Introduction of chartering

Chartering is an activity within the shipping industry. In some cases a charterer may own
cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price, called
freight rate. Freight rates may be on a per-ton basis over a certain route or alternatively may
be expressed in term of a total sum normally in U.S dollars per day for the agreed duration of
the charter. In this contractual relation and commitment, setting forth their respective duties
and obligations is terms and conditions under which they remains legally bound with legal
consequences.
Next, chartering is nothing but an engagement of a fleet for transportation of goods or
passenger traffic. A charterer may also be a party without a cargo who takes a vessel on
charter for a specified period from the owner and then trades the ship to carry cargoes at a
profit above the hire rate, or even makes a profit in a rising market by re-letting the ship out
to other charterers.
Besides that, it is depending on the type of ship and the type of charter, normally a standard
contract from called a charter party is used to record the exact rate, duration and terms agreed
between the ship owner and the charterer.

Various type of chartering

There are many types of chartering in shipping industry, these include voyage charter,
contract of affreightment(COA), time charter, time charter on trip basis(TCT) and bareboat
charter or demise charter.
Firstly, the voyage charter involves the chartering of ship and crew to carry the cargo
between the load and the discharge ports. The charter is responsible for paying the ship owner
on per ton basis while the ship owner is obliged to pay for the fuel costs, cost for crew and
port cost (excluding stevedoring).The payment for the use of the vessel is known as freight. A
voyage charter specifies a period, known as lay time, for loading and unloading the cargo. If
lay time is exceeded, the charterer must pay demurrage. If lay time is saved, the charter party
may require the ship owner to pay despatch to the charterer.
Secondly, a contract of affreightment(COA) is a contract similar to a voyage charter, but
ship owner undertakes to carry a number of cargoes within a specified route. Agreed
frequency of cargoes may require more than one ship.
Thirdly, a time charter is the hiring of a vessel for a specific period of time, the owner still
manages the vessel but the charterer selects the ports and directs the vessel consumes, port
charges, commissions, and a daily hire to the owner of the vessel. Next, a trip time charter is
a comparatively short time charter agreed for a specified route only (as opposed to the
standard time charter where charterer is free to employ the vessel within agreed trading
areas).
Lastly, is a bareboat charter or demise charter necessitates the shipping companies to finance
for the charter of the ship. In this kind of charter arrangement, the contract does not involve
any agreement on administration or operational management. The Shipping charterers are
responsible for paying for the costs of crew, fuel and the port expenses. The charterers are
required to pay for the hull insurance and the period for the bareboat charter arrangement
between the shipping companies and the charterers ends after the charterer takes full
ownership of the ship.