IGNOU : M.COM : IBO 4 : UNIT 11 : Q - 3. What are various forms of chartering of the shipping services? Explain.

 

Ans. CHARTERING PRACTICES

When a tramp carrier is engaged, it is said to be under charter, as one-charterer hires either the whole or the bulk of its space. A tramp may be chartered in a number of ways. Three most important forms of engagement are:

i) Voyage Charter

ii) Time Charter

iii) Bareboat Charter or Charter by Demise.

 Let us now discus them in detail.

Voyage Charter

A ship may be chartered either for a single voyage (say, from port A to port B) or for consecutive voyage (say, from port A to port B to port C) or for a round voyage (say, from port A to port B to port A).The ship owners provide the vessel to the charterers for carriage of an agreed quantity of cargo from the named port or ports to be discharged at named port or ports. Alternatively, the agreement (known as Charter party) provides for carriage of cargo between ports within a certain range (say from any port in India to any port in Germany). In the latter case, the charterers will be required to convey the names of specific ports to the ship owners (which in effect is the Master of the vessel) at the time of voyage or voyages are to be made.

For engaging a tramp on voyage basis, the charterers are to pay freight to the ship owners. Freight may be payable either according to the actual quantity loaded or may be calculated - on the basis of the total capacity of the ship. In the first case, the charterers may also be required to pay for any capacity, which remained unused, Alternatively, the ship owners hire out the unused capacity to another charterer.

In voyage charter, the ship owners are not only to meet all expenses of running the ship such as officers and crew wages, stores and provisions, insurance of ship, depreciation, etc. but also the operating expenses like fuel cost, port charges, light dues, etc. The ship owners recoup their expenses and earn profits from the freight paid by the charterers.

Time Charter

For time charter engagement, a ship is hired for a fixed time period operation within the defined territories or between agreed ports. Although the ship is operated at the command of the charterers, it cannot be taken outside the agreed territories or agreed ports to protect the interests of the ship owners. It may also be noted that time period is the essence of the agreement but it also provides for the voyage territories.

Under the time charter agreement, ship owners have the responsibility to deliver the vessel at the agreed port within the specified time period in such a condition that it is in every way fitted and equipped for the contemplated employment. The charterers in turn are to redeliver the vessel at the agreed port in the same condition, in which it was taken in charge, excepting normal wear and tear.

The entire capacity of the ship is hired and the ship owners receive charter hire for the time duration for which it has been hired. The charter hire is generally payable in advance at certain agreed intervals. The quantity of cargo carried has not bearing upon the charter hire and even if no voyage is made because of the charterer's fault, the ship owners are entitled to the hire.

In a time charter engagement, the responsibility of scheduling the ship's employment and meeting port expenses, canal dues, fuels cost, cargo expenses etc., remain with the charterers. However, running expenses of the vessel like officers and crew wages, stores, provisions, insurance; etc., have to be met- by- the ship owners. Another feature of the time charter engagement is that the charterers can either operate themselves or sublet the vessel on voyage charter depending upon their requirements (provided the latter action is not specifically prohibited in the agreement between the ship owners and the charterers). If the market improves after the vessel is taken on time charter and the charterers sublet it, the charterers may earn more money than what is payable to the ship owners by way of charter hire. Sometimes ships are time chartered an a long- term basis to fulfill the contractual obligations like the Contract of Affreightment. Such long-term charters are entered into so as to protect the charter.ers from the vagaries of fluctuation in the freight market.

Bareboat Charter or Charter by Demise

Under this arrangement, the ship owners let out the bare ship for a period of time. The difference between the time charter and bareboat charter lies in the fact that in the latter case the ship in the bare form lies at the disposal of the charterers who have the full right and responsibility of operating the ship. The ship owners have the minimum responsibility and act as it' they are 'dead' and have no concern about the ways the ship will be used. Also known as "Demise Charter" the charterers in this case become the disponent owners and are responsible for manning as well as operating the ship as if they are the owners of the ship.

Since the ship is at the disposal of charterers, they have the right to appoint the Master and the Chief Engineer, however, subject of the approval of the owners. They bear all costs and expenses for the operation of the ship. For the time period, the ship owners are paid a fixed sun1 calculated at a certain rate per ton dead weight on summer free board per calendar month payable in advance. 'The ship is put at the disposal of the charterers in the seaworthy condition and after the expiry of the time period, it is redelivered to the ship owners in the same good order and condition as and when delivered, minus the ordinary wear and tear.