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Reversible laytime and despatch

Reversible laytime is a voyage charter party clause that pools the laytime allowed at the load port and the discharge port into a single combined allowance: time saved at one port can offset time exceeded at the other, and the demurrage or despatch calculation is performed once on the combined account. The alternative is non-reversible (split) laytime, where each port is calculated separately and the financial outcome is the sum of the per-port outcomes; non-reversible is the default under most charter party forms when the laytime clause is silent. Despatch (sometimes spelt dispatch) is the reverse of demurrage, payable by the shipowner to the charterer when laytime is saved, typically at half the demurrage rate (‘despatch half demurrage’). Despatch may be calculated on ‘all time saved’ (ATS) or ‘all working time saved’ (AWTS), and the choice between the two can change the despatch amount by a factor of two on a typical voyage. Reversible laytime and despatch interact: a vessel that finishes early at the load port and runs into demurrage at the discharge port may owe a small demurrage on a non-reversible basis, but pay nothing or even collect despatch on a reversible basis. The combination is one of the most commercially material drafting choices in a voyage charter, and is treated in the BIMCO LAYTIMEDEFS 2013 glossary, the GENCON 2022 charter party and the major tanker forms (Asbatankvoy, Shellvoy 6, BPVOY 5). ShipCalculators.com hosts the principal computational tools: the reversible laytime calculator, the despatch calculator, the ATS vs AWTS despatch calculator, the laytime calculator, the demurrage calculator and the Statement of Facts builder. A full listing is available in the calculator catalogue.

Contents

Background

The two-port problem

A voyage charter party covers a journey from a load port to a discharge port (or sometimes through several ports of each type). Laytime is allocated for cargo operations at each port; the same allocation is used as the basis for demurrage when laytime is exceeded and despatch when laytime is saved.

The natural question is: are the load and discharge laytime calculations independent or combined? Two charters that allow 96 hours total laytime can structure that allocation in three different ways:

  1. Split (non-reversible): 48 hours at load + 48 hours at discharge, calculated separately.
  2. Reversible: 48 + 48 = 96 hours total, calculated against the sum of actual time used at both ports.
  3. Averaged: 96 hours total, with explicit averaging language that allocates the bonus equally rather than as a single pot.

In practice ‘reversible’ and ‘averaged’ are often treated as synonyms by drafters, but careful drafting distinguishes them; see the BIMCO LAYTIMEDEFS 2013 glossary for the standard definitions.

Why the choice matters financially

Consider a voyage with 48 hours allowed at each port and a demurrage rate of 30,000 USD per day (despatch rate 15,000 USD per day under the half-demurrage convention).

Scenario A: load port used 24 hours (saved 24), discharge port used 72 hours (exceeded by 24).

  • Non-reversible: load port pays 15,000 USD despatch (24 hours saved at the despatch rate), discharge port pays 30,000 USD demurrage (24 hours exceeded). Net to charterer: minus 15,000 USD.
  • Reversible: total used = 96 hours = total allowed. Net to charterer: zero.

Scenario B: load port used 36 hours (saved 12), discharge port used 60 hours (exceeded by 12).

  • Non-reversible: 7,500 USD despatch, 15,000 USD demurrage, net minus 7,500 USD.
  • Reversible: total used 96 hours = total allowed, net zero.

The difference is meaningful even on a small voyage; on a large voyage with high rates the difference can run to tens of thousands of dollars. Reversible laytime systematically favours the charterer when port efficiency varies, because savings at one port absorb overruns at the other. The owner gives up the upside (no despatch unless aggregate is favourable) and reduces the downside (no demurrage unless aggregate is unfavourable).

Default position

Under English law, the default position when the charter is silent on the question is non-reversible laytime (see The Margaronis Navigation Agency v Henry W Peabody [1965] 1 QB 300 and the discussion in Scrutton on Charterparties). The reasoning is that each port is a discrete commercial operation, and pooling requires an explicit contractual choice. Tribunals do not infer reversibility.

This means a charterer who wants reversibility must negotiate it in. A charterer who fails to negotiate may discover post-fact that they are exposed to demurrage at one port even though they saved time at the other. Conversely an owner who agrees to reversibility without raising the rate may find themselves giving up demurrage that would have been due on a split basis.

Reversible laytime mechanics

Drafting forms

Reversible laytime is signalled in the charter party by phrases like:

  • ‘Time at load and discharge ports to be reversible’.
  • ‘Laytime to be averaged across load and discharge ports’.
  • ‘Total laytime allowed of 96 hours, reversible’.
  • ‘Laytime non-reversible’ (the explicit opposite, included for clarity).

The BIMCO LAYTIMEDEFS 2013 glossary defines ‘reversible laytime’ as: ‘an option given to the charterer to add together the time allowed for loading and discharging. Where the option is exercised, the effect is the same as a total time being specified to cover both operations.’

Note the option language: in some drafting, reversibility is an option for the charterer to elect, not an automatic feature. The charterer must declare the election, typically before the vessel leaves the load port. Other drafting makes reversibility automatic and unconditional.

Calculation method

Under reversible laytime the calculation is:

  1. Compute the time used at the load port from the Statement of Facts, applying SHEX/SHINC and weather exclusions per the charter.
  2. Compute the time used at the discharge port in the same way.
  3. Sum the two used figures to get the combined time used.
  4. Sum the two allowed figures to get the combined time allowed.
  5. If combined used > combined allowed: demurrage on the excess at the demurrage rate.
  6. If combined used < combined allowed: despatch on the saving at the despatch rate.

The arithmetic is mechanical once each port’s used figure is computed. The complication is that the per-port used figures are computed under the charter party’s normal exclusions, which may differ between load and discharge (different SHEX days, different weather conventions, different shifting rules). Reversibility pools the net used time, not the gross elapsed time.

The reversible laytime calculator implements this algorithm directly.

Worked example

Charter terms: 60 hours allowed at load + 60 hours allowed at discharge = 120 hours combined, reversible. Demurrage 40,000 USD per day, despatch 20,000 USD per day.

Load port (Vancouver, coal):

  • NOR tendered Tue 09:00.
  • Laytime commenced Tue 21:00 (after 12-hour notice grace).
  • Loading completed Thu 14:00.
  • Time used: Tue 21:00 to Thu 14:00 = 41 hours, less Sunday exclusion none = 41 hours.

Discharge port (Qingdao, coal):

  • NOR tendered Sun 06:00.
  • Laytime commenced Sun 18:00.
  • Discharge completed Wed 22:30.
  • Time used: Sun 18:00 to Wed 22:30 = 76.5 hours, less Sunday exclusion (00:00 to 18:00 = 18 hours) = 58.5 hours.

Combined used: 41 + 58.5 = 99.5 hours. Combined allowed: 120 hours. Time saved: 20.5 hours = 0.854 days. Despatch payable to charterer: 0.854 days × 20,000 USD = 17,083 USD.

On a non-reversible basis the calculation would be:

  • Load port: 60 - 41 = 19 hours saved = 0.792 days × 20,000 = 15,833 USD despatch.
  • Discharge port: 60 - 58.5 = 1.5 hours saved = 0.063 days × 20,000 = 1,250 USD despatch.
  • Total: 17,083 USD despatch.

In this case the two methods produce the same number because both ports finished early. The methods diverge when one port is in despatch and the other in demurrage.

Multiple load or discharge ports

Many voyages call at two or more load ports or two or more discharge ports. Reversibility can be:

  • Reversible across all ports: a single pooled calculation across every port called.
  • Reversible within a class only: pooled across all load ports OR all discharge ports, but not across the two classes.
  • Reversible per pair: each load-discharge pair pooled separately.

The charter party should specify which. Drafting that says merely ’laytime reversible’ without qualifying the scope is ambiguous and may be construed against the drafter under the contra proferentem rule.

The multi-port reversible laytime calculator handles the standard configurations.

Reversible laytime and the Statement of Facts

The Statement of Facts is unaffected by the choice of reversible vs split laytime; it remains a per-port document signed at each port. The reversibility convention applies in the laytime statement that the owner’s claims department prepares post-discharge, not in the SoF itself.

This means the master at the load port has no need to consider reversibility when signing the SoF. The reversibility decision is a downstream commercial calculation. Master and agent record the events truthfully; the laytime accountants apply the charter party rules.

Despatch

What despatch is

Despatch is the financial reward to the charterer for completing cargo operations in less time than the allowed laytime. In economic terms it is the mirror image of demurrage: where demurrage compensates the owner for time consumed beyond the contractual allowance, despatch compensates the charterer for time saved within the allowance. Together demurrage and despatch align the incentives of both parties: the charterer wants to load and discharge fast, the owner wants the vessel back at sea.

Despatch is not universal: many tanker and large-volume dry-bulk charters include demurrage but not despatch, leaving the owner to capture the full upside of vessel performance. Conversely many smaller dry-bulk and break-bulk charters do include despatch, particularly in the Atlantic Basin and the Mediterranean grain trades.

Despatch rate

The despatch rate is normally specified as a fraction of the demurrage rate. The most common conventions are:

  • ‘Despatch half demurrage’: despatch rate = demurrage rate / 2. By far the most common worldwide.
  • ‘Despatch one-third demurrage’: despatch rate = demurrage rate / 3. Common in some Atlantic Basin grain trades.
  • ‘Free despatch’: no despatch (the owner keeps all the upside). Common in tanker trades.
  • ‘Despatch equal to demurrage’: despatch rate = demurrage rate. Rare; only in highly competitive markets.

The half-demurrage convention reflects a rough commercial fairness: the charterer gets half the upside, in recognition that the owner has done some of the work to enable the time saving (vessel performance, faster pumping, better gear).

Time saved: ATS vs AWTS

The most consequential drafting choice in despatch is how ’time saved’ is measured. The two principal conventions are:

‘All time saved’ (ATS): time saved equals laytime allowed minus actual elapsed time from commencement to completion of cargo. This includes time that would have been excluded under SHEX/SHINC if it had been laytime: Sundays, holidays, weather, breakdowns. The despatch is payable on the full elapsed savings.

‘All working time saved’ (AWTS) / ‘All laytime saved’ / ‘Working time saved’: time saved equals laytime allowed minus laytime used. Excluded time (Sundays, weather) is excluded from both sides; the despatch is payable on the saving in counted laytime only, not on calendar time.

The two methods give very different answers when significant time has been excluded. Worked example:

Charter: 96 hours allowed, despatch half demurrage at 20,000 USD per day = despatch rate 10,000 USD per day.

Voyage (discharge port only):

  • NOR tendered Friday 06:00.
  • Laytime commenced Friday 18:00.
  • Discharge completed Sunday 12:00.
  • Elapsed time Friday 18:00 to Sunday 12:00 = 42 hours.
  • Sunday exclusion (00:00 to 12:00) = 12 hours.
  • Time used (counted laytime): 42 - 12 = 30 hours.
  • Time saved (laytime basis): 96 - 30 = 66 hours = 2.75 days.
  • Time saved (elapsed basis): 96 - 42 = 54 hours = 2.25 days.

Under AWTS: despatch = 2.75 × 10,000 = 27,500 USD. Under ATS: despatch = 2.25 × 10,000 = 22,500 USD.

In this case AWTS pays 5,000 USD more. The difference can be much larger when the voyage spans multiple weekends or includes major holidays. A 7-day voyage spanning two Sundays could see a 7,500 USD difference per Sunday under typical rates.

The ATS vs AWTS despatch calculator computes both methods side by side and explains the difference.

English vs US convention

There is a long-standing divergence in default convention:

  • English (London) practice: AWTS by default. Despatch is payable on time saved as if the laytime convention applied, excluding what would have been excluded.
  • US practice: historically ATS by default, particularly in Gulf of Mexico tanker trades.

The divergence is captured in the case law (The Themistocles (1947) 73 Ll L Rep 379 in the English tradition, US Court of Appeals authority on the ATS side). Modern charters resolve the question by drafting the despatch clause explicitly: ‘despatch payable at half demurrage rate on all working time saved’ or ‘despatch payable at half demurrage rate on all time saved’. Where the drafting is silent and the charter is governed by English law, the English default applies; under New York law the US default applies. The choice of governing law in the charter party therefore matters even for the despatch calculation.

Despatch on reversible laytime

Despatch on a reversible laytime charter is calculated on the combined time saved, not on per-port savings. The arithmetic is:

  1. Compute combined time used (per the reversible laytime method above).
  2. Compute combined time allowed.
  3. If combined used < combined allowed, the saving is the basis for despatch.
  4. Apply the ATS or AWTS convention as drafted.
  5. Multiply by the despatch rate.

Despatch on a reversible charter is generally lower than the sum of per-port despatch under a non-reversible charter, because per-port savings cannot be converted into despatch if there is an offsetting overrun at the other port. From the charterer’s perspective this is the cost of the demurrage protection that reversibility provides: less upside for less downside.

Despatch invoicing

The despatch claim is initiated by the charterer, not the owner. After the laytime statement is finalised, the charterer prepares a despatch invoice and sends it to the owner. The invoice should include:

  • Per-port time used and time allowed.
  • Combined figures if reversible.
  • Time saved per the charter convention (ATS or AWTS).
  • Despatch rate.
  • Total amount.
  • SoF and supporting documents as backup.

The owner’s claims department reviews and either pays or disputes. Disputes typically turn on:

  • The classification of excluded periods (was a particular suspension truly outside laytime?).
  • The interpretation of the despatch convention (ATS vs AWTS where drafting is ambiguous).
  • The NOR validity (an invalid NOR delays laytime commencement, increasing time used and reducing time saved).
  • The time bar (despatch claims often have shorter time bars than demurrage; some forms require the charterer to claim within 30 days of completion).

Despatch claims are less litigated than demurrage claims because the amounts are smaller (despatch is typically half the rate, and the saved time is usually less than overrun time on a typical voyage). But the principles are identical and the same case law governs both.

Despatch in the broader commercial picture

Despatch is one element of the charterer’s voyage economics. A charterer comparing two vessels may prefer the slightly more expensive one if the vessel’s faster pumps, better cargo gear or better port performance reliably generate despatch. The despatch upside on a typical large dry-bulk voyage is modest (a few tens of thousands of dollars) but the cumulative effect across a year of charters is material for a major operator.

For the owner, despatch is part of the freight commercial reality: the vessel’s performance reputation affects the rates at which it can be chartered. A vessel that consistently finishes early is attractive to charterers and earns a small premium in the market; a vessel that consistently runs into demurrage is shunned or chartered only at a discount. The owner therefore manages despatch and demurrage together as part of the vessel’s commercial profile.

The voyage profit estimator integrates demurrage and despatch into the full voyage P&L calculation.

Common pitfalls

Drafting ambiguities

The most common drafting failure is silence. Charter parties that say ’laytime 96 hours total’ without specifying reversible or split, or that say ‘despatch half demurrage’ without specifying ATS or AWTS, leave both sides exposed to default rules they may not have considered. The interpretive default often disfavours one party more than they intended.

Best practice is to draft reversibility and despatch convention as separate explicit clauses:

  • ‘Laytime: 60 hours load + 60 hours discharge, reversible.’
  • ‘Despatch: half demurrage rate, payable on all working time saved.’
  • ‘Demurrage: 35,000 USD per day pro rata.’
  • ‘Time bar: demurrage and despatch claims to be submitted within 90 days of completion of discharge, fully documented.’

NOR validity blowback

A defective Notice of Readiness at the load port reduces the load-port time saved (or increases the time used) and therefore reduces the despatch (or increases the demurrage) at that port. Under reversible laytime the effect propagates into the combined account: a defective NOR at one port can erase despatch that would otherwise have been earned at the other. Masters should be especially careful to tender valid NORs on reversible voyages where the financial leverage is amplified.

Late time bar

Despatch claims, like demurrage claims, are often subject to strict time bars. The charterer who delays the despatch invoice past the contractual deadline may forfeit the entire claim regardless of merit. Charterer’s freight payment teams should diary the time bar from the date of completion of discharge and ensure the invoice is sent (with full backup) before the bar expires.

Currency and rounding

Despatch rates are stated in USD per day; cents matter on large claims. Use the same rounding convention as the demurrage calculation (typically round to nearest cent, not nearest dollar). Currency conversion (where the charter is in USD but settlement is in another currency) should use the rate at the date of the invoice or the date of payment as the charter party specifies.

Overlapping exclusions

Where a single period qualifies for two exclusions (e.g. a Sunday on which a breakdown also occurred), the SHEX SHINC time exclusion calculator should be used to apply the exclusions in the correct order. Double-counting an exclusion inflates the time saved and the despatch; missing an exclusion deflates them.

See also

References

  • BIMCO, CMI, FONASBA and INTERCARGO, Laytime Definitions for Charter Parties 2013, joint publication, 2013.
  • BIMCO, GENCON 2022 - General Voyage Charter Party, BIMCO Documentary Committee, 2022.
  • ASBA, Asbatankvoy - Tanker Voyage Charter Party, Association of Ship Brokers & Agents, current edition.
  • Shell International Trading and Shipping Company, Shellvoy 6 - Voyage Charter Party, Shell, current edition.
  • BP Shipping, BPVOY 5 - Voyage Charter Party, BP, current edition.
  • John Schofield, Laytime and Demurrage, 8th edition, Informa Law from Routledge, 2021.
  • Donald Davies, Commencement of Laytime, 4th edition, Informa Law, 2006.
  • Sir Bernard Eder et al., Scrutton on Charterparties and Bills of Lading, 24th edition, Sweet & Maxwell, 2020.
  • The Themistocles (1947) 73 Lloyd’s Law Reports 379 - the classic English authority on AWTS despatch.
  • The Margaronis Navigation Agency v Henry W Peabody [1965] 1 QB 300 - on the default of non-reversibility.