Demurrage and despatch are terms used in shipping that refer to a penalty or a compensation if it takes more or less time to load or discharge your vessel in a port versus the terms you have used in your pre-voyage calculations. 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. In shipping, demurrage is essentially an overtime payment when the total agreed laytime in the charterparty has been spent.
Demurrage is usually described as a daily rate, but it is pro rata for shorter periods as applicable. The rates are agreed in the charterparty negotiations and are usually based on the daily Time Charter Equivalent for the voyage in question.
If the delay in loading and discharging is caused by the vessel, that (delayed) time is not included in the total laytime or demurrage. Demurrage is included in all the different shipping segments.
In short; demurrage is essentially a penalty for delaying the vessel.
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.
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. The rate of despatch is usually half the rate of demurrage, though it can be different depending on the terms agreed upon in the charterparty agreement.
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.
