Commercial Shipping // Voyage Charter Operations
BIMCO Laytime Definitions
Demurrage, Laytime, and Despatch: Commercial Calculations, NOR Rules, and Charter Party Terms
A practical guide to port stay accounting under voyage charter parties. Legal mechanisms governing Laytime commencement, Notice of Readiness (NOR) validity, Laycan windows, liquidated damages under Demurrage, incentive calculations for Despatch, and the creation of evidentiary Statement of Facts (SOF) and Time Sheets.
| Concept | Legal & Operational Definition | Financial Nature |
|---|---|---|
| Laytime | The contractually agreed period allowed to the charterer for loading and discharging cargo without incurring additional payments over the agreed freight. | Subsumed into the primary freight rate. |
| Demurrage | Agreed liquidated damages payable by the charterer to the shipowner for detaining the vessel in port beyond the permitted laytime. | Fixed daily rate (e.g., $15,000 / day pro rata). |
| Despatch (Dispatch) | A financial incentive paid by the shipowner to the charterer for completing cargo handling prior to the expiration of allowed laytime. | Customarily agreed at 50% of the demurrage rate (DHD — Despatch Half Demurrage). |
Fig. 1. Bulk carrier handling cargo alongside: precise recording of time increments decides laytime and demurrage claims.
1. Charter Party Framework: Where Laytime Applies
A Charter Party defines commercial risk sharing between the disponent owner and the merchant. How port time is treated depends on the governing charter form:
- Voyage Charter: The owner agrees to transport a designated parcel of cargo between specific ports for an agreed freight sum. Laytime, demurrage, and despatch apply exclusively to voyage charter agreements, as port delay risks fall upon the charterer;
- Time Charter: The charterer hires the vessel for a defined calendar period, paying a continuous daily hire rate. Demurrage does not exist in time chartering; port delays simply remain on charter hire unless caused by an owner’s breach or breakdown triggering an off-hire event;
- Bareboat Charter: The charterer assumes complete operational, commercial, and technical custody of the vessel without crew.
Review standard cargo carriage documentation and commercial contracts in our guide to Bills of Lading.
2. Laydays, Laycan, and Notice of Readiness (NOR)
Specific time intervals dictate the vessel’s arrival obligations at the load port:
- Laydays: The agreed calendar period during which the charterer is committed to providing cargo and starting operations;
- Laycan (Laydays and Cancelling Clause): The contractually established arrival window defined by two boundary dates (e.g., June 10 / June 20). The first date marks the earliest time the owner can tender NOR. The second date (Cancelling Date) is the deadline by which a valid NOR must be presented. If the vessel arrives after 23:59 on the cancelling date, the charterer holds the legal option to cancel the charter party without penalty;
- Notice of Readiness (NOR): The formal written document tendered by the Master certifying that the vessel has arrived at the destination and is in every respect physically and legally ready to load or discharge cargo.
Fig. 2. Vessel waiting at outer anchorage: when charter parties contain WIPON clauses, NOR can be tendered immediately upon anchoring.
Statutory Requirements for a Valid NOR (The “Arrived Ship” Test):
Under English maritime law, an invalid NOR is treated as a nullity. Three criteria must be fulfilled simultaneously:
- Arrived Ship Status: Under a Berth Charter, the vessel must be securely moored alongside the nominated berth. Under a Port Charter, the vessel must have arrived within the commercial limits of the port or at the standard customary anchorage;
- Physical Readiness: Cargo holds or tanks must be fully cleaned, dry, odorless, and passed by independent cargo surveyors. Any cargo gear, cranes, or cargo pumps must be operational;
- Legal & Administrative Readiness: Free Pratique and Customs clearance must be secured, unless protected by standard commercial protective clauses like WIFPON (Whether In Free Pratique Or Not) and WICCON (Whether In Customs Clearance Or Not).
Protective Charter Clauses for Anchorage Waiting:
• WIPON (Whether In Port Or Not) — Permits valid NOR tendering even if congestion forces the vessel to anchor outside commercial port boundaries;
• WIBON (Whether In Berth Or Not) — Triggers laytime commencement even when the vessel is held at anchor awaiting an open berth;
• Turn Time — Contractually agreed grace periods (commonly 6 or 12 hours) between NOR acceptance and the active running of laytime.
• WIPON (Whether In Port Or Not) — Permits valid NOR tendering even if congestion forces the vessel to anchor outside commercial port boundaries;
• WIBON (Whether In Berth Or Not) — Triggers laytime commencement even when the vessel is held at anchor awaiting an open berth;
• Turn Time — Contractually agreed grace periods (commonly 6 or 12 hours) between NOR acceptance and the active running of laytime.
3. Laytime Calculation Terms and Clauses
Specific charter party clauses dictate which operational hours count toward allowed laytime and which are excluded:
| Charter Party Term | Clause Meaning | Practical Laytime Counting Rules |
|---|---|---|
| Running Days / Consecutive Days | Calendar days running consecutively | Laytime runs non-stop 24 hours a day, including weekends, public holidays, and bad weather periods. |
| Working Days (WD) | Customary port working days | Days on which cargo handling is customarily carried out in the port (excludes official public holidays and local weekend days). |
| Weather Working Days (WWD) | Working days unaffected by adverse weather | Working days on which weather conditions allow cargo handling without risk of damage. Bad weather interruptions (rain, heavy swell) stop the laytime clock. |
| SHEX (Sundays & Holidays Excepted) | Weekends and holidays excluded | Hours falling on Sundays and recognized local holidays do not count against laytime, even if cargo operations continue (unless amended to SHEX Unless Used). |
| SHINC (Sundays & Holidays Included) | Weekends and holidays included | Laytime counts continuously through weekends and holidays (standard across tanker charter parties). |
Fig. 3. Dry cargo loading: hatch covers are closed during rain showers, suspending laytime counting under standard WWD terms.
Reversible vs. Non-Reversible Laytime:
- Non-Reversible Laytime: Separate, independent time allowances are allocated for the load port and discharge port. Demurrage incurred at loading cannot be offset by fast discharge;
- Reversible Laytime: Time saved at the loading port can be credited toward allowed time at the discharge port, balancing the total laytime allowance across the entire voyage.
4. Demurrage Calculations and the “Once on Demurrage” Rule
When total time used exceeds allowed laytime, the vessel goes on demurrage.
The Paramount Legal Maxim: “Once on Demurrage, Always on Demurrage”
Unless explicit contractual clauses state otherwise, standard laytime exceptions cease to apply once laytime expires. Weekends, holidays, and weather interruptions run continuously on demurrage. Under English law, the underlying rationale is that had the charterer loaded within the agreed laytime, the ship would not have been trapped by bad weather or weekend closures. Time is deducted from demurrage only if delays stem directly from the owner’s default (e.g., vessel mechanical failure, crew strikes, or shipboard deviations).
Unless explicit contractual clauses state otherwise, standard laytime exceptions cease to apply once laytime expires. Weekends, holidays, and weather interruptions run continuously on demurrage. Under English law, the underlying rationale is that had the charterer loaded within the agreed laytime, the ship would not have been trapped by bad weather or weekend closures. Time is deducted from demurrage only if delays stem directly from the owner’s default (e.g., vessel mechanical failure, crew strikes, or shipboard deviations).
Evidentiary Documentation for Demurrage Claims:
| Document | Issuing & Signing Parties | Role in Laytime Claims |
|---|---|---|
| Notice of Readiness (NOR) | Master / Ship’s Agent | Establishes arrival time and legal readiness; triggers the laytime clock. |
| Statement of Facts (SOF) | Port Agent, Master, Stevedores, Charterer | The chronological minute-by-minute log of all events: berthing, hose connections, rain delays, and completion times. Generate this document with our Statement of Facts SOF Generator. |
| Time Sheet | Operations Department / Chartering Broker | The formal mathematical spreadsheet reconciling allowed laytime against actual time used from the SOF. |
| Pumping Logs & Hourly Pressure Reports | Chief Officer / Terminal Representative | Critical for tanker claims to verify the vessel fulfilled cargo pumping warranties (e.g., discharging within 24 hours or maintaining 100 psi manifold pressure). |
5. Despatch Money and Risk Mitigation Strategies
Despatch (Dispatch) is common in dry bulk, grain, and general cargo trades, but is rarely used in tanker charters. Charter parties standardly benchmark despatch at half the demurrage rate:
Despatch Rate = 1/2 Demurrage Rate (DHD — Despatch Half Demurrage)
Two standard calculation methodologies exist:
- All Time Saved (ATS): Despatch is payable on every calendar day and hour saved between actual completion and the theoretical expiry of laytime;
- Working Time Saved (WTS): Despatch is calculated solely on the laytime hours that would otherwise have counted against the charterer, excluding non-working holidays and weekends.
Operational Best Practices for Shipboard Officers:
- Strict Adherence to NOR Clauses: If charter terms specify tendering during office hours (09:00–17:00), an NOR sent on Saturday evening will not become legally operative until Monday morning;
- Contemporaneous SOF Endorsements: Never sign an agent’s Statement of Facts clean if operational stoppages are incorrectly marked as “Ship’s Fault”. Endorse the SOF with specific reservations or issue a formal Letter of Protest;
- Monitor Time Bar Deadlines: Voyage charter parties include strict time-bar provisions requiring owners to submit fully documented demurrage claims within 30 to 90 days. Late submission forfeits the claim entirely.
Frequently Asked Questions: Demurrage, Laytime & Despatch (FAQ)
1. What is the fundamental difference between Laydays and Laycan?
Laydays represent the contractual time allowance or window agreed for cargo handling. Laycan (Laydays and Cancelling) is the contractual arrival window. If the vessel fails to arrive and present a valid NOR before the cancelling date, the charterer holds the option to cancel the charter party.
2. Does laytime start the exact minute NOR is tendered?
Rarely. Charter parties typically include a contractual Turn Time (commonly 6 or 12 hours) between NOR presentation and the active commencement of laytime. However, if cargo handling commences before Turn Time expires, time used counts immediately.
3. Does demurrage stop running during weekends and public holidays?
No. Under the legal principle “Once on Demurrage, Always on Demurrage,” all subsequent calendar time—including weekends, holidays, and bad weather—runs continuously on demurrage unless an express clause states otherwise.
4. How do weather interruptions affect laytime under a WWD clause?
Under a Weather Working Day (WWD) clause, periods of adverse weather that actually prevent or endanger cargo operations are excluded from counted laytime and recorded in the Statement of Facts. Under a Running Days clause, weather delays count against the charterer.
5. What happens if an owner misses the demurrage time bar deadline?
Under standard charter forms, failing to submit a complete demurrage claim with all supporting documents (NOR, SOF, Time Sheet, and pumping logs) within the agreed time-bar period (often 30 to 90 days) results in the claim being legally extinguished.