Laytime and demurrage explained, with a calculation example

Laytime, demurrage and despatch in one minute

• Laytime: the time allowed for cargo operations, free of extra charge
• Demurrage: an agreed daily rate the charterer pays once laytime is used up
• Despatch: an agreed daily rate the owner pays for laytime saved, often half the demurrage rate
• Laytime is fixed in days or hours, or derived from a load or discharge rate

How laytime is agreed

Laytime is usually expressed as a rate, for example 5,000 mt per day, or as a fixed number of days. The words around the rate matter as much as the number. SHINC means Sundays and holidays included, so every day counts. SHEX means Sundays and holidays excepted. WWD, weather working days, means time does not count when weather stops cargo work. The charter also says whether laytime is counted separately at each end or on a combined basis.

When laytime starts

Laytime does not start when the ship drops anchor. The ship must be an 'arrived ship' at the place the charter names, ready in all respects, and the master must tender a valid notice of readiness (NOR). Most charters then add a notice period, for example laytime commences 12 hours after NOR is tendered, or at 13:00 if NOR is tendered before noon. Time waiting for a berth may count, depending on whether it is a berth or port charter and on clauses such as WIBON (whether in berth or not).

Demurrage and 'once on demurrage, always on demurrage'

When laytime runs out the ship goes on demurrage, charged per day and pro rata for part days. Unless the charter says otherwise, the exceptions that stopped laytime (weekends, bad weather) no longer stop the clock once the ship is on demurrage. That is the principle usually summarised as 'once on demurrage, always on demurrage'. Many charters also have a time bar: a demurrage claim not submitted with supporting documents within a set period can be lost.

A worked laytime calculation

Illustrative example, not a market quote. A 25,000 mt cargo loads at 5,000 mt per day SHINC, so laytime allowed is 5 days. Laytime commences 12 hours after NOR. Demurrage is USD 12,000 per day pro rata and despatch is half that. The statement of facts shows loading completed 7 days 6 hours after laytime commenced, with no interruptions that count under the charter.

Documents that decide the result

• The charter party laytime and NOR clauses
• The notice of readiness and its acceptance
• The statement of facts (SOF) signed at each port
• The port log and pumping or cargo records where relevant

How to avoid demurrage surprises

Agree load and discharge rates the terminals can actually achieve, check congestion before fixing, and be precise about where NOR can be tendered. When ships wait, read the statement of facts at the time rather than months later. We calculate laytime from the same terms and statement of facts the owner uses, so disagreements show up while they can still be fixed.