Chartering is an activity within the shipping industry. In some cases a charterer may own
cargo and employ 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, in
Worldscale points 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.
A charterer may also be a party without a cargo who 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. 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.
Time Charter Equivalent is a standard shipping industry performance measure used primarily
to compare period-to-period changes in a shipping company's performance despite changes in the
mix of charter types.
Charter types A voyage charter is the hiring of a vessel
and crew for a voyage between a load port and a discharge port. The charterer pays the
vessel owner on a per-ton or lump-sum basis. The owner pays the port costs, fuel costs
and crew costs. The payment for the use of the vessel is known as freight. A voyage charter
specifies a period, known as laytime, for loading and unloading the cargo. If laytime
is exceeded, the charterer must pay demurrage. If laytime is saved, the charter party may
require the shipowner to pay despatch to the charterer.
A Contract of Affreightment is a contract similar to a voyage charter, but ship-owner
undertakes to carry a number of cargoes within a specified period of time on a specified
route. Agreed frequency of cargoes may require more than one ship.
A time charter is the hiring of a vessel for a specific period of time; the owner still
manages the vessel but the charterer selects the ports and directs the vessel where to
go. The charterer pays for all fuel the vessel consumes, port charges, commissions, and a
daily hire to the owner of the vessel. A trip time charter is a comparatively short
time charter agreed for a specified route only.
A bareboat charter or demise charter is an arrangement for the hiring of a vessel whereby
no administration or technical maintenance is included as part of the agreement. The
charterer obtains possession and full control of the vessel along with the legal and financial
responsibility for it. The charterer pays for all operating expenses, including fuel,
crew, port expenses and P&I and hull insurance. In commercial demise chartering, the charter
period may last for many years; and may end with the charterer acquiring title of the
ship. In this case, a demise charter is a form of hire-purchase from the owners, who
may well have been the shipbuilders. Demise chartering is common for tankers and bulk-carriers.
(In the context of the leisure industry, the term "demise charter" will rarely be heard.
Bareboat yacht chartering will typically be the short-term hire for only a few weeks or
even less. Here, the owner will supply the yacht in seaworthy order, fully fuelled and
possibly revictualled. The yacht may be hired as one of a flotilla; and at least one yacht
may be manned by an employee of the owner. At the end of the hire period, the charterer
will be expected to pay for the fuel used). See also
Seaworthiness References
Further reading Huber, Mark. "Ch. 9:Chartering and Operations".
Tanker operations: a handbook for the person-in-charge. Cambridge, MD: Cornell Maritime Press. ISBN 0-87033-528-6.
Turpin, Edward A.; McEwen, William A.. "Ch. 18:United States Navigation Laws and Ship's
Business". Merchant Marine Officers' Handbook. Centreville, MD: Cornell Maritime Press. ISBN 0-87033-056-X.