INTERTANKO. Payment Performance System (PPS) Together we can make a difference

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2 INTERTANKO Payment Performance System (PPS) Together we can make a difference

3 PAYMENT PERFORMANCE SYSTEM (PPS): Together we can make a difference 20 May 2016 Contents 1 Introduction The Payment Performance System in practice The need for critical mass PPS: Value for Members PPS: Basic Principles PPS: Output and Deliverables a) Comparison of payment performance b) Comparison of owner s own data with all Members data c) USD cost to owner of late payments d) Best payment performers e) Checking charterer performance PPS: Freight and Demurrage Scenarios Scenario A Scenario B Scenario C PPS: Data Needs PPS: Data Upload and Data Edit PPS: Next Steps Appendix 1: PPS Technical Specification Appendix 2: Terms & Conditions of Use

4 1 Introduction INTERTANKO is committed to improving the way business is done in the tanker industry. This focus on the commercial side of the business includes initiatives which will provide Members with real, tangible, practical benefits. The initiatives include a Code of Conduct (CoC) for tanker chartering, more transparent and cost-effective vetting and assurance practices, charterparty commentaries and specific clauses, freight and demurrage collection services (FDIP), monitoring new chartering terms and the deterioration in existing ones, as well as a benchmarking tool for delays in freight and demurrage payments, the Payment Performance System (PPS). 2 The Payment Performance System in practice What is PPS in practice and what it can mean for Members? The idea behind PPS is to reduce the length and cost of delays in recovering freight and demurrage payments. By recording, monitoring and benchmarking them, the PPS provides a comprehensive overview of the state of affairs. INTERTANKO can use the results directly in dialogue with charterers, addressing and discussing their individual payment performance. If for example we achieve a reduction of two days delay in freight payments, a Member would save some USD15,000 a year for a 10-ship fleet; and if we reduced demurrage payment delays from 85 days to say 60, that could mean a saving of USD27,500 a year for the same fleet. In its first year of operation, INTERTANKO Members with almost 25% of the membership tanker fleet, submitted payment data for over 7,500 voyages into PPS, with over 450 charterers in the system. Comments received from regular users have been used to modify and improve the system since its inception. Modifications include: Allowing users to see the payment performance of any charterer in the system (up to a maximum of five views a day to prevent reverse engineering of data). The addition of separate data streams for chemical and gas fixtures, separate from the crude/products data, in order not to skew the figures due to sector specific differences. Allowing users to update freight or demurrage data only, without having to update the whole record. Allowing users to enter voyage data with a 0 value for the USD figures for freight and demurrage, in case of concerns over specific charterparty P&C clauses. Specific legal advice has been sought and we have been assured that entering data into the system is not in breach of c/p P&C clauses. 3

5 3 The need for critical mass INTERTANKO encourages its tanker-owning Members to use PPS and allow INTERTANKO to make it an integral part of its efforts to promote good chartering practice. The success of PPS is dependent on the active use and support by Members. The more data we have, the more representative results will be, providing more leverage when discussing payment performance with some of the worst performers. 4 PPS: Value for Members The PPS has been designed to provide insight into freight and demurrage payment performance in the tanker voyage charter market. It allows Members to benchmark their overall payment delay experience against that of other Members, and their experience with one charterer against the experiences of all other Members with the same charterer. It allows Members to see the best performing charterers for freight and for demurrage, and also to see the cost of delayed payments to their business and the industry as a whole. It allows INTERTANKO to offer proof of good or poor payment performance when entering into discussions with any particular charterer. Its ultimate aim is to bring about behavioural changes among the chartering community in the form of demonstrable reductions in the time taken to settle freight and demurrage invoices. 5 PPS: Basic Principles The PPS is a proprietary and highly secure database that has been designed by INTERTANKO s software development partner Tradenet, who provide technology solutions for the maritime and commodity industries. An outline technical specification of PPS can be found in Appendix 1. PPS design and development to date has been governed by INTERTANKO s Council, in full compliance with data protection and antitrust legislation. Governance also encompasses: a strict data security protocol to ensure that the database is only accessible via a unique password control that allows access according to a strict hierarchy of usage. Members compliance with the terms and conditions of usage set out in Appendix 2. 4

6 6 PPS: Output and Deliverables This strictly confidential database of voyage charter information will enable Members contributing information to access reliable KPI data on payment trends in real time at the same time as it enables INTERTANKO to show evidence of payment performance to stakeholders. It provides users with: A list of the best performing charterers for prompt payment of freight and demurrage Average delays in freight payments Average delays in submitting, negotiating and getting demurrage claims paid Comparison of your own data with the average for other participating members for a specific charterer Comparison of a specific charterer s performance with other charterers (in compliance with anti-trust advice) Comparisons of delays for different tanker sizes USD $ cost to you of late payments Comparisons of payment performance over time Sample PPS outputs are presented (using fictitious data) on the following pages, including: 6a) Comparison of payment performance 6b) Comparison of owner s own data with all Members data 6c) USD cost to owner of late payments 6d) Best payment performers 6e) Checking charterer performance 5

7 6 a) Comparison of payment performance This chart shows where one nominated charterer is positioned compared to all charterers entered by all INTERTANKO Members (blue). It also shows (white on blue) the logged in INTERTANKO Member's freight payment experience for this nominated charterer (white) in comparison to the experience of all participating INTERTANKO Members with the same charterer (blue). 6

8 6 b) Comparison of owner s own data with all Members data This chart shows on the left the overall freight payment experience of the logged in INTERTANKO Member (My Average Overall) compared to the overall performance reported by all participating Members for the given period (INTERTANKO Member Average Overall). On the right, the fixtures reported by the logged in Member with one selected charterer (a fictional ACBA) (My Average for ACBA)) are compared with the INTERTANKO Member average for the same charterer (INTERTANKO Member Average for ACBA). The chart also shows the time taken to pay by the fastest payer overall. 7

9 6 c) USD cost to owner of late payments The average freight invoice amount in our pilot database back in 2014 was $1.2m per fixture with a mean payment delay of days. At 2.5% annual interest that is USD850 cost of delay for the average freight. Based on one owner with a ten ship fleet fixing each ship once a month, that represented USD102,000 a year. Or basis 3,000 tankers (our membership at the time) fixing once a month, that would have been USD 30.6 million a year. The average demurrage claim amount in the pilot database was $120,000 per fixture with a mean time from invoice to payment of 85 days. At 2.5% annual interest that the cost of delay for the average demurrage would have amounted to USD700. Again based on one owner with a ten ship fleet, fixing each ship once a month, that the cost would have amounted to USD84,000 a year or for the entire membership at that time (3,000 tankers), fixing once a month, some USD $25.2 million a year. 8

10 6 d) Best payment performers This is the type of graph we have all been waiting for. It shows the charterers which have performed best over a specific period of time. In other words which have paid freights or have settled demurrage with the least delay. (N.B. Charterer data in the illustration below is fictitious and in the live database updates immediately as soon as new fixtures are added.) 9

11 6 e) Checking charterer performance This graph provides PPS users with a tool to check the payment performance of a charterer before negotiating and fixing them. In order to ensure data cannot be reverse engineered the system will allow checks on the performance of up to five charterers a day. Should this be insufficient for your needs, please contact the secretariat. 10

12 7 PPS: Freight and Demurrage Scenarios Three voyage charter scenarios are considered for demurrage. It is important to note that time measurement between demurrage invoice submission and payment excludes the time taken to negotiate the amount payable in the case of Scenario B but is included in the case of Scenario C. Scenario A: the demurrage claim is submitted and accepted by the charterer Event Voyage End Invoice Sent Dispute Notified Dispute Settled Invoice Payment Time Delay in submitting x Delay in paying Scenario B: the demurrage claim is submitted and challenged by the charterer with the negotiated outcome resulting in a settlement at a lower amount than originally claimed Voyage End Invoice Sent Dispute Notified Dispute Settled Invoice Payment Event Time Delay in submitting Delay in paying Negotiation Delay in paying Scenario C: as Scenario B although the outcome of negotiation results in a settlement at the original amount claimed by the owner Voyage End Invoice Sent Dispute Notified Dispute Settled Invoice Payment Event Time Delay in submitting Delay in paying x Negotiation time included Delay in paying A single scenario is considered for freight: Voyage End Invoice Payment Event Time x Delay in paying 11

13 8 PPS: Data Needs Thirteen data points are required to support the system deliverables outlined in section 6. In addition chemical or gas voyages should be indicated in the fourteenth column. Data transfer has been made as easy as possible and the Secretariat can provide a standard input template using a simple Excel spreadsheet. Data can also be accepted in the format routinely used by the participating Member with a specific protocol applied to convert and map the information into the format required by PPS. A Vessel Name B Vessel Size (dwt) C Charterer Name D Charter Start E Charter End /Freight Due F Freight Invoice Amount G Freight Invoice Payment H Demurrage Invoice Amount I Demurrage Invoice Sent J Demurrage Dispute Notified K Demurrage Dispute Settled L Demurrage Invoice Payment M Demurrage Invoice Payment Amount N Tanker Type (1=chemicals, 2=gas) 12

14 9 PPS: Data Upload and Data Edit Member Users can easily upload and edit their own data. Once your data is on your desktop, the upload takes just a few mouse clicks, and the data shows immediately on the system. PPS will inform you immediately if any data is not in the required format. Alternatively we are more than happy to assist with your initial upload to check that your data is in the correct format. 13

15 10 PPS: Next Steps If you would like to contribute and to ensure that the System is populated with sufficiently current and representative data to enable us to generate meaningful statistics and provide insight into charterer payment performance, we follow a four steps approach. 1) Agreement in principle by an individual INTERTANKO Member to participate according to terms & conditions of use (see Appendix 2). 2) Engagement between the Member's designated post fixture representative and INTERTANKO's PPS Project Manager to: a) Go over how the PPS works in practice; and to b) create a 'bridge' to enable data transfer into PPS. 3) Testing of data transfer to ensure reliable functioning. 4) Go live as basis for on-going usage. Members participating in PPS may wish to include at the bottom of their freight invoices wording to the effect that they participate in INTERTANKO s Payment Performance System. For further information or to set up your username and password for the PPS platform, please contact the PPS Project Manager: Bill Box Senior Manager, Commercial INTERTANKO bill.box@intertanko.com Appendix 1: PPS Technical Specification The system uses web-based technologies, therefore most system interaction takes place using a web browser. A spreadsheet upload feature 14

16 is provided for bulk data upload; this uses secure web services to connect to the system. The system and its support processes use a number of techniques in order to prevent unauthorised access to data: Application-based security control. A username and password combination is used to secure access to the system. A strong password policy (enforcing the use of complex and sufficiently lengthy passwords) protects against password guessing. Data encryption in transit. All data traffic into and out of the system is encrypted using HTTP Secure, a web standard protocol for securing data transmission over the internet, as commonly used in e- commerce, online banking and other applications where protection against eavesdropping is required. Data encryption at rest. All sensitive data is stored using strong encryption (Advanced Encryption Standard) in the database. In the highly unlikely event of unauthorised access to the database, the exposed data is meaningless. Internal segregation of users and transaction data into Member organisations. Accidental access of one Member s data by another Member is prevented by keeping the user and transaction data for each member logically separate within the system. Strong data validation and robust procedures for new user access. 15

17 Appendix 2: Terms & Conditions of Use The content of the PPS is for your general information and use only. It is subject to change without notice. The information is submitted by Members and compiled by INTERTANKO and whilst we endeavour to keep it up to date and correct, neither we nor any third parties provide any warranty or guarantee of any kind, express or implied, as to the reliability, accuracy, timeliness, completeness or suitability of the information found or offered on the PPS for any particular purpose. You acknowledge that such information and materials may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials on this website is entirely at your own risk and it shall be your own responsibility to ensure that any information available through the PPS meets your specific requirements. The PPS and its contents are copyright of INTERTANKO. Any redistribution or reproduction of all or part of the contents in any form is prohibited save that the user may print or download to a local hard disk extracts for the user s own use. Users of PPS accept the Terms and Conditions of use (Data Licence text available on website home page). 16