6 tips to help you avoid demurrage and detention charges

The answer is YES. With rates varying from country to country and charges being calculated per day and per container, these penalties can blow up quickly and leave a dent in your profits. In some cases, the charges run so high that the shippers/importers are forced to abandon the cargo. To help you avoid facing such circumstances, here are 6 tips that you can follow:

1. Plan in advance

Time is literally money in logistics, and it’s vital you use it to your advantage. Always plan ahead. By working out a mechanism to execute the loading and unloading of your cargo, arrange for pick-up and return, informing third parties, etc. well in advance, you can ensure smooth execution of all processes. Pre-planning also wins you the time to focus on unexpected problems that might crop up, without compromising on facilitating the execution of the routine processes.

2. Do your research

The shipping world can be quite tricky when it comes to terminologies, policies and costs. With different countries and shipping lines observing different regulations and procedures, it’s necessary that you do your research and reading well before committing to anything. This one step will go a long way in making sure you are not met with any expensive surprises.

3. Documentation

Whether you’re a shipper or an importer, make sure you have everything covered from your end in terms of paperwork. If you need to obtain documents from another party, inform them well in advance so that everything goes smoothly for you. Learn about what you require and make checks beforehand to ensure your documentation work is up to the mark.

4. Be as specific as possible

While dealing with shipping lines, make sure you are clear about all their clauses regarding free days, charges etc. If you require additional free days, make sure you specify what’s it for – demurrage or detention. Clarifying these minute details in advance can help you negotiate smartly and minimize the risk of unexpected penalties.

5. Always have a backup plan

Things can always backfire when you’re in the shipping business. With multiple resources at play and uncertainty being an unavoidable aspect, having a contingency plan is indispensable. Planning for the best, but staying prepared for the worst is the smartest way to mitigate the risks of delays and costly fines.

6. Freight forwarder

Hiring an experienced freight forwarder can greatly simplify managing all this. Using their knowledge and expertise, you can really save time and have a better grip on things. With most of the groundwork taken care of by the freight forwarder, you just have to focus on what they require of you versus you solely carrying the onus of strategizing and following up on every tiny detail.

Good luck and happy shipping!

So what’s demurrage?

It’s a fee charged by the shipping line to the importers when they don’t pick up a full container from the port, within the free period fixed by the shipping line. This free period starts from the day the container is unloaded and typically lasts for 3-5 days (varies from carrier to carrier). Demurrage is calculated from the expiry of the last free day, up till the day the container is moved out of the terminal. Also, these charges vary from carrier to carrier and country to country.

And detention?

It’s a fee charged by the shipping line to the importers in cases where they pick up the full container for unpacking, but don’t return the empty container to the nominated depot within the allotted free period (varies from carrier to carrier). Also known as per diem, detention charges also vary from carrier to carrier and country to country. This covers the importers, but what about exporters?

Demurrage and detention apply to exporters too.

Here’s how and when.

Demurrage for exporters:

When a packed container cannot be shipped due to certain non-carrier related issues, once the allotted free time has expired, the shipper is charged a penalty called demurrage. For example, if the exporter fails to provide certain documents in a timely manner, the carrier will not be able to load the container onto the scheduled vessel and will instead roll the container to a new vessel. Demurrage will be charged for the additional storage period at a rate fixed by the shipping line, till the time the full container is not shipped out.

Detention for exporters:

Detention charges are levied upon shippers when they fail to return the container picked up for loading, to the carrier, within the allotted free time. Shipping lines usually provide 5 free days to shippers to pick up the empty container, load it, and return it full to the port. If the container is not returned during this free time, detention will be charged for the additional days the container is under the shipper’s possession as empty or full.

Simply put, demurrage is a fee charged when the container is under the possession of the carrier beyond the permitted time, whereas detention is a fee charged when the container is under the possession of the importer/shipper beyond the permitted time.

However, this is just a simple explanation of these two cost items. Different countries employ different definitions. Which is why it’s advisable to check with your shipping line how these terms are defined in your country of business so that, you can make informed decisions and avoid incurring these unnecessary costs.

Hope this was helpful. Do let us know in the comments section below. Thanks.