Trading and Demurrage in Today's Market

Trading in our industry has changed considerably in relation to how it affects demurrage. Today, we load product from more than one supplier 99% of the time and discharge to more than one receiver. There are companies who are using Marine Provisions from 1996 and others who have not addressed this type of transaction in their Marine Provisions.
There is wording that is being used which address this type of a trade it’s called “Pro Rata Part Cargo Apportionment” (the “Clause”). ConocoPhillips had it in their 2009 Marine Provisions but for reasons unknown removed it from their 2010 Marine Provisions. One other company has the clause in their 2010 Marine Provisions. Nevertheless, Majors and other trading companies who do not have this clause in their Marine Provisions accept the calculation as it applies under the Clause because it is a commercial equitable distribution of demurrage incurred. There are, however, three exceptions that DSI is aware of; ExxonMobile who uses 1996 Marine Provisions, CITGO, and Chevron who will not accept any proration.

We want to emphasize that the wording in the clause is far from perfect and in some instances increases demurrage liability based on whether or not product was loaded concurrently or separately.

Here is an example of how DSI calculates demurrage for each supplier when product is loaded concurrently:

ALL FAST/START 0100/25
HOSE ON 0250/25
START LOADING 0305/25
FINISH LOADING 0835/26
HOSE OFF 0900/26
RELEASED/STOP 1235/26
USED HOURS 45.58
LESS
ALLOWED 22.00
DEMURRAGE 23.58HX$1050/H = $24,759.00

FIRST SUPLLIER’S’ PRORATION OF DEMURRAGE:
86,337.69/108,214.91 = .80 X $24,759.00 = $19,807.20

SECOND SUPPLIER’S PRORATION OF DEMURRAGE
21,877.22/108,214.91 = .20 X $24,759.00 = $4.951.80

The Clause reads:

QUOTE
Whenever this Agreement covers Cargo which is among other Cargoes to be loaded or discharged by the Vessel at the same port, and the Vessel is waiting to berth or is diverted for other risks for which diversion is authorized, then laytime and time on demurrage during the delay shall be apportioned on the basis of the ration of the barrels of this Cargo to the total barrels of all such affected Cargoes.

All time used in loading or discharge of other Cargoes shall be excluded from laytime and time on demurrage for this Cargo.

Laytime and time on demurrage during periods of concurrent Cargo handling shall be apportioned based on the ration of the barrels of this Cargo to the total barrels of all such Cargoes subject to concurrent Cargo handling.
UNQUOTE

In regard to the second sentence of the Clause, following is an example where the demurrage charged to each party would be greater than our first example. In the first example, we did not shown that the cargo was loaded separately from each supplier. Following is the calculation based on the wording in the second sentence deducting each supplier’s loading time from the total used hours:

First Supplier would be charged:

ALL FAST/START 0100/25
HOSE ON 0250/25
START LOADING RBOB REG 0305/25
FINISH LOADING RBOB 2050/25
START LOADING RBOB PREM 0255/26 2nd Supplier
FINISH LOADING RBOB PREM 0835/26 2nd Supplier
HOSE OFF 0900/26
RELEASED/STOP 1235/26
USED HOURS 45.58

LESS
0255-0835/26 @ 100% 5.67
ALLOWED 17.60 (86,337.69/108,214.91 = .80 X 22)
DEMURRAGE 22.31HX$1050/H = $23,425.50 V. $19,807.20

Second Supplier would be charged:

USED HOURS 45.58
LESS
0350/25-0255/26 @ 100% 23.08
ALLOWED 4.08 (21,877.22/108,214.91 = .20 x 22)
DEMURRAGE 18.42HX$1050/H = $19,341.00 v. $4.951.80

Calculating the total used hours, applying the total allowed laytime to arrive at the demurrage incurred and then prorating each suppliers share based on the volume they supplied against the total volume loaded would be a commercially equitable distribution of liability.

The Clause is far from perfect. The second sentence does not address what the allowed laytime should be.

Then there is the problem of barges that are time chartered. In a Time Charter, the nomination states the allowed laytime which has been accepted by most but not by all. Only one company that we know of addresses allowed laytime for time charters in their Marine Provisions. Therefore, the allowed laytime used is that which is stated in the seller’s Marine Provisions. Sometimes it is less than the allowed laytime noted in the nomination. Another serious problem is that demurrage in Seller’s Marine Provisions is not based on C/P terms. Only the rate is addressed.

Those of us who have been in the industry for what seems be too long understand the method used and the commercial side of demurrage In today’s times, individuals handling demurrage are new to the industry, not trained sufficiently and look at demurrage as black and white as well as working with outdated Marine Provisions.