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2021 IN REVIEW | Chartering risk In association with Marsh Specialty
In the world of supply chain disruption and traffic jams at ports chartering your own vessel may seem like a good idea. But Stephen Harris, (above) Senior Vice President, Marine & Cargo, Marsh Specialty, urges cargo owners to look carefully at the risks involved and ensure they are adequately covered Fear of supply chain disruption has led some large retailers and wholesalers to charter their own vessels and others to consider doing the same. The recent convulsions in the marine chartering market have resulted in traffic jams at ports, with ships unable to berth and discharge their goods. At the same time, some vessels are earning record-breaking fees. However, chartering a vessel is complex, involving a host of responsibilities and expenses that the unwary may not realise. Smaller traders often rely on cargo consolidation when they struggle to fill a whole shipping container with their goods, so the idea of hiring an entire ship is impractical. But for large wholesalers and retailers, chartering a ship could provide a degree of control they do not have when relying on others to carry their goods. At the outset, organizations that decide to hire their own vessels must decide whether to voyage or time charter a vessel. The two types of charter are subject to their own agreements, known as “charterparties”. Under a voyage charter, a vessel is hired for a single voyage, or a series of consecutive voyages. Under a time charter agreement, a vessel is hired for all voyages, during an agreed period of time, be it six months, a year, or longer. Retailers and wholesalers that are considering chartering vessels typically opt for a voyage charter. Unlike professional vessel charterers, they are unlikely to want to hire a vessel for long periods of time.
CHARTERER RESPONSIBILITIES There are a host of standard voyage charterparty agreements available, each requiring expert guidance as to suitability to the charterer’s needs, though they generally have common themes. All, for example, place some obligation on the charterer. Where a charterer has a responsibility, there is also the risk of incurring a liability if that obligation is badly discharged or not discharged at all. A charterer’s responsibilities include a number of key areas that need to be taken seriously from the outset.
The Marine Insurer | January 2022
Look before you leap
SAFE PORTS First there is the matter of nominating “safe” ports. The charterer is normally expected to designate a “safe” port that the vessel is to sail to with the goods. A port could be deemed unsafe if it is not deep enough for a vessel to enter safely, or where political or weather conditions expose a vessel to unacceptable danger, potentially leading to damage or even loss. There have been legal cases brought by ship operators where the port nominated by the charterer has turned out to be unsafe. For example, the so-called “capesize” bulk carrier Ocean Victory broke up after leaving the Japanese port of Kashima during a severe storm in 2006. The charterers were held liable for costs, after a judge held that the port was unsafe. In a case involving the vessel Athos 1 (Citgo Asphalt Refining Co v Frescati Shipping Co), the ship’s charterer was held responsible for costs relating to an oil spill in the Delaware River in 2004 as the charter contract established that Citgo would provide a safe berth. When chartering a vessel, care needs to be exercised in ensuring that all the ports that a vessel is nominated to enter (generally by the charterer), stay at, and leave are safe. The depth of a port, its cargo handling capabilities, the weather patterns, and political stability in the port area are all critical. Not to do so is to risk incurring a liability for damage done to a vessel visiting an unsafe port.
