Chartering (shipping)

Activity within the shipping industry

Chartering is an activity within the shipping industry whereby a shipowner hires out the use of their vessel to a charterer. The contract between the parties is called a charterparty (from the French "charte partie", or "parted document"). The three main types of charter are: demise charter, voyage charter, and time charter.

In some cases, a charterer may own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price, the freight rate. Freight rates may be on a per ton basis over a certain route (e. g. for iron ore between Brazil and China), in Worldscale points (in case of oil tankers). Alternatively may be expressed in terms of a total sum, normally in US dollars, per day for the agreed duration of the charter. A charterer may also be a party without a cargo that takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate or even makes a profit in a rising market by reletting the ship out to other charterers. Depending on the type of ship and the type of charter, a standard contract form, called a charter party, is normally used to record the exact rate, duration and terms that are agreed between the shipowner and the charterer. Time charter equivalent is a standard shipping industry performance measure and is used primarily to compare period to period changes in a shipping company's performance despite changes in the mix of charter types.

Charterers' Liability Insurance is a type of insurance meant to protect shipping businesses from certain risk or liabilities. That could include fines and breaking of a law, cargo or vessel damage and physical injuries including and up to death. Coverage of a Charterers' Liability Insurance can vary, based on the charter party type and additional inclusions or exclusions that are arranged prior to the purchase of the insurance.