Transparency is Good Business

July 1, 2014

Ensuring that justice is served on behalf of our clients is foundational to Haugen Consulting and is something that I’m passionate about.  Justice is meted out according to the level of transparency in business dealings.  So when industry leaders purposefully obfuscate shipping operations that’s a clear signal that something is wrong.

Much time is spent negotiating special charter party terms and conditions to mitigate demurrage; terms that are effectively “bought” in the freight.   For example, in order for one to benefit by clauses like Prorated Laytime or Suspended Laytime it requires full disclosure of the ship and terminal operations — details that are not always readily available.  Unfortunately, these special provisions can be quickly rendered useless without the operational details to support their application.

To understand the causes of demurrage (and hopefully eliminate its risk in the future) it requires information dissemination by ship owners, ship agents, surveyors, loss control specialists, terminals, and AIS (Automatic Identification System) ship positioning data, to name a few.  All of these parties are integral in providing information (aka transparency) to facilitate the proper analysis of demurrage events.

Of the foregoing resources, only AIS data is publicly available.  AIS positioning became mandatory in 2003 and has created unparalleled transparency in determining a vessel’s arrival in port which is one of three limbs needed to uphold a valid Notice of Readiness (NOR).  Through AIS data one can also uncover the berthing order of ships at a terminal (which, as it turns out, is not always in order of each vessel’s arrival in port).  This invaluable real-time and historical AIS data reporting is available through providers like PortVision, Platts cFlow, and others.

At the end of the day, as demurrage constitutes an extension of freight, there’s an absolute liability to pay demurrage foregoing express exonerating clauses, fault of the owner, or vis major.   As such, it’s our objective to ensure that the proper liability is assessed through validation of the vessel and terminal operations — information which is not always readily available and, sometimes, purposefully withheld.  This lack of transparency causes undue delays in settling claims.

Procuring information and having the tools needed to accurately calculate demurrage liability is a hard requirement for effective demurrage management.   The delays that our analysts spend chasing counterparties for information is our biggest pain point that delays the overall claims process.  The billions of dollars of pending demurrage could be resolved expediently if the industry adopted more transparent reporting practices.

In our quest to work towards this goal, our sister company, Haugen Software, has developed an elegant solution in the demurrage space.  Voyager is a cloud-based demurrage workflow that includes a powerful demurrage calculator and enables parties to upload and selectively share information on a secure platform.  It also provides powerful reporting that informs decision makers on mitigating risk.  Haugen Software is passionate about building the world’s best demurrage platform and continues to iterate and provide other cost-saving features that streamline the claims process.  Please let us know if you would like to learn more.

Now, please excuse me while I chase for a missing terminal log for the fifth time — ugh!!