(Re) Calculating Laytime

re-calculating-laytime

After the documentation has been gathered and there’s a clear understanding of the clauses that imply demurrage on the charter party, the next step is to assess the vessel’s voyage and port activities, and compare the vessel’s port call events to the agreed laytime amount and the claim that was received.

The events that count for laytime and the events that happened during the vessel’s time in port are logged in the Statement of Facts (SoF). An SoF includes information about the vessel’s arrival and departure times, the amount of cargo loaded or discharged, and any delays that occurred during the cargo operations.

However, port operations often become extremely complicated, with a myriad of potential events occurring due to weather, equipment, personnel, and other supply chain disruptions. For dry bulk cargoes, for example, a simple rainstorm can stop loading or discharging operations for a significant period.

Determining how much laytime was used involves comparing the allowed laytime as specified in the charter party agreement, as well as the relevant clauses for contracts (e.g., shifting), to the actual port call events that happened during the voyage.

However, the first thing a seasoned analyst would do in calculating laytime is to understand if the claim (or even the SoF) is valid at all. Two main things can be checked:

  • Was the Notice of Readiness (NOR) tendered before laycan, the agreed period within which a vessel is expected to arrive at the loading or discharging port?
  • Was NOR tendered before the terminal was ready?

If the claim is valid, the analyst will recalculate laytime from the charterer’s perspective, and validate if the claim received from the shipowner is valid, or not.

To calculate laytime, specific events and time ranges within the SoF must be analyzed, such as the Notice of Readiness (ready to berth), Operations Ready and Operations Complete, and All Fast (ready to departure). However, these events take on a new meaning depending on what has been agreed upon in the charter party, and the clauses that were mentioned in the previous section.

After recalculating laytime, the analyst will then compare the invoiced claim vs their own calculation to look for any errors or discrepancies.

  • Are there any differences in the calculation?
  • Are there any letters of protest/dispute or remarks that justify this difference?
  • Did any unaccounted delays happen? Etc.

Although most carriers have a reputation for honesty and billing liable claims, it’s not uncommon to find differences between the claim amount that was received versus the final calculated amount.

Accurately calculating laytime is tied to a deep understanding of the charter party agreement and how the clauses were structured.

Real case study

Picture this situation: A charterer receives a claim from a shipowner, with 1.5 days of demurrage being billed.

When validating the SoF, the charterer calculated laytime starting at 16th of September. However, the shipowner considered the 15th of September as the starting date, resulting in two different laytime amounts.

A dispute letter from the Shipowner revealed that the terminal didn’t want to sign the SoF, due to the terminal not being ready at that time. Essentially this would make the SoF invalid, dropping the whole claim.

Now the charterer has to make a decision:

  • Should we sail without the valid SoF and dispute this later
  • Or should we wait for a valid SoF, and risk delaying the voyage even more?

This simple anecdote shows how lack of information can cause distress on the maritime supply chain. The ultimate decision was to sail without the valid SoF and dispute the amount later, which led to court disputes and at least a year of negotiation between shipowner and charterer. 

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