How to “Lay-up” a Ship?

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How to “Lay-up” a Ship?

A well known saying – “Tough times never lasts, but tough people do!”

It would be more appropriate – “Tough times never lasts, but tough companies do!”

So is the situation now for every shipping company.  Right from the dry bulk index to drop in oil price, Chinese economy slowdown to ships idling without cargo – these are definitely the trying moments for the shipping industry.  It looked like the tanker market would sustain but given the current situation, the graphs are on a downtrend.

Thus, many considered to send their old tonnage to graveyards, however others chose to “lay-up” their ships.  Here are some guidelines issued by the Swedish P&I Club for “lay-up” of ships.

Lay-up types

There are two types of lay-ups:

Cold lay-up, which applies to vessels that have been taken out of commercial operation and are subject to the recommendations presented in this document and/or any recommendations issued by the Classification Society, Flag State and/or Port Authority.  Hot lay-up or Idling, which applies to vessels that, when applicable, are subject to the recommendations presented in this document and/or any recommendations issued by the Classification Society, Flag State and/or Port Authority, but are still in operation and may be idling for a period awaiting the next cargo.  Returns for hot lay-up or Idling are granted for Hull & Machinery insurance only.

Premium Returns

Lay-up return will be granted for Hull & Machinery and Protection & Indemnity only.

Hull & Machinery

The Association will acknowledge lay-up for Hull & Machinery Insurance as follows:

Cold lay-up with a reactivation time exceeding one week.

Members are entitled to lay-up returns if the period exceeds 30 days, i.e. for any such period the return will be calculated from Day 1.  Days of arrival, departure and shifting will be deducted.  The Member must comply with any recommendations issued by the Classification Society, Flag State and/or Port Authority.  If a claim arises due to the recommendations referred to above not being followed, the Association will not be liable for that claim.  Returns are not granted for periods when the vessel is undergoing repairs or if compensation for a total loss has been paid.

Hot lay-up or Idling with a reactivation time between 24 hours and one week.

Members are entitled to lay-up returns for any period in excess of 30 days, i.e. the return will be calculated from Day 31.  Days of arrival, departure and shifting will be deducted.  If and when applicable, Members must comply with any recommendations issued by the Classification Society, Flag State and/ or Port Authority.  If a claim arises due to the recommendations referred to above not being followed, the Association will not be liable for that claim.  Returns are not granted for periods when the vessel is undergoing repairs or if compensation for a total loss has been paid.

Lay-up rate schedule

The association has the discretion at all times to individually assess any lay-up and apply a relevant rate.

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Applications for subsequent returns

Applications for lay-up returns must be made in writing no later than 30 days after the expiry of the insurance period or at the absolute latest by 31 January of the year after the lay-up commenced.

Returns are credited to the Member when the policy year expires.

Applications for upfront returns

Returns may be granted upfront in respect of cold lay-up or hot lay-up.  Regarding the former, upfront returns will be granted after the expiry of the excess period provided for within the relevant Hull & Machinery conditions.  In respect of the latter, an upfront return will only be granted for the idling period exceeding 30 days.

Lay-up rate schedule

The association has the discretion at all times to individually assess any lay-up and apply a relevant rate.

Protection & Indemnity

The Association will acknowledge lay-ups for Protection & Indemnity Insurance as follows:

Cold lay-up with a reactivation time exceeding one week

Members may be allowed up to 50% premium returns for vessels laid up in a safe port for more than thirty (30) consecutive days, subject to reduction of crew and no cargo onboard.

No premium return is granted for vessels less than 500 GT or for tugs, barges or passenger ships/ferries in coastal trade.

Returns are not granted for periods when the vessel is undergoing repairs.  If and when applicable, Members must comply with any recommendations issued by the Classification Society, Flag State and/ or Port Authority.  If a claim arises due to the recommendations referred to above not being followed, the Association will not be liable for that claim.

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Applications for subsequent returns

A claim for lay-up returns should be made to the Association as soon as possible, however, at the latest 12 months after expiry of the P&I policy year.  Sufficient information has to be supplied in order for the Association to calculate the return.

Source: The Swedish Club

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