Suez Canal Sea Trials – owners’ or charterers’ costs under time charter?

Suez Canal Sea Trials – owners’ or charterers’ costs under time charter?

Overview

BIMCO has received numerous questions related to the costs of “sea trials” in the Suez Canal – mainly creating disputes for ships transiting for the first time.

BIMCO is aware of a type of dispute which appears to have developed between owners and charterers under time charter parties.

It concerns costs for “sea trials” in the Suez Canal and the issue is – not surprisingly – that the parties do not agree who should pay for these sea trials.

The Rules of Navigation of the Suez Canal include an article concerning Trial Charges:

“Art. 103 - Trial  Charges: 
For the safety of navigation, trials may by requested by the SCA before entering the Canal or resuming the transit.

A pilot will supervise the trials.

A charge of (1000 U.S. Dollars) is to be paid by the vessel for each pilot or Canal expert for each trial.

If trials are made outside Canal water, the charge will be (2000 U.S. Dollars)”.

There is also a different article containing references to trial charges for the first transit for ships of a certain draft:

Art. 53 - Conditions of Transit:
The Maximum draught for loaded vessels is according to Table 2 (must not exceed the Tropical Load Line). For vessels without tropical load Line indicated in the Load Line Certificate, the maximum draught allowed will be the summer Load Line.

1. Vessels allowed to transit with a draught over 50 feet up to 66 feet must, for the first passage, effectuate successful sea trial before entering the Canal either at Suez or Port Said Roads. 

2. Sister ships shall not benefit from authorization granted to a particular ship of the group.

We understand from local sources that it is usual practice of the SCA to request trials for ships transiting for the first time, but there are several other situations where the ship may be subject to a sea trial - even when it has transited before.

For the ships transiting with a draft less than 50 feet, the rules do not specify that it is for “the first transit” or “only for the first transit” the trial may be conducted. It appears to be much more open than that and rather be related to the “safety of navigation”. As far as BIMCO knows, a possible trial will not prevent the ship from transiting and the ship will not receive eg a “certificate of compliance” after a sea trial.  

Based on this information we think it is not to be considered a trial where the positive outcome of an obligatory test will make the ship “compliant” with the Suez Canal after the first transit. Nor is it a trial where the owners and master will be informed that the ship must perform in a particular manner to obtain a certificate or other “proof” that it can safely transit the Suez Canal.

It appears to be a wider range of ships that may undergo these trials (in addition to the first transit). A common feature about the situations reported by our members is, that neither of the ships displayed any deficiencies, which would have warranted sea trials.

We understand that the Rules of Navigation of the Suez Canal also included the rules concerning the sea-trials previously, but the costs have increased immensely after the new Suez Canal was inaugurated. This may be a reason why the parties now end up in disputes – or why we hear about them now. It was not a common enquiry to BIMCO before the change in the cost structure.

While the charterers usually argue that this will be the owner’s cost as it is a requirement for being able to transit Suez, the owners generally claim it is a cost which falls under the operational expenses incurred due to charterers’ commercial trading of the ship.

The better option is to ensure that this is addressed during the charter party negotiations. While both parties may tend to “keep out” of the dialogue as they believe the other party will be responsible, we think this can be a typical dispute breeder.

Having said that, we do believe that in the absence of a clear agreement, it will be difficult for the charterers to saddle the owners with the costs under a time charter party. Had it been a requirement for the first transit for the ship to be “Suez compliant” the owners may have had to assume the costs. As it is now, it appears to be a cost which may or may not be charged to ships transiting the canal. As such, it will be a result of the charterers’ commercial operation - the charge being related to the Suez Canal rather than to the vessel - as long as the targeted ships are not deficient warranting “sea trials”.

To avoid disputes and uncertainty we would, however, recommend that this is addressed during the negotiations.

Merete Lund Greisen
in Copenhagen, DK

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