Despatch

What it does

Despatch is the mirror image of demurrage. Where demurrage charges a charterer for using more time than the laytime allowed, despatch rewards the charterer for finishing cargo work in less. If the ship is loaded or discharged faster than the agreed time, the owner pays the charterer an agreed sum for the time saved, recognising that a quicker turnaround lets the vessel earn elsewhere sooner than the charter assumed.

By long-standing convention in dry bulk trades the despatch rate is set at half the demurrage rate, though the parties are free to agree any figure or to exclude despatch altogether. The time saved can be measured in two different ways, and which one applies is a point that must be settled in the charter because it changes the money materially over a long allowance.

Commercial effect

Despatch gives the charterer a direct financial incentive to work cargo quickly, which aligns the interests of ship and shore. A charterer that controls efficient terminals can treat despatch as a small but real revenue line, while the owner accepts it as the price of the same speed that frees the vessel for its next fixture earlier than the laytime allowance would otherwise have implied.

The size of the exposure turns on how saved time is calculated. Despatch on all time saved counts every hour between completion and the expiry of laytime, including periods that would not themselves have counted as laytime. Despatch on working time saved counts only the laytime hours that were not used. The first basis is more generous to the charterer, and the gap between them can be substantial on a generous allowance.

Owner's perspective

The owner prefers, where despatch is payable at all, that it be calculated on working time saved rather than on all time saved, since that narrows the hours for which it must pay. The owner also wants the despatch rate kept proportionate, with the conventional half of demurrage treated as a ceiling rather than as a starting point for the charterer to negotiate upward.

An owner whose vessel trades to consistently efficient ports may accept a higher despatch rate in exchange for other concessions, treating it as a manageable and predictable cost. What the owner resists is an open-ended or generously calculated despatch that hands back more than the value the early completion actually creates, since the point of the payment is to share a real benefit, not to manufacture one.

Charterer's perspective

The charterer wants despatch payable and, ideally, calculated on all time saved, capturing the full span between finishing and the end of laytime. For a charterer operating fast terminals this turns cargo-handling efficiency into a tangible return, offsetting some of the demurrage risk it carries on the slower port calls elsewhere in its trade where delay runs the other way.

A charterer trading on back-to-back terms tries to mirror the despatch it earns from the owner against any despatch it must pay its own counterparties, just as it does with demurrage. Where the sale contract provides no despatch but the charter does, the charterer simply keeps the benefit, which is one reason despatch terms are watched closely when trading chains are assembled and priced.

Negotiation points

• The despatch rate, conventionally half the demurrage rate but freely negotiable or excluded entirely.
• Whether despatch is calculated on all time saved or only on working time saved — the single biggest driver of the sum.
• Whether despatch is payable at both load and discharge, or only at one end of the voyage.
• How saved time interacts with reversible laytime, where time is pooled across ports before despatch is assessed.

Common variations

• Despatch on all time saved, counting every hour to the expiry of laytime including otherwise excepted periods.
• Despatch on working time saved, counting only the unused laytime hours.
• No despatch payable, where the charterer accepts a tighter overall package in return.
• A despatch rate other than the conventional half, agreed where port efficiency or market conditions justify it.