Page 208 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

Unit 9: Characteristics of Shipping Industries

in advance, whether the ship is used or not during the contractual period. After the period Notes
is over, charterer has to return the ship, in the same seaworthy condition; it has been
given, back to the ship owner, except the normal wear and tear.
The ship owner is assured of the contracted hire charges. By a long-term contract of
affreightment, the charterer is protected from the vagaries of fluctuations in freight rates
during the long-term contractual period. The charterer can also sublet the ship if the
agreement so provides. If the market rates improve and the ship is sublet later, then the
charterer may earn more money than what he has to pay in the form of hire charges to the
ship owner and stands to gain.
The charterers have greater responsibility under time charter compared to voyage charter.
However, under time charter, the ship owners have to undertake the responsibility that
the ship is maintained in a seaworthy condition during the contract period. The ship
owners have to exercise all reasonable care and diligence to maintain the ship, in seaworthy
condition. This implies that the ship owners are responsible in keeping the hull, machinery
and equipment in a thoroughly efficient condition during the contract period so that the
charterers are able to employ the ship for carrying the cargo without any problem,
whatsoever.
(c) Bare Boat Charter or Charter by Demise: Under this agreement, the bare boat is let out by
the ship owner to the charterer for a fixed period. The ship owner hands over the boat in
a seaworthy condition to the charterer. The ship is at the disposal of the charterer during
the period. It is the responsibility of the charterer to bear all running expenses like paying
salary to crew and maintaining the necessary provisions and stores, in addition to bearing
all the operating expenses, as mentioned above in the charter voyage. The charterer has
the right to appoint the master of the crew and the Chief Engineer, subject to the approval
of the owners.
The difference between the time charter and bare boat charter lies in the fact that in the
later case the ship lies in the bare form with the charterer who has the full right to operate
the ship, in the way he desires. The ship owners have the minimum responsibility and are
considered as ‘dead’ as they have no concern about the expenses and the use of the ship.
Under this type of chartering arrangement, which is frequently also termed ‘chartering by
demise,’ the ship owner virtually relinquishes all responsibilities and rights in respect of
his vessel for a specified period, in return for a pre-arranged and regular payment of hire.

The charterer becomes an assumed owner, operating, crewing and chartering the ship as if he
were, in fact, the owner. They have to return the ship in the same seaworthy condition as they
have received, except normal wear and tear. For the agreed period, the ship owners are paid a
fixed sum per ton, calculated on dead weight of the ship. The charterer is totally free to use the
ship for carrying the cargo during the specified period and has to bear all running and operational
expenses.

9.9 Global Trade and Container Traffic

Shipping is truly the lynchpin of global economy and international trade. More than 90% of
world merchandise trade is carried by sea and over 50% of that volume is containerised. In
today’s era of globalisation, international trade has evolved to the level where almost no nation
can be self-sufficient and global trade has fostered an interdependency and inter-connectivity
between countries. Shipping has always provided the most cost-effective means of transportation
over long distances and containerisation has played a crucial role in world maritime transport.

LOVELY PROFESSIONAL UNIVERSITY 203