Chartering of ships: what is it and why is it needed

Chartering of ships. Types of charter contracts. Differences between chartering and transportation contracts

Chartering of ships. Types of charter contracts. Differences between chartering and transportation contracts

Chartering is a service that provides for the search and rent of a vessel of the required tonnage or part of its capacity for the forthcoming transportation to the port of destination. In sea freight transportation, the contract for this service is provided by freight brokers. These are contractors hired by the customer in the ports where the shipment takes place. A charter or charter agreement is concluded between the owner of the vessel (charterer) and the person paying for carriage (charterer).

What types of charter contracts exist

  1. Flight charter. In fact, this is sea freight with the differences indicated below. A voyage charter can be for 1 flight or for a series of consecutive flights, for a circular flight or charter under a contract. The latter provides for the transportation of a certain volume of goods in the selected direction within a designated period of time.

  2. Time charter. A type of contract in which the charterer leases the vessel to the charterer and the crew is rented for a specified period. This means more responsibility for the charterer. Together with the shipowner, he shares the cost of insurance, depreciation, operating costs and crew. Time-charter contracts are concluded when it is necessary to use the full capacity of the ship.

  3. Bareboat charter or ship leasing. Similar to a time charter, but is for a long term (up to 10-15 years). The scope of the charterer's duties is even greater and includes:

  • Manning the vessel;

  • Full coverage of operating costs and crew maintenance;

  • The costs of repairing and maintaining the ship in a seaworthy condition;

  • Liability for damages arising from commercial activities.

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Differences between contracts for chartering and transportation
Chartering differs from ordinary contracts for transportation of goods by choosing a specific vehicle or a separate part of it, in which the cargo will be placed. The charter takes into account such details as the exact time of departure of the goods and the route to the final destination. In case of charter transportation, the customer of the service does not draw up a consignment note and is not responsible for the safety of the cargo. Ensuring the integrity of the transported property or goods and insurance against possible damage is the task of the charterer.

Specifics of concluding a contract for the chartering of ships in Ukraine
Legally, this type of activity is regulated by the Merchant Shipping Code of Ukraine. In particular, Article 206 of the KTM refers to the rights of property lease and provides for the possibility of concluding charter contracts with third parties (subleasers) subject to the consent of the ship owner. This rule is valid when concluding contracts for time charter and bareboat charter.
Because time charter and bareboat charter provide for the use of the vessel in various directions of maritime navigation, the charter of ships always states that navigation can only be carried out between safe ports and within a certain area. The vessel for the entire period of the contract must be in a seaworthy condition.
A resident charterer in Ukraine to withhold taxes from payment for the services of a non-resident charterer. The established tax rate is 6% in accordance with clause 141.4.1 of the Tax Code of Ukraine. The basis for taxation is the freight rate specified in the contract.

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Chartering of vessels in Chernomorsk through brokers TTG "Forward"
If you are interested in finding vessels for the delivery of sea cargo from Chernomorsk, our company is ready to provide you with the services of chartering agents. We invite you to consult with our experts to find the most profitable contract options. Our brokers have access to an extensive database of sea freight carriers and ready-made forms for concluding voyage and time charters. With us you can quickly and confidently solve the issue of chartering ships in the south of Ukraine.

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