Escalation clause

An escalation clause raises hire or freight over the life of a charter to track increases in defined operating costs, most often crew wages, bunkers, insurance, and stores. It names an index or a fixed annual percentage and a base date, then adjusts the rate on each review. Long time charters and contracts of affreightment use it to protect the owner against cost inflation across a multi-year fixture, while de-escalation language can move the rate down if the index falls. It works alongside the exchange-rate and devaluation clauses, which address currency rather than cost movements.