The Tanker Was Time-Chartered. The Owner Kept the Sub-Let Revenue.
Quote from chief_editor on June 6, 2026, 3:00 amTime charterers who sub-let vessels to third parties may find their charter agreement prevents them from keeping sub-let profits above the hire rate. The terms vary.
A commodity trading company had time-chartered an MR product tanker for six months at $14,000 per day. Their business model: use the vessel for their own cargo trades, and sub-let the vessel on voyage charters during periods when they did not have cargo, earning voyage freight revenue that would exceed the daily hire cost and contribute to the overall charter economics.
In the third month, the trading company sub-let the vessel for a single voyage at a rate that generated gross freight revenue of approximately $21,000 per day equivalent — $7,000 per day above the time charter hire. They expected to keep the excess revenue as profit from the sub-let operation.
The vessel owner reviewed the charterparty and invoked an anti-profiteering clause that required the time charterer to share any sub-let revenue above the time charter hire rate on a 50/50 basis with the owner. The owner claimed $3,500 per day for the duration of the sub-let voyage. The time charterer had not noticed this clause when fixing the charterparty, had not factored it into the sub-let economics, and had to pay.
Time Charter Parties Contain Sub-Letting Provisions That Are Not Standard
Time charterparties — the contracts by which vessel owners make their vessels available to charterers for a period at a daily hire rate — are negotiated documents. They contain provisions that vary significantly between fixtures. BIMCO publishes standard form charterparties (NYPE, Baltime) that provide a starting point, but most fixtures involve addendum provisions that modify the standard terms.
Sub-letting provisions are one of the areas of most significant variation. Some charterparties permit sub-letting freely without additional payment to the owner. Some require owner consent for each sub-let. Some include anti-profiteering provisions that require revenue sharing when the sub-let generates revenue above the hire rate. Some are silent on the subject, in which case the legal position depends on the governing law and the standard form's default terms.
A time charterer who plans to use sub-letting as a component of their commercial strategy — earning voyage freight income to offset time charter hire costs — needs to ensure their charterparty permits sub-letting on terms consistent with their strategy. A charterparty that requires 50/50 revenue sharing on sub-let profit fundamentally changes the economics of the sub-let strategy: the charterer earns half the excess revenue instead of all of it.
Industry estimates for the frequency with which time charterparties include revenue-sharing clauses suggest that these clauses are more common in specific market conditions — when freight markets are rising and owners are concerned about charterers profiting from sub-letting at much higher rates than the time charter rate — and less common when freight markets are depressed and owners are willing to give charterers flexibility to support the hire payment.
The Charterparty Review Process That Should Precede Fixing
A commodity trader who fixes a time charter as part of a commercial strategy should have someone read the charterparty completely before signing. This is a statement that is obvious in principle and inconsistently applied in practice. Time charters in the commodity trade world are sometimes fixed under time pressure, with the charterparty reviewed quickly for the main commercial terms — hire rate, period, vessel specifications — and with addendum provisions reviewed more cursorily or not at all.
The sub-letting clause, the off-hire provisions, the redelivery conditions, and the maintenance obligations in a time charterparty are the terms that produce disputes when the charter does not go exactly as planned. They receive less attention during fixing than the hire rate receives, even though their financial consequences can be larger than a $500-per-day negotiation on the hire rate.
For a trading company that regularly time-charters vessels as part of its logistics strategy, building a charterparty review process that includes a standardized checklist of provisions with material commercial consequences — sub-let terms, off-hire events, redelivery windows, owner's liability for vessel performance — is a systematic way to avoid the discovery of unfavorable terms in the moment when they become commercially relevant.
Time charterers who sub-let vessels to third parties may find their charter agreement prevents them from keeping sub-let profits above the hire rate. The terms vary.
A commodity trading company had time-chartered an MR product tanker for six months at $14,000 per day. Their business model: use the vessel for their own cargo trades, and sub-let the vessel on voyage charters during periods when they did not have cargo, earning voyage freight revenue that would exceed the daily hire cost and contribute to the overall charter economics.
In the third month, the trading company sub-let the vessel for a single voyage at a rate that generated gross freight revenue of approximately $21,000 per day equivalent — $7,000 per day above the time charter hire. They expected to keep the excess revenue as profit from the sub-let operation.
The vessel owner reviewed the charterparty and invoked an anti-profiteering clause that required the time charterer to share any sub-let revenue above the time charter hire rate on a 50/50 basis with the owner. The owner claimed $3,500 per day for the duration of the sub-let voyage. The time charterer had not noticed this clause when fixing the charterparty, had not factored it into the sub-let economics, and had to pay.
Time Charter Parties Contain Sub-Letting Provisions That Are Not Standard
Time charterparties — the contracts by which vessel owners make their vessels available to charterers for a period at a daily hire rate — are negotiated documents. They contain provisions that vary significantly between fixtures. BIMCO publishes standard form charterparties (NYPE, Baltime) that provide a starting point, but most fixtures involve addendum provisions that modify the standard terms.
Sub-letting provisions are one of the areas of most significant variation. Some charterparties permit sub-letting freely without additional payment to the owner. Some require owner consent for each sub-let. Some include anti-profiteering provisions that require revenue sharing when the sub-let generates revenue above the hire rate. Some are silent on the subject, in which case the legal position depends on the governing law and the standard form's default terms.
A time charterer who plans to use sub-letting as a component of their commercial strategy — earning voyage freight income to offset time charter hire costs — needs to ensure their charterparty permits sub-letting on terms consistent with their strategy. A charterparty that requires 50/50 revenue sharing on sub-let profit fundamentally changes the economics of the sub-let strategy: the charterer earns half the excess revenue instead of all of it.
Industry estimates for the frequency with which time charterparties include revenue-sharing clauses suggest that these clauses are more common in specific market conditions — when freight markets are rising and owners are concerned about charterers profiting from sub-letting at much higher rates than the time charter rate — and less common when freight markets are depressed and owners are willing to give charterers flexibility to support the hire payment.
The Charterparty Review Process That Should Precede Fixing
A commodity trader who fixes a time charter as part of a commercial strategy should have someone read the charterparty completely before signing. This is a statement that is obvious in principle and inconsistently applied in practice. Time charters in the commodity trade world are sometimes fixed under time pressure, with the charterparty reviewed quickly for the main commercial terms — hire rate, period, vessel specifications — and with addendum provisions reviewed more cursorily or not at all.
The sub-letting clause, the off-hire provisions, the redelivery conditions, and the maintenance obligations in a time charterparty are the terms that produce disputes when the charter does not go exactly as planned. They receive less attention during fixing than the hire rate receives, even though their financial consequences can be larger than a $500-per-day negotiation on the hire rate.
For a trading company that regularly time-charters vessels as part of its logistics strategy, building a charterparty review process that includes a standardized checklist of provisions with material commercial consequences — sub-let terms, off-hire events, redelivery windows, owner's liability for vessel performance — is a systematic way to avoid the discovery of unfavorable terms in the moment when they become commercially relevant.