Is #laytime / #demurrage more a process or a negotiation?
Feedback on this topic in the past was, of course, a mix of views, largely dependent on the industry sector commenting. The “hot” topic related to clauses, in charter parties and commodity contracts, that were open to interpretation leaving room to negotiate.
The lack of clarity as a result of ambiguous laytime clauses in contracts leaves the door open to 'negotiations' and time wasted sorting them out.
Often the time/effort spent by personnel sorting out the 'negotiated' point exceeds the actual value of the disagreement!!
Studies have shown that more than 70% of laytime calculations are actually process based, ie: Charterer accepts the 1st Laytime claim sent in by the Owner. No to/fro negotiations needed. This is assisted by clear and explicit laytime clauses being written in the charter party.
When analyzing the figures in greater detail, there appears to be a tendency for ‘negotiations’ to occur a lot more frequently in the SHEX trades where laytime clauses/exceptions are more prevalent and where such clauses are not always written in a clear, concise manner, minimizing the scope for different interpretations.
A simple example relevant to all sectors is an “Anchorage-to-Berth Shifting” clause where frequently this clause is written in CPs as:
”shifting from anchorage to berth not to count as laytime – even if on demurrage”.
Simple enough, it appears, until we look at the potential options for how one could interpret this clause when looking at SOF events.
Is it:
From ‘Pilot on board’ to ‘All fast’
Or
‘Anchor up’ to ‘1st line ashore’
Or
‘Anchor up’ to ‘All fast’
Or
‘Pilot on board’ to ‘1st line ashore’
And/or a multitude of other options if the SOF also includes ‘berthed’ as an event as well!
One quickly sees how one can waste time negotiating just this point as it has been left open to interpretation.
In comparison, Global Coal’s SCOTA contract form is 100pct explicit, providing:
‘’For the avoidance of doubt, the Vessel’s inward voyage to “all-fast” at any point of unloading in the Port (including any shifting between the earlier of the time of “anchor-up” and “pilot on board” at the point of anchorage and the time of “all-fast” at any point of unloading) will not be counted towards Laytime, Turntime or Demurrage’’
Explicit descriptions lead to less ‘interpretations’ and less time wasted in agreeing the ‘excepted’ event.
The more one can encourage chartering and legal staff to make their CP laytime exclusion clauses explicitly describe which events should stop and restart the laytime clock, the quicker laytime/demurrage claims can be agreed.
More a process than a negotiation?!
Let us know what you think?
#supplychain
#commodities
#chartering
