How Variable Speed Routing Can Help You Save Money On Charter Party Claims

Shipping industry decision-makers of all stripes are continuously looking for ways to optimize business and innovate in these changing times. Charter party voyages are one way to do this. This article will consider what a charter party agreement is, what problems you can run into with it, how to avoid those problems, and how variable-speed routing can save you money on charter party claims.

DTN Vessel Routing API gives your company a tactical advantage through optimizing routes by time, fuel, or cost. It will help you to find the fastest way to your destination while using the least amount of fuel by giving you weather optimized routing options using more than 30 different parameters. The API considers ECA fuels, daily hire, and additional costs in your routing calculation.

 

What is a charter party agreement?

A charter party contract will be drawn up before a charterer hires your company to undertake a series of voyages on his behalf. The charter-party terms include a clause or warranty about vessel performance.

 
Navigational officer looking through binoculars

What problems could you run into with charter contracts? 

If, after working with you, the charterer feels you have not honored the charter party agreement or contract of affreightment, a dispute may ensue. (Check this link to see the difference between a charter party and a contract of affreightment, including explaining other types of contracts, including a bareboat charter, time charter, and a voyage charter contract.)

In the event of a dispute, the charterer may try to make a claim based on what he perceives as your company’s failure to fulfill specific targets. For example, those targets could be outlined in the vessel performance clause regarding speed and fuel consumption.

For this reason, it is in the interests of all parties concerned to optimize vessel performance. Staying within the agreed-upon parameters of minimum speed and maximum fuel consumption will make for a longer, more prosperous relationship.

 
Container ship and tugboat in shipyard

How can you avoid those problems? 

Here are some points you will want to consider when attempting to avoid contractual disputes. These include:

  • The wording of your charter party agreement – The more clarity you can achieve in the way you word your contract, the better. This is especially important if the contract you are drawing up must depart from the standard wording (wording with a generally accepted meaning in the shipping industry). It is also essential to avoid falling into the trap of using overly generic or vague wording. If in doubt, spell it out!
  • Agree to use weather data provided by DTN – To avoid arbitration, both the shipowner and the charterer can agree in advance to refer to a mutually trusted source for accurate and detailed weather data. This data can allow you to clearly show how the weather impacted speed and consumption targets during each voyage. This can be a great help in clearing up misunderstandings with charterers.
  • Include an arbitration clause in your charter party contract – Consider the pros and cons of including an arbitration clause in your charter party agreement very carefully. In most circumstances, it is considered preferable for disputes to be resolved by negotiation before having to resort to arbitration. Charter party disputes are usually resolved in this way.
  • Use a vessel routing API to optimize vessel performance

 
Man looking at computer monitors

How does your vessel routing API, including variable speed routing, help?

One crucial part of that answer has to do with weather data. In claims made against you by a charterer, your weather routing decisions and the source of your weather data play a key role. In the event of a dispute, accurate weather data provided by your vessel routing API taken into consideration by ship Captains can help settle the dispute. 

In the best case scenario, the charterer is often agreeable to following a weather optimized route as it keeps his fuel bill as low as possible. Ideally, you and the charterer will agree, omce vessel performance has been proven, on the use of a weather optimized route for mutual benefit, ie: no claims against you (the owner) and a low fuel bill for the charterer.

Of course, your Captain will also use judgment and make decisions accordingly. In any case, it will be essential to the success of any negotiation to show that high-quality data and variable speed routing were consulted before making routing decisions.

In a negotiation scenario, the vessel routing API will help arbitrators see whether the decisions made were reasonable according to prevailing sea and weather conditions. It will also show these decisions to be appropriate, having been taken with the proper computations of cargo size and vessel performance parameters. In this instance, technology will help you tick all the right boxes with the voyage report you provide.

A second important part of the answer to the question posed in this subheading is that the vessel routing API is useful for both shipowners and charterers in drawing up the contract. Specifically when determining the reasonable speed, fuel consumption, and other parameters.

The predictive modeling and accurate, detailed weather forecasting capabilities of your vessel routing API allow for realistic planning. It is no longer necessary for your shipping company or the charterer to rely on outdated methods or compromise accuracy when calculating arrival times and other variable outcomes.

The shipping industry’s conditions today call for efficiency in all areas of operations. To be profitable in today’s economy, shipping companies need the edge provided by data and digitalization.

Although the volume of trade continues to expand globally, the shipping industry is becoming more and more competitive. There is an increased need to rely on data for all aspects of voyage planning in this environment, including optimal route planning. A prosperous enterprise has little or no room for costly charter party claims.

With DTN Vessel Routing API, you can successfully optimize routes by time, fuel, or cost and find the fastest way to your destination while using the least amount of fuel to reach the destination.