Question 3 Toba shipping company chartered a vessel

Posted: April 4th, 2019

Question 3 Toba shipping company chartered a vessel under a time charter for two years from COSCO. From the charterer’s perspective, explain the following terms that are commonly used in charter parties and liner bills of lading: 1. Himalaya Clause 2. Lien 3. Paramount Clause 4. General Average and Salvage 5. Naming of loading and discharging ports 6. The amended Jason Clause [(2+2+2+2+2+2)=12 marks]

Question 4 (The answer to this question will not count towards the word limit) Consider the following two options for the vessel MV KONTA which is available for new employment at Port of Ras Tanura. The vessel’s details are as follows: Vessel details: Deadweight: 70,000 tonnes Fresh water: 200 tonnes Constants: 300 tonnes Fuel consumption at sea: 35 tonnes per day (the vessel must carry 300 tonnes of fuel in addition to that required for the voyage) Fuel consumption in port: 3.5 tonnes per day Daily running costs: $5,400 Option 1 is a voyage from Port of Ras Tanura to Aberdeen Port under a voyage charterparty. Details of the proposed employment are as follows: Voyage charterparty details: Sea voyage duration: 35 days Time in ports: 11 days (in total) Loading port charges : $25,000 Discharging port charges: $20,000 Suez Canal charges: $50,000 Freight rate: $19.5 per tonne Bunker cost: $425 per tonne Total commission: 4.5% Option 2 is the hire of MV KONTA under a time charterparty at a daily rate of $6,100 for 60 days. The delivery port is Port of Ras Tanura and the redelivery port is Aberdeen Port. Total commission is 4.5%. Which option is better for the shipowner? Justify your answer with appropriate explanations and calculations.

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Answer 3:

Himalaya Clause: It is a clause in a bill of lading that extends the benefits of the contract of carriage to other parties, such as the ship’s agents, stevedores, and other third-party contractors who are involved in the performance of the carriage. The clause provides these third parties with a contractual right of action against the carrier in the event of loss or damage to the goods during transit.

Lien: It is a legal right of a party to retain possession of property until a debt or other obligation is satisfied. In shipping, a lien can be exercised by a shipowner, a carrier, or a stevedore to secure payment of unpaid freight, demurrage, or other charges.

Paramount Clause: It is a clause in a bill of lading or charter party that stipulates that the carriage of goods is subject to a particular international convention, such as the Hague-Visby Rules or the Hamburg Rules. The clause provides a framework for the rights and obligations of the parties involved in the carriage and can limit the carrier’s liability for loss or damage to the goods.

General Average and Salvage: General Average is a legal principle under which all parties involved in a maritime adventure share the cost of any voluntary sacrifice or expenditure that is made for the common safety of the ship and cargo. Salvage is a similar principle that applies to the recovery of a ship or cargo that is in danger or has been lost.

Naming of loading and discharging ports: It is a term in a charter party or bill of lading that specifies the ports where the goods will be loaded and discharged. The naming of these ports can affect the cost and efficiency of the carriage and may also impact the legal and regulatory requirements that apply to the shipment.

The amended Jason Clause: It is a clause in a charter party that allocates the responsibility for complying with international maritime regulations to the charterer. The clause is designed to ensure that the ship complies with all relevant safety and environmental standards during the course of the charter, and can help to reduce the risk of fines or other penalties for non-compliance.

Answer 4:

To determine which option is better for the shipowner, we need to compare the revenues and costs of each option and calculate the profit for each.

Option 1:

Revenue = Deadweight x Freight rate = 70,000 x $19.5 = $1,365,000
Total costs = Loading port charges + Discharging port charges + Suez Canal charges + Bunker cost + Daily running costs x (sea voyage duration + time in ports) = $25,000 + $20,000 + $50,000 + (325 x $425) + ($5,400 x 46) = $1,170,450
Net profit = Revenue – Total costs = $1,365,000 – $1,170,450 = $194,550

Option 2:

Revenue = Daily rate x Time charter duration = $6,100 x 60 = $366,000
Total costs = Fuel cost for voyage + Constants + Fresh water + Daily running costs x (time charter duration) = (35 x 35) + 300 + 200 + ($5,400 x 60) = $374,500
Net profit = Revenue – Total costs = $366,000 – $374,500 = -$8,500

Based on these calculations, it is clear that Option 1 is more profitable for the shipowner than Option 2. Therefore, the shipowner should choose Option 1, which is the voyage charterparty from Port of Ras Tanura to Aberdeen Port.