Scrubber slip-up

During the negotiation of a Time Charter (T/C), a shipbroker prepared the ship’s Total Cost of Distribution (TCD). Due to an error, the TCD stated the ship’s marine diesel oil (MDO) consumption while berthed as 0.3 mt per day, when the actual consumption was approximately 1.8 mt per day. The discrepancy arose because the broker incorrectly assumed the ship was not fitted with scrubbers.

The error remained unnoticed for several years until the charterer entered into a sub-charter arrangement and the discrepancy was identified. The charterer subsequently alleged that the inaccurate TCD had caused it to underestimate its MDO requirements throughout the T/C and presented a claim of approximately US$620,000 for additional fuel costs.

ITIC assisted the shipbroker in responding to the claim and negotiating a settlement. Considering the circumstances of the case and the amount claimed, the matter was ultimately settled for US$125,000, which was reimbursed by ITIC.

Shipbrokers should take care to verify technical information included in a ship’s TCD, particularly consumption figures that may have a significant commercial impact. Small errors in charter documentation can remain undiscovered for years before resulting in substantial claims.