Voyage charter vs time charter vs bareboat charter

The short answer

On a voyage charter the charterer pays freight to have a cargo carried between named ports, and the shipowner runs the ship and pays the voyage costs. On a time charter the charterer pays hire per day for the use of the ship, decides where it goes, and pays for bunkers and port costs. On a bareboat charter the charterer takes over the ship almost like an owner: it crews, insures and operates it for a long period.

Voyage charter

A voyage charter is priced in freight, usually a rate per metric tonne of cargo (for example USD per mt) or a lump sum. The owner provides the ship, crew and fuel and carries the risk of how long the voyage takes at sea. Time in port is governed by laytime: the charterer has an agreed allowance for loading and discharging, and pays demurrage if it runs over.

This is the natural choice for a cargo owner with a single parcel to move: one price for one voyage, and no exposure to bunker prices or sea time.

• Paid as freight per tonne or lump sum
• Owner pays bunkers, crew and usually the port costs agreed in the charter
• Charterer's exposure is port time, through laytime and demurrage
• Common forms: GENCON and commodity-specific forms such as those for grain

Time charter and trip time charter

A time charter is priced in hire, a daily rate paid in advance, usually every 15 days. The owner still provides a crewed, maintained and insured ship, but the charterer gives the employment orders and pays the voyage costs: bunkers, port charges, canal dues and cargo handling costs agreed in the charter. Performance matters: the ship is described by speed and consumption, and underperformance can lead to claims.

A trip time charter (TCT) is a time charter for one trip, for example 'delivery Istanbul, redelivery Egypt, via Black Sea'. Operators and traders use it when they want to control the voyage themselves.

• Paid as hire per day, plus the voyage costs
• Charterer directs the ship and buys the bunkers
• Owner keeps crew, maintenance and hull insurance
• Common forms: NYPE and BALTIME

Bareboat (demise) charter

Under a bareboat charter the charterer takes possession of the ship for a long period, often years, and is responsible for crew, maintenance, insurance and operation. The owner is effectively a financier. Bareboat charters are used for fleet financing, sale-and-leaseback deals and flag arrangements rather than for moving a single cargo. BIMCO's BARECON form is the usual starting point.

Side by side

Which one fits your cargo or ship

A cargo owner moving a single parcel usually wants a voyage charter: a known freight per tonne and no bunker risk. A cargo owner with a steady flow over months may want a contract of affreightment instead. An operator who can use the ship better than the owner, or wants to relet it, takes it on time charter. A shipowner weighs the same choice from the other side: voyage business pays for taking the voyage risk, time charter business gives a steadier daily income.

• One cargo, one voyage: voyage charter
• Regular cargoes over a period: contract of affreightment
• Control of the ship for a trip or a period: time charter
• Long-term control with operating responsibility: bareboat charter

How to compare offers across charter types

A voyage freight and a daily hire cannot be compared directly. Convert the voyage offer into a time charter equivalent (freight minus voyage costs, divided by voyage days), or convert the time charter into a cost per tonne of cargo by adding bunkers and port costs to the hire. Only then do you see which offer is actually better for the voyage in front of you.