Demurrage and despatch are terms used inshipping that refer to the payment of liquidated damages for delays or rewards for early completion of cargo operations. Here are some key points about demurrage and despatch:
● Demurrage is a penalty fee paid by the charterer or consignee to the shipowner in the event of delayed loading and discharging operations over which the vessel had no control. It is essentially an overtime payment when the total agreed laytime in the charterparty has been spent.
● Demurrage is usually described asa daily rate, but it is pro rata for shorter periods as applicable.
● If the delay in loading and discharging is caused by the vessel that time is not included in the total laytime or demurrage.
● Demurrage rates are agreed in the charter party negotiations and are usually based on the daily Time Charter Equivalent for the voyage in question.
● Demurrage is essentially a penalty for delaying the vessel.
● Demurrage is included in all the different shipping segments.
● Despatch is a reward paid by the shipowner to the charterer if the loading and discharging operation is completed within a time shorter than the total laytime.
● The rate of despatch is usually half the rate of demurrage, though it can be different depending on the terms agreed upon in the charter party agreement.
● Despatch refers to the time that the shipowner has been able to save since the charterer completed the cargo operations quicker than anticipated/agreed and was able to despatch (sail) the ship quicker than expected which is to the benefit of the ship owner.
● Despatch is a sort of bonus or reward for efficient turnaround.
● Despatch is most common in dry cargo shipping, and is normally not included in charterparties in the tanker or gas segments.
In summary, demurrage is an overtime payment for delayed loading and/or unloading operations, while despatch is a reward paid for early completion of cargo operations. Both are used to encourage efficiency and minimize delays in the loading and unloading process, since time is a critical factor in shipping.