NOTICE OF READINESS – THE MASTER’S PROBLEM

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If you’ve seen Asdem’s message of 19th October regarding my new course in November and have a view please add your comment here

NOR at Customary Anchorage

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I’m just putting my finishing touches to my next course, “Tanker Delays in Ports – How ship, terminal and shore staff can minimise claims for demurrage”. During this course I will be giving delegates my opinion and guidance on when to tender, receive and accept NOR together with other practical points around the operations in port.

This got me thinking again about ASBATANKVOY which is not my favourite Charter party. Clause 6 – The Notice of Readiness clause requires the master to give his notice of readiness upon arrival at customary anchorage, this gives rise to a number of questions.

1. When should the NOR be tendered when berthing on arrival?
According to common law we have the Reid test which tells us that the NOR must be tendered once the vessel comes to a stop which in this case will be on arrival at the berth, but the wording of this charter party says ‘on arrival at customary anchorage’.

2. If berthing on arrival and the NOR has to be tendered at the customary anchorage what happens if that anchorage is not in the direct line of sailing for the vessel?
Does the vessel have to deviate in order to travel through the customary anchorage to tender the NOR? That seems a little ludicrous.

3. What happens if the customary anchorage is some way outside the port limits?
There have been two arbitrations in the last few years where the arbitrators have said in one case that it was ok for an NOR to be tendered 50 miles off shore when the vessel is discharged at Lagos. The reason for the NOR being given at such distance was to avoid the risks of piracy. In the other arbitration they decided that an NOR given at the entry buoy to Ras Tanura was good enough, rather than at one of the anchorages that the vessel would be ordered to.

What do I think?
Well in questions 1 and 2 the Charter party wording clearly states that the vessel must tender NOR at the anchorage, so I think that is where the NOR should be tendered, even if it means deviating from the direct route to the berth. Of course with ASBATANKVOY this is quite an academic question as lay time will always start on berthing anyway.

On point 3 I think the anchorage must be within port limits and I don’t agree with the decisions made in the arbitrations and I am not sure what the courts would say. Certainly in the case of Lagos it would need the Owners and the Charterers to have some conversation around when the NOR should be tendered as I doubt any responsible Charterer would want his cargo put at risk with the threat of piracy and a compromise should have been agreed upon before the vessel arrived in Lagos.

I think most arguments in laytime and demurrage negotiations centre on the validity of the NOR and as a result an invalid NOR can turn a claim for a substantial amount into something quite minimal and Charterers will always look for a way of minimising costs.

At the same time incorrect acceptance of an invalid NOR by the shore or Agent can create liabilities for Charterers and suppliers. Receivers and shore staff should be aware of the consequences when they sign that little bit of paper presented by the Master. If you want to know more about this course please click here or contact me direct philip.stalley@googlemail.com.

If you have any comments or thoughts on this topic please join in the debate here

European Barge Contract Standardization – LEAP

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Those of you that attended the Barge Conference in May this year will know that there is an initiative going on where the trading terms around barge cargoes in Europe will be standardised. I agreed to report back and I know that Roger Sepkes is giving his view in the Asdem newsletter – contactsarah@asdem.co.uk to subscribe to Asdem’s newsletters

LEAP is the Leadership for Energy Automated Processing group which is a collection of oil companies, service providers, and technology groups getting together to streamline transactions in the physical oil business.

What do I know? I have been talking to Kevin Jandora at LEAP over the last few months and this is my impression of what is going on.

First of all the group is looking at the trading terms between oil companies and NOT the terms for chartering barges. I don’t know if they intend to look at the charter party at a later stage but this may be difficult for this group as they represent the oil companies. No barge or indeed ship owners are currently members of LEAP, although it is open to them. Personally I would like to see a review of the chartering terms at a later date as it is clear that the current arrangement of TTB rules, Owners standard terms and the odd oil company charter party make this quite fragmented and messy. I am sure that this is something that Asdem could co-ordinate for the industry – see Asdem’s newsletter on this point and other areas of dispute identified at the Barge Conference.

Back to LEAP and what they want to achieve.
They are looking at all aspects of the deal, not just laytime and demurrage and will be covering things like quality and quantity, payment terms VAT etc.. Their timeline means that they are aiming to complete this process by midyear in 2013, which I think is pretty ambitious and it would be great if this timetabIe can be maintained. As I mentioned at the conference there are about five companies involved in the process, any more than that then I would expect the timeline to slip. Other LEAP members are entitled to contribute to this process, I’m not sure exactly how but if your company is a member then speak to your rep or else consider joining LEAP.

If your company is not a member how do you get your voice heard? Asdem has agreed to collate any comments and pass them on to LEAP – email roger@asdem.co.uk although we must all understand that this is merely as an advisory capacity. If you feel brave you can open up a debate by using the comments feature here. This will be open to all to see and I’m sure LEAP members will read it and let’s see if we can get some healthy debate going on.

The group is meeting by teleconference every two weeks and I know they have started on probably one of the mist difficult areas first – Nominations. I presented an alternative procedure where the penalty for a late nomination was on a sliding scale rather than losing everything when you are just one minute late. I am disappointed to hear that so far this alternative was not favoured by the group so I suspect we will end up with a drop dead clause of 48 hours or 2 clear working days. Voting is still to take place on this so there is still time for them all to come to their senses and agree with me!

The use of a standard calendar for public holidays has gained some favour but which dates will be agreed? The jury is still out on that one but I understand a London based calendar versus a Rotterdam calendar is being considered, or indeed a combination of both.

If you have any comments to make on any points I have raised here, or even points you want to discuss please add your comments here. And don’t forget to subscribe for Asdem’s newsletter for more information on this subject.

Line Displacement – an Explanation

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I was lecturing a month or so ago when a delegate asked me what Line Displacement was. I said it was a procedure that the cargo inspector carried out to check the shore line content before and after loading. It occurred to me that I didn’t really know what happened during this procedure, but I got a chance to find out a few weeks later when I bumped into my former boss, Tony Yates who is Head of Operations at BP Oil International in London. Tony has a wealth of experience; he has served at sea with BP and was at one time with an inspection company in the USA.

This explanation is how I remember the conversation we had:

Before bulk loading or discharging of a tanker is started the inspector will want to carry out the line displacement procedure in order to ensure the pipeline contents are the same before and after the operation so that no-one is disadvantaged when shore tank measurements are used for Bill of Lading and Outturn determination. It is usually expected that pipelines are full before and after. In order to verify this a small portion of the cargo is loaded or discharged and this is usually equal to or slightly more than the calculated line volume between the ship and the shore tanks. Let’s say it is 400mt in this example. Cargo operations will be stopped while the inspector measures what has been loaded/discharged to/from the shore tank and he will compare this with what has been discharged/loaded from/to the vessel. If both the ship and shore figures agree that 400MT has been transferred then the line is confirmed as full. As measurement is an art and not a science then a small degree of tolerance will be permitted between the two sets of figures, although this often leads to a degree of debate as to what is acceptable tolerance or otherwise!

This procedure should not take long, obviously it depends on the length of the shore line and how much cargo it holds, but the whole procedure should not delay commencement of bulk cargo operations by more than an hour at the very maximum.

What are the laytime and demurrage implications for this time? I would argue that this is all part of the loading/discharging procedure and it is in both ship and shore interest to ensure that the quantities are as accurate as possible. The same applies to buyers and sellers under an oil contract and unless there is anything specifically mentioned to exclude this time, then time must continue to run for laytime and demurrage purposes.

Was this explanation useful? Do you have any stories to share about line displacement? Do you have any other useful information to share? Please add your comments to this article.

Asbatankvoy Clause 8 Half Demurrage Rate

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Part of Asbatankvoy Clause 8 states

If, however, demurrage shall be incurred at ports of loading and/or discharge by reason of fire, explosion, storm or by a strike, lockout, stoppage or restraint of labor or by breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper or consignee of the cargo, the rate of demurrage shall be reduced one half of the amount stated in Part I per running hour or pro rata for part of an hour for demurrage so incurred.

I have a regular debate about this clause when I share a practical demurrage session with a lawyer on one of the training seminars I am involved with.

My point of view – if there is a delay whilst the vessel is still within her laytime but the vessel nevertheless incurs demurrage, if that delay is caused by one of the quoted causes then for the duration of that delay the demurrage should run at half rate.

The Opposing view – because the clause mentions only demurrage, then the half rate provision will only apply if the delay occurred after laytime has expired. As an example in a case where the charter allows 72 hours, if the event occurs in the first 72 hours then time runs in full and any demurrage incurred after the 72 hours is paid at the full rate. If the event occurs after the first 72 hours then that part of the demurrage will run at half rate.

Our argument depends on the interpretation of the words “If, however, demurrage shall be incurred” and my view is that demurrage has been incurred albeit that the event happened before laytime had expired.

In my defence I quote two rather old arbitration cases where this was decided in my favour: London Arbitration 10/89 and London Arbitration 18/04.

I had thought there were no court cases on this point but I have come across this article on the Skuld website http://www.skuld.com/templates/newspage.aspx?id=881 which infers that the breakdown of the Afrapearl was decided in my favour. I don’t know if this was ever part of the dispute in this case as the Afrapearl was a landmark case in dealing with what constitutes a “breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper or consignee of the cargo”

What do you think? Are you on my side? Do you have arguments for the opposing view? Please convince me by posting your views here.

Electronic Bills of Lading are here to stay!

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I was pleased to see the press release this week from Electronic Shipping Servives(ESS) advising that Preem have adopted Electronic B/Ls for their refineries in Sweden. See www.essdocs.com for further details.

For those of you who have missed this revolution or are sceptical after the many attempts in the business eb/ls are a reality and are here to stay and it’s great to see Preem giving it their vote of confidence with a five year deal. Preem join other companies working with ESS to slowly change this industry’s love of paperwork and transforming the way things are done.

There are many benefits to eb/ls but I am interested in the demurrage and ship operations where I see gains on both sides of the charter party.

Demurrage savings – no longer will vessels have to wait hours for cargo docs to be placed on board. Under most c/ps Owners have to suffer the first two or three hours delay waiting for documents after hoses have been disconnected. Charterers are then liable for the time after the grace period of 2 or 3 hours.

Look at the statistics on the ESS website –

8 minutes…
Fastest time for terminal and master to review and sign draft eDoc

Think what that could do for your turnaround in port, and what about the hidden costs? Wait too long for your docs and then miss the tide. Waiting time after docs on board is for Owners account, but what about the cost for the terminal. An idle vessel on your berth is tying up time you could have used loading or discharging another vessel.

No more letters of indemnity. With e/bls the original b/l will be presented to the master electronically to discharge the cargo. Owners will no longer need an LOI, no more arguing over the wording, no more asking for a bank guarantee. The major Pandi clubs have also given their blessing to this system

There are also many advantages to trading oil with the speed of documents running through the banking system. You can do everything in electronic form what you currently do in paper form including recutting of the b/l, only faster –

3 hours…
Fastest time to recut an electronic bill of lading post issuance

Are you using e/bls already? What do you think? Tell us what you like and what you dislike here.

Are you still a sceptic? Tell us here why you think it won’t catch on.

How big is this business?

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In January 2011 there were 11,092 tankers in the world merchant fleet (Note 1) and 1,350 tank barges operating in European Inland Waterways (Note 2) but how many voyages do they make each year?

That was the question Hub Software Engineering www.hubse.com was trying to answer a month or so back when we were updating our business plan. HubSE’s flagship product Claims Management Service (CMS) handles all aspects of demurrage and other claims from the calculation through to settlement. Clients of CMS do not pay any onboarding fees or maintenance costs, instead HubSE operate CMS under the Software as a Service (SAAS) model where clients pay according to how many claims they process through the system.

We actually wanted to know how many demurrage claims there are likely to be in the world every year, which is nigh on impossible to establish, so we thought we’d find out how many voyages are performed then guess from there how many voyages incur demurrage. The next step would be to guess how many demurrage claims have oil trading claims behind them reflecting the buying and selling of oil amongst the trading companies.

We stumbled at the first hurdle. No-one could tell us definitively how many voyages are performed. I contacted a few shipbrokers and one leading broker reported 17,000 fixtures last year, but of course many fixtures are unreported and what about voyage performed under Contracts of Affreightment (COA)? One broker did suggest contacting Lloyd’s List Intelligence. This was more promising as they told me that they monitored some 25,000 crude voyages each year (Note 3). Apparently tracking the products market is much more difficult in this detail. I’m sure many traders would not want the world to know where and when they were shipping cargoes but I am surprised this information is not more readily available.

In the European barge market I don’t know where to start! As a guess we could say that each barge on average performs a voyage every three days giving about 164,000 voyages per year. How does this sound to you?

What about other sectors of this business e.g. LPG and Chemicals?

Have you got any interesting statistics for this business or know where to get them from? Have you carried out any similar exercises and have the answers to these questions? Please share them here by using the Leave a Comment button.

Note 1. UNCTAD Review of Maritime Transport 2011
Note 2. Odin Barging 2012
Note 3. Lloyd’s List Intelligence

Free Information

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In the January edition of the Asdem newsletter I wrote an article about the importance of keeping up-to-date with court cases and developments in the business. See the January newsletter here Asdem News January 2012

There is no substitute for attending a training course and hearing about the latest cases from someone who has had the chance to study them and discuss it with others in the business. However, a lot of information can keep you ticking along in between courses and some of it is free. Here are some of the free resources I use from time to time:

1. The Asdem newsletter – what I like is that it is free and focused on demurrage and closely related subjects. The archive of newsletters can also be found at www.asdem.co.uk and to subscribe contact sarah@asdem.co.uk
2. Solicitors, Barristers – many solicitors produce their own newsletters or bulletins and these are free. You need to check the individual websites to find out how to subscribe but the following firms cover marine matters: Clyde & Co, Eversheds LLP, 20 Essex St
3. P and I clubs are also a great source of information and this is also open to non-members. I have just subscribed to the Skuld newsletter but other clubs such as the Gard have other good articles
4. Intertanko and Bimco also have a lot of open information on their website. If your company is a member of these organisations you should be able to access even more.
5. Twitter is also useful and I follow a number of solicitors and organisation who tweet. Although each tweet is limited to 140 characters there is often a link to see the story in much more detail. These are a few of the tweeters I follow: @holmanfenwick, @clydeconews and @incelaw, @bimco, @gcaptain, @worldmaritimenews, @oil_trader, @ukpandi, @marinecafeblog, @iticLondon, and @intertanko. I follow @lloydslist for the headlines only – to read the articles you have to be a paying subscriber. I tweet occasionally and you can follow me @philstalley.
6. Tanker Operator Newsletter is a free newspaper available by email/download – see www.tankeroperator.com for details
7. Platts provide a daily digest by email of news in different segments of the market, they also tweet similar stuff and you don’t need to be a subscriber – www.platts.com. Platts also provide a free training afternoon where you can hear how the Market on Close procedure works and see it in action.
8. LinkedIn – joining some of the groups gives access to a variety of news articles which may be of interest, and you can join in the debate if you want to.

Why is all this information free? I guess they are all hoping that you will join their organisation or buy one of their products. A bit like this blog, I hope you enjoy the information and debate and if you see a demurrage system you would like to buy on your way here then that would be good too!

What other sources do you use? Do you provide free information useful to this community and I’ve missed you out? My apologies but put it right here. Do you tweet? Who do you follow? Let us know. Please share your ideas by clicking the comments button.

What a difference a Day Makes

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We heard this week that the Home Office got it wrong about the deadline to lodge an appeal in the case under the European Convention on Human Rights ECHR. Any good demurrage analyst could have told them that. The Government said the deadline for the appeal was midnight 16th April, whereas the other side said it was midnight 17th and their appeal was lodged sometime during that day.

This deadline is no different to the demurrage time bars we all have to contend with and this case is an illustration of how to calculate a time bar and is simply a question of whether the Judgement Day is counted as day one or day zero.

According to ukhumanrightsblog.com the ECHR says
“Within a period of three months from the date of the judgment of the Chamber, any party to the case may, in exceptional cases, request that the case be referred to the Grand Chamber.”

Judgment Day was 17th January 2012 so does the three month period run:
a) From 17th January 2012 to 16th April 2012, or
b) From 18th January 2012 to 17th April 2012

Ukhumarightsblog.com infers that the English text is ambiguous but I am not so sure when you look at typical demurrage time bar clauses. BPVOY4 for example states:
“Charterers shall be discharged and released from all liability…. unless a claim in writing has been presented … within ninety (90) days of the completion of discharge…”

I don’t see this wording to be fundamentally different to that of the ECHR and it is established that a clause like BPVOY4’s is interpreted to mean that completion of discharge is day zero in the count to 90 days. If you want to count the trigger date as day one you have to write the time bar very specifically to count this way.

In the ARA barge world where time bars are usually just 30 days it is often argued that the trigger date is day one. In my opinion this is not the case as a general rule, or industry practice as it is often argued. Here is an extract of a clause where it is specifically stipulated that the trigger date is day one:
“Any claim for demurrage must be received by seller in writing with full supporting documents within thirty days of completion of loading (Completion of Loading = Day 1) failing which the claim shall be deemed waived by buyer and time-barred.”

A clause like this is the only way to be sure you get the time bar you want.

Last week I was at the European Oil Barge Conference (see my other blog this week for a review) and David Atkins presented a case study where he looked nomination clauses and specifically the meaning of giving two days notice. He cited a 1971 case* where Lord Justice Denning ruled that where we need to give a number of days notice we have to ensure that the number of days quoted are clear full days. What this means when giving two days notice is that a notice given on a Monday is not effective until Thursday i.e. Tuesday and Wednesday being the full clear days that need to elapse first.
I’m not sure I agree with this interpretation and we didn’t come to a conclusion at the conference. I can’t find any other cases to support my case. What do you think?

Please share your thoughts on this but remember this is a discussion about time bars and notice periods – NO POLITICS PLEASE!

* Carapanayoti & Co Ltd v Comptoir Commercial Andre & Cie SA (Court of Appeal 1971)

European Oil Barge Conference – Review

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Last week I was at the first European Oil Barge Conference in Rotterdam and here is a quick summary of what went on:

Mark Richardson, Senior Barge Operator, Hess Energy Trading Co. Ltd
Mark’s opening paper “Barge Operations Past, Present and Future” was a great start to the conference giving us all a history lesson on how the industry has changed and is changing.
Main message I got?
Many more players in the market and whereas disputes could be resolved in the past by consensus of small number in the group this is no longer possible

Andrew Bonnington, Managing Editor, EMEA Clean Products, Platt’s Oilgram
Andrew gave us a run through how the prices for products in the barge market were calculated and outlined the “Market on Close” procedure. Platts also report on barge freight costs and Andrew explained how this data was collected.
Main Message?
Good information of how this market worked and how Platts want to work with the barge community in the future over demurrage clauses and dispute over non-performance for trades agreed in the Platts “window”.

Jos Van Altvorst, Chartering Manager, Interstream Barging BV
Jos gave us a very entertaining view of the market as seen by barge operators and took us through the 22 pitfalls that can be encountered on a typical voyage.
Main Message?
I was already aware of the demurrage related issues so I was particularly interested in the operational problems encountered by charterers not giving correct or timely information about loading terminals and cargo specification.

Cynthia Worley, Head of New Markets, Electronic Shipping Solutions
Cynthia paper on “Electronic Documents” outlined how things have changed in the business and some of the obstacles to change, often with people tolerating old ways and paper intensive processes. The future is electronic.
Main Message?
Sometimes you have to dance with your shirt off and look stupid to create momentum and provide leadership to this industry – you had to be there to see the video to appreciate this!

Cees De Baare, Port of Amsterdam
Cees gave us the Harbour Master’s view of inland shipping outlining the growth in oil storage facilities in Amsterdam and the often conflicting demands of the port users versus the residents of Amsterdam who may not always appreciate the noise that comes with the prosperity of a port.
Main Message?
The expansion of storage facilities and forecast of future growth in port activity but the lack of lay-by berths for barges in Amsterdam – does this mean a future of congestion?

David Atkins, Demurrage Consultant
David gave us a case study which raised questions around the notice periods of nominations and the variety of different wordings. He challenged the audience’s understanding of these words.
Main message?
What do we mean by two days notice? See my blog “what a difference a day makes” for more details.

Dinner
We ended the first day in style with dinner on board the M/V “Henry Hudson” which took us round the port of Rotterdam where we saw real barges, ships of all shapes and sizes and great to see a working port whilst enjoying a meal and a glass of wine with friends.

Elizabeth Nemeth, Lead Negotiator Barge Demurrage, BP Oil International Ltd
Elizabeth opened the second day with six different versions of pro-rating the same demurrage claim, and told us that there are more options than that.
Main Message?
No wonder there are so many arguments in demurrage when there is really no consensus on the way these calculations should be done.

Jeroen de Man, Operations Manager, Odin Marine
Jeroen gave us an outline of the role of the broker in the barge business. Brokers are prevalent in deep sea market but a fairly recent innovation in the barge market and Jeroen gave us the advantages of using a broker.
Main Message?
Brokers are trying to bring more transparency to the market by proving market information and their aim is to increase productivity.

Phil Stalley, Demurrage Consultant
This is me! I gave my views on how we should change nomination and time bar clauses to avoid the disputes we currently run into. I also proposed a low cost arbitration service provided under the umbrella of Asdem.
Main Message?
Is the market ready for my ideas or do they even want to change?

Frank van de Ven, Vetting & Clearance Superintendent, BP Shipping Ltd. EBIS Netherlands
Frank gave us an outline of how EBIS works, how its activities have grown over the years. EBIS is a non-profit making organisation formed by Oil and Chemical companies to enable barge inspection reports to be carried out and stored.
Main Message?
EBIS do not approve or reject barges for use, it is the Oil/Gas Companies that use and interpret the reports to make the decisions as to whether they can use a barge or not subject to the individual oil company’s criteria

Martin Stokes, Asdem’s Senior technical Consultant
Martin took us through the quality and quantity issues facing the carriage of oil products in ARA and in the market in general. He emphasised the importance of measuring and sampling at each stage of the voyage.
Main Message?
The biggest issue for the industry in cost terms is not disputes over quantity but quality. Be careful out there!

Panel Discussion
We ended the day with panel discussion. What needs changing in the industry and how. There seemed to be universal agreement that TTB rules do not meet the needs of the industry and this has led to a proliferation of General Terms and Conditions all saying different things about nomination periods and demurrage. Many delegates had not heard of the LEAP initiative where a group of Oil Companies are looking to draw up a common set of terms for use in ARA. I sensed some scepticism around the room as to how fast this could be resolved and should the industry look at other options so solve some of these issues.

Were you there? Do you have anything to add?
Did you miss the conference? Do you want to know more?
Add your comments here and continue the discussion!