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Time charter fuel related issues

Updated 11 Oct 2019

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As possibly the highest of all operating costs, fuel and lube purchases need to be subject to proper oversight. When a ship is operated for the owner’s own account, control of choice of fuel and its suitability is clearly a matter for the owner but when time chartered out, fuel supply is taken over by the time charterer. Lubricants almost always stay within the control of the owner or ship manager.

Regardless of the time charterer’s status, the operator should always ensure that full details of acceptable fuel grades are included in the charter party. While the time charterer will normally consult with the ship’s officers on quantities of fuel needed for particular voyages, the choice of supplier and actual grade ordered is out of the ship’s control and it often happens that the time charterer orders the cheapest fuel available even though it may not be in accordance with the quality criteria in the charter party. If that happens, the master should seek advice from his owner, but the concerns of the technical staff are sometimes ignored by management especially in times when employment for vessels is hard to find.

It is vital that any problems with supplied fuel are brought to the charterer’s attention because in the event that a problem occurs that causes an off-hire situation there will be no recourse for the owner if the charterer can plead ignorance of the consequences of using inadequate fuel.

Another problem that is frequently encountered when vessels are time chartered is when the time charterer hits financial difficulties and does not pay all outstanding costs incurred. Far too many owners have been caught in this situation and the legal consequences are that they become responsible for most if not all of the unpaid debts.

There are clauses that can be inserted in charter parties that seek to minimise the risk but these are not always helpful or enforceable. One clause which provides a good example of the practices that owners should adopt is the BIMCO Bunker Non- Lien Clause for Time Charter Parties. BIMCO has also developed two clauses for use in charter parties that cover potential problems associated with the 2020 rule changes.

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