March 2007

Demurrage and Despatch FACT sheet

I nternational shipping contracts of affreightment include de- running day, or pro-rata for any part of a day. Such demurrage
murrage and despatch clauses which are standard inclu- shall be paid by the Shippers to the Owners day by day, when
sions in the majority of dry bulk charter parties and sales and where incurred”.
contracts worldwide, including (but not limited to) coal, iron ore, At the time of negotiating a sales contract, the price negotiated
salt minerals, cement, grains, and steel products. between the Buyer and AWB (International) (AWB(I)) will factor
A Charter Party is a written agreement between a ship owner amongst other issues the risk associated with the delivery of the
and a charterer whereby a ship owner fixes an entire vessel, or wheat and any particular requirements that the Buyer may have
part thereof, to the charterer. The charterer agrees to provide the with respect to grade and quality. The National Pool benefits
cargo to the ship owner at an agreed time and load port(s). The from receiving despatch payments, however at other times, the
ship owner in turn agrees to convey the cargo to a particular National Pool is required to pay demurrage charges. Therefore,
place. Principally, the agreement stipulates the port(s) of loading the overall Net return to the Pool is affected by the combination
and delivery, how the freight is to be paid for and sets out in of despatch benefits and demurrage costs.
broad terms the legal responsibilities and liabilities of the parties.
The figure below shows that for the National Pool Year 2004-05,
In addition, the charter party includes specifics of demurrage and
AWB(I) had a net return of negative AUD 14.076 million for
despatch and the terms and quantum of any calculations
demurrage and despatch.
involving demurrage and despatch.
IRAQ 2003-2005
Laydays is the period of time agreed between the parties during
In 2003-04 approximately AUD10.7million of net demurrage
which the owner must present his vessel for loading. Laytime is
costs were incurred by AWB(I) as a direct result of shipping to
the number of days as agreed by the parties that the charterer
Iraq and the associated conflict. The remainder was primarily
has to load or discharge the vessel before the vessel is deemed
due to delays in export shipments from various load ports in
to be on demurrage.
Australia.
Demurrage is the agreed level of damages payable to the vessel
Additional demurrage costs were incurred in the 2004-05 Pool
owner for delays in loading or discharging the vessel (for which
as a direct result of the dispute over claimed iron filing con-
the owner is not responsible), after the laytime has expired. It is
taminations in Iraq.
customarily expressed in United States currency per day”.
INDIA 2006
Despatch is the money payable by the ship owner to the char-
In 2006 the execution of the first contract of wheat sold to India
terer in the event that the vessel completes loading (or dis-
was delayed due to difficulties meeting the import regulation re-
charge) within the agreed laytime. Customarily the rate of des-
quirements of the Indian Government.
patch is usually half the demurrage rate expressed in United
States currency per day. In relation to freight contracts ‘washed out’ and/or diverted
to other markets, the National Pool incurred an additional
For example the demurrage clause from an AUSTWHEAT Char-
AUD 9.577 million of shipping execution expenditure.
ter Party (a standard Australian charter party agreement, recom-
mended by the documentary committee of the Baltic and Interna- This expenditure included load port demurrage at AUD 4.431
tional Maritime Council (BIMCO), Copenhagen) Clause 15 reads: million and freight contract washout charges at AUD 5.146 mil-
“Should the cargo not be loaded within the time stipulated in lion. AWB(I) has since been successful in tendering for further
Clause 11 (the Loading Clause which determines laytime under contracts with India.
AUSTWHEAT), demurrage shall be paid at the rate of ……per

Wheat Export Authority

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