Page 207 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes 9. There are three types of conference rates, including commodity rates, ..........................., and
commodity-class rates.
10. When a tramp carrier is engaged, it is said to be under.............................

9.8 Chartering Practices

When a tramp carrier is engaged, it is said to be under charter. The charterer (person who
engages or hires the tramp) can hire the tramp either whole or bulk of the space. The agreement
between the ship owner and charterer for hiring the ship is called charter party. A tramp may be
chartered in one of the most important forms:
(a) Voyage Charter: A ship may be engaged for a single voyage (say from port A to port B) or
for consecutive voyage (say from port A to port B to port C) or return voyage (say from
port A to port B and return to port A). The ship owner provides the vessel to the charterer
for carrying an agreed quantity of cargo from a particular port in a country (Mumbai,
India) to another port in a different country (Baltimore, USA). Instead of one port, ports of
loading in India could be more (Mumbai, Chennai) and in similar way ports of discharge
can be more than one in USA (Baltimore, New York). Alternatively, the agreement (known
as charter party) provides carriage of cargo between ports within a certain range (say from
any port in India to any port in USA). In the later case, the charterer has to convey the
names of the specific ports to the master of the vessel before the commencement of voyage.
The agreement may provide that the charterer has to pay for the freight according to the
actual quantity loaded or for the total capacity of the ship. Even if the charterer is not able
to load the total quantity agreed upon, he has to pay the freight for the agreed quantity.
The remaining capacity not booked by the charterer can be hired by the ship owner to
another charterer. In this case, the ship owner has to bear the total expenses for the voyage
such as fuel, port charges, salaries of crew, stores and provisions, depreciation, insurance,
etc. In other words, ship owner has to bear all running expenses and operating expenses
for the voyage. The ship owner recovers the freight charges from the charterers in the
form of revenue. After meeting all expenses, balance of revenue becomes the profit for the
voyage to the ship owner.
For a comparison, this practice can be compared to engaging a total bus by a marriage
party with understanding that fifty seats would be paid at an agreed rate and the balance
10 seats can be sold to other passengers by the bus owner. Even if the marriage party does
not come in full swing of total booking made, still the bridegroom’s party has to pay for
50 seats, as agreed. The bus owner is free to book the balance 10 tickets to another marriage
party, provided he is able to synchronise!
(b) Time Charter: Under time charter arrangement, a ship is hired for a fixed time period with
the condition that the ship is to be operated in specified territories. Though the primary
essence of the agreement is for the fixed time, still the charterer can employ the ship only
within the specified territories. The charterer cannot operate the ship beyond the territorial
jurisdiction. The ship owner has to deliver the ship to the charter, on the agreed date, in a
seaworthy condition. Besides, it is the duty of the ship owner to ensure the ship, in the
same seaworthy condition, during the period for which the ship has been given on contract
to the charterer to enable him to use the ship for the purpose of carrying cargo during the
contracted period. It is the responsibility of the ship owners to provide the crew and
maintain stores and provisions for the crew during the period of voyage. All the operating
expenses such as insurance, depreciation and other fixed expenses have to be borne by the
ship owner. All the running expenses like fuel, port charges, canal dues and cargo expenses
have to be met by the charterer. The charterer has to pay the agreed hire charges, generally

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