Laytime Proration Clause

In early 2017, the LEAP Public Dock Standing Committee identified and discussed a recurring matter of confusion and disagreement in the market: the scenario in which a single vessel or barge loads (or unloads) a cargo at a shared berth for two or more companies in the same operation. This increasingly-common situation frequently leads to unresolved demurrage claims among market participants, so the Committee agreed to discuss ways to clarify the calculation and allocation of demurrage liability among the parties in the voyage.

After a series of meetings to specify the scenario and discuss potential solutions, the Committee then documented their understanding of the expected fair and ‘market neutral’ approach to this scenario.

LEAP Proration Clause

If the Vessel is loading or discharging any part cargo for other parties at the same berth, then any time used by the Vessel waiting at or for such berth and in loading / discharging which would otherwise count as used Laytime, and after applying any Laytime exclusions allowed by the governing terms, shall be pro-rated.

The proration will be determined by the Terminal Party’s loaded cargo volume divided by the total cargo volume loaded, or the Terminal Party’s discharged cargo volume divided by the total cargo volume discharged by the Vessel at the berth.

If supporting documentation, such as time sheets, statements of facts or inspection reports, allows the parties to identify each and every counterparty’s parcel, then the following will apply:

  • Any used Laytime that occurs from the commencement of loading / discharging to the completion of loading /discharging solely for another party’s cargo shall not count in calculating used Laytime for the Terminal Party.
  • Any used Laytime from the commencement of loading / discharging to the completion of loading / discharging solely for the Terminal Party’s cargo shall exclusively count (100%) to the Terminal Party’s used Laytime.

It is understood used Laytime is continuous from start to end. All used Laytime not specifically excluded above is to be prorated to each counterparty.

For the avoidance of doubt, if any time used prior to commencement of loading or after completion of discharge can be clearly determined to be the fault of specific party(ies), then such time is to be for the account of the responsible party(ies).

LEAP and the Public Dock List Committee believe that providing these documents will reduce confusion, inefficiency, and risk among parties in the waterborne trade of oil and products. The above clauses, when edited for market participants’ needs, can be inserted into General Terms and Conditions, Confirmations, and other oil trading-related correspondence to document and clarify the Buyer and Seller’s responsibility for demurrage.

The above clauses are for voluntary use by market participants.  LEAP acknowledges that parties have many options to negotiate and document the demurrage liability in their oil trading agreements. LEAP believes that the above clauses serve to provide clarity and a reasonable ‘market-neutral’ solution to a set of circumstances that may occur in the market from time to time. Other options may be available to market participants, and the above option should not be seen as exclusive, as they may be revised by parties to address the individual needs of bilaterally-negotiated trading agreements.