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How To Reduce Demurrage & Detention Charges

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For any business in ship chartering or for an import/export business, it is vital to avoid getting any additional costs at the end of the voyage. It may occur in the form of demurrage or detention.

What are the Demurrage fees?

Demurrage is calculated for the cargo based on the extra time it spends at the terminal over the agreed period. Different contracts may provide different free time allowances for charterers. It is important to review the contract and confirm the free time allowance. In general, charterers may get 4-5 days of free time.

After that period, the ship will be charged a storage fee on a daily basis until the time ship leaves the terminal. Based on the kind of the vessel or the terminal, the demurrage amount may vary. This will increase after the end of the initial period. For a container, the daily demurrage charge can be around $75 – $150. This is generally for the first five days, after which the fee will increase. The longer the  cargo spends on the terminal the higher the charge.

Demurrage charges can have a notable impact on the shipping expenditure. The shipper is considered responsible for the demurrage, which must be paid to the port.

Tips to avoid charges

  • Work in advance

Provide delivery instructions in advance to the inland carrier and pre-clear the cargo. An efficient broker can help to pre-clear the cargo. In this way truckers can move the load easily before the free time ends.

  • Request an extended period of free time

This works in the case of large shippers. Large ships can be evaluated based on the number of containers that will be coming to the port through a specific ship at a given time. How a ship can fall under the “larger shipper” category varies from one carrier to another. To be categorised in this way, a ship must move at least 800 containers in a year.

  • Have a back-up plan involving a haulage company

It is wise to have access to an alternative haulier, who can help you out in case of tight schedules. Demurrage is applied on ships before  the cargo is collected from the port. This means the fees are known in advance. Planning in advance for demurrage is wise to preclude, and being charged extra fees.

Detention fees

There is a set free time to keep the container at the storage terminal at the port. Beyond this time, a detention fee may apply. Just like demurrage, the detention fee is also calculated on a per-day basis. Detention fees are charged around $50 – $100 a day but can vary depending on the port or the carrier.

A detention charge will be levied by the inland carrier as the driver’s waiting time in the form of a haulage-related fee. Drivers generally allow 1-2 hours of free time for importers to let them unload the container so that they can take the empty containers back to the port. Similarly, drivers will wait at the port for the exporters to bring in loaded containers to the terminal so that they can be boarded on the vessel. Any extra time over the agreed free time will be charged. Like demurrage, detention charges are the shippers’ responsibility. A detention fee is paid to the shipping company that owns the trucker or the container.

Tips to avoid detention fees

  • Negotiate more time

If it seems likely that loading or unloading will take longer than the allotted time it would be wise to negotiate extra time. If this is not possible, be clear about the free time and confirm when the billing will start.

  • Dispatch cargo in advance

This will enable the trucking company to schedule the pick-up or drop-off of the cargo. Make sure that when the container arrives the loading or the unloading party is ready.

  • Keep detention time in mind when scheduling loading/unloading

By doing so, it will be clear how much time is available. This is very important in case of dropped containers.

Summary

Demurrage is charged when cargo remains at the terminal longer than the agreed time. Detention is calculated when the container remains at the port for longer than the agreed time. Detention fees are also applicable for drivers waiting at the port  longer than the agreed period. Take some time to cross-check the time and dates detailed in the bill before making any payment.

Leonard Moore
Leonard Moore mission is to conduct in-depth research that leads to new ideas in creating informative articles. His focus is on innovation in technology and creativity.

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