What is dispatch (despatch)?
Dispatch money is the sum an owner pays a charterer when cargo loading or discharging finishes faster than the laytime allowed in the charter party. It is the mirror reward to demurrage: laytime saved earns the charterer money, usually at half the demurrage rate. Both spellings, dispatch and despatch, mean the same thing.
The two spellings deserve a note up front. British charter-party drafting, including most BIMCO forms, tends to use “despatch,” while American practice and general dictionaries lean toward “dispatch.” They are the same word for the same payment, and a recap that mixes the two creates no legal difference. This page uses both interchangeably so that a desk searching either way lands in the right place. Throughout, the underlying concept is identical: it is an incentive payment that flows from owner to charterer when the ship is turned around quicker than the agreed allowance of laytime.
Dispatch exists because laytime is a two-sided bargain. The owner grants the charterer a fixed quantity of free time to work the cargo. If the charterer overruns that allowance, the charterer pays the owner demurrage for keeping the ship idle. To balance the incentive, many charter parties also reward the charterer for beating the allowance, on the logic that a fast turn releases the ship back to the owner sooner and lets the owner earn on the next fixture. Dispatch is that reward. It appears most often on dry bulk voyage charters, and is a negotiated item: not every fixture carries it, and some trades fix “free despatch,” meaning no payment is made for time saved at all.
How dispatch money is calculated
The calculation has three moving parts: how much laytime was allowed, how much was actually used, and the despatch rate. Time saved is the allowance minus the time used. Despatch payable is that saved time multiplied by the despatch rate, which is conventionally set at half the demurrage rate.
The formula, in T1 terms, is:
Despatch payable = time saved (days) x despatch rate (USD per day)
where:
- Time saved = allowed laytime minus time actually used to load or discharge, measured from the same statement of facts that drives any demurrage calculation.
- Despatch rate = USD per day, conventionally one half of the demurrage rate. So if demurrage is USD 24,000 per day, despatch is typically USD 12,000 per day. The half relationship is a market convention, not a legal rule; the recap states the actual figure and it governs.
- Direction of payment = owner pays charterer (the reverse of demurrage).
The representative computation below shows the full chain from allowed laytime down to the amount the owner owes. The same statement of facts and the same laytime allowance that would produce a demurrage bill on an overrun produces a despatch credit when time is saved.
| Line | Value |
|---|---|
| Allowed laytime (load + discharge) | 6.0000 days |
| Time actually used | 4.0000 days |
| Time saved | 2.0000 days |
| Demurrage rate (reference) | USD 24,000 per day |
| Despatch rate (half of demurrage) | USD 12,000 per day |
| Despatch amount payable by owner | USD 24,000 |
Time is conventionally carried to four decimal places of a day in laytime statements, because part-days are routine and rounding early distorts the result. The arithmetic itself is trivial; almost every despatch dispute is about the inputs, not the multiplication. The two contested inputs are how much time counted as “used” (which depends on notice of readiness validity, exceptions, and weather) and which basis of time saved the clause uses, covered further below.
Dispatch vs demurrage
Dispatch and demurrage are the two outcomes of the same laytime account. They share one set of facts and one allowance; the only question is whether the charterer beat the allowance or blew through it. The table sets the two side by side.
| Dispatch (despatch) | Demurrage | |
|---|---|---|
| What triggers it | Cargo worked faster than allowed laytime | Cargo worked slower than allowed laytime |
| Who pays whom | Owner pays charterer | Charterer pays owner |
| Direction of incentive | Reward for saving time | Penalty for wasting time |
| Rate relationship | Conventionally half the demurrage rate | The reference rate, set in the recap |
| Basis of time | All time saved, or working time saved | Time on demurrage, once on always on |
| Prevalent in | Soft markets, where charterers extract concessions | Firm markets, where owners hold the line |
| Standard form treatment | Optional; some fixtures fix free despatch | Default consequence of laytime overrun |
The rate relationship and the market-condition prevalence are the two points a desk should internalise. Despatch at half the demurrage rate is the market default because the owner’s loss from a slow turn (ship idle, next fixture delayed) is treated as larger per day than the owner’s gain from a fast turn, so the reward is discounted. And whether despatch appears at all tends to track the freight cycle: in a soft market a charterer has the leverage to negotiate despatch into the fixture, while in a firm market owners often fix free despatch and keep the demurrage protection. The mechanics flow directly from laytime and the agreed loading and discharge rate.
How dispatch connects to the laytime regime
Dispatch never stands alone. It is the closing entry on a laytime account, so every term that affects how laytime is counted also affects whether despatch is earned and how much. The dependency map below is the practical reading list for anyone reconciling a despatch claim.
| Related term | How it connects to dispatch | Page |
|---|---|---|
| Demurrage | The mirror image. Dispatch is the reward for saving time; demurrage is the penalty for losing it. Same account, opposite sign, and dispatch is conventionally half the demurrage rate. | Demurrage |
| Laytime | Dispatch is earned only when time is saved against the laytime allowance. No allowance, no benchmark to beat, no dispatch. | Laytime |
| Notice of readiness | A valid notice of readiness starts the laytime clock. If the notice is defective, the clock start moves and the time-saved figure shifts with it. | Notice of readiness |
| Loading and discharge rate | A faster agreed rate, or outperformance against it, creates the saved time that dispatch pays for. The rate sets the allowance; beating it generates the credit. | Loading and discharge rate |
| Laycan | If the ship misses the laycan, the fixture may not proceed at all, so there is no laytime account and no dispatch to compute. | Laycan |
Reading the map top to bottom gives the order of operations on any despatch reconciliation: confirm the notice of readiness was valid and fix the clock start, apply the laytime allowance derived from the loading and discharge rate, measure time actually used from the statement of facts, and only then compute despatch as the mirror of demurrage. Skip a step and the despatch figure will not survive scrutiny.
How a despatch clause is worded
The despatch clause is short, but two words inside it decide the size of the payment. The annotated sample below shows representative wording and flags the “all time saved” versus “all working time saved” distinction that is the single most common despatch dispute.
Worked dispatch calculation
This worked example (T2) follows the chain end to end with representative anonymised numbers, using the same allowance and rates introduced above so the two visuals reconcile.
A Supramax fixes to load coal under a voyage charter with a combined load-and-discharge laytime allowance of 6.0000 days, demurrage at USD 24,000 per day, and despatch at half that rate on an “all working time saved” basis. The statement of facts, after both parties agree the laytime account, shows 4.0000 days of laytime actually used across the two ports.
- Allowed laytime: 6.0000 days
- Time actually used: 4.0000 days
- Time saved: 6.0000 minus 4.0000 = 2.0000 days
- Despatch rate: half of USD 24,000 = USD 12,000 per day
- Despatch payable by owner to charterer: 2.0000 x USD 12,000 = USD 24,000
The owner credits the charterer USD 24,000 in the final freight reconciliation. Had the same ship instead overrun the allowance by 2.0000 days, the charterer would have owed the owner USD 48,000 in demurrage (2.0000 days x USD 24,000), which shows the asymmetry built into the half-rate convention: the same two days are worth twice as much against the charterer as for them. A Panamax or Supramax on a faster-discharging grain trade would run the identical arithmetic on its own allowance and rates.
All time saved versus working time saved
The edge case (T3) that costs real money is the choice of time basis, because “all time saved” and “all working time saved” produce different payouts from one identical statement of facts. Take the worked example above and add one fact: of the 2.0000 days saved, the ship finished discharge on a Friday evening, and the fixture is SHEX (Sundays and Holidays Excepted), so the following Saturday and Sunday would not have counted as laytime.
- On an all working time saved (AWTS) basis, the saved time is only the laytime that would have counted: the weekend is excluded, so the saved time might be just 1.0000 day. Despatch = 1.0000 x USD 12,000 = USD 12,000.
- On an all time saved (ATS) basis, the clock runs continuously from the moment work finished until the allowance would have expired, weekend included, so the saved time is the full 2.0000 days. Despatch = 2.0000 x USD 12,000 = USD 24,000.
Same ship, same statement of facts, same despatch rate, and the payment doubles purely on the wording of the time basis. This is why the despatch clause must name ATS or AWTS, and why a desk reconciling a claim checks the basis before checking the arithmetic. The two bases interact with the laytime exceptions regime (SHEX, SHINC, weather working days), so the saved-time figure has to be built on the same exceptions that governed the laytime count itself, not recomputed from scratch.
Scope and what this page does not cover
This page explains dispatch money as a commercial mechanism and how it is computed against a laytime account. It does not draft jurisdiction-specific despatch clauses, resolve which laytime exceptions apply on a given fixture, or opine on the validity of a particular notice of readiness, all of which turn on the exact charter-party wording and the facts. Those questions belong with chartering counsel and the operations desk working from the actual recap, the governing standard (for example a BIMCO GENCON form read with the Laytime Definitions for Charter Parties 2013), and the agreed statement of facts. For how dispatch sits inside the wider negotiation, see the ship-chartering and ship-brokering hubs.