In the world of chartering, there are various types of cargo tolerances that are agreed upon between shipowners (lessor) and charterers (lessee), which are also reflected in the charter party. One of these cargo tolerances is MOLCO.
More or Less Charterer’s Option (MOLOO) is a cargo tolerance option in a charter party that gives the right to the charterer to increase or decrease the cargo load up to a certain percentage of the agreed cargo volume. This cargo tolerance is typically indicated in percentage (%) or in absolute values (metric tons).
Let’s take a look at an example to better understand the concept of MOLCO. Let’s say a charter party between a charterer and a shipowner indicates 30,000 metric tons of cargo with a 5% MOLCO tolerance.
The MOLCO tolerance gives the charterer the option to decide on the final cargo load within the tolerance range, which is 5% in this example. Therefore the charterer has the right to load anywhere between 28,500 to 31,500 metric tons.
Important Notice: It’s important to note that the MOLCO tolerance, which stands for More or Less Charterer’s Option is also abbreviated as MOLCHOP or MOLCHOPT, as MOLCO handwritten looks too similar to the term MOLOO, which is the owner’s option.
Where Are MOLCO Cargo Tolerances Found?
Like most liner and charter terms, such as laytime and vessel specifications, cargo tolerances such as MOLCO are found on charter parties.
Charter parties are charter agreements between the shipowner and the charterer, who is typically the exporter and shipper. The cargo tolerance MOLCO, MOLCHOP or MOLCHOPT is typically located next to the agreed cargo volume, when it’s used as an option.
What Happens to Underutilized and Overutilized Cargo Space?
With reference to the example given earlier, where the initially agreed cargo volume is 30,000 metric tons (with a tolerance of MOLCO 5%), the charter has the option to load 5% more or less, which equates to 1,500 metric tons.
Therefore, the charter has the right to load between 28,500 to 31,500 metric tons of cargo. On the other hand, if the charterer fails to load within the MOLCO tolerance they are over or underutilizing cargo space.
When a charterer loads less than the MOLCO tolerance (28,500 as per our example) they are underutilizing cargo space. In the industry, this is referred to as dead freight.
Therefore, charters typically work to load cargo into the vessel that is within the minimum allowed tolerances. Shipowners will usually impose dead freight charges if the charterer fails to load less than the minimum MOLCO tolerance.
Similarly, if the charterer loads more than the maximum allowed (which is 31,500 metric tons in our example), the cargo space is overutilized. The vessel owner may impose charges for overages for loading above the MOLCO tolerance.
When Is a MOLCO Cargo Tolerance Used?
A MOLCO cargo tolerance is used in favor of the charterer if they are unsure of the final cargo volume. A MOLCO tolerance gives them the opportunity to load cargo within an agreed range.
There are various types of reasons why a charterer or shipper is unable to finalize the exact volume when the carter parties are agreed, and therefore requests for a MOLCO tolerance. Some of these reasons can relate to: