WHAT ARE DEMURRAGE & DETENTION CHARGES?

 WHAT ARE DEMURRAGE  & DETENTION CHARGES?

 

For a common person, the words Demurrage and Detention charges are kind of similar, but in the shipping industry,  one cannot use them interchangeably. They are widely different from each other. Freight forwarders know these terms by heart as it comes to them with experience. While both can involve charges, these terms aren't something to be afraid of. As long as you have a good handle on your logistics, they're just another part of your cargo's journey and a key cog in well-planned, smooth-running global supply chains.

With AFM Logistics’s industry-leading real-time tracking data and market analysis, container tracking API, shippers, and freight forwarders can track the location of their ocean freight with unmatched accuracy and reliability. This allows for complete supply chain transparency and enables organizations to schedule and manage their operations confidently, eliminating delays and the fees they cause. With our specialized personal baggage shipping company in Delhi services, you can move any type of goods that you want from India to the UK, USA, Australia, Canada, New Zealand, European and Gulf countries, or any other country as well. 

What is demurrage?

Demurrage is a fine to the buyer that is levied by a courier or freight provider if they do not take their goods away from a port or terminal. Often ports and terminals allow importers to store goods or containers for a number of ‘free’ days, after which charges are applied.

As an example; let’s say a container of widgets is being shipped from a supplier in China to a port in Amsterdam. The delivery is due on the 8th of April and the consignee collects the delivery on the 20th of April.

The shipping line normally allows 7 free days of storage (which is typical for shipping lines) therefore the consignee has until the 13th of April to pick up the goods, after which they will get charged. So of the 14 days ‘dwell’ time of the goods, 7 days are free and 7 days are eligible to be charged demurrage. Demurrage would be calculated by a fixed charge times the number of days the container was held after the free period.

What Causes Demurrage Charges?

The causes of demurrage can vary, but typical causes include:

Errors or discrepancies in shipment documentation

Late receipt or loss of shipment documentation

Port congestion

Issues during customs clearance or cargo inspection

Labor shortages at the port

Failure to pay freight charges in full

Delay or abandoning of cargo by the consignee

Bad weather

Lack of container visibility

Some of these causes are unavoidable. Even the most proactive supply chain leaders experience at least occasional difficulty with the above factors. However, there are steps they can take to avoid demurrage charges.

What is detention?

Other than the one issued for being naughty at school, detention is another charge that can be levied by a shipping transport provider for not returning an empty container to a container yard or port after an agreed time.

As an example, if the buyer of goods takes a container to their factory for 14 days to unpack, and the shipping port allows just 10 days to return the box, then the shipping line will be charged ‘detention’ for 4 days.

What is the difference between demurrage and detention?

Demurrage and detention are typically found together in logistics. They are two separate things, but they're closely linked. When an importer fails to remove its goods from a port or terminal within the allotted grace period granted by the carrier, a penalty is assessed. This penalty is known as demurrage. The same happens to export shipments when a container is already at the export terminal and cannot depart within the allotted free time.

On the other hand, detention results when empty containers are not returned to the container yard or terminal within the agreed period of time.

 

What’s the difference between demurrage and detention charges?

Demurrage and detention charges are both levied by shipping companies. Typically, when you need to ship a consignment, you would need to rent a container from a shipping company. The rental period covers the time spent in transit and a certain number of days at the port. Demurrage and detention charges refer to the penalties related to using the container for longer than the planned period. While shippers look at these charges as unreasonable, shipping lines justify them as they ensure the efficient use of containers. 

 

Demurrage charges are the penalties applicable if your container sits at the port for longer than the free time agreed upon. This applies to containers that have reached the origin port and cannot be loaded onto the ships as well as containers that have been unloaded at the destination port but not collected from the container terminal.

 

For example, let’s say your container reaches the port and is unloaded from the ship but traffic congestion and a closed highway keep your trucks from reaching the port. In such cases, you will be charged demurrage until your trucks reach the terminal and take the containers out. 

 

Detention charges are incurred if you keep the container outside the terminal for longer than the number of free days provided. They are usually incurred at the port of discharge when you take the container out of the container terminal but are unable to empty and return it on time. 

 

Let’s say your trucks reached the terminal in time and your containers were brought to your distribution center. However, you were unable to unload the containers because of a worker strike. In such events, you will be charged detention fees for the number of extra days you keep the container. 

 

How do you avoid these charges?

Storage, demurrage and detention charges can quickly increase the costs of importing your merchandise; therefore, it is essential to closely monitor the arrival of the merchandise. Here are a few tips: 

1)        Make sure that your customs broker is notified that your container or merchandise will soon arrive.

2)        Check to ensure that your carrier is notified that your container or merchandise will soon arrive to ensure that your merchandise will be picked up during the free-of-charge storage period offered by the terminal.

3)        If possible, have all the information about your merchandise sent to your customs broker or freight forwarder.

4)        As soon as you receive your merchandise, empty the container as soon as possible and return the empty container to the right location. Otherwise, the shipping line considers that the container is still in your possession and detention charges will accumulate until you ask your carrier to retrieve the empty container and return it to the location provided by the shipping line.  

  

 

There was a time not long ago when demurrage and detention fees were rare. Today, though, these fees can add up to significant expenses if shippers, freight forwarders, and BCOs don't take action to avoid them. When trying to reduce the frequency of delays that lead to demurrage and detention fees, nothing is more vital than achieving supply chain transparency. Stay Ahead of D&D With the services of the  best air freight agents in India. To learn more about the many benefits of the most complete, detailed, and standardized container tracking data on the market, feel free to book an  AFM Logistics’s API demo today!