In the shipping industry, you have a choice of charter arrangements. In this post we will outline the key features of bareboat charter arrangements, and discuss how this arrangement differs from a time charter arrangement, and a voyage charter arrangement.
What is a Bareboat Charter?
A bareboat charter is a type of leasing arrangement. It involves hiring a vessel without any crew, fuel, or provisions.
In a bareboat charter, the charterer who has hired the vessel takes on full responsibility for every aspect of the subsequent shipping operations, including the management of crew, cargo, and logistical tasks such as fuelling and procurement. They will take on these responsibilities for the duration of the pre-agreed charter period.
Types of Bareboat Charter
There are two types of bareboat charters:
- Commercial maritime bareboat charters
- Leisure craft bareboat charters
Each type of bareboat charter is subject to different regulatory requirements, and there will be different insurance requirements depending on the nature of the charter.
In this post we will focus on commercial maritime bareboat charters. We shall cover leisure charters in a future post.
Commercial Maritime Bareboat Charters
This is a bareboat charter taken out for commercial purposes, including cargo shipping, industrial operations, or offshore procedures. These charters typically involve large ships and specialised vessels, including tankers, Crew Transfer Vessels and cargo ships.
Commercial maritime bareboat charters are often long-term, with the charter period lasting for months or years. The charterer assumes full operational control of the vessel, including crewing, bunkering, insurance and maintenance.
A commercial maritime bareboat charter is normally be referred to as a Charter Party Agreement (CPA).
What is a Time Charter?
In a time charter arrangement, the shipowner hires out their vessel for a specific period of time. Whereas bareboat charter arrangements involve hiring out the vessel, in a time charter arrangement the shipowner may also hire out their crew, along with certain supplies and bunkers. The shipowner may also retain responsibilities for maintaining and insuring the ship for the duration of the charter.
What is a Voyage Charter?
In a voyage charter, a shipowner will hire out their ship, usually along with their crew, for a single voyage, or for a set number of voyages. The charter will only apply for this specific voyage, or for a round trip between specified ports. The shipowner will also retain responsibilities for maintaining and insuring the ship for the duration of the charter. The charterer will often be responsible for and/or own the cargo.
What is the Difference Between Bareboat Charters, Time Charters, and Voyage Charters?
Here is how bareboat charters differ from other types of charters:
- In a bareboat charter, the charterer has full flexibility over their crew, their schedules, and even the ongoing maintenance and insurance of the ship. In both voyage and time charters, the shipowner retains responsibilities for the ship’s operations, insurance or management.
- Bareboat charters allow charterers to do things their way. With total control over the routes they take, the cargo they carry, and the vessel’s maintenance schedules, they can streamline their operations for maximum profitability.
- Time charters and voyage charters are mainly used in the world of commercial shipping, but bareboat charters can be taken out for recreational use too.
Choosing the Right Type of Charter
No type of charter is inherently “better” than any other type. There are situations when a time charter might work best for all parties involved, and situations where a voyage charter might prove most convenient.
Yet a bareboat charter offers a good balance of flexibility and cost-effectiveness for charterers, while giving shipowners a reliable source of income without any of the expenses and responsibilities that the other arrangements might entail.
Fore more, you can also read our full guide to the differences between time charters and voyage charters.
Bareboat Charters – Insurance, Regulatory, and Financial Considerations
Bareboat charters offer charterers a huge degree of flexibility and control, making them a popular option for maritime shipping companies. However, when a charterer hires out a vessel as part of a bareboat charter arrangement, they will take on a lot of extra responsibilities. You need to ensure you can meet all applicable compliance requirements while managing all the risks:
- Legal and regulatory: The charterer will have to obtain all necessary permits and licenses for the vessel, the cargo, and the voyage. They will also need to ensure the vessel meets all relevant safety and environmental requirements. In a CPA, this can involve meeting SOLAS, ISM Code, MARPOL, and flag state requirements.
- Financial: The charterer will be responsible for meeting all operational costs, from the crew wages to the fuel expenses and insurance. They will also need to schedule and pay for all necessary maintenance and repairs, and they will need to pay for all applicable port fees and other charges for every voyage they undertake.
- Insurance: In a CPA, the charterer may be responsible for arranging adequate marine insurance for the duration of the bareboat charter. This may include cover for hull and machinery, and for protection and indemnity. Depending on the nature of the operations, they may also need to arrange specialist cover for war risk and for Protection and Indemnity Specialist Operations cover.
Which Type of Charter is Right For Your Voyage?
If you cannot decide which type of charter is right for your voyage, we can help you.
Our short Charters Liability Insurance Questionnaire will help you understand your operation’s possible exposure to risk. This will help us provide the best package of insurance cover and terms for your voyage.
Want to discuss your requirements in more detail? Get in touch with our marine team by calling us on 020 3148 9540 or email info@everardinsurance.co.uk