Ship chartering: how to charter a vessel for sea transportation

Sea transportation is considered the bloodstream of the global economy. According to approximate estimates, about 80–90% of all goods on store shelves have traveled across the ocean. Huge shipments of grain, oil, and hundreds of thousands of containers are transported thanks to the chartering mechanism.

What is ship chartering and how it works

In logistics, there are two ways of transporting goods by sea:

• the first is to use the services of a liner carrier, as if buying a ticket for cargo on a scheduled bus;
• the second is to rent the entire transport for your own needs, similar to a taxi.

Ship chartering is an agreement in which one party (the shipowner) provides another party (the charterer) with a vessel or part of it for a certain period to perform a specific voyage.

To simplify what ship chartering is, it is essentially renting a vessel for transportation. The term originates from the German word “Fracht,” which means “cargo.” The key difference lies in responsibility and the volume of space. When chartering, you are not just buying space — you are operating the vessel’s capacity fully or partially. The shipowner (the one who leases you the vessel) does not bear direct responsibility for the safety of the cargo, unlike a carrier. Their task is to provide a seaworthy vessel and, in some cases, a crew.

Who participates in the process

First, let’s define the main terms:

• Shipowner — a person or company that owns the sea vessel.
• Charterer — a person or company that needs to transport goods. This can be either the final cargo owner or a logistics intermediary.

Who charters vessels? In practice, the shipowner and the charterer rarely communicate directly. The process is handled by a charter broker. This is an expert with access to exchanges and up-to-date databases. The broker acts as a link between the parties in the transaction.

The party that wants to rent a vessel issues a chartering order to the broker. This document defines the urgency of the request. After that, the broker works based on an offer: firm — when the broker can conclude a deal without additional confirmation, and conditional — when details must be agreed upon.

A charter party is a paper or electronic document that records the chartering agreement — essentially a contract. It includes the details of the parties, vessel information, cargo description, route, deadlines, and laytime (the “free” time for loading and unloading).

In which cases is it beneficial to rent the entire vessel:

1. When the cargo volume is comparable to the vessel’s.
2. When the route is specific and not served by regular shipping lines.
3. When sequential delivery to multiple ports is required.

You may be wondering: is chartering related to Incoterms? Yes! Let’s explain with an example.

Imagine you are purchasing 10,000 tons of grain in Poland with delivery to Turkey under Incoterms FOB conditions. This means that you must find the vessel yourself. You contact a broker and conclude a voyage charter agreement. Now you become the charterer. Once the grain is loaded on board, the captain issues a bill of lading to the seller. After payment, it is transferred to you. This allows you to claim your cargo in Turkey.

In simple terms, without understanding Incoterms, you will not know whether you are required to charter anything at all, and without a bill of lading, you cannot prove ownership of the goods.

Types of ship chartering

The choice depends on your experience in maritime logistics and what costs you are ready to take on.

• Voyage charter

The vessel is hired for a specific shipment from port A to port B. The owner pays for fuel, crew maintenance, and insurance. The charterer pays based on cargo volume or a fixed rate per voyage.

• Time charter

This is the chartering of a cargo vessel for a specific period — days, weeks, or months. The vessel is fully at the disposal of the charterer within the agreed region. Payment is made per day of use. The shipowner covers crew salaries and technical maintenance, while the charterer pays for fuel and port charges. This format is suitable for large companies that require a постоянный fleet for cargo transportation.

• Bareboat charter (“demise charter”)

This involves hiring a vessel without a crew. In fact, the charterer becomes the temporary operator of the vessel for the duration of the contract. All expenses fall on the charterer, along with lease payments to the owner. This option is often used by large logistics operators to expand their fleet without purchasing vessels.

What cargo is transported by sea

International sea logistics services handle almost all types of goods:

• bulk cargo: grain, coal, ore, fertilizers;
• liquid cargo: oil, oils, chemicals, petroleum products;
• general cargo: equipment, metal structures, timber;
• containerized cargo: electronics, clothing, and consumer goods.

Technically, almost anything can be delivered by sea, but for some goods it is less practical:

• perishable goods, such as fruits (except apples and bananas);
• time-sensitive cargo, such as microchips or urgent spare parts;
• extremely valuable goods (jewelry, precious metals);
• live plants and animals.

For such cargo, air freight is usually the preferred option.

How freight cost is formed

In shipping, freight is a dynamic value. A significant part of it (about 10–30%) consists of stevedoring operations, i.e., loading and unloading. To define who pays for what, the following abbreviations are used:

1. FIOS (Free in/out) — the charterer pays for both loading and unloading.
2. LILO (Liner in/Liner out) — costs are included in the shipowner’s rate.
3. LILO/LIFO — mixed options where costs are shared at different stages of the route.

You should also consider THC — the terminal handling charge for container processing in the port.

How to charter a vessel profitably: tips and support from DiFFreight

Ship chartering is not a universal solution. However, if you need to rent an entire vessel for export or import operations, here are several important recommendations:

1. Choose a vessel of optimal size — do not overpay for excess tonnage if your cargo volume does not require it. Proper vessel selection can significantly reduce logistics costs.
2. Carefully calculate the time required for loading, unloading, and customs clearance to avoid additional expenses. Vessel downtime is often associated with penalties, which can significantly increase the overall cost of transportation.
3. Select the most suitable type of charter. In most cases, voyage charter or time charter will be optimal for businesses, while bareboat charter is more appropriate for large companies with sufficient experience and resources.
4. Carefully check all documentation. It is important to ensure that the broker or agent clearly specifies all chartering conditions in the contract, including responsibilities of the parties, сроки, rates, and possible additional expenses.

DiFFreight specialists will provide консультации on vessel chartering, help you choose the most suitable format of cooperation, and offer individual solutions for delivering your cargo. We carry out sea transportation from China, the USA, Europe, and in the reverse direction with transit routes.

Want to learn more? Submit a request on the website or order a callback — entrust your logistics to experts!