Laytime, Demurrage & Despatch: Complete Calculation Guide

1. What Is Laytime?

Laytime is the period of time agreed in a voyage charter party during which the shipowner makes the vessel available for loading or discharging cargo, without additional charge. It represents the "free time" the charterer has at the port.

Laytime is normally expressed as:

• A fixed number of days or hours — e.g., "5 weather working days"
• A rate-based quantity — e.g., "at a rate of 2,000 MT per weather working day"

Example: If 50,000 MT of grain is to be loaded at 5,000 MT/WWD, the allowed laytime is 50,000 ÷ 5,000 = 10 WWDs.

Why Laytime Matters

On a typical Panamax bulk carrier carrying 70,000 MT of grain:

• Demurrage rate: $15,000 per day
• 1 day of delay = $15,000 loss for the charterer
• A dispute over 3 days = $45,000 — more than the broker's commission

Accurate records and correct laytime calculation protect both parties.

2. Notice of Readiness (NOR)

The Notice of Readiness (NOR) is a formal declaration by the master that the vessel has arrived at the port/berth and is in all respects ready to load or discharge. Tendering the NOR is the trigger event that starts the laytime clock — but only after certain conditions are met.

NOR Requirements

For NOR to be valid, the vessel must typically be:

• Arrived — at the agreed location (port, berth, or anchorage depending on charter party)
• Ready — holds clean and ready to receive cargo; documentation in order
• At the disposal of the charterer

Arrived Ship Concepts

NOR Time — When Laytime Begins

After NOR is tendered, there is often a notice period before laytime commences:

• 6-hour notice: Laytime begins 6 hours after valid NOR is tendered
• 24-hour notice: Laytime begins at 08:00 on the next working day
• WIPON (Whether In Port Or Not): Laytime counts from NOR if already in port

3. Key Laytime Clauses Explained

Practical tip: Always read the full charter party carefully — the combination of clauses determines what counts as laytime. "5 WWD SHEX EIU" is very different from "5 days SHINC".

4. How to Calculate Laytime Used

Laytime used is calculated from the Statement of Facts (SOF) — the official port log of all events. Every period is assessed to determine whether it counts as laytime or is interrupted/excepted.

Step-by-Step Method

1. Start from the moment laytime commences (after valid NOR + notice period)
2. Work through the SOF chronologically, hour by hour
3. For each period, decide: Does this count as laytime? (Yes/No/Partial)
4. Periods that do NOT count: bad weather (if WWD), SHEX periods, breakdowns of ship's gear
5. Periods that DO count: all working periods, breaks due to charterer's fault, time during SHINC days
6. Sum all counting periods to get total laytime used

Worked Example — Laytime Calculation

Charter Party Terms: 3 WWD SHEX EIU | Demurrage $8,000/day | Despatch $4,000/day (half demurrage)

Laytime Allowed: 3 WWD = 72 hours

Laytime Used: 50 hours = 2.083 days

Result: Time saved = 72 − 50 = 22 hours = 0.917 days → Despatch applies

5. Demurrage Calculation

Demurrage is the penalty payable by the charterer to the shipowner when the vessel is kept at port beyond the agreed laytime. It compensates the owner for the ship's lost earning time.

Demurrage Formula

Demurrage = (Laytime Used − Laytime Allowed) × Daily Demurrage Rate

Worked Demurrage Example

Scenario: Panamax bulk carrier, 70,000 MT iron ore, port of Rotterdam

• Laytime allowed: 4 days (per charter party)
• Laytime used: 5.75 days (from SOF)
• Demurrage rate: $12,000 per day

Calculation:

• Time on demurrage: 5.75 − 4.0 = 1.75 days
• Demurrage owed: 1.75 × $12,000 = $21,000

Important: "Once on Demurrage, Always on Demurrage"

This fundamental principle means that once laytime has expired and demurrage begins, exceptions such as SHEX or WWD clauses no longer apply. Demurrage runs continuously, 24 hours a day, including Sundays and holidays, until loading/discharging is complete.

This is one of the most commercially important rules in chartering — bad weather after laytime expires does NOT stop the demurrage clock.

6. Despatch Calculation

Despatch is the financial reward paid by the shipowner to the charterer for completing cargo operations faster than the agreed laytime. It incentivises efficient port operations.

Despatch Formula

Despatch = (Laytime Allowed − Laytime Used) × Daily Despatch Rate

The despatch rate is typically half the demurrage rate ("despatch money at half demurrage"), though some charters specify a fixed despatch rate.

Worked Despatch Example

Scenario: Handymax bulk carrier, 45,000 MT grain, port of Santos

• Laytime allowed: 5.0 days
• Laytime used: 3.5 days
• Demurrage rate: $10,000/day → Despatch rate: $5,000/day

Calculation:

• Time saved: 5.0 − 3.5 = 1.5 days
• Despatch owed: 1.5 × $5,000 = $7,500 (paid by shipowner to charterer)

Despatch on All Time Saved vs. Working Time Saved

All Time Saved is more favourable to the charterer. Most modern charter parties specify which applies — if silent, "all time saved" is generally presumed.

7. Statement of Facts (SOF)

The Statement of Facts is the chronological port log recording every event during the vessel's port stay. It is the primary document used to calculate laytime.

What SOF Must Record

• Date and time of arrival at port / anchorage
• Date and time NOR tendered and accepted/noted
• Date and time of berthing / first line ashore
• Start and end times of every cargo operation
• All stoppages: reason, duration (bad weather, gear breakdown, rain, strikes)
• Shift changes, meal breaks (if excluded by charter party)
• Date and time of last line / departure

Who Signs the SOF?

The SOF must be signed by the master (or Chief Officer) and the charterer's agent. The master should carefully review all entries before signing — a disputed SOF entry can lead to lengthy arbitration. If an entry is incorrect, the master should note objections in writing at signing time.

Time Bar Clauses

Most charter parties contain a time bar clause (e.g., "demurrage claims must be submitted within 90 days of completion of discharge"). Missing the time bar can make a valid claim unenforceable. The master should ensure the shipowner/manager receives all SOF documentation promptly.

Frequently Asked Questions

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