Demurrage

Demurrage is the payment owed by the charterer to the shipowner under a voyage charter party for keeping the vessel at the loading or discharging port beyond the agreed laytime. The demurrage rate is contractually fixed (typically USD per day, pro rata), the demurrage clock starts immediately on laytime expiry and runs continuously thereafter under the once-on-demurrage-always-on-demurrage principle (most time exclusions that applied during laytime cease to apply during demurrage), and demurrage claims are subject to a strict time bar (typically 60 to 90 days from completion of discharge) for documentary submission to the charterer. Demurrage is the most frequently disputed commercial item in the dry bulk and tanker markets, with the underlying Statement of Facts (SOF) being the principal evidential document and disputes typically resolved through London (LMAA), Singapore (SCMA) or New York (SMA) arbitration. The demurrage rate is set in the charter party as part of the freight negotiation and reflects the freight market, the vessel type, the trade route and the cargo: typical 2024 rates are USD 20,000 to USD 50,000/day for Capesize bulkers, USD 12,000 to USD 25,000/day for Panamax bulkers, USD 30,000 to USD 70,000/day for VLCC tankers, and USD 18,000 to USD 35,000/day for Aframax tankers. Demurrage income can constitute 5 to 15% of total voyage revenue for active dry bulk and tanker operators. ShipCalculators.com hosts the principal computational tools: the demurrage calculator, the demurrage time bar tracker, the demurrage rate market check calculator, the despatch calculator, the laytime calculator, the Statement of Facts builder and the WWD weather working day calculator. A full listing is available in the calculator catalogue.

Contents

Background

The economic basis

A voyage charter freight rate compensates the shipowner for the use of the vessel from loading to discharging port, assuming a normal port turnaround. If the charterer takes longer than the agreed laytime to load or discharge, the vessel is held idle at the charterer’s request beyond the assumption built into the freight; the shipowner suffers an opportunity cost equal to the daily revenue the vessel could have earned on its next voyage. Demurrage compensates the shipowner for that lost earning capacity.

The demurrage payment is liquidated damages: a contractually fixed sum payable irrespective of the actual loss the shipowner suffers. This contrasts with general damages, which would require the shipowner to prove the actual loss. Liquidated damages avoid the procedural and evidential complexity of proving daily lost earnings; the parties agree the rate up front.

Charter party context

Demurrage applies under voyage charter parties (where the charterer hires the vessel for a specific voyage). It does NOT apply under time charter parties (where the charterer pays a daily hire that already covers all time) or bareboat charter parties (where the charterer takes operational control).

Standard voyage charter forms (GENCON 2022, Asbatankvoy, Shellvoy 6, BPVOY 5, Synacomex 2000, Coal-Oreorder, Sugarvoy, GAFTA / FOSFA forms) all include demurrage provisions, typically with reference to BIMCO LAYTIMEDEFS 2013 for definitional consistency.

For container shipping, “demurrage” has a different meaning: it refers to the per-day charge for late return of an empty container by a shipper or consignee (commonly distinguished as container demurrage from the chartering sense). This article concerns the chartering sense.

Demurrage rate

Setting the rate

The demurrage rate is negotiated as part of the charter party. The rate is influenced by:

Freight market: in a strong freight market the daily TCE earning is high; demurrage rates are correspondingly high. In a weak market, lower.
Vessel type and size: larger vessels with higher capital value command higher demurrage rates.
Trade route: longer voyages support higher demurrage (the vessel is committed for longer).
Cargo type: time-sensitive cargo (e.g. perishable foodstuffs, refined products with strict commercial windows) supports premium demurrage.
Counterparty creditworthiness: a charterer with weaker credit may need to accept a higher rate.

Typical 2024 demurrage rates by vessel type (full-laden voyage charter):

Vessel	Demurrage rate (USD/day)
Handysize bulker (35,000 DWT)	6,000 to 14,000
Supramax bulker (60,000 DWT)	8,000 to 18,000
Panamax bulker (75,000 DWT)	12,000 to 25,000
Capesize bulker (180,000 DWT)	20,000 to 50,000
MR2 tanker (50,000 DWT)	15,000 to 28,000
LR2 / Aframax tanker (110,000 DWT)	18,000 to 35,000
Suezmax tanker (160,000 DWT)	22,000 to 45,000
VLCC tanker (300,000 DWT)	30,000 to 70,000
LNG carrier (174,000 m³)	40,000 to 100,000

These are typical mid-cycle rates; cyclical extremes can produce rates 2 to 3 times these levels in tight markets.

Pro rata application

Demurrage is conventionally pro-rated for partial days. If the laytime expires at 14:00 on a Tuesday and operations complete at 06:00 on Wednesday, the chargeable demurrage time is 16 hours, charged at $16/24$ × the daily rate.

Some charter parties specify that demurrage is calculated to the nearest 30 minutes, hour, or other granularity. The charter party language governs.

Demurrage clock

Triggering demurrage

Demurrage begins immediately when the agreed laytime is exhausted. There is no grace period unless explicitly negotiated. The transition is automatic; no formal notice is required.

Once on demurrage, always on demurrage

The widely-adopted OODAOOD principle (“once on demurrage, always on demurrage”) provides that:

During laytime, time exclusions (SHEX, weather working days, holidays) apply.
Once laytime is exhausted, the vessel goes “on demurrage” and most exclusions cease to apply. Time runs continuously, including on Sundays, holidays, weather days, etc.

The principle reflects the commercial reality that the vessel is detained at the charterer’s request and the shipowner’s opportunity cost continues regardless of why operations are interrupted.

The OODAOOD principle is subject to charter party variation. Some forms preserve specific exclusions even during demurrage; others (notably some Asian rice and grain trades) carve out weather exclusions even during demurrage. The charter party language governs.

Termination of demurrage

Demurrage stops when one of the following occurs:

Operations complete (cargo loading or discharging finishes and all post-completion formalities are done).
Vessel sails (the operations may have finished but demurrage runs to actual departure if cargo paperwork or other formalities held the vessel).
Charter party termination (the parties terminate by agreement or under contractual termination provisions).

The charter party defines the precise termination event.

Calculation methodology

The demurrage calculation

The demurrage calculation is built from the Statement of Facts (SOF) maintained at each port:

Determine when laytime started: typically when Notice of Readiness (NOR) was tendered and the contractual grace period (if any) elapsed.
Calculate laytime allowed from the charter party (fixed days, per-tonne rate × cargo quantity, or other formula).
Calculate laytime used by walking through the SOF and applying the agreed exclusions (SHEX, weather working day, holidays, equipment failure, shifting time).
Compare: if laytime used > laytime allowed, demurrage applies; if laytime used < laytime allowed, despatch may apply.
Calculate demurrage time: the period from laytime expiry to operations termination (subject to the charter party’s variations on OODAOOD).
Multiply by demurrage rate.

For a vessel calling multiple loading or discharging ports, the calculation is performed at each port, then aggregated according to the charter party’s reversible / non-reversible / all-purposes provisions (see reversible laytime and despatch).

Worked example

A Capesize bulker carries 170,000 t of iron ore from Brazil to China. Charter party terms:

Loading rate: 30,000 t/day WWDSHEX of 24 consecutive hours.
Discharging rate: 25,000 t/day WWDSHEX of 24 consecutive hours.
Demurrage rate: USD 35,000/day pro rata.
Despatch: USD 17,500/day pro rata, all time saved.
Reversible laytime.

Loading port:

Allowed laytime: 170,000 / 30,000 = 5.667 days.
NOR tendered Monday 0900; 6 hours grace. Laytime starts Monday 1500.
Operations complete Sunday 0500.
Total elapsed: 6 days 14 hours = 158 hours.
SHEX exclusion: 1 Sunday (excluded), so 24 hours excluded = 134 hours used.
Laytime allowed in hours: 5.667 × 24 = 136 hours.
Laytime saved: 2 hours.

Discharging port:

Allowed laytime: 170,000 / 25,000 = 6.8 days = 163.2 hours.
NOR tendered Tuesday 1200; berthed Wednesday 0800; loading commenced Wednesday 1000. Charter party laytime starts Wednesday 1000.
Operations interrupted by weather Saturday 0400 to Sunday 1800 = 38 hours WWD-excluded.
Operations complete Tuesday 2200.
Total elapsed: 6 days 12 hours = 156 hours.
WWD exclusion: 38 hours, so 118 hours used.
Laytime allowed: 163.2 hours.
Laytime saved at discharging: 45.2 hours.

Combined (reversible):

Total laytime allowed: 136 + 163.2 = 299.2 hours.
Total laytime used: 134 + 118 = 252 hours.
Net laytime saved: 47.2 hours.
Despatch payable to charterer: 47.2 hours / 24 × USD 17,500/day = USD 34,400.

In this example demurrage doesn’t arise because reversible aggregation produces net despatch.

Common calculation pitfalls

Frequent errors in demurrage calculation:

NOR validity: was the NOR actually valid when tendered? An invalid NOR doesn’t start laytime.
Office hours: NOR tendered at 1700 may be deemed delivered at 0900 next working day.
Berth charter vs port charter: a berth charter requires arrival at the berth; “WIBON” or “WIPON” may relax this.
Weather classification: was an interruption truly weather-driven, or was it port-side issue masquerading as weather?
Equipment failure: vessel-side equipment failure is shipowner’s account; port-side failure is charterer’s account; documentation of the cause is critical.
Shifting time: time spent shifting between berths counts how, depends on the charter party.
Bunkering during cargo operations: simultaneous bunkering counts how, depends on the charter party.
Customs and documentary delay: who pays for customs delay, depends on the cause.

These pitfalls are why demurrage is the most disputed commercial item in chartering.

Time bar

Concept

The time bar is a contractually agreed deadline for the shipowner to submit a documented demurrage claim to the charterer. Claims received after the time bar are barred from recovery, regardless of merit.

Typical time bars:

GENCON 2022: not specified (default to general time bar in the governing law, typically 6 years for English law contracts).
Asbatankvoy: 90 days from completion of discharge.
Shellvoy 6: 90 days from completion of discharge.
BPVOY 5: 60 days from completion of discharge.
Many bespoke clauses: 30, 60, or 90 days.

The time bar is strict. Late claims fail even if the underlying demurrage is undisputed. Shipowners therefore maintain dedicated demurrage departments to ensure timely submission.

Documentary requirements

Within the time bar, the shipowner must submit:

Notice of demurrage: formal claim document.
Statement of Facts (SOF) signed by all parties.
Notice of Readiness with delivery confirmation.
The laytime calculation showing the demurrage time and amount.
All pumping logs (for tankers).
Weather records (where weather exclusions are claimed).
Any other documentary evidence supporting the claim.

The submission must be complete and properly documented. Some courts and arbitrators have held that an incomplete submission does not stop the time bar clock; the shipowner must re-submit a complete claim within the original deadline.

Notable cases

The Eternal Bliss (2020): confirmed that demurrage is the sole financial remedy for breach of charterer’s laytime obligations under English law (preventing recovery of indirect losses).
The Adventure (2015): addressed the validity of demurrage claims in failed loading scenarios.
Various LMAA awards: addressing time-bar strictness, NOR validity, weather classification.

The principal English-language authoritative texts are:

Schofield, Laytime and Demurrage (8th ed, 2021).
Tiberg, The Law of Demurrage (5th ed, 2018).
Cooke et al, Voyage Charters (5th ed, 2022).

Despatch

The inverse of demurrage

When operations complete before laytime is exhausted, the charterer is entitled to despatch: a refund of the unused time, conventionally at half the demurrage rate (“half despatch”, the conventional commercial bargain).

Despatch types:

Despatch on all time saved (DATTS): the most generous to the charterer; refund covers all unused laytime including SHEX/weather time that wouldn’t have counted anyway.
Despatch on working time saved: refund only for the unused working time; SHEX/weather time excluded.

The choice depends on the charter party. DATTS is more common in the tanker market; working-time-saved is more common in the dry bulk market.

Calculation

Despatch is calculated:

$$ \text{Despatch} = (\text{Laytime allowed} - \text{Laytime used}) \times \text{Despatch rate} $$

For the worked example above, the despatch on the reversible-aggregated basis was USD 34,400.

Time bar for despatch

Despatch claims are subject to time bars on the charterer’s side, typically symmetrical with the demurrage time bar. The charterer must submit the despatch claim with documentation within the agreed deadline.

BIMCO demurrage clauses

LAYTIMEDEFS 2013

The BIMCO LAYTIMEDEFS 2013 glossary provides standard interpretations for laytime and demurrage terms. Most modern charter parties incorporate LAYTIMEDEFS by reference.

BIMCO Demurrage Time Bar Clause

BIMCO publishes a standard Demurrage Time Bar Clause for incorporation into voyage charter parties. The clause specifies:

The time bar period (configurable).
What documentary requirements the shipowner must satisfy.
The consequences of late submission.

BIMCO ETS, FuelEU and CII Operations Clauses

The newer BIMCO CII Operations Clause for Time Charter Parties (2022), BIMCO ETS Allowances Clause (2023) and BIMCO FuelEU Maritime Clause (2023) introduce climate-related cost allocation that interacts with demurrage in some cases (e.g. extended port stays may trigger additional ETS exposure for vessels calling EU ports).

Implications for owners, charterers, traders and brokers

Shipowners

Shipowners maintain dedicated demurrage departments that:

Construct laytime calculations from SOFs.
File timely demurrage claims within time bars.
Negotiate disputed claims.
Coordinate with arbitration counsel for unresolved disputes.
Track the demurrage receivables ledger (a significant working capital item).

Demurrage income is meaningful: 5 to 15% of total voyage revenue for active operators in the dry bulk and tanker markets.

Charterers

For voyage charterers (commodity traders, refineries, miners, grain merchants, steel mills), demurrage is a cost-control discipline:

Pre-charter analysis of port performance vs charter party terms.
Selection of efficient ports and stevedores.
Real-time monitoring of port performance.
Vigorous defence of demurrage claims through detailed SOF review.
Despatch claims to recover savings.

A trader’s demurrage exposure on a single voyage can exceed USD 1 million; the financial significance is high.

Commodity trading houses

The major commodity trading houses (Trafigura, Glencore, Vitol, Cargill, Bunge, ADM, COFCO, Mercuria, Gunvor, Wilmar) all maintain large in-house demurrage teams. Demurrage is treated as a profit centre alongside the cargo trading P&L.

Insurance

Marine insurers cover some demurrage scenarios:

P&I clubs: cover the shipowner for liability arising from cargo claims that cause delay.
Bunker insurance: covers bunker contamination that delays the voyage.
War risks insurance: covers war-related delays.
Charterers’ liability insurance: covers the charterer for demurrage exposure arising from the charterer’s breach of charter party.

Brokers

Charter party brokers play a critical role:

Advising on standard market demurrage rates.
Mediating disputes between owner and charterer.
Maintaining standard charter party templates with appropriate demurrage clauses.

The principal commercial brokers (Clarksons, Howe Robinson, SSY, Braemar, Galbraith’s, Maersk Broker) all have specialised demurrage teams.

Future developments

Electronic SOF

The transition to electronic Statement of Facts (eSOF), driven by ports such as Singapore (MPA), Rotterdam, Hong Kong, is reducing the time and dispute risk in demurrage calculation. eSOF systems automatically capture port events with machine-verified timestamps, reducing the documentary burden on the shipowner and the dispute risk for the charterer.

Demurrage clause modernisation

BIMCO is progressively modernising its demurrage clauses for new market realities (climate compliance, fuel mix, EU ETS, FuelEU). Updates to the standard time bar clause and the demurrage rate methodology are anticipated through 2025 to 2027.

AI-assisted demurrage management

Several startups and established demurrage software providers (NXcharter, Demurrage.io, Vessel.io) are introducing AI-assisted tools for SOF parsing, claim drafting, and dispute resolution. The technology is at early adoption stage but is expected to substantially reduce the manual workload in demurrage management over the next 5 years.

References

BIMCO. BIMCO Laytime Definitions for Charterparties (LAYTIMEDEFS) 2013. BIMCO, 2013.
BIMCO. BIMCO Demurrage Time Bar Clause. BIMCO, with periodic updates.
BIMCO. GENCON 2022: Voyage Charter Party. BIMCO, 2022.
BIMCO. Asbatankvoy: Tanker Voyage Charter Party. BIMCO and Asbatankvoy Committee.
Shell. Shellvoy 6: Shell Voyage Charter Party. Shell, 2014 with subsequent updates.
BP Shipping. BPVOY 5: BP Voyage Charter Party. BP Shipping, 2008 with subsequent updates.
LMAA (London Maritime Arbitrators Association). Annual Reports and selected awards. LMAA, ongoing.
The Eternal Bliss [2020] EWHC 2373 (Comm), confirming demurrage as the sole financial remedy for laytime breach under English law.
Schofield, John. Laytime and Demurrage, 8th edition. Informa Law, 2021.
Tiberg, Hugo. The Law of Demurrage, 5th edition. Sweet and Maxwell, 2018.
Cooke, Julian and others. Voyage Charters, 5th edition. Informa Law, 2022.