Demurrage is a charge levied by the shipping line to the importer in cases where they have not taken delivery of the full container and move it out of the port/terminal area for unpacking within the allowed free days.
In an attempt to improve the turnaround time of containers shipping lines will apply detention charges for import containers returned after the expiry of the free time. Free time allowed is 7 -10 calendar days (weekends and public holidays are included). Free days commence from midnight on the day of discharge from vessel.
- Demurrage relates to container storage at terminal (charged by the port)
- Detention relates to container usage (charged by the shipping line)
Example: A container is discharged off a ship on 2-July. Consignee approaches the shipping line to take delivery of the cargo around 9-July. Working off a standard 3 free days from date of discharge, the port free days (different to shipping line free days) expire on 5-July. So, the port will charge the consignee Demurrage for 4 days from 6-July to 9-July at the rate fixed by the port.
After the full container has been picked up by the client, for example if they take another 7 days to return the empty container, then it is known as Detention which again will be charged at the rate fixed by the shipping line.
So basically before the full container is picked up, Demurrage is charged and after the container has been picked up, till the time the empty is returned to the shipping line’s nominated depot, Detention is charged.
Demurrage may be caused due to a variety of reasons. Common among them are
- Consignee did not receive the documents in time for customs clearance
- Documentation received by consignee is incorrect or insufficient
- Container has been stopped by customer, police or other authorities for inspection of the cargo which may take longer than expected
- Consignee was unaware of the arrival of the cargo and was unable to do the customs clearance in time
- Consignee does not have the finances in order to clear the container in time
- Dispute between shipper and consignee
- Cargo received was not as per the sales order
Tips to Avoid Demurrage Charges
- Know the rules, meaning know the number of free days allotted within the contract.
- Large shippers can typically negotiate extending the number of free days, so negotiate well.
- Pre-clear the cargo by submitting the shipping documents as soon as possible.
- Align the business with multiple trucking options, so if one trucker falls off the load another one can be found quickly to recover and not incur charges.
- Keep track of the containers on their arrival and departure. No one will care more about the freight than you will. Demurrage charges have no mercy and missing a detail on a spreadsheet is not an excuse.
Tips to Avoid Detention Charges
- Schedule the dock, so the operations team is prepared to load / unload the day's cargo.
- Detention is negotiable at the time of contract, so work the amount of free time required into the agreement. Carriers can better manage pricing and service knowing the wait and load times they can expect.
- Dispatch the cargo well in advanced to give the trucking company plenty of time to work the shipment into their schedule.
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