accordingly to cargo quantity or lump sum.
Under voyage charter party owner is responsible for ship and crew expenses.
The most common proforms for voyage charter party (general cargo) are GENCON, BALTIME.
Every proforma usually contains next clauses :
Preamble, Owners’ Responsibility, Deviation, Freight (Rate and amount of payment of freight), Loading/Discharging Costs, Laytime (Duration of laytime allowed; exceptions to laytime; commencement of laytime; time and manner of tendering of NOR), Demurrage (Duration of demurrage period allowed; whether demurrage allowed at loading and/or discharge ports) Lien, Bills of Lading, Laydays and Cancelling, General Average, Agency, Brokerage, War Risks, Paramount Clause, New Jason, Both To Blame Collision Clause, Law and Arbitration, Rider clauses.
Now, that we’ve established an understanding of when is laytime applicable, it’s time to define the terms, such as laytime, demurrage, and despatch.
What is Laytime?
Laytime is the agreed period of time for cargo operations in ports of loading and discharging between the shipowner and the charterer.
In a simple manner, you can count laytime as:
Laytime could be reversible and nonreversible. Reversible laytime is one consecutive time for port of loading and discharging together.
For example, let’s imagine a trading operation where the total commercially agreed time for cargo operations is 18 hours.
Additionally, let’s imagine that the loading operations at loadport took 11 hours. That leaves only 7 hours of contractual time at the discharging port.
In this example, 7 hours may or not be enough time to perform the unloading operations. If the total time exceeds the commercially agreed laytime, demurrage shall be payable.
What is Demurrage?
So, we came to the term demurrage – what is it? Let’s look at the definition from VOYAGE CHARTER PARTY LAYTIME INTERPRETATION RULES 1993.
Demurrage is an agreed amount payable by the charterer due to owners in respect of delay to the vessel beyond the laytime, for which the owners are not responsible. Demurrage shall not be subject to laytime exceptions.
“DESPATCH MONEY” or “DESPATCH” shall mean an agreed amount payable by the owner if the vessel completes loading or discharging before the laytime has expired.
In the case of non-reversible laytime, the time given for loading and discharging should be counted separately. So dispatch and demurrage are also calculated separately.
Also, laytime may be specified as loading/discharging with customary despatch or as fast as the ship can receive. It also could be stated the exact amount of days or hours, or there is a given norm of loading per hatch.
How to calculate laytime?
Exceeding laytime will incur in extra costs, therefore calculating the total laytime is extremely important.
To calculate laytime you’ll need to perform a few steps:
- You need to obtain the Statement of Facts (SOF) from the ship’s agent. SOF should be agreed upon by all the parties involved in loading/discharging operations (port authorities, Master, agent, charter representative). It’s vital to describe in SOF clearly everything that is happening to the ship, for example, when the NOR and free pratique are given, weather conditions, etc;
- You have to read carefully charter party and rider, especially clauses about laytime, despatch, demurrage, and notice for yourself whether laytime is reversible or not, when the notice of readiness (NOR) should be sent, how long is turn time, how many ports of loading/discharging is allowable, how many berths agreed, think what you should count in laytime calculations and what not;
- Create a spreadsheet to count the allowed time for loading/discharging, and a) determine when laytime starts to count, and b) when the time is over. Remember to take into consideration all exemptions from laytime. You should state all the exceptions from laytime accordingly to the charter party and rider;
- Once the calculation is finished, it is clearly seen if despatch is payable to the charterers or demurrage is due to the owners
- There could be a few scenarios when laytime should start to count. One of them is once the Notice Of Readiness (NOR) is given plus turn time (abt 6-12 hours, as stated in the charter party).
- Another is written in the charter party (c/p) Gencon 1994. Clause 6 of this c/p has the following terms of laytime commencement:
- Laytime for loading and discharging shall commence at 13.00 hours, if notice of readiness is given up to and including 12.00 hours, and at 06.00 hours the next working day if notice is given during office hours after 12.00 hours. Notice of readiness at the loading port to be given to the Shippers named in Box 17 or if not named, to the Charterers or their agent named in Box 18. Notice of readiness at the discharging port to be given to the Receivers or, if not known, to the Charterers or their agents named in Box 19
Also, you’ll have to pay attention to all abbreviations when calculating the laytime, for example, WWD, SHEX, and SHINC.
WWD (weather working day ) The weather could prevent safe loading/discharging and could be a reason for lesser quantity and bad quality of cargo. Therefore in the charter party could be stated that laytime should be stopped for a period of bad weather conditions. But to stop the calculation of laytime, cargo operations should be stopped in fact, and only during usual port working hours. You should keep in mind that what might constitute bad weather for one vessel will not necessarily be the same for another. A period of heavy rain may prevent the discharge of grain, but not of iron ore.
SHEX (Sundays and holidays excepted) It means that Sundays and holidays are to be excepted from the counting of laytime. The occurrence of a Sunday or holiday temporarily stops the laytime. The clause may also provide that if loading or discharging is carried out on these days, laytime will count. And for these cases, the abbreviation will be SHEX UU (Sundays and holidays excepted unless used).
SHINC (Sundays and Holidays included). This abbreviation is on the shipowner’s side because while SHEX UU refers only to actual time used, SHINC includes all the Sundays and Holidays and laytime is running.
Common mistakes when calculating Laytime
The most common mistake in counting laytime is a result of carelessness. This includes the sloppy reading of the terms or wrong laytime calculations.
You always have to pay attention to all terms and conditions in c/p and read carefully all the abbreviations.
Remember to implement the “4-eye” principle, and let a peer or senior review your calculation. Such quick checks may prevent you from sending the wrong calculation to the counterpart and thus save a commercial conflict.