Types of Charter Arrangements

The international trader follows both spread in prices of bulk commodities in different areas of the world and the charter rates for carrying car-goes from locations where prices are low to where they are high. Whenever price spread is greater than chartering cost, a deal is made. This would be a one-shot arrangement and a voyage charter or trip charter would be made, covering only the specific move between the origin and destination, and within the time frame agreed to take possession of and deliver the commodity. The other widely used form of chartering is on the basis of a time charter, usually for a period of several months to a year. This would be used, for example, by a steel company that decided it needed to supplement its own fleet to the extent it could fully utilize another vessel for that specified period of time.

The term bareboat charter applies to a time charter in which the owner of the vessel supplies only the vessel and the user must provide the crew. This is also sometimes called a demise charter. Often these are used by individuals who see ships solely as an investment to be bought and sold; during the time they own the vessel they charter out to some user who assumes complete responsibility for the vessel’s operation. There are, in fact, many variations of chartering agreements that are entered into. These agreements are influenced by tax laws or subsidies.

A contract of affreightment is a charter arrangement that commits the ship-owner “to carry quantities of a specific cargo on a particular route or routes over a given period of time using ships of his choice.

It is a form of multiple voyage charter and may extend over a period of years. The ship-owners may deploy various vessels as they are needed to carry portions of the entire lot being shipped. Contracts of affreightment are “often used in LPG-gas, chemical and reefer shipping.

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