Demurrage and Detention seem to be one of the most popular topics in this blog.. If you haven’t read about these terms yet, this would be a good time to do so.. Just click on this link..A lot of the times however these terms have been confused with a similar sounding combination Demurrage and Despatch.. I have received several questions from readers about the differences in these terms..
These two sets are two totally different terms which I will explain here..
While it sounds similar, the terms Demurrage and Despatch are used in bulk cargo shipments covered and governed by Charter Parties and is completely different from the terms Demurrage and Detention which is used in containerised shipments..
In bulk shipments, a lot of the cargoes are fixed on FIO terms (Free In and Out) which in simple terms means that the charterer (a person who hires a ship from a ship owner for a particular voyage or for a period of time) is responsible for the loading and discharging operations at the ports and the speed at which these operations are carried out..
Before a fixture (agreement to take a ship on charter) is made, a charterer is required to advise the load/discharge rates – which is the time (in number of hours or days) it will take to load or discharge the cargo, to the ship owner.. This information is required by the shipowner to assess how long his ship will have to be chartered..
Based on these calculations, the shipowner will quote a freight rate for the voyage, which if the charterer agrees, will result in a fixture..
Once the fixture has been made, if the charterer fails to load or discharge as per the load/discharge rates they have given and allowed in the contract, the shipowner will hold them liable for “Demurrage” @ a rate which is pre-agreed between the owners and the charterers..
In this case the term Demurrage refers to the time that the shipowner has lost because the charterer could not complete the required cargo operations within the stipulated/agreed time frame..
At the other end of the spectrum, if the charterer completes the load/discharge operations before the time frame indicated, they can claim “Despatch” from the owners @ a rate which is pre-agreed between the owners and the charterers..
Despatch refers to the time that the shipowner has been able to save since the charterer completed the cargo operations quicker than anticipated/agreed and was able to despatch (sail) the ship quicker than expected which is to the benefit of the ship owner..
Have you had any experiences with Demurrage/Despatch..??
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