Chartering in Import and Export
The market for shipping bulk cargo is referred to as charter market and the shipping services are known as chartering.
Chartering Practices
When a tramp carrier is engaged, it is said to be under charter. The charterer (person who engages or hires the tramp) can hire the tramp either whole or bulk of the space. The agreement between the ship owner and charterer for hiring the ship is called charter party. A tramp may be chartered in one of the most important forms:
(a) Voyage Charter: A ship may be engaged for a single voyage (say from port A to
port) or for consecutive voyage (say from port A to port B to port C) or return voyage (say from port A to port B and return to port A). The ship owner provides the vessel to the charterer for carrying an agreed quantity of cargo from a particular port in a country (Mumbai, India) to another port in a different country (Baltimore, USA). Instead of one port, ports of loading in India could be more (Mumbai, Chennai) and in similar way ports of discharge can be more than one in USA (Baltimore, New York). Alternatively, the agreement (known as charter party) provides carriage of cargo between ports within a certain range (say from any port in India to any port in USA). In the later case, the charterer has to convey the names of the specific ports to the master of the vessel before the commencement of voyage.
The agreement may provide that the charterer has to pay for the freight according to the actual quantity loaded or for the total capacity of the ship. Even if the
charterer is not able to load the total quantity agreed upon, he has to pay the freight for the agreed quantity. The remaining capacity not booked by the charterer can be hired by the ship owner to another charterer. In this case, the ship owner has to bear the total expenses for the voyage such as fuel, port charges, salaries of crew, stores and provisions, depreciation, insurance etc. In other words, ship owner has to bear all running expenses and operating expenses for the voyage. The 81.4 owner recovers the freight charges from the charterers in the form of revenue. After meeting all expenses, balance of revenue becomes the profit for the voyage to the ship owner.
For a comparison, this practice can be compared to engaging a total bus by a marriage party with understanding that fifty seats would be paid at an agreed rate and the balance ten seats can be sold to other passengers by the bus owner. Even if the marriage party does not come in full swing of total booking made, still the bridegroom's party has to pay for 50 seats, as agreed. The bus owner is free to book the balance 10 tickets to another marriage party, provided he is able to synchronize!
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