LATEST IN CHARTERER  RECOVERING MORE THAN THE OWNER’S INVOICE

 

Seller submitted their invoice to the buyer in the amount of $21,144.44. I requested a copy of the owner’s invoice which was for $16,466.67.  Obviously they did not check the amount on the owner’s invoice before forwarding it.  When asked if they were going to revise their invoice their response was that their claim at disport was purely based on actual times from all fast to hoses off.  Claim stands as invoiced.  So, how does everyone feel about this scenario?

To go even further, a fixture came across my desk wherein the allowed laytime was actually retyped in another location in the fixture to show 72H replacing the actual laytime which must have been more than 72H.  It was obvious this was done because clause  I) Laytime does not come ahead of clause  H) Freight, which is followed by clause  J) Demurrage.  If the allowed laytime is changed in the fixture how do you know if the demurrage rate was not changed as well.

ONE-HALF OF 84H IS NOT 36H

ONE-HALF OF 84H IS NOT 36H.

 

FINALLY SOME COMPANIES “GET IT”  AND HAVE CHANGED THE WORDING IN THEIR CONTRACTS TO

 READ “ ONE-HALF OF THE ALLOWED LAYTIME IN THE C/P PRORATA PART CARGO”.

The first mention of a Charter Party in England was as early as 1369.  The term Charter Party derivesfrom the Medieval Latin phrase “Carta Partita” meaning “divided document”.  The contract would be prepared twice on the same piece of paper and torn into two pieces, each party taking one portion.  If the torn edges of the two pieces fit together, then the document was authentic.  I cannot confirm that there was an allowed laytime for the voyage back in 1369. 

 

However, sometime thereafter, a voyage under a Charter Party allowed 72H.  Thus the logical allowance noted in a contract for supplier and/or receiver was 36H.  This allowed laytime has not changed in the anyone’s contracts until recently.

 

Nowadays, 84H is not uncommon and just this past week a fixture for 96H came across my desk.  Some Charterers who have a fixture with 84H refuse to apply 42 hours from used laytime.  They go back to the contract which says 36H.  Well I don’t know about the rest of you, but one half of 84 is not 36.   Changing laytime allowance in a contract is not a major undertaking.  Change allowed laytime to “ONE-HALF OF THE ALLOWED LAYTIME IN THE C/P PRORATA PART CARGO” and forget about putting in a number.  A minimum of 12H can still be added for part cargoes. 

 

By only applying 36H the Charterer is profiting by 12H and under a 96H voyage by 24H and is recovering monies for demurrage it did not incur. Does this not fall under “unjust enrighment”?  Unjust enrichment is a legal term and a legal principal which has been upheld in U.S. and English courts.  Is the industry going to continue to allow those companies to recover more demurrage than they have to pay the owner?  You can stop this by requesting a copy of the Owner's' invoice and Owner's Demurrage Calculation. 

In case anyone has forgotten the definition of Demurrage I quote below from Llyod's of London Dictionary of Shipping Terms:

"Demurrage:  Amount of money paid to the shipowner by the charterer, shipper or receiver, as the case may be for failing to complete loading and/or discharging with THE TIME ALLOWED IN THE CHARTER PARTY'.

 I received a demurrage claim for $42K.  I requested a copy of the Owner's Invoice and Demurrage Calculation.  I received the Owner's invoice which was for $22K.  I  asked how they could invoice this out at $42K.  The response was that I the client could pay the $22K.  I requested the Owner's Demurrage Calcuation as $22K covered the voyage.  No response.
 

There are only a few companies who argue about applying the allowed laytime under a voyage and refusing to provide the Owner’s demurrage invoice and calculation.  The reason for not doing so is transparent. 

 The stubbornness on the part of these companies prolongs the settling of their claims.  In some cases years before the claim is settled.  Considering the time value of money  you would think that they would move forward.  

First Come - First Served

Which company came up with “first come-first served”?

If a terminal operates under a “First come – First served” basis it does not imply that they are a public dock.. KMI, IMTT are privately held terminals.  Check out demurrageonline.com. More to come.

It's all in a "word".

THE REAL PROBLEM IS THE TERM "PUBLIC DOCK"

According to the American Association of Port Authorities, the definition of a “public dock” is one that is owned and operated by the Port Authority. If the Port Authority owns and operates the dock it than dictates the order the various parties get to use the dock.  This is not the case for  IMTT, KMI, GATX, etc.

Sales/Purchase contracts read if "loading at public terminals is effected on a first-come, first serve basis" time starts at all fast.  KMI, IMTT are not public docks in any way whatsover but operate on a first come, first serve basis.  CITGO Linden and Hess Port Reading operate as a first come, first serve basis as well and are not public docks.  For lack of better terminology the phrase "public dock" was born which was applied to terminals operating on a first come, first serve basis.  Terminals operating on a first come first serve basis have no bearing on the words "public dock".

No reference whatsoerver in any terminal agreemernt that we have read state that the terminal is a public dock.  The Agreement only states that it operates under the first come, first serve basis.

It is our opinion that if a terminal is operating under a first come, first serve basis then it is operating under the term our industry has labled as "public dock" and therefore time starts at all fast.

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.

Arbitration

QUESTION: WHEN DOES A NOMINATED PORT BECOME A DEVIATION
ANSWER: IN AN ARBITRATION PROCEEDING.

In a recent decision a panel ruled that the first nominated port was a deviation and disregarded the second nominated port. This ruling is based on a Contract of Affreightment on an Asbatankvoy C/P form fixed on August 4, 2005. The loadport was Trinidad, August 16 and the discharge range was 1-2 SP USAC or CHOPT 1-2 SP USG. This decision set an unwarranted precedent in favor of Owners.

The following facts were presented to the Panel:

The vessel completed loading on August 21, 2005.

The Charterer nominated two discharge ports, USCG.

During the six day voyage to the first nominated port, the Master’s ETA reports were:

August 21: wind direction “Lt Airs’, current “favourable”, ETA Aug 27, Noon

August 22: wind direction “SW-4 / Mod Seas & Swell”, current “favorable”, ETA Aug 26, 2200 LT.

August 23: wind direction “SW-5 / Mod Seas & Swell”, current “none”, ETA Aug 26, 2200 LT.

August 24: wind direction “Lt Airs”, current “none”, ETA Aug 26, 2200 LT.

August 25: wind direction “Lt Airs”, current “none”, ETA Aug 26, 2200 LT

August 26: wind direction “N-4 / mod seas & Swell”, current “favorable”, ETA Aug 26 2400 LT. Remarks: ETA delayed (by 2 hours) due to deteriorating weather conditions.

At no time in the Master’s ETA’s was there any indication of any weather difficulties until August 26 when in fact she arrived at the first nominated port on August 26, at 2200 LT, two hours earlier than her ETA time.

She anchored and tendered her NOR on August 27 at 1100 LT.

Upon anchoring, the USGC closed the port due to the approach of a hurricane. Ship waited out the storm. When the storm passed, the Agent could not advise as to when the ship could berth at the first nominated port or steam to the second port in the Miss River.

The Charterer exercised its rights under CL 23 and instructed the ship to go to Houston asap.

The Charterer paid for the deviation from NOL to Houston plus bunkers.

The Charterer also paid freight based on a 1 port load and a 2 port discharge, in accordance with Part 1 of the C/P. The actual voyage performed was from Trinidad/NOL/Houston. The Charterer paid freight based on the terms in the C/P plus deviation and bunkers.

The Charterer's position was that NOL either counted at 1/2 under the Weather Clause or not at all. The Panel ruled that the first nominated port was a deviation and Charterer had to pay for all of the time in NOL. The Panel also ruled that the weather clause in the C/P was not applicable. In essence, this changed the terms and conditions of the agreed upon C/P to a 1 port load and a 1 port discharge.

This decision made the Charterer responsible for weather.

The Charterer relied on the provisions in the C/P which were negotiated and accepted by the parties. The Charterer relied on the following clauses:

CL 23 Deviation:
Notwithstanding anything else to the contrary in the C/P and notwithstanding what loading and/or discharging port(s) may have been nominated and bills of lading issued, Charterer shall have the right to change is nomination of the loading and/or discharging port(s) in accordance with Part 1 C and D of the C/P.

Any extra time and expenses incurred by Owner in complying with Charterer’s orders shall be for the Charterer’s account and shall be calculated in accordance with part II Clause 4 © of the C/P. Freight shall be based on the actual voyage performed. Charterer shall have the right to make as many changes as it deems necessary.

The Panel ruled that all of the time in NOL fell under the deviation clause disregarding the fact that it was a nominated port and that "it was not necessary to consider any weather-related clauses in the C/P or whether Katrina was a hurricane or an Act of God".

Part 11, Asbatankvoy
Clause 6. Notice of Readiness
Clause 19. General Exceptions Clause

Charterer’s Rider Clauses

7. Laytime Clause: If for any reason laytime has expired, Charterer shall be allowed the benefits of Clauses 6,7, and 8 of Part 11 at each port of loa ding or discharge before demurrage shall be incurred.

38. Weather Clause. ...delays in berthing for loading or discharging and any delays after berthing which are due to weather shall count as one half laytime or, if on demurrage at one half demurrage rate. However, any additional costs (for tugs, pilotage, bunkers, or otherwise) due to maneuvers caused by bad weather shall be for Owner’s account.

The Panel ruled it was not necessary to consider any weather-related clauses in the C/P or whether Katrina was a hurricane or an Act of God and that the hurricane came as no surprise. This was a complete disregard as to the how the term “act of God” has been defined legally.

The actual voyage performed was Trinidad-Convent-Houston. The charterer paid against freight $393,768.59 (less address commission);
$6.320.89 against deviation to Houston plus bunkers.

The Panel awarded an additional $151,995.24 for outstanding freight and deviation costs; interest and a payment of $10,000 towards the Claimant’s attorney’s fee for a total of $174,084.90.

The only issue in this matter was the determination of the time spent in NOL.

"Nothing is ever accomplished by a committee unless it consists of three members, one of whom happens to be sick and the other absent". Henrik Van Loon, 1942