After fixing a voyage with a cargo and a set freight rate, the charterer may decide to cancel the cargo and instead pay a penalty fee for this cancellation. This is what is described as a washout payment. In supply contracts, a washout is a method of settlement, in which cargo is not delivered and counterparties agree to a difference settlement. To handle this kind of settlement, use the below workflow.
The process of settling washout Cargo contracts is similar to the processes of cargo relet and relet voyage scheduling, with the following differences:
You will choose a washout vessel. The purpose of creating and selecting a specific washout vessel is that it allows us to easily manage and reference these washout contracts going forward, along with helping to manage any trading impact.
You will create the relet from the Cargo contract instead of the Estimate.
To create, schedule, and settle a washout contract, do the following:
Open an unscheduled Cargo.
Click the Relet toolbar button and then click Link to New VC In.
On the VC In form, complete the following fields:
Owner: This should be the same as the Charterer in the Cargo contract because you are closing out the agreement with that counterparty.
Nominated Vessel: Choose the washout vessel for your specific trading desk.
Depending on the Freight Type:
L: Lumpsum, which is a flat, agreed-upon settlement amount.
F: Frt Rate, which will result in the agreed washout amount.
Example: If the original freight rate for the Cargo was $25/MT for 30,000 MT, and the settlement amount is $600,000, then the washout rate is $5/MT.
Any other form of freight.
Status: Set to Confirmed.
Save the VC In.
Financially close the voyage.