Shipping contracts play a crucial role in global trade, defining the rights and responsibilities of parties involved in transporting cargo. One of the fundamental distinctions in voyage chartering is between a Berth Charter Party and a Port Charter Party. Understanding the differences between these two types of charter parties is essential for shipowners, charterers, and operators to manage risks, costs, and operational efficiency effectively.
Meaning of Berth Charter Party and Port Charter Party
- Berth Charter Party: A Berth Charter Party (Berth CP) is a contract where the vessel is considered as having arrived only when it is securely moored at a specified berth within the agreed port. The laytime (the period for loading and unloading cargo) begins only when the vessel is at the designated berth.
- Port Charter Party: A Port Charter Party (Port CP) is a contract where the vessel is considered as having arrived when it reaches the designated port and is ready to load or discharge, even if it is waiting at an anchorage or outer port area due to congestion or other delays.
How to Identify the Difference?
The difference between a Berth CP and a Port CP can be identified based on the wording in the contract, particularly in clauses related to “arrival,” “notice of readiness (NOR),” and “laytime commencement.” Here’s how it is typically stated:
- Berth Charter Party: The contract will specify that the vessel is considered arrived “only when securely moored at the agreed berth” and that the Notice of Readiness (NOR) can only be tendered once the vessel is all fast at the berth. It is often denoted in the contract as “1 SB / 1 SP Santos”, indicating that a single berth (SB) is mentioned before a single port (SP), which signifies a Berth CP.
- Port Charter Party: The contract will define the vessel as arrived when it reaches the “port limits” and is “ready in all respects” to load or discharge. The NOR can be given while the vessel is at anchorage or waiting within the port limits, subject to readiness conditions. This is often denoted as “1 SP / 1 SB Santos”, where a single port (SP) is mentioned before a single berth (SB), indicating a Port CP.
Specific CP clauses to look for:
- Arrival Condition Clause: Clearly mentions whether arrival is determined at the berth (Berth CP) or within port limits (Port CP).
- Notice of Readiness (NOR) Clause: Indicates if the NOR can be given upon port arrival (Port CP) or only after berthing (Berth CP).
- Laytime Commencement Clause: Details when laytime starts based on the arrival definition.
- WIBON, WIPON, WIFPON, WICCON: In a Berth CP, if it mentioned wibon, wipon, wifpon, wiccon clause, it converts a berth CP to a port CP only at the condition when a berth is occupied and the vessel can tender NOR at the usual waiting area of the port or anchorage. In the absence of this clause, even at the condition when the berth is occupied NOR can be tendered at the designated berth only.
Still, have doubts about what will happen if the berth is vacant in a Port CP.
- In a Port CP if the berth is vacant, but the vessel cannot berth due to weather conditions, tide, or other navigational delays, the vessel can tender NOR at port limits, provided it is ready in all respects.
This aligns with the principle that in a port CP, the vessel is considered an “arrived ship” once it reaches the port limits, regardless of weather the berth is occupied or if external factors prevent berthing. This risk of such delays (e.g., bad weather or navigational restrictions) typically falls on the charterers, and laytime would commence as per the CP terms. - In a Port CP, if the vessel proceeds directly to the berth upon arrival without any waiting or delays, the Notice of Readiness (NOR) should ideally be tendered at the berth, not at the port limits.
This is because NOR must reflect the vessel’s actual readiness to load or discharge. If the vessel can go straight to the berth, there is no waiting time ar the port limits, and thus, NOR should be given upon berthing. While the Port CP allows NOR to be given at the port limit, this is typically relevant only when there are delays in berthing due to congestion or external factors.
Key Differences Between Berth CP and Port CP
| Aspect | Berth Charter Party | Port Charter Party |
|---|---|---|
| Arrival Definition | Vessel arrives only when berthed | Vessel arrives when it reaches port limits |
| Laytime Commencement | Starts when vessel is secured at berth | Starts when vessel reaches port and is ready to load/discharge |
| Risk of Congestion | Owner bears risk | Charterer bears risk |
| Notice of Readiness (NOR) | Given only after vessel berths | Given upon arrival at port, subject to readiness |
| Cost Implication | Higher risk for owners due to delays | More predictable for owners, but risk shifts to charterers |
Impact of Each Type on Stakeholders
1. Shipowners
- Under a Berth CP, shipowners face potential delays if the berth is occupied, leading to increased operational costs and lost time.
- A Port CP benefits shipowners as they can tender NOR upon arrival at the port, reducing waiting risks.
2. Charterers
- A Port CP places the risk of congestion on charterers, meaning they may have to pay demurrage if the vessel is waiting at anchorage.
- A Berth CP is favorable for charterers since laytime only starts when the ship is secured at the berth, reducing their exposure to demurrage costs.
3. Laytime and Demurrage Implications
- In a Berth CP, the waiting time at anchorage is on the shipowner’s account, leading to potential delays without compensation.
- In a Port CP, the waiting time at anchorage counts towards laytime, which can lead to demurrage claims if the agreed laytime is exceeded.
Which Charter Party Should Be Used?
The choice between a Berth CP and a Port CP depends on various factors such as:
- Port Congestion: If frequent congestion is expected, a Port CP may be more suitable for shipowners.
- Cargo Operations: If the berth is known and predictable, a Berth CP could be advantageous for charterers.
- Contractual Negotiation Power: Depending on market conditions, parties may negotiate terms that allocate risks and responsibilities in their favor.
Conclusion
The distinction between a Berth Charter Party and a Port Charter Party is crucial in the maritime industry as it impacts laytime, demurrage, and overall risk allocation between shipowners and charterers. Understanding these differences helps stakeholders make informed decisions, ensuring smooth commercial operations and efficient risk management.
By carefully selecting the appropriate charter party type, both owners and charterers can optimize operational efficiency, control costs, and minimize disputes. In an industry where time is money, knowing the right contract terms can make a significant financial difference.
