Sea transportation is the most convenient and cost-effective type of carriage. It allows one to deliver a significant amount of cargo using sea transport. Vessels differ in size and carrying capacity, as well as technical characteristics such as the ability to navigate certain routes. Although sea shipping is slower than air transport, it is more cost-effective. Today, the most common type of vessel for shipping is the universal container ship, which can be loaded with a significant number of containers. Moreover, maritime transport has a large capacity and a single legal field with a long history.
In order to use the services of transportation by sea, one needs to contact the shipping company and conclude a contract. It can be either renting or buying a vessel, and the first one includes several options. Freight is a contractual payment for the lease of a vessel, which differs depending on the period of the charter. The chartering of a sea vessel includes the process of finding a ship, agreeing on the terms of the lease, namely partial or full lease, and preparing a charter agreement (Skaar, 2020). The contract contains all the necessary terms of the transaction and is concluded between the ship owner and the shipper.
It is worth mentioning that chartering a vessel includes several options, each of which is suitable for certain situations. For example, voyage chartering, which may include chartering for one cruise. It is suitable for a person who has a need to transfer a significant amount of cargo at a time. Thus, an individual can rent the entire vessel or part of it and carry out the transportation. Otherwise, one has the opportunity to charter a vessel for several consecutive voyages. It will be convenient if the amount of cargo exceeds that which can be delivered at one time. In this case, a person, with the help of several flights, which usually go one after another, has the opportunity to send a full load. In addition, an individual can enter into a charter contract and time charter.
The most common types of the charter are time charter and bareboat charter. Time charter in maritime law is an agreement that includes the temporary rental of a vessel with a crew (Rob, 2021). That is, in addition to the ship itself, the consignor receives at the disposal of the ship’s crew and equipment. The crew of the ship will perform work related to the transportation of cargo or passengers. On the other hand, the equipment can include equipment to transfer cargo from land to ship and, vice versa, to transport and store the load.
According to the time charter agreement, the ship owner undertakes to provide the charterer with the ship, crew, and equipment for rent. It is granted to the shipper for a specified period of time for the carriage of goods, passengers, or other maritime purposes (Song and Panayides, 2021). It is worth noting that with a time charter, the ship owner assumes some other responsibilities, such as paying for certain items. It includes crew costs and other fixed costs of the joint venture. For example, insurance, mortgage interest, depreciation costs, and others.
Under the terms of the time charter, the charterer acquires the right to dispose of the vessel and the crew at one’s own discretion, although for the purpose of navigation. However, in this case, the charterer also assumes the obligation to pay for some items. Thus, for example, one must pay some of the costs of the joint venture, such as the cost of fuel, water, grease, navigational expenses, and more (Rob, 2021). Usually, the terms of a time charter stipulate a greater number of duties, responsibilities, and costs compared to a voyage charter.
However, one has more rights to own the vessel, for example, to sublease it, dispose of the vessel on certain conditions, charter the vessel on the terms of a voyage charter, and more. Under a time charter, the charterer gets the right to determine the order of commercial procedures for the vessel independently. However, matters of a technical nature regarding the vessel and its operation remain under the control of the ship owner.
A common alternative to a time charter is a bareboat charter. In maritime law, this is a charter contract for a lease of the vessel without a crew and equipment (Ma, 2020). Under this agreement, the ship owner obliges to provide the charterer with a ship for a certain period (Hillenius and Sandevarn, 2018). However, unlike a time charter, equipment and crew services are not included in the rental (Watt and Coles, 2018). That is, this type of rental is suitable for a person whose cargo does not require special equipment. Otherwise, the individual may oneself be able to hire a crew or outfit a ship for fewer finances than what would be provided by a time charter. Freight, or rental fee, is agreed upon depending on the time of the lease, the specifics of the cargo, the route, and other factors (Ehlers, 2020). The ship is provided for the carriage of cargo, and passengers or for other purposes of navigation.
In this case, an Argentine company exporting meat to the UK is considered. Deliveries are made regularly, moreover, a 10-year contract was signed with a supermarket chain. Previously, the company used refrigerated containers on a linear service. Now the exporter needs to decide between a time charter and a bareboat charter, namely, to choose the most suitable and profitable option. Thus, taking into account all the above aspects, one can conclude that, in this case, time charter will be the most appropriate variant. Primarily, it is justified by the type of cargo that will be transported, namely meat. For such goods, it is necessary to have specific equipment on the ship, such as refrigerators. Moreover, a crew is required for cargo management, which can be costly without a time charter provision.
In addition, it is necessary to take into account the long-term and regularity of cargo deliveries. In this case, a 10-year contract was signed with a supermarket chain, that is, the supply will be carried out for a long period and be of a regular nature. An advantageous point of the time charter is that the ship owner takes on the payment for the maintenance of the crew. Despite the fact that the charterer, in this case, is obliged to pay for the fuel, one will have the opportunity to build the route in the most economical way independently. In addition, technical issues regarding the vessel remain within the competence of the ship owner, which formulates liability in the event of a breakdown.
To conclude, there are two common types of boat leases for transportation, namely time charter and bareboat charter. Time charter includes the rental of the vessel with crew and equipment, however, it implies some expenses. Bareboat charter formulates the lease of the ship without staff and equipment, however, in this case, it is not a suitable option. Given that the company is engaged in the export of meat, a time charter is necessary, which will allow one to hire the crew and equipment needed for transportation.
Reference List
Ehlers, P. (2020) Maritime law – current developments and perspectives. LIT Verlag Münster.
Hillenius, P. and Sandevarn, A. (2018) Shipbroking and chartering practice. Taylor & Francis.
Ma, S. (2020) Economics of maritime business. Routledge.
Rob, M. (2021) Marine insurance: a legal history. Edward Elgar Publishing.
Skaar, A. A. (2020) Permanent establishment: Erosion of a tax treaty principle. Kluwer Law International B.V.
Song, D. W. and Panayides, P. (2021) Maritime logistics: a guide to contemporary shipping and port management. Kogan Page Publishers.
Watt, E. and Coles, R. (2018) Ship registration: law and practice. Taylor & Francis.