Neptune Atlas

Laytime

How to calculate laytime and demurrage

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Laytime is the time the charterer is allowed for loading and discharging. Demurrage is what they pay when they exceed it. The arithmetic is four numbers in order, and it is never what a claim turns on. What a claim turns on is how the clock was counted, which is why most of this page is about the counting.

Allowed − Used

Positive is despatch, negative is demurrage. Multiply by the daily rate, pro rata for part days. The number is never the hard part; the intervals behind it are.

There is a free laytime and demurrage calculator on this site that does the arithmetic below, including the worked example further down. No account, and nothing you type into it leaves your browser.

The calculation, in four steps:

  1. Turn the charterparty rate into allowed time
  2. Start the clock: notice of readiness, plus any turn time
  3. Count time used, minus the excepted periods
  4. Allowed minus used, times the daily rate

Each step is a section below, and each is where a real claim can go wrong.

Step 1: how much laytime was allowed

Allowed laytime is either a period or a rate, and a rate has to be turned into a period before anything else can happen. Four shapes cover almost everything you will meet on a dry cargo fixture:

The quantity in that division is the quantity actually loaded, taken from the bill of lading, not the quantity written into the charterparty. On a cargo described as 30,000 tonnes with a ten per cent option in the owner's favour, the difference between the contract figure and the loaded figure is most of a day of laytime at a typical rate. Getting this wrong is the single commonest error in a first attempt at a calculation.

Load and discharge are allowed separately unless the fixture says reversible or names a total laytime, in which case the two become one pot and time saved at the load port is time available at the discharge port. Reversible is generous to the charterer and it is negotiated for, so it is stated when it applies.

Step 2: when the clock starts

Laytime does not begin when the ship arrives, and it does not begin when work begins. It begins when a valid notice of readiness has been tendered and whatever notice time the charterparty allows has run out. That period is commonly six or twelve hours and is variously called notice time or turn time; some fixtures give the charterer until a stated hour of the next working day instead.

Two clauses decide whether the notice could be given at all. Under a berth charter the ship is not an arrived ship until she is at the berth, so congestion is the owner's risk. Under a port charter she arrives on reaching the port, and the waiting is the charterer's. WIBON, whether in berth or not, and WIPON, whether in port or not, are the shorthand for moving that line, and they move it further than people expect.

A notice tendered before the ship was genuinely ready is not merely early. On many forms it is invalid, and an invalid notice starts nothing, which can leave an owner discovering months later that the clock he has been billing against never ran.

Step 3: what stops the clock

Everything after commencement is a sum over intervals, and each interval either counts or does not. What decides it is the exceptions written into the fixture, and they are shorthand:

TermWhat it does to the count
WWD, weather working day A day on which weather permits work. Time lost to weather comes out. Whether the whole stoppage or a proportion of the day comes out is drafted differently by different forms.
SHEX, Sundays and holidays excepted Those periods do not count. Their boundaries are themselves drafted: from 1700 Saturday to 0800 Monday is a common form and is not the same as midnight to midnight.
SHINC, Sundays and holidays included They count. Ordinary at many discharge ports and unusual at load.
EIU, even if used The excepted period stays excepted even where cargo was actually worked through it. Without it, working a Sunday usually brings that time back into the count.
UU, unless used The opposite: work through the excepted period and it counts.
FHEX, Fridays and holidays excepted The same mechanism on the working week of ports that keep it.
Shifting, from anchorage to berth or berth to berth A clause, not a default. Applied to a movement nobody wrote down it cannot be applied at all.
Breakdown Ship's gear is usually the owner's side of the line and comes out. Shore equipment is usually the terminal's and stays in. The reason written beside the stoppage decides which.

Once on demurrage, always on demurrage. The usual position is that when laytime has expired the exceptions stop applying, so the rain that suspended laytime on Tuesday is paid for on Thursday. Whether that holds depends on the wording, and it is the single most common point of disagreement between an owner's calculation and a charterer's. It also means the exact moment laytime expired matters more than any other timestamp in the file.

Step 4: the difference, priced

Demurrage runs at a daily rate agreed on the fixture, pro rata for part of a day, which is why minutes are money and why an SOF rounded to the hour invites a challenge. Despatch, where the fixture provides for it, is conventionally half the demurrage rate, and it is paid on one of two bases that are not interchangeable:

On a fixture with a Sunday inside the saved period, those two produce visibly different figures from the same timeline. The basis is one line on the recap and it is worth reading.

A worked calculation

Reversible laytime, one load port and one discharge port, going onto demurrage at the second. Every timestamp on the left comes off the statements of facts.

CHARTERPARTY
  Cargo             30,000 mt, 10 pct more or less in owner's option
  Load rate         6,000 mt per weather working day, SHEX EIU
  Discharge rate    8,000 mt per weather working day, SHINC
  Laytime           reversible
  Demurrage         USD 14,500 per day pro rata
  Notice time       12 hours at each port

ALLOWED
  Bill of lading quantity                        31,800 mt
  Load       31,800 / 6,000 = 5.300 days        5d 07h 12m
  Discharge  31,800 / 8,000 = 3.975 days        3d 23h 24m
  Total allowed, reversible                     9d 06h 36m

LOAD PORT
  NOR tendered                       03 Aug 0800
  Laytime commenced                  03 Aug 2000
  Completed loading                  09 Aug 1400
  Elapsed                                       5d 18h 00m
  Less Sunday 09 Aug 0000 to 1400, SHEX EIU         14h 00m
  Less rain 05 Aug 0230 to 0810                      5h 40m
  Used at load                                  4d 22h 20m

DISCHARGE PORT
  Laytime remaining on arrival                  4d 08h 16m
  NOR tendered                       24 Aug 0600
  Laytime recommenced                24 Aug 1800
  Laytime expired                    29 Aug 0216
  Completed discharge                31 Aug 1000

RESULT
  On demurrage, 29 Aug 0216 to 31 Aug 1000      2d 07h 44m
  2.3222 days at USD 14,500 per day          USD 33,672.22

Three things in that are worth pointing at. The allowance was worked on 31,800 tonnes rather than 30,000, which is nearly nine hours of laytime. The Sunday came out even though the ship worked through it, because the fixture said EIU. And nothing came out at the discharge port at all after 29 August 0216, because by then she was on demurrage and the exceptions had stopped running.

Where claims are actually lost

The statement of facts is the evidence

Every claim is decided on the statement of facts: a timed list of events from arrival to completion. The calculation is a sum over the intervals between those events. If the events are not recorded properly the calculation cannot be defended, however correct the arithmetic.

An interval counts only where the event that opened it counts

This is the rule that makes stoppages work. A period of rain that suspends laytime is recorded as an event, and the interval it opens is excluded. The stoppage is never deleted from the record, because deleting it makes the timeline unauditable exactly where somebody will later dispute it.

A stoppage with no reason against it is a gap, not an exclusion

The same forty minutes is weather, a shore crane, or the ship's own gear depending entirely on the words beside it, and each of those three sends the money somewhere different. Whoever drafts the claim will read an unexplained interval in their own favour, and they are entitled to.

Time zones

Record every event in UTC and label it. A thirty-minute offset can move a notice of readiness tender across a minute that money turns on, and a system that renders times in an unstated local zone will do that silently. Ports change to summer time on their own schedule and ships' clocks are advanced on passage, so a document reading 0930 without saying 0930 where is unusable against a notice tendered from a different clock.

The time bar ends more claims than the arithmetic

Most voyage charters bar a demurrage claim unless it is presented within a stated period of completion of discharge, commonly ninety days, and unless the supporting documents go with it: the statements of facts, the notices of readiness, the bills of lading, the pumping or time logs. A claim that arrives on day ninety-one, or that arrives on time without its documents, fails without anybody looking at whether it was right.

That is a filing problem rather than a legal one, and it is the reason the paperwork has to stay attached to the fixture rather than to whoever handled the voyage. The people who recorded the events have sailed or changed employers; the claim lands on a desk where nobody was present. It is also the point at which a desk running on a mail folder and a spreadsheet starts losing money it had already earned, which is the argument set out in ship broker software vs spreadsheets.

The arithmetic above is free to use on this site and needs no account. Inside the product the same sheet is built from the agent's signed statement of facts rather than retyped out of it, which is where the counting errors this page is mostly about actually get made: laytime and demurrage on a working desk.

References

The statement of factsThe agent’s timed record of everything that happened in port. Every demurrage claim is decided on it, long after anyone was watching. Notice of readinessThe one page that starts the laytime clock: arrived, ready, tendered, and the separate way each of those three is attacked. Demurrage vs detentionOne is a daily rate agreed before the delay, the other a loss proved after it. Container shipping uses both words for something else. Voyage charter vs time charterThe risk split behind the two main charter forms, what each side pays for, and which terms only exist on one side of it. The fixture recapThe e-mail that says what was agreed. Written in minutes, read by a tribunal years later, and the contract until the charterparty is drawn.

Neptune Atlas

Neptune Atlas rebuilds the used figure from the statement of facts events recorded against a fixture, each one timestamped in UTC with the local offset kept and each stoppage carrying its reason rather than being netted away, so the demurrage or despatch line falls out of the timeline instead of a spreadsheet. Allowed laytime is a figure you enter against each leg, because the rate, the exceptions and the quantity that produce it belong to the charterparty and are not the software's to assume. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

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