Demurrage and Detention in maritime transport: what are they and how to reduce the costs associated with them?
Container shipping plays a key role in the global supply chain, enabling goods to be moved over vast distances. However, the process is not without its challenges, and one of the problems that businesses and shippers may face are charges related to Demurrage and Detention. What these fees are and how to avoid the additional costs – you can find out by reading this episode in the “Practical Tips from Our Experts” series.
Demurrage and Detention are fees charged by a shipowner when you are late in delivering or picking up a container. The shipowner sets a period during which the container’s detention at the terminal is free of additional charges. After that time, it introduces charges for holding the container.
Demurrage is the period of container demurrage at the port:
– in import – from deposit from the ship to take full,
– in export – from deposit in the port to take on board.
Demurrage fee depends on the type of container. There are different rates for 40′ containers, 20′ containers and refrigerated containers. The rates also change with the days. Shipowners use a tariff with incremental rates per day.
Detention in imports is the time from taking a full to returning an empty container to port, as determined by the shipowner. It is, in a way, a fee for “renting” a container and is charged until it is returned. The length of the Detention free period can vary, depending on the shipowner’s conditions under the shipowner’s tariffs and the individual terms of the contract with the shipowner.
In exports, it is the period from taking up an empty container (or taking over a container after importation) until the full container is deposited in the port. The shipowner determines the period within which the exporting cargo must pick up the empty container, load it, and then return it to the port. If there are delays, the shipowner charges Detention. When the container is already loaded and deposited at the port, and the shipper cannot ship the goods for various reasons, then Demurrage costs will be charged until the full container is shipped.
That is to say, in short: after the empty container is taken and before the full container is deposited at the port, Detention is charged, and from the time it is deposited at the port until the full container is taken to the ship, Demurrage is charged.
In importation, if a container with goods arrives for the importer, he has a certain period of time (e.g. 7 days) to take it from the port without additional charges. If this time limit is exceeded, a demurrage fee for each additional day the container is detained begins to apply. In addition, once the container is emptied, the importer has a certain amount of time to return the empty container to the port. If this time limit is exceeded, then the Detention fee applies.
That is, in short: before the full container is retrieved, Demurrage is charged, and after it is retrieved and until the empty container is returned, Detention is charged.
There is another similar type of charge – Storage is a charge for a container’s use of space at a port terminal – in a container yard or warehouse. The difference is that it is charged by the terminal and may differ from the Demmurage free period – it is worth paying attention to! It may already be included in the Demurrage rate, but if the shipowner does not cover this cost to the port, it will be a separate fee charged directly by the terminal.
Demurrage and Detention free period.
The Demurrage and Detention free period is specified in the contracts. It can be several days or weeks, depending on the shipowner and the container terminal.
Sometimes shipowners provide an option for combined Demurrage and Detention free time (Combined or Merged D&D), specifying the total number of days to empty the container after unloading from the ship and return the empty container to the port or container depot in imports, or from taking the empty container to depositing it full in exports, as agreed. In this case, demurrage and detention charges are not calculated separately. This gives more room for maneuver and flexible use of Demurrage and Detention as needed.
The most common causes of delays leading to Demurrage and Detention charges are problems with customs clearance (e.g., failure to provide documents necessary for customs clearance on time, provision of incorrect or incomplete documentation, inconsistency of cargo with information on the invoice). Unfortunately, there are also all sorts of delays and unforeseen circumstances that are completely out of our control, such as lack of available drivers, lack of equipment, strikes or port congestion (known as congestion).
Demurrage and Detention fees are unfortunately a constant issue in shipping, but we know ways that will give us a chance to minimize the costs associated with them.
What can you do to reduce the risk of Demurrage and Detention fees?
- Knowledge: Compare quotes and check Demurrage and Detention costs at different ports and shipowners.
- Planning: Carefully plan dates for unloading and loading containers to avoid detention after deadlines.
- Communication: Maintain constant communication between all parties involved in transportation to avoid misunderstandings and delays.
- Contract negotiations: When negotiating contracts with shipowners or port operators, try to obtain reasonable free periods.
- Container management: Regularly monitor container movements and maintain detailed reports to respond quickly to any delays.
- Documentation preparation: Be well prepared for customs clearance. Make sure you have all necessary and properly completed documentation on time. Remember that countries have different procedures.
- “Plan B”: If you can, have a contingency option on hand – then there’s a chance you can avoid high costs when unplanned obstacles arise.
- Experience: Work with an experienced freight forwarder in handling a particular direction – this will undoubtedly streamline the transportation process and minimize the risk of delays and setbacks.
Above all, remember that working with experts who have knowledge of port procedures and the ability to solve potential problems gives you a far better chance of your goods arriving safely and on time!
What happens to unclaimed goods?
If the goods are not picked up or unloaded on time, there can be several negative consequences. In addition to Demurrage and Detention fees, in extreme cases, the shipowner can claim ownership rights over the unclaimed cargo to recover costs. It is worth remembering that in case of unclaimed cargo by the consignee, the carrier with the demurrage fee may charge the shipper. This is due to the fact that on the bill of lading both the consignee and the shipper appear as “Merchant”, or “Merchant”.
Of interest: Container xChange’s annual benchmarking report shows that in the first half of 2023. average Demurrage & Detention fees declined by 25 percent year-on-year and by 14 percent compared to 2020 rates. However, not everywhere: in 11 major ports, the fees remain higher than in 2020: Antwerp and Rotterdam, Jebel Ali (UAE), Port Kelang (Malaysia), Singapore (Singapore) and China’s Ningbo, Shenzen, Tianjin, Xiamen, Hong Kong, Guangzhou and Guangzhou.
In summary, Demurrage and Detention fees pose significant challenges for traders and shippers in the maritime transport of containers. Effective planning, communication and contract negotiations are key to avoiding these additional costs. Entrepreneurs should work with experienced logistics partners to minimize the risk of delays and additional fees, which will contribute to a more efficient global supply chain.