A courtesy of Commodity Merchant Trading & Shipping Advisory Services

A C/P (charter-party) outlines the responsibility between the ship owner and the charterer(can be the commodity buyer or seller).


It is easy to be confronted with contentious issues both in chartering and arbitrations: Parties in a C/P have opposite interests. [ it’s not just charterer vs owner but also charterer’s broker vs owner’s broker].

Laytime and demurrage are two of the most contentious subjects in a C/P. Computation of laytime and the resulting demurrage or despatch is a mean of settling whether the voyage has gone faster or slower than under the terms negotiated in the C/P. Demurrage claims can vary from a couple of hundred dollars, up to millions. Demurrage for dry cargo can run up to more than the actual freight if the ship has to wait a long time due to port congestion.

During the mid-70’s, congestion paralyzed Lagos Port fifteen months. Government ordered cement for road building. It is said that government ordered cement priors years, they only received partial shipments, so this time they ordered more than needed. For whatever reasons, contracts were fully executed, resulting in a 15 months port congestion. This resulted in enormous demurrage invoices.[1]

During October 2013, major disruptions happened in the PNW, while almost half of US wheat exports pass through Portland and the Port of Vancouver, Washington, zealous inspectors in the Washington Department of Agriculture (WSDA) (unrelated with the USDA but designed as inspector by the U.S Grain ACT) compromised the entire export system reliability. They created congestion by making sporadic inspection interruptions at port washington to support the International Longshore and Warehouse Union in a labor dispute at one of the grain export elevators in the region (the Bunge/Itochu/STX export terminal venture ).

For the trader/charterer, when shipping rates are high or cargo profit margins in the SPAs are thin[often the case in Coal] , demurrage/despatch can make a difference between making or losing money on a cargo. I must emphasize that we are at war.

Laytime – Time allowed by the shipowner to the voyage charterer or Bill of Lading holder in which to load and / or discharge the cargo. It is expressed as a number of days or hours or as a number or tons per day.
Demurrage – The cost, or delay period resulting in the cost, charged when a vessel fails to unload or load within the allotted time period, or laytime, provided by contract. A liquidating damages charge for contract breach for detention of the ship. [Demurrage is a penalty for Charterers]
Despatch – Amount of money the rate of which is agreed in advance, payable by the shipowner to the charterer, shipper or receiver, as the case may be, for loading and/or discharging in less than the time allowed; normally despatch money, if a provision for it has been made, is at the same rate as, or half the rate of the rate of demurrage agreed in the Charter-Party. [Despatch is a bonus for the Charterer]


What causes Demurrage ?

Port/railways congestion or anything that can cause congestion in transportation system:
• Strikes
• Randomness of ship arrivals
• Barges/Ships and cargo availability.
• Pipeline problems
• Poor Port infrastructure.
• Commodities considerations
• Tidal flows/ river depth; ex: Making the tide at Delaware Bay (PBF Energy. Delaware city), Fundy Bay (Irving Oil Refinery IOR, Canaport).
• Weather events
• Customs clearing
• Most importantly the interpretation of the C/P clauses, terms.

coal loading

Vessels loading coal cargoes are typically on Demurrage because of weather. Snow, Water over the coal piles are an issue for coal cargoes. Weather isn’t the only issue.
In Carboex SA v Louis Dreyfus Commodities Suisse S.A. [2]
Owner Louis Dreyfus Commodities Suisse S.A. (LDC) had chartered 4 vessels to Carboex on an amended AmWelsh VOY berth C/P [Americanised Welsh Coal Charterparty] for the carriage of coal from Indonesia to Puerto de Ferrol in Spain. In June/July 2008 there was a nationwide strike in Spain, there were significant delays to the vessels in getting into berth, as although the strike had ended, the after effects were such that other vessels were ahead of the Carboex ships in the queue to berth.

• For Owner LDC, the vessels arrived at the discharge port when they tendered NOR on the basis of the “whether in berth or not” (WIBON) provision in clause 40, so as to start the running of laytime.
• For Charterer Carboex, clause 9 contained an exception in relation to strikes (“In case of strikes, lockouts, civil commotions…. beyond the control of the charterers which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.”)
LDC first won in arbitration but Carboex appealed and won. It was held that Carboex were entitled to the protection of the exception clause in relation to strikes. The strike clause saying that in case of strikes beyond the control of charterers time should not count, also covered a delay in discharging in Spain caused by congestion due to the after effects of a strike that had already ended when the vessels arrived.

The North American Grain Export Charterparty 1989 (NORGRAIN) [3]

NORGRAIN89 is the most widely C/P form used by Grain Houses and is recommended by BIMCO and FONABSA as the C/P for the grain trade.

vessel black vancouver

NORGRAIN89 has a significance in the context bumper crops this harvest and likely congestion in the U.S. and Canadian ports this fall and winter.
In the NORGRAIN89, before Laytime can commence, ship must have arrived at the loading/discharging berth/port specified in the C/P, then NOR(notice of readiness) must be tendered to the shipper or receiver of the cargo. The ability for the shipowner to tender the NOR itself depends on Vessel Inspection of a Grain inspector licensed by the USDA in the U.S. (NORGRAIN89 clause 3).
Following the receipt of NOR, laytime(time counting) will start at 0800 on the next day SHEX (Sundays and holidays excluded).

clause 18

NORGRAIN89 clause 18b deals with waiting for berth and applies in the situation where a vessel is prevented to enter the limits of the loading/discharging port(s) by an order of arbitrary government officials.
“If the vessel is prevented from entering the limits of the loading/discharging port(s) because the first or sole loading/discharging berth or a lay berth or anchorage is not available within the ports limits, or on the order of the Charterers/Receivers or any competent official body or authority, and the Masters warrants that the vessel is physically ready in all respects to load or discharge,the Master may tender vessel’s notice of readiness, by radio if desired, from the usual anchorage outside the limits of the port, whether in free pratique or not, whether customs cleared or not.

If after entering the limits of the loading port, vessel fails to pass inspections as per Clause 18 e) any time so lost shall not count as laytime or time on demurrage from the time vessel fails inspections until she passed, but if the delay in obtaining said passes exceeds 24 running hours shex all time spent waiting outside the limits of the port shall not count.

Clause 20

In clause 19, “working days of 24 consecutive hours” doesn’t include Saturday or sunday. Sunday and Holidays doesn’t count as Laytime under the NORGRAIN89.
With “weather permitting” (WP) in clause 19a, 19b of NORGRAIN89 C/P:
The interpretation of (WP) is that Laytime is only interrupted if weather conditions prevent actual work from being performed, this time shall be excepted/excluded from laytime.
Contrariwise a clause with the “Weather working” (WW) wording would deduct any time lost due to weather during working hours, even if no real work was scheduled. Charterer is entitled to more time deductions under (WW)[for a practical example of WW in a C/P see FERTIVOY88 Laytime Clause 14b, a C/P used in the NPK complex].

In the NORGRAIN89, WP is used, hence protecting the Owner against time deductions due to weather during working hours when no real work was scheduled by charterer.

Clause 21

In Clause 20, NORGRAIN89 deals with load demurrage and discharge demurrage situations making clear about who between charterer and receiver will pay for demurrage at the discharge. Owner doesn’t know who is the final receiver.

[the rest of the article deals with the intricacies of the NORGRAIN89]










Exclusive advisor to leading energy marketers and producers with energy merchant assets, complex risk fundamentals applied to a macro view on prices, spreads and non-linear dynamics, I impart the knowledge and business skill sets necessary for the professional staff to function effectively.

Simon Jacques is a certified Energy Risk Professional, as distinguished by the prestigious Global Association of Risk Professionals. His Transactional & Operations expertise in commodities is based on hundreds of engagements with some of the world’s leading houses and banks in energy and agricultural commodities at Commodity Merchant Trading and Shipping Advisory Services, the international commodity merchant trading consultancy dedicated to help a clientele comprised of traders/merchants and banks to achieve world-class competency in commodity trading and trade finance.

Commodity Merchant Trading and Shipping Advisory Services can see the same issues of the Law Professor but their team is also able to put the commercial and contractual aspect of shipping in the context of Terminal Operations and Seafaring.

For Traders and Shippers it is a structured approach based on 4 pillars  Analysis, Defence, Negotiation and Collection.


Simon Jacques

Advising the producer, processor and end-user in North America.



Navigating the commodities markets with Freight and Spreads © 2015



  1. hi Simon all in all a very good article. it is very well written. It’s important that the laytime provisions in his c/p do not differ from the provisions in his sales contract. While most of them will have covered this, only a few will admit that the actual impact of these laytime provisions is not always fully clear to them.


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