This article provides general information, not legal, regulatory or financial advice. Requirements depend on the applicable contract, authority and jurisdiction.
The three types
Every commercial arrangement in shipping is ultimately a decision about who carries which risk. The three main charter types allocate risk very differently, and understanding that allocation is the foundation of every commercial conversation in the industry.
| Voyage charter | Time charter | Bareboat (demise) charter | |
|---|---|---|---|
| What is hired | Carriage of cargo A to B | The ship's earning capacity for a period | The ship itself |
| Payment | Freight per tonne or lumpsum | Hire per day | Hire per day, lower rate |
| Master and crew | Owner's | Owner's | Charterer's |
| Bunkers | Owner | Charterer | Charterer |
| Port charges | Owner | Charterer | Charterer |
| Canal dues | Owner | Charterer | Charterer |
| Maintenance and repairs | Owner | Owner | Charterer |
| Insurance (H&M) | Owner | Owner | Usually charterer, owner as loss payee |
| Speed and route decisions | Owner (within contract) | Charterer's orders | Charterer |
| Delay risk in port | Owner, mitigated by demurrage | Charterer | Charterer |
| Off-hire | Not applicable | Owner bears loss of hire | Limited |
Voyage charter
The owner sells a transport service. Freight is earned on cargo carried, and the owner bears all voyage costs: bunkers, port charges, canal dues and agency. The owner therefore carries fuel price risk, port cost risk and delay risk — the last mitigated by laytime and demurrage provisions.
The measure of performance is TCE — Time Charter Equivalent — calculated as voyage revenue less voyage costs, divided by voyage days. It is what allows a voyage fixture to be compared with a time charter rate.
Time charter
The charterer hires the vessel's earning capacity for a period and gives orders on employment. The owner provides and pays the crew, maintains the vessel and keeps it in class; the charterer pays for bunkers, ports and canals.
The key owner risks are:
- Off-hire. If the vessel cannot perform, hire stops. This is why unplanned technical off-hire is the sharpest measure of technical management.
- Performance warranties. Speed and consumption warranties in good weather, with deductions for underperformance.
- Maintenance cost inflation over the charter period.
- Redelivery condition disputes.
The key charterer risks are market movement, bunker price and utilisation.
Bareboat charter
The charterer takes the ship and mans, operates, maintains and insures it. It is closer to an asset lease than a transport contract and is widely used in financing structures — sale and leaseback arrangements are typically documented as bareboat charters with purchase options.
The owner retains title and residual value risk; almost everything else moves.
Emissions: the newest allocation question
Since 2026, EU ETS requires surrender of allowances for 100% of applicable emissions on in-scope voyages, including methane and nitrous oxide alongside CO₂. FuelEU Maritime separately imposes a GHG intensity obligation with financial penalties.
The regulated entity is the "shipping company" as defined — frequently the ISM company rather than the registered owner — but the emissions result from decisions about speed, route and fuel that the charterer often controls.
| Charter type | Practical position |
|---|---|
| Voyage charter | Owner buys fuel and typically bears the cost, priced into freight |
| Time charter | Charterer buys fuel; ETS clause should transfer the allowance cost |
| Bareboat charter | Charterer operates and typically bears compliance obligations |
Silence in the charterparty leaves the cost with the regulated entity. Standard clauses now exist; use them, and define the price basis, the transfer mechanism, the working capital position and what happens on redelivery.
Choosing between them
| Owner's objective | Suitable structure |
|---|---|
| Maximise upside in a rising market | Voyage / spot employment |
| Secure cash flow and cover debt service | Time charter |
| Release capital from the asset | Bareboat, in a leaseback structure |
| Minimise operational involvement | Bareboat |
| Retain operational control and quality | Time or voyage |
Lenders frequently have views here. Debt service coverage is easier to demonstrate with period employment, and finance documents sometimes require a minimum level of charter cover.
charterparty terms vary; this is general information, not legal advice. Risk index chart is conceptual. Emissions references to Directive (EU) 2023/959 and Regulation (EU) 2023/1805. Reviewed by the Zeaclub Editorial Team, 24 August 2026.
Frequently asked questions
Who pays for fuel on a time charter?
The charterer. On a voyage charter, the owner. This single difference drives most of the commercial distinction between the two.
What is TCE?
Time Charter Equivalent — voyage revenue less voyage costs, divided by voyage days. It converts voyage results into a daily figure comparable with time charter rates.
What is off-hire?
A period during which a time-chartered vessel is unable to perform the required service and hire ceases, as defined by the charterparty's off-hire clause.
Who pays for EU ETS allowances?
The regulated shipping company must surrender them, but the cost is normally allocated by charterparty clause to the party controlling fuel purchase and operational decisions. Without a clause, the regulated entity bears it.