What is Tramp Shipping or chartering?

International Tramp Shipping started with the Phoenicians in Carthage, when merchants-chartered vessels for Mediterranean and North European trading. In Ancient Rome there was a vessel chartering market of sorts dealing in Egyptian grain prices on arrival at Ostia (Rome’s seaport).

Tramp Shipping is a Subsidiary from Maritime & Logistics activity, The main players for this field is Ship owners, Charterers & Ship brokers. to find a Vessel to shipped the cargo for a certain price called” freight rate”. Freight rates may be on a per-ton basis over a certain route the common payment is United States Dollars and paid even with rate or Lumpsum as agreed with all parties

•Tramp Shipping doesn’t have a fixed schedule and is available at short notice to load any cargo from port to port
•Tramp Ships trade on the spot market and often wait for enquires from cargo owners who want to ship goods to buyers
•For tramp shipping, the chartering department is always in need to have accurate information about the location of the vessel
•and the Estimated Time of Arrival (ETA) at the next port to answer enquiries from cargo owners.
•However, bulk shipping companies are usually unable to convey the most accurate available schedules to their customers.
•The provision of incorrect or delayed information means businesses may miss trade opportunities, incur demurrage,
• underutilized shoreside assets and generally incur financial penalty as contracts are not fulfilled.


Liner Shipping VS Tramp Shipping
Liner Shipping VS Tramp Shipping

• What are the most common Incoterms used in Tramp Shipping?

Tramp Shipping usually takes place on Free On Board (FOB) terms; this means that all costs are covered by the charterer/ Buyer who will also take care of insurance policies. Once signed, charter parties do not require further approval or ratification by any authorities or other third parties (UNCTAD, 2001). On the other hand, charter contracts involving government organizations (such as customs unions) may need governmental authorization to enter into force.


Free on Board 2020
Free on Board 2020

Tramp Shipping sometimes used Cost & Freight (CFR) terms; this means that all costs are covered by the charterer/ Seller who has a weightier responsibility for arranging and paying for transportation the ordered products. Using CFR means that the seller transmit the goods on board of the vessel or purchase the goods already so transported. The risk of loss or damage to the goods passes when the goods are on board of the vessel. The seller must contract for payment the costs & freight necessary to bring the commodities to the Discharging port. but, using CFR, the seller doesn’t have to make marine insurance against the risk of loss or damage to the goods during transit.


Cost and Freight 2020
Cost and Freight 2020

The Buyer must take delivery of the commodities once they are delivered and receive them from the carrier at the named port of destination.

The buyer is then responsible for discharging costs and any further transportation costs to the final point (Port/ Warehouse, etc.).

• Chartering sometimes used Cost + Insurance & Freight (CIF) terms; Same as CFR except seller have to buy marine insurance against the risk of loss or damage to the cargo during transit.


Cost, Insurance and Freight 2020
Cost, Insurance and Freight 2020

How Ship Tramp Shipping works and why it is Important?

Before Tramp Shipping becomes possible, it is necessary to find a cargo that needs transportation from its supplier to its final destination. Finding such cargo is generally done through shipping brokers who either work independently or for freight forwarders, companies which specialize in international logistics and cargo transportation. Shipping brokers operating on their own tend to search for candidates among several shipping lines that are willing to charter ships.

Although the Tramp Shipping process usually takes place between a ship owner and a charterer, it can be divided into various stages where different parties (such as shipping brokers) may be involved. an overview of charter contracts and how chartering is carried out in practice. The complexity of this process makes chartering one of the least understood aspects of maritime trade.

Tramp Shipping is a form of charter party, which is defined as an agreement between the ship owner and the charterer for cargo transportation. The chartering process can be described as “one of the most important stages in any charter market transaction”.


Tramp Shipping process
Tramp Shipping process

types of brokers, Ship brokers, Charterer Broker, Sake /Purchase Broker & Freight forwarders
a. Ship Brokers : a broker is someone who act between two parties for a definitive task
b. Charterer broker whomever he represent, should provide information and sometimes give advice to his principal on ship’s open and cargo offering

Chartering broker can act as charterer’s or owner’s broker at different occasions
c. Sales /purchase brokers activities: should offer a lot of services especially the following :
i. To provide information on reported ships’s sale in the recent past,
ii. To provide information on the relevant vessels on the market for sale, information of alternative suppliers should be provided for comparison

iii. To provide information and analysis on the market in which the vessel will be operated
iv. To provide information on second hand market, and also scrap metal markets
v. To assist its principal to negotiate the conditions of sale/purchase contracts
d. Freight forwarding who act on behalf of an exporter/ importer as forwarding agent and who act in their ow name as Non vessel operating common carriers (NVOCC) or in some case as Multimodal Transport Operators(MTO) and have a Tramp Shipping desk department.


Ship broker role in Tramp shipping
Ship broker role in Tramp shipping

charter parties are always first negotiated with the help of shipping operator. After successful negotiations, brokers may initiate charter party negotiations or request further information from potential charterers who already have exclusive rights over the cargo during Tramp Shipping talks.

However, if brokers work independently without having any principal company overseeing their actions, charter parties are almost exclusively negotiated directly between ship owners and charterers. It is important to note that ship owners interested in chartering out their vessels offer charter parties for sale. The Tramp Shipping process can be described as “one of the most important stages in any charter market transaction”.

Once Tramp Shipping is set to begin, brokers may act both on behalf of ship owners and prospective charterers. Freight forwarders usually entrust charter contracts negotiations to reputable shipping brokers who must be able to obtain necessary information about cargo origin and destination. Shipping brokers working for freight forwarders are required to give their principals access to charter party offers obtained through bidding procedures carried out by Tramp Shipping lines involved in particular trade lane (UNCTAD, 2001).

Once Tramp Shipping negotiations are finished and terms have been agreed upon, charter parties should be submitted to several official authorities for approval. In this phase, charter party documentation must be legally approved by the shown Tramp Shipping line’s headquarters before being sent out to local governmental bodies in order to obtain all necessary approvals. Ship owners may require different documents from potential charterers. However, a few main legal requirements must be met before ships can enter into service:

– Obtaining a tonnage measurement certificate from a class surveyor which states that vessel is fully seaworthy and fit for service if cargo holds meet required safety standards

– Getting a license for ship operation from a relevant maritime authority such as Ministry of Transport or Maritime Department in case ship owner

– Getting a license for ship operation from a relevant maritime authority such as Ministry of Transport or Maritime Department if ship owner is non-Egyptian company

Shipping intermediates play and important role in transport reliability. In the shipping practice a “Good Broker” is often referred as “First class Broker”

Replying on the first class brokers isa great importance for having a reliable transport service. This is equally true as regards the dispute settlements.

For a shipowner, the importance of Broker, NVOCC & MTO is becoming bigger as increasingly NVOCC’s control transport routing of cargo and thus the selection of shipping companies.

Depending on the type of vessel and the type of charter, normally a standard contract form called a “charter party” include the agreed freight rate , loading & Discharging ports & any special terms between Sip owner/ Operator & charterer. The most common measurement in maritime to calculate the freight rate called Time charter Equivalent can calculate period-to-period changes in a shipping company’s performance despite changes in the mix of charter types.


Tramp Shipping Agreements
Tramp Shipping Agreements

What are the types of Charter contracts?

There are a various types of ship charter contracts that charterers might came across , such as

A- voyage charter
B- time charter
C- Bareboat charter or a demise charter
D- Contract of Affreightment (C.o.A)

A voyage charter : can be defined as a legal contract, in which ship owners committed to transport a particular cargo (Sole cargo or different cargoes) on a specific vessel on a determined voyage for an agreed sum.

Point to hire a vessel and crew for a voyage between a loading port and a discharging port; The charterer pays the shipowner on a per ton “weight” or lump sum {single large payment} basis while the shipowner pays the port costs “excluding stevedoring”, fuel costs & crew costs.

A time charter: can be defined as a legal contract, in which charterers are hire vessels for a certain period of time from the ship owners.

Go into hiring a vessel for a constant timeframe; the owner preserves management of the vessel, but the charterer has the power to choose which ports to dock and directs where the Vessel sails. Additionally, the charterer affords all the fees that the ship bear.

This includes the cost of bunker that the vessel consumes, port charges, and a daily hire to the Ship owner

Voyage and time charters are totally different, in their seek in use and service conditions.

Knowing when to select each type of charter which match meeting expectations of the charterer and ship-owner.

A voyage charter is preferred in situation which the charterer only needs the vessel for certain voyages that may arise for different causes.

This could be the case when there is a transverse cargo to be shipped.
An occasional cargo commonly emerges during sudden rise in demand, when the supply services are down. So, companies that may deal in other goods could enter the cargo industry for that certain of time, in order to gain a profit.

A bareboat charter or a demise charter grants ownership or possession of the vessel to the charterer subject to certain time-bound conditions.

Point out to hire a vessel whereas no administrative or technical maintenance is included as part of the agreement. The charterer incur the full operating expense which includes fuel, crew wages, port expenses & hull insurance. Actually, most charter periods “usually counted in years” end with the charterer obtaining ownership of the vessel. virtually, the Ship owner relinquished possession of the vessel to the charterer & the charterer takes full control of the vessel along with the legal and financial responsibility for it.


Charter parties types
Charter parties types

Contract of Affreightment (C.O.A) : is an agreement between the owner or operator of the Vessel and the charterer.

This contract is distinguished by the fact that it is Shipped of a specific quantity of goods divided into shipments for more than one voyage) meaning that it combines Tramp Shipping by voyage and time. And it is called by the name (tender contract) Here, the ship owner or operator is not obligated to a particular ship or a particular route, like the rest of the lease/ Charter party contracts… because the obligation here is to transport the proper quantities of the goods agreed upon.

The Contract of Affreightment “COA” is a mixed type of charter, which includes parts from all other types of Tramp Shipping and especially voyage charter. CoA is recognized as one of the newest forms of freight transport by sea, which applies to homogenous cargoes that are to be transported in large quantities and over long periods, between specified ports and specific voyages.

In this charter, the shipowner committed to meet the charterer’s needs in terms of volume of goods transported over a period of time usually one or more years. During this time, a number of two or more loads and trips are usually agreed, but no specific ship will be identified to perform the Tramp Shipping. The freight is usually calculated on the basis of the cargo carried and may be paid in advance or afterward, as agreed.


Contract of Affreightment VS other Charter Parties
Contract of Affreightment VS other Charter Parties

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