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SHIP TERMINOLOGIES –
ORGANIZATIONS & CHARTERING
By Kevin Joseph
MBA (Energy Trading)
Chartering is an activity within the shipping industry.
The definition of a charterer is a person who reserves
a ship or other mode of transportation for the
personal use of others.
Depending on the type of ship and the type of
charter, normally a standard contract form called a
charter party is used to record the exact rate, duration
and terms agreed between the shipowner and the
In case the charterer owns the cargo:
He employs a shipbroker to find a ship to deliver the cargo
for a certain price, called freight rate.
Freight rates may be on a per-ton basis over a certain route
(e.g. for iron ore between Brazil and China), in Worldscale
points (in case of oil tankers) or alternatively may be
expressed in terms of a total sum - normally in U.S. dollars per day for the agreed duration of the charter.
In case of a charterer without a cargo:
He takes a vessel on charter for a specified period from the
owner and then trades the ship to carry cargoes at a profit
above the hire rate, or even makes a profit in a rising
market by re-letting the ship out to other charterers.
Ship broking is a financial service, which forms part of the
global shipping industry.
Shipbrokers are specialist intermediaries/negotiators (i.e.
brokers) between shipowners and charterers who use ships to
transport cargo, or between buyers and sellers of ships.
Some brokerage firms have developed into large companies, incorporating
departments specialising in various sectors, e.g.
• Sale and purchase
• Dry cargo broking
• Tanker broking
• Container broking
• Ship broking Training
• The principal shipping and shipbroking centres are London,
New York and Singapore.
• Tokyo has a longstanding tradition in shipping/shipbroking,
which is now more focused on Japanese domestic trade.
• It was commonplace for shipbrokers to cover more than one
discipline, although nowadays the vast majority of
• The Institute of Chartered Shipbrokers sets educational
standards throughout the industry, fellowship of which is
considered a great honour.
• A shipping agency or shipping agent is the designation for
a person or agency responsible for handling shipments and
cargo at ports and harbors worldwide on behalf of shipping
• These agents are referred to as port agents or cargo
• There are several categories of shipping agents such as:
port agents, liner agents and own agencies, each rendering
specific services depending on the shipping company they
• Shipping agents will quickly and efficiently take care
of all the regular routine tasks of a shipping company.
• They ensure that essential supplies, crew transfers,
customs documentation and waste declarations are
all arranged with the port authorities without delay.
• They also provide the shipping company with updates
and reports on activities at the destination port so
that shipping companies have up-to-the minute
information available to them at all times while goods
are in transit.
Responsibilities of shipping agents include:
ensuring a berth for the incoming ship
arranging for the pilot and the tugs if necessary
drawing up the documents for the customs and harbour services
assisting the master in making the necessary contacts with the local
authorities and the harbour authorities
arranging for the necessary ship fresh water / provisions
arranging for the necessary doctor for the crew any medical assistance
arranging for storage bunkers if these are needed
arranging for the necessary repairs
conveying instructions to and from the ship owner
organizing the supply, transport and the handling of the goods
organizing the necessary contacts with the stevedores
collecting freights, cargoes
contacting shippers and the receivers of the goods
In the case of damage to cargo or the ship, the shipping agent also
makes the necessary arrangements (at the request of the ship's
master or owner) with the insurance company, and for nautical
inspections and the services of experts or surveyors, etc.
AAAA - Always Accessible
It is a term in Charter-Party which stipulates
that the charterer must not order the ship to
a port or berth where she would touch the
bottom or perhaps be unavailable at any time
due to tidal variations.
ADDCOM - Address Commission
It is a payment made by vessel owners to charterers;
It is stated in the charter party as a percentage of the amount
paid in freight.
Address commission does not require any particular services
on the part of the charterers, and amounts therefore to a
slight reduction in the freight rate.
The reason for this system is sometimes said to be that the
charterer's shipping department for bookkeeping purposes
must show some kind of income from their activities
A charter made without provision for address commission is
said to be free of address.
COA - Contract of Affreightment
Contract of Affreightment is usually a contract for the carriage of a
specified type and quantity of cargo, covering two or several
shipments and running over a long period.
In the COA it is the cargo and not the vessel that has a central
The vessel owner undertakes to provide cargo-space (at a specified
time, and for a specified freight) to the merchant who
is liable for payment whether or not the cargo is ready for shipment.
This contract addresses issues associated specifically with a vessel,
its crew, and the routes on which it will be plied.
Not Always Afloat But Safe Aground
It is a marine term used to describe berths in
There are areas and ports where water depth is
restricted but, the bottom being soft mud, it is
customary for ships to safely lie on the bottom.
As the time of the rotation of the moon round
the earth is not an exact day, the times of tides
This can be calculated precisely so that almost all
the world ports publish tide tables.
Such tables can be of vital interest to shipping
because the rise and fall of tides determines how
deep the water will be in the port area during the
course of the day and so dictates when ships can
reach the port and when the water is too shallow
to accommodate the ship's draft.
In some ports, the draft is deep enough at high
water to allow the ship to enter but when the
tide falls the ship goes aground, hence the
abbreviation mentioned in the chartering terms
NAABSA - Not Always Afloat But Safe Aground.
The effect of neap tides can have a serious effect
on NAABSA ports because a ship near the upper
limit of the permitted draft may enter without
difficulty on a reasonably high tide but may
become trapped for several days if the neap tide
occurs while the ship is at that berth.
Dead Weight All Told
It states the total amount of weight that a
ship may carry before it passes the waterline,
including the weight of: cargo, water, crew,
fuel, food and anything else that is not part of
the ship and is not counted in its' light
Dead weight all told = (Loaded displacement)(light displacement)
Weight of cargo, stores and water, i.e. the
difference between lightship and loaded
Its commercial importance is that it represents
the total weight a ship can carry which includes
cargo, fuel, stores, fresh water etc.
Deadweight Cargo Capacity
This indicates the potential earning capacity
of a ship, but it is not a figure that is cast in
When quoted in a ship's description it
assumes that the maximum quantity of
stores and bunkers are on board.
In practice the operator may increase the
DWCC by carrying less bunkers.
APS - Arrival Pilot Station
It is a Location often used as the place of delivery of a ship
by the shipowner to the charterer at the commencement of
a time charter. The hire charge commences from the time
‘Delivery point' of a vessel in any time charter negotiation is
a MAJOR point of discussion and choice can come down to
the prevailing market conditions at that particular time.
All charterers try and get APS delivery because that means
they only start paying hire at the load port (ie arrival pilot
station) while All shipowners try and get DOP delivery
(dropping outward pilot station at last port of discharge previous voyage) because it means the charterer pays from
the moment the ship leaves the last discharging port of the
AMERICANISED WELSH COAL CARTERPARTY
Voyage charter party used for shipments of coal from Welsh ports, United
The AMWELSH 93 has been officially approved by the Board of Governors of
ASBA(Association of Ships and Broke Agents) and has been adopted by the
Documentary Committee of BIMCO as a "Recommended" Form
Few of the clauses –
• Clause 1 - Loading Port(s)/Discharging Port(s) the word "dock" used in the AMWELSH
1979 has been replaced by the word "berth"
• Clause 2 - Freight Payment Similarly as with the AMWELSH 1979, it is left to the
parties to agree on the various details regarding freight payment, currency, time and
place for payment, etc
• Clause 3 - Notices & Loading Port Orders. For many mining products, including coal,
it applies that cargoes often travel a long distance from place of origin or production
site to port of shipment; for that reason, advance notice of the date of the vessel's
expected readiness to load is of great importance to shippers/charterers
(“BIMCO”) Uniform General
Charter, or “GENCON”, is the
standard form voyage
charterparty most commonly
GENCON 1994 consists of two parts.
Part I is the “box form” which all the necessary
information can be conveniently inserted and seen by
the parties. The details to be inserted in this part are
freely negotiable and may be traded back and forth.
Part II contains all the standard terms and conditions
which are usually non-negotiable, though it is common
for the parties to amend some of the printed clauses by
way of attaching a rider which overrides them or
incorporates the standard terms into a negotiated fixture
There are 26 boxes in total in Part I
boxes 1 to 7 describe the identity of the parties and the details and
capacity of the vessel.
Boxes 8 and 9 describe the present position of the vessel and the
expected date when the vessel is ready to load the cargo.
Boxes 10 to 11 provide information of the loading and discharging
Box 12 describes the type and quantity of the cargo to be loaded and
whether “full and complete” or “part” cargo
Boxes 13 and 14 give details of the freight rate (per tonne,lump sum
or other basis), freight payment currency and method.
Box 16 states the “laytime”, i.e. the amount of time available to the
charterers free of charge for loading and discharging operations.
Boxes 17 to 19 give particulars on the identity of the shipper and the
agents in the loading and discharging port.
Box 20 states the “demurrage rate” which is the penalty rate payble
to the owners if the charterers exceed the agreed time in loading/
discharging the cargo.
Clause 21 sets out the cancelling date which means if the vessel is
not ready to load on that date the charterers may cancel the charter
General Average shall be adjusted in London unless otherwise
agreed in Box 22 according to an international convention called
“York-Antwerp Rules 1994”.
Box 23 states the freight tax payable if it is for the owners’ account.
Box 24 states the brokerage commission and the person to whom it
Lastly, Boxes 25 and 26 state the law and place of arbitration and
whether there are any additional clauses agreed between the parties
Part II of GENCON 1994 provides the standard terms and conditions
clause 1 - introductory clause
gives the owners an unfettered right to refuse to put their vessel at the named port and
clause 2 – owners’ responsibility
Clause 2 provides that the owners are responsible for loss of or damage to the goods or for
delay in delivery of the goods only in cases where the loss, damage or delay has been caused
by the personal lack of due diligence on the part of the owners or their manager to provide a
seaworthy vessel and to secure that she is properly manned, equipped and supplied, or by
the personal act or default of the owners or their manager.
clause 3 – deviation
Clause 3 provides that the owners have an unfettered right to call at any port or ports in any
order, to tow and/ or to assist vessels, and to deviate from its course for the purpose of saving
life and/ or property.
clause 4 – payment of freight
freight can either be “pre-paid” or “paid on delivery”
clause 5 – loading/ discharging
Clause 5(a) provides that all the risks, liabilities and expenses associated with the loading,
stowage, trimming, tallying, lashing and discharging of the cargo shall be borne by the
Clause 5(b) states that the owners shall provide free use of the vessel’s cargo handling gear, if
any, and the necessary motive power, unless the parties otherwise agree; and provide free of
charge cranemen/ winchmen to operate the cargo handling gear, unless prohibited by local
Clause 5(c) provides that the charterers shall be responsible for damage (beyond
ordinary wear and tear) to any part of the vessel caused by stevedores
clause 6 – laytime
Clause 6 states that the cargo shall be loaded/ discharged within the time frame in
a weather permitting condition, excluding Sundays and holidays
clause 7 – demurrage
demurrage at the loading anddischarging port is payable by the charterers upon
receipt of the owners’ invoice. If it is not paid accordingly, the owners shall give
the charterers 96 hours to rectify, exhausting which the owners can terminate the
charterparty and claim damages.
clause 8 – lien(legal claim)
owners have a lien on the cargo and all sub-freights payable in respect of the
cargo for freight, deadfreight, demurrage, claims for damages and for all other
amounts due under the charterparty. the owners will be entitled to obtain security
up to an amount of a reasonably calculated claim, including the costs of recovery
clause 9 – cancelling clause
if the vessel is not ready to load on the cancelling date the charterers shall have
the option to cancel the charterparty.
clause 10 – bills of lading
gives the owners an express right of indemnity from the charterers for issuing bills
of lading at the charterers’ request and as a result of which the owners may
assume greater liabilities than under the charterparty.
Major coal importing
Arbitration agreement is a written agreement
between the parties to a dispute or to designate a
particular arbitrator to resolve their disputes
arising out of a particular business relationship.
It calls for a mandatory arbitration before an
An Arbitration agreement is usually legally binding.
For example : Companies often require employees
to sign an arbitration agreement which prevents
the employee from suing the company in court.
ARBITRATION AGREEMENT (sample)
It is hereby mutually agreed between___________________________*1 and
___________________________________*1 for the settlement of any and all disputes arising out of or in
connection with _________________________________ *2 that :*3
The disputes shall be submitted to the Tokyo Maritime Arbitration Commission (TOMAC) of The Japan
Shipping Exchange, Inc. for arbitration in Tokyo.*4
The arbitration proceedings and all other related matters shall be conducted in accordance with the Rules
of Maritime Arbitration of The Japan Shipping Exchange, Inc. (the "TOMAC Rules").
The award given by arbitrators appointed in accordance with the TOMAC Rules shall be final and binding
upon the parties.
Other arbitration agreements, if any, with regard to such disputes shall become null and void upon the
making of this agreement.
_____________________________*5 _________________________________ *5
________________________________ _________________________________ "
Explanation of Arbitration Agreement
(Note 1.) Indicate the names of the parties.
(Note 2.) Write down sufficient information to allow determination of fundamental issues like the type of
contract in dispute, and where the dispute took place.
(Note 3.) Indicate below the particulars of the agreement to arbitrate.
(Note 4.) International arbitration is only conducted in Tokyo.
(Note 5.) All parties should sign the agreement and indicate a specific address. In the case of a corporate
party, a representative must sign and the name and address of the corporation should be indicated. It is
customary to align the signatures horizontally one next to another, not vertically, one over another.
It is a Provision which includes in, certain
construction, insurance, labor, sale, or other
types of contracts, requiring settlement of
disputes through arbitration instead of
Often the procedure to be followed in
arbitration is also laid down in the same
AS - Along Side
Free Alongside Ship
It is an agreement between a buyer (importer) and a
seller (exporter) in which the seller is responsible for
the transportation and risk of the good until it is
within reach of the ship's crane, at which point the
buyer assumes responsibility for both.
That is, the seller does not bear the expense or risk
of actually loading the good onto the ship.
The buyer is responsible for clearing the good
through customs in both the home country and the
country of delivery.
Association of Ship Brokers
and Agents (ASBA)
ASBA is an independent membership trade association,
established in 1934 that brings together member Ship Brokers,
Agents and Affiliates with offices in the United States and
ASBA aims to inculcate
The ideals and standards of professional conduct and practices.
Define customs of the business
To establish and maintain uniformity in commercial usages
To adjust controversies and misunderstandings
To promote the common interests of those business
establishments which are engaged in business as ship brokers
Ship Brokers (Dry Cargo, Tanker, and Sale & Purchase)
ASBA Certified Agents
Affiliate Members (Ship Owners, Operators, Charterers,
Tug Companies and Maritime Lawyers)
ADDITIONAL WAR RISK INSURANCE
• This is an extra amount paid to the owner of a time-chartered vessel if the
ship is ordered to a port or an area in which war or hostilities are taking
place and the ship owner's insurers require an additional insurance
premium for the vessel to be considered to be covered against risks in that
• When tankers-are fixed to carry oil cargoes from or to a place where war or
hostilities are taking place, hull insurers quickly impose additional war risk
premiums on ships travelling to the areas of hostilities.
• In the shipping business, it should be made clear in the charterparty as to
which party will bear the cost of the AWRI premium.
• If there is no clause in the charterparty and the charterer orders the ship to
a war danger area, the owner may very well attempt to demand
reimbursement of premiums from the charterer.
Time allowed by the shipowner to the voyage charterer to carry
out the cargo loading and/or discharging operations; laytime
may be expressed as a certain number of days or number of tons
of cargo loaded/unloaded per day.
In other words, the period of time agreed between the parties
during which the owner will make and keep the vessel available
for loading or discharging without payment additional to the
Laytime in which loading and discharging times are calculated
separately and any time saved in one operation is allowed to
offset the additional time used in the other.