Explanatory notes

The following explanatory notes are given for the guidance of users to help them complete the relevant boxes in Part I of the form and to better understand the thinking behind the provisions of Part II of FERTICON 2007.

Part I

• Boxes 1 to 8
• Box 10
• Boxes 14 and 15
• Box 16
• Box 22
• Box 26

Part II

• Clause 1 Preamble
• Clause 2 Advance Notices
• Clause 3 Freight
• Clause 4 Cleanliness of Vessel
• Clause 5 Loading/Discharging
• Clause 6 Draft Survey and Tallying
• Clause 7 Stevedore Damage
• Clause 8 Laydays/Cancelling Date
• Clause 9 Notice of Readiness
• Clause 10 Laytime
• Clause 11 Demurrage/Despatch
• Clause 12 Undue Delay
• Clause 13 Lien Clause
• Clause 14 Bills of Lading
• Clause 15 Shifting
• Clause 16 Warping
• Clause 17 Seaworthy Trim
• Clause 18 Lighterage
• Clause 19 Liberty
• Clause 20 Overtime
• Clause 21 Trading History
• Clause 22 Taxes and Dues
• Clause 23 Agency
• Clause 24 Address Commission/Brokerage
• Clause 25 BIMCO AMS Clause for Voyage Charter Parties
• Clause 26 Protective Clauses
• Clause 27 Strike Clause 
• Clause 28 BIMCO General Ice Clause for Voyage Charter Parties
• Clause 29 ISPS/MTSA Clause for Voyage Charter Parties 2005
• Clause 30 BIMCO Dispute Resolution Clause
• Clause 31 BIMCO Notices Clause

 

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Part I

The boxes in Part I are all labelled to guide the parties as to the information to be inserted.

Boxes 1 to 8

These boxes require the parties to fill-in the usual details required in a charter party such as place and date of contract; name and address of the parties and vessel description/present position.

Box 10

Reflecting the fact that the draft of both the vessel and the port has a direct bearing on the vessel’s earning capacity and that there have been disputes in these respects, Box 10 allows the parties to state the maximum permissible drafts for the discharge ports.

It should be noted that this places an obligation on both parties to meet the draft requirements – for the vessel to arrive at the discharge port at the appropriate draft and for the charterers to ensure that the agreed arrival draft is available on the vessel’s arrival. If either of the parties fails to meet their obligations in respect of draft then the provisions of Clause 18 (Lighterage) take effect.

Boxes 14 and 15

There are two alternative freight payment methods available under COAL-OREVOY – on shipment or on arrival. Freight payable on shipment applies by default if the parties fail to state which of the two options are to apply.

Box 16

This box requires the parties to state the type and capacity of vessel’s cargo handling gear. This will make it clear if the vessel has grabs - which is an important feature in cargo operations in India where grabs are almost the only method of loading fertilizer. It will still be possible in the contract for the parties to share the costs by using the vessel’s gear.

Box 22

In the box for demurrage the possibility of agreeing on a despatch rate has been added.

Box 26

This important box deals with the parties’ choice of how disputes under or arising out of the charter party are to be dealt with. If the parties fail to state which law govern the charter party and the location of the place of arbitration then English law and London arbitration will prevail.

Part II

Part II starts with a contents page in order to give an overview of the document and to be consistent with other recently published BIMCO forms.

Clause 1 Preamble

The preamble states the basic purpose of the agreement between the owners and the charterers that the vessel identified in Part I will go to the agreed place and there load the agreed cargo and then proceed to the agreed discharge place within a reasonable time.

It was decided to maintain the option in the original Clause 1 of FERTICON for the vessel to lay safely aground. Accordingly, the clause now reads “as it may safely get and lie, always afloat or safely aground” in relation to both loading and discharging.

Clause 2 Advance Notices

The Clause describes in two sub-clauses what kind of notices and information that the owners should give to the charterers or their nominees. Sub-clause (a) provides a structured approach to the giving of ETA notices and cargo requirements. The restriction to the charterers’ agents has been removed and it now reads “the charterers and/or their nominees and/or agents”.

Clause 3 Freight

Payment of freight is dealt with in three sub-clauses where (a) and (b) are alternatives which the parties have to make a choice between. Otherwise, the default position (a), freight payable on shipment, will apply.

The freight is to be calculated on the quantity of cargo stated on the bill of lading. The important issue in this clause is the time when freight is payable. The normal practice regarding when freight should be paid is for the charterers to pay 90 % on the issue of Bills of Lading with the balance paid on settlement of the documents or within 150/180 days. The payment of the balance of freight has been linked to the owners’ submission of documents as this reflects the method of payment in India. That way the payment is not dependent on the parties reaching a final agreement on demurrage and despatch.

Sub-clause (a) deals with the payment of freight on shipment, its equivalent in GENCON 1994 is called pre-paid. Reference is made to Box 14 describing the time allowed for payment of the balance of freight. Sub-clause (b) deals with payment of freight on arrival at or off the first port of discharge. Reference is made to Box 15 that describes method and time allowed for payment. Sub-clause (c) deals with what the final freight account is to include in terms of supporting documentation.

Clause 4 Cleanliness of Vessel

This Clause has been inserted in order to deal with the issue of hold cleanliness – ensuring that the vessel tenders notice of readiness with holds in a clean and dry condition. The cleanliness of the vessel has an impact on when a valid notice of readiness can be given and ultimately when laytime starts to run. Specifically, loose rust scale and residues of previous cargoes must be removed – this more clearly establishes the standard of cleanliness required.

Consequently, the owners and the master are obliged to make sure that the vessel’s holds are thoroughly clean at the loading port, before giving the notice of readiness. This reflects the position under English law which requires a vessel to be “ready” to load when a notice of readiness is given in order for the notice to be valid. The vessel will be “ready” even if there are some routine formalities left to be done, but only if it is completely ready immediately when it arrives at the loading place. The cleaning of the vessel’s holds would not count as a routine formality.

In the event that the holds are be found not clean after a notice of readiness has been given the owners must at their own expense and time make the vessel clean. It should be noted that it is assumed that the original notice of readiness is given in good faith – so laytime or time on demurrage ceases to count only from the time that the vessel is rejected until once more ready in all respects.

The third paragraph deals with the situation where the charterers have rejected the vessel one or more times after additional cleaning by the owners. In this situation, the parties are to appoint jointly an independent surveyor whose decision will be final. Sub-clauses (a) and (b) provide for a division of costs between the parties for the surveyor in the situations where the surveyor accepts respectively rejects the vessel’s holds. Sub-clause (c) deals with the counting of time.

Clause 5 Loading/Discharging

Sub-clause (a) has been divided into two sub-clauses; (i) providing for the loading and discharging of bulk cargo, the responsibility, costs and time for loading, stowing and discharging is for the charterers account; (ii) dealing with the loading and discharging of bagged cargo, the responsibility, time and cost for loading, tallying, stowing, securing and discharging on the charterers. The last paragraph of sub-clause (a) provides for the responsibility for the provision and removal of dunnage by the charterers.

Sub-clause (b) deals with cargo segregation and states that different cargoes should be separated by being loaded in different holds.

Sub-clause (c) deals with the vessel’s cargo handling gear, the default position being that the owners shall give free use of the vessel’s gear which should be in good working order. It should be noted that the vessel is required to carry a test certificate covering the Vessel’s gear in accordance with the International Dock Safety Convention and that the certificate must remain valid for the duration of the charter party.

Lines 99-104 deal with time lost by breakdown of the vessel’s gear. Unless the breakdown is caused by the negligence of the stevedore’s, time will not count as laytime or time on demurrage. The owners have been given the option to hire shore cargo handling equipment of similar or better capacity at their risk – in which case laytime or time on demurrage would not be affected as the charterers have not been disadvantaged. This is considered to be fair and practical to both parties.

The last paragraph of Sub-clause (c) divides the responsibilities and costs for the stevedores and for labour to operate the vessel’s cargo handling gear. The default position is that it is the charterers’ obligation to provide and pay for shore labour to operate the vessel’s cargo handling gear; however, the owners have an option to provide their own cranemen/winchmen unless local regulations prevent that. This provision reflects that many owners would prefer that their cargo gear was operated by their own personnel.

Clause 6 Draft Survey and Tallying

The Clause is divided into two sub-clauses; (a) dealing with draft survey regarding the weight of bulk cargo and (b) dealing with tallying of bagged cargo at loading and discharging ports. The charterers must at each loading port provide and pay for independent tallymen acting on behalf of and binding on both the owners and charterers.

Lines 116-119 deal with the discharge of bagged cargo. The default position is that a declaration by the master or chief officer that all the consigned bagged cargo to that port has been discharged is conclusive evidence of the number of bags. This position is modified, however, if the receivers in advance of the discharge notify the master of their intention to tally the cargo at the hatchway and such tally is carried out.

Clause 7 Stevedore Damage

This is a standard wording found in many BIMCO voyage charter parties. Under the provisions of the Clause the liability for stevedore damage is placed on the charterers. The master has an obligation to give notice of the damage to the charterers, their port agents and to the stevedores. Sub-clause (b) makes a distinction between stevedore damage affecting the seaworthiness of the vessel and other damage. The former must be repaired before the vessel leaves the port where the damage was caused and the latter must be repaired before the completion of the voyage. The costs of the repairs and any time lost are for the charterers’ account.

Clause 8 Laydays/Cancelling Date

In order for the clauses to follow a logical structure the Laydays/Cancelling Date Clause has been inserted before the Notice of Readiness Clause. It provides for laydays and cancellation in four sub-clauses.

Sub-clause (a) states the earliest date of when laydays can start with reference to the exception in Clause 10 (Laytime).

Sub-clause (b) gives the charterers the right to cancel the charter party in the event that no notice of readiness has been given latest on the agreed cancelling date. No time is given within which the charterers should cancel the charter party after the cancelling date has passed.

Sub-clauses (c) and (d) contain a so-called “interpellation” provision, the purpose of it being to avoid the sometimes harsh result to an owner who cannot make a cancelling date but, nevertheless, is legally obliged to tender his vessel, perhaps at a remote port, after having performed a long ballast voyage, only to be cancelled. Similarly, the provision benefits the charterer because advance notice of a delayed vessel will provide greater opportunity to find an alternative vessel in sufficient time.

The effect of the interpellation is that a vessel at risk of arriving after the cancellation date/time will not have to proceed on a long voyage towards the delivery place, not knowing whether or not the charterers will accept or cancel the vessel once it has arrived. The interpellation provision provides a mechanism whereby the charterers are required to declare their intention to cancel following the owners’ notice that the vessel will be late. This is an important provision, since the basic position under English law is that unless there is a relevant clause in the governing charter party the charterers can wait until the vessel tenders its notice of readiness before they decide whether or not to cancel, thus obliging the owners to make a potentially unnecessary ballast voyage.

If the owners anticipate with reasonable certainty that the vessel will not be ready to load by the agreed cancelling date then the owners can require the charterers to declare whether they wish to maintain or cancel the charter party. The charterers will have to declare their option within two working days after the owners have given the notice. If the charterers choose to cancel, the owners may save considerable costs by not bringing the vessel to the delivery port and may be able to fix the vessel on another charter at an earlier time. Similarly the charterers will have advance notice of the delay and be able to look for substitute tonnage to lift the cargo on the dates requires. If the charterers choose not to cancel the new cancelling date will be the second day after the date that the owners have stated in their notification that the vessel will be ready.

Clause 9 Notice of Readiness

The intention behind this Clause is to give the parties a choice between SHINC and SHEX for both loading and discharging ports. Consequently, the clause is divided into four sub-clauses, (a) and (b) are alternatives regarding when and how the notice of readiness shall be given at the loading ports, (a) being the SHINC option and (b) being the SHEX option. Sub-clauses (c) and (d) are alternatives for when and how the notice of readiness shall be given at the discharging ports, (c) being the SHINC option and (d) is the SHEX option. The parties have to indicate their choices, otherwise the default position of (a) and (c) will apply (the SHINC-option).

The paragraph after sub-clause (d) applies to all sub-clauses and states where the notice of readiness is be given, that is, when the vessel is within the commercial area of the port or at the usual waiting place.

Clause 10 Laytime

This Clause is split into six sub-clauses. Sub-clause (a) provides for the situation when loading is carried out before the commencement of laydays and states that in such cases half time actually used before the commencement of laydays shall be counted as laytime. The intention is to give the charterers an incentive to start loading as soon as possible by giving them some discount. For the time actually used to count as half laytime the charterers must have accepted in writing to commence loading prior to the commencement of laydays.

Sub-clause (b) regulates when laytime starts at first or sole loading port. The parties have been given the option in Box 21(i) to state when laytime will start and only if they have not made such an agreement will the default position in this sub-clause apply (which is six hours after tendering notice of readiness).

Sub-clause (c) provides for when laytime starts at the first or sole discharging port and at second or subsequent loading or discharging ports. At the first or sole discharging port and unless the parties have agreed otherwise, laytime will start 24 hours after tendered notice of readiness. At the second or subsequent loading or discharging ports, laytime or time on demurrage will start when the vessel arrives at the port.

Sub-clause (d) clarifies that at loading and discharging ports actual time used before commencement of laytime and during excepted periods will count as laytime. It should be noted that Sub-clause 10(a) deals with time used for loading before the commencement of laydays (i.e. outside the laycan). In contrast Sub-clause 10(d) deals with the situation where loading is within the laydays window but prior to the contractual commencement of laytime and accordingly also applies to discharging.

Sub-clause (e) states that laytime will not count when the loading or discharging of cargo into or from the Vessel is actually prevented by weather conditions, including surf days officially declared by a port authority.

Sub-clause (f) provides that the time used for moving from the place of waiting to the loading or discharging berth will not count as laytime.

Clause 11 Demurrage/Despatch

The charterers will be liable to pay demurrage at an agreed rate in Part I when the laydays are used up. The issue of despatch is included to be consistent with Part I Box 22 on demurrage and despatch rates. Thus, the owners will have to pay despatch money to the charterers if loading and or discharging is completed before laytime is used up at, unless otherwise stated, a rate of one half the demurrage rate daily or pro rata.

Clause 12 Undue Delay

This clause gives the owners a possibility to cancel the charter party in a situation where the vessel has been on demurrage for at least 15 days and no cargo has been loaded. If the owners decide to cancel under this clause its other claims, e.g. for freight, demurrage etc. will still be valid. It is important to note that this provision applies only in cases where no cargo has been loaded. Once cargo is on board the vessel the owners will have liabilities and obligations towards the bill of lading holder meaning that the voyage cannot simply be cancelled.

Clause 13 Lien Clause

The owners have a lien on the cargo, certain enumerated sub-freights and other amounts due under the charter party. Thus, the owners have the right to retain possession of the cargo at the port of discharge as security for the payment of the enumerated items in the clause. The owners should be aware that they can only exercise their lien if the cargo remains in their possession; the right is lost as soon as the cargo comes into the hands of a consignee. Further, the lien is only enforceable against the charterer and not against others who are not a party to the charter party.

Regarding sub-freight, this means that the owners are given the right to intercept these sub-freights before they are paid to the charterer. Once they are in the hand of the charterer the lien is lost. The most convenient way to exercise this kind of lien is by notifying the bill of lading holder or sub-charterer that any freight due from it should be paid direct to the owners.

The words “legal fees and other” has been inserted before “costs” in order to clarify what the costs shall include and to make sure that it includes the same thing in both USA and Europe.

Clause 14 Bills of Lading

A new bill of lading with the codename FERTICONBILL 2007 has been drafted to be used together with the FERTICON 2007. This Clause gives the charterers the right to issue bills of lading which will be binding on the owners who will be regarded as the carrier against whom cargo claims can be made. However, if the charterers should present bills of lading imposing a greater liability on the owners than that contained in the charter party, the charterers will have to indemnify the owners in respect of that greater liability.

Clause 15 Shifting

This Clause takes effect where Boxes 9 and/or 10 provide for the use of more than one berth or anchorage. In such cases the owners pay for the costs of moving, but the time used counts as laytime. However, if the charterers require further moving it will be for their account.

Clause 16 Warping

The owners are allowed to move the vessel up and down alongside the berth in order to make loading or discharging easier. Such operation will be at the owners’ risk and expense, but the time used is for the charterers’ account.

Clause 17 Seaworthy Trim

The charterers should make sure that the cargo is stowed so as to not render the vessel unseaworthy during the voyages. Any costs involved and any time used will be for their account.

Clause 18 Lighterage

The Clause on lighterage is divided into three sub-clauses, sub-clause (a) deals with the situation where the charterers do not comply with the draft stated in Box 10. Laytime will count from arrival at the lightening place and the lightening operation will be at the charterers’ time, risk and cost.

Sub-clause (b) provides for the situation where the owners do not comply with the agreed maximum draft. The owners will be liable to pay the costs of reducing the draft and the cost of any lightening operation.

Thus, when the charterers do not comply with the agreed maximum permissible draft, the time, risk and costs of lightening operations are for their account. Conversely, when the owners fail to comply the time, risk and costs for any lightening operation will be for their account.

Sub-clause (c) states that delivery of cargo over side will constitute right and true delivery.

Clause 19 Liberty

This Clause replaces the deviation clause in GENCON and includes a reference to bunkering. The owners have the right to deviate to assist vessels in distress, to bunker, to save life and property and for other reasonable purposes. One should bear in mind that under English law the courts apply the principle of contra preferentem to liberty to deviate clauses and will give them a very restrictive interpretation. They have been given full effect by the courts subject only to the restriction that the essential purpose of the voyage must not be frustrated.

Clause 20 Overtime

This Clause is divided into two sub-clauses; (a) explains who will be liable to pay overtime. Sub-clause (b) states that overtime ordered by the owners and which is worked during periods that are excepted from laytime the actual time used will count as laytime. If the charterers or the people in control of the loading or discharge terminal have ordered the overtime the actual time used will not count, unless the vessel is already on demurrage. If ordered by public authorities half of the actual time used will count as laytime, unless the vessel is already on demurrage.

Clause 21 Trading History

This Clause provides a warranty by the owners that the vessel’s trading history will not preclude the vessel from being able to trade unhindered to the ports stated in Part I.

Clause 22 Taxes and Dues

In four sub-clauses it is clarified who pays the taxes and dues on the vessel, cargo, freight and other taxes.

Clause 23 Agency

The vessel should be consigned to agents at the loading and discharging ports. Box 27 gives the parties a choice between the owners and charterers nominating the agents.

Clause 24 Address Commission/Brokerage

This Clause provides for the address commission and the brokerage commission with cross references to the relevant Boxes in Part I.

Clause 25 BIMCO AMS Clause for Voyage Charter Parties

This is a standard BIMCO Clause providing for compliance with US customs regulations in the event the vessel should visit USA. The party who should fail to comply with the requirements of the clause will assume liability for such failure and also indemnify the other party for any losses in this respect. Any time lost because of failure of compliance will be at the risk of the failing party.

The owner will be regarded as carrier for the purposes of this clause; however that will not affect the identity of the carrier in other respects.

Clause 26 Protective Clauses

This clause lists a number of protective clauses that will apply to the charter party and to any bills of lading issued thereunder.

Sub-clause (a) is BIMCO’s General Clause Paramount which makes the Hague-Visby Rules applicable to the charter party and the bills of lading. The Owner’s Responsibility Clause found in GENCON 1994 was replaced with BIMCO’s General Clause Paramount as the latter reflects modern, commercial practice and is more acceptable to charterers because of its liability regime.

Sub-clause (b) contains the both-to-blame collision clause. It will be relevant only in a situation where the liability for a collision in which the vessel has been involved during the currency of the charter party is to be resolved under US law. The clause protects the owners from cargo claims for which it would not be liable for under the Hague-Visby Rules because of art. IV, r.2 (a), (the error in navigation defence).

The charterers' position in a mutual collision situation is that they cannot claim for loss of or damage to its cargo directly from the owners. The charterers can however claim against the other vessel involved in the collision.

As there are few collisions where only one vessel has contributed to the accident it is normal for courts to apportion the blame. For example 70% fault on the cargo carrying vessel and 30% fault on the other vessel. In such circumstances the non-carrying vessel may claim from the carrying vessel their portion of blame i.e., 30% of the cargo owner's (the charterers) claim. As the charterers have obtained the entire claim for their losses from the non-carrying vessel they are required under the clause to indemnify the owners of the carrying vessel for the 30% claimed by the non-carrying vessel. The end result is that the owners of the carrying vessel are not indirectly exposed to claims for cargo damage for which they are not liable under the Hague Rules (error in navigation defence).

Sub-clause (c) contains a General Average Clause and the New Jason clause. In accordance with BIMCO’s recommendations general average should be adjusted according to the York/Antwerp Rules 1994. The adjustment and settlement of general average is by default in London unless the parties agree otherwise.

The New Jason clause is relevant only when general average is to be adjusted in accordance with US law. This clause allows the owners to claim a contribution for general average even if the event that created the general average situation was due to negligence on part of the owners. The clause will apply to both the charter party and any bills of lading issued there under, thereby the owners bind all cargo owners directly.

In sub-clause (d) BIMCO’s Standard War Risks Clause for Voyage Charter Parties (VOYWAR) is found. It starts with defining “owners” and “war risks” for the purpose of the clause. In the following three paragraphs (b-d) it deals with the owners rights in war risk situations before and during loading as well as during the voyage. Paragraph (e) deals with the insurance aspect and states that the owners may take out war risk insurances with their hull underwriters and P&I underwriters at their own cost. If the charterers’ orders the vessel into additional premium areas the charterers must reimburse the owners of such additional premiums. Paragraph (f) gives the owners the liberty to comply with directions etc given by the vessel’s flag state, other governmental bodies, war risks underwriters, Security Council of the UN and other supranational bodies. Furthermore, the owners have the liberty to deviate for certain enumerated reasons and it should not be considered a deviation when the vessel complies with something mentioned in the clause.

Clause 27 Strike Clause

This is BIMCO’s standard strike clause. Paragraph (a) is concerned with strikes and lockouts affecting the loading of the cargo. The master or owners may ask the charterers to agree to reckon the laydays as if there were no strike and if no such agreement is reached the owners may cancel the charter party. If part of the cargo has already been loaded the owners must continue with that part, but have the liberty to complete with other cargo.

Paragraph (b) deals with strikes and lockouts affecting the discharging of the cargo. The charterers have the option of keeping the vessel waiting against paying half demurrage after the expiry of laytime or ordering the vessel to a strike free port.

Paragraph (c) contains an exception which is triggered by strikes and lockouts and may be invoked by either the owners or charterers.

Clause 28 BIMCO General Ice Clause for Voyage Charter Parties

This is BIMCO’s general ice clause for voyage charter parties dealing with the parties’ rights and obligations in ice areas.

Clause 29 ISPS/MTSA Clause for Voyage Charter Parties 2005

This is BIMCO’s ISPS/MTSA Clause for Voyage Charter Parties 2005 which provides for the compliance with the ISPS Code and the US Maritme Transportation Security Act.

Clause 30 BIMCO Dispute Resolution Clause

This is BIMCO’s Standard Dispute Resolution Clause. The parties should make a choice between (a), (b) and (c) and state their choice in the appropriate box in Part I. Otherwise, sub-clause (a) which provides for English law will apply. Sub-clause (d) which provides for the referral of the dispute to mediation will always apply. It should be observed that the arbitration provisions of the Dispute Resolution Clause are identical to those of BIMCO’s Law and Arbitration Clause 1998. The only difference between the two Clauses is that the Dispute Resolution Clause contains a mediation provision.

Clause 31 BIMCO Notices Clause

All notices must be in writing in a readable and understandable way, capable of being a record.