What is a charter party bill of lading?

International sea freight transportation can be divided into two main categories:

Containerized cargo shipping and dry bulk cargo shipping.

Containerized shipping deals with relatively small scale cargo shipments.

Electronic goods, processed packed foods, textiles, mobile phones, furniture and almost every manufactured products are examples of typical goods that can be carried by container vessels.

Shippers of the containerized cargo receive ocean bills of lading as a transport document from the container vessel carriers.
Bulk shipping deals with huge cargo shipments.

Coal, sugar, timber, copper, iron ore, chemicals are the main examples of goods that can be carried by bulk vessels.

Shippers of the bulk cargo receive charter party bills of lading as a transport document from the owners or charterers of the break bulk vessels.

Today I would like to explain the core elements of a charter party bill of lading.

Understanding Charter Party Contracts in International Sea Transportation:

Perhaps, the best way to explain the charter party contracts and charter party bills of lading is to show the main differences between an ocean bill of lading and a charter party bill of lading.

Containerized shipments are relatively a new concept in international sea transportation. Containerization brings standardization in enormous scale to international sea freight transportation. Almost all elements used in container transportation have been standardized: containers, cranes, ports, storage areas, terminal and even vessels.

If you are a container carrier (liner), it would be more profitable to operate your own a container vessel fleet, as it is predictable where and how to use each of your container vessels, thanks to the advanced standardization of the container freight transportation.

MSC, Maersk, Hapag Llyod, CSCL, ZIM, CMA CGM, Evergreen, Hamburg Süd are top global container carriers. All of these big container carriers, operate both owned and chartered vessels. In average, half of their total fleet in operation consist of their own vessels. Remaining %50 is chartered.

Bulk shipping, unlike containerized shipping, is an unstandardized business model.
For example think yourself as a dry bulk carrier, who is operating only between Russia, Brazil and China. Even with a very restricted operating range, you may have to ship various types of cargo in a short period time as specified below. 
  • 28600 Metric Tons of Coal from Novorossiysk Port, Russia to Hong Kong Container Yard, China
  • 40000 Metric Tons of Chromite Ore from Santana Port, Brazil to Chizhou Port, China
  • 100000 Metric Tons of Timber from Primorsk Port, Russia to Shanghai Container Yard, China
  • 20000 Metric Tons of Wheat from Ust-Luga Container Yard, Russia to Rizhao Container Yard, China
You may realize from above illustration that the bulk carrier have to use a different types of vessels for each shipment, because it is not possible to ship wheat, coal, ore and timber with the same type of vessel.

For this reason it is not beneficial for the dry bulk carriers to operate their own fleets. Instead they rent the exact vessel from the vessel owners whenever they will be in need of for a specific dry bulk carriage.

In international sea transportation hiring a dry bulk vessel defined with charter party term.

Parties to Charter Party Contracts:

Charter party contracts are signed between charterers and shipowners/ carriers. Charter party contracts are signed before the bill of lading is issued. As a result charter party contracts are separate documents than bills of lading.

Understanding the Formation of a Charter Party Bill of Lading:

A charter party bill of lading can be formed, only if a bill of lading gives an express reference to a charter party contract on its face. A bill of lading could give an express reference to a charter party contract one of the ways described below: 
  • If bill of lading contains a wording similar to the following: "Issued pursuant to charter party dated.". 
  • If bill of lading shows "freight payable as per charter party dated" or similar phrase. 
  • The document is entitled "Charter Party Bill of Lading", "Congenbill 2007", "Bill of Lading to be used with charter parties" etc...
Charter Party Bill of Lading Example: