In shipping lines, one would come across various expenses that add up to the total shipping charge. But what if the total expenses get even more spiked up by other charges as fine or penalties. In the shipping industry, demurrage and detention are the two popularly known charges that can accrue up to 20 times the actual value of your shipping container itself. Both of these have been widely used in container shipping.

Most of the people count demurrage and detention as one charge, but they carry a slight difference.

Demurrage charges are imposed when someone uses the container within the terminal beyond the free time while detention charges are imposed when someone uses the container outside of the terminal or depot, beyond the free time.

They have one thing in common that both are levied for using the container for more than the given time period.

Let’s get into the terms in detail.

What is demurrage charge?

Let’s say your exporter has imported a fully loaded container. The port receiving your cargo containers allot you two free days to get the container unloaded. But due to some reason, you couldn’t get it unloaded within the given time frame and you reached the port on the fifth day. In that case, the port operator will impose a demurrage charge for acquiring the terminal space for an extra three days.

In simple terms, demurrage charges depend on how much time a container is in port after arrival. It is levied by the shipping lines to the importers for not taking the delivery of the full container within the given time frame and occupying the port or terminal area for more than the permitted time.

Demurrage charges can vary from country to country as well as from carrier to carrier. The charge brings fear among shippers because it does not only apply per day but also per container. It is an avoidable cost but if not controlled can sometimes overtake the price of the container or the cargo itself.

What are the possible causes of demurrage?

  • A delay in custom clearance from custom officers
  • Custom officials disagree to pass the clearance papers
  • Documents received by the consignee is incorrect or insufficient.
  • The container has been stopped by customer, police, or other authorities for inspection
  • The consignee was unaware of the arrival of the cargo.
  • Consignee does not have the finances in order to clear the container in time
  • Dispute between importer and exporter
  • Cargo received did not comply with custom rules & regulation

How to avoid demurrage?

  • If you are a newbie in shipping lines, you need to be extra vigilant of the possible contingencies and be aware of every terminology used in the industry
  • Understand the do’s and don’ts of the shipping lines.
  • Enquire from your carrier company about the necessary documentation required during the time of custom clearance.
  • Find out if any special legalities or formalities are required for the cargo you are importing.
  • Find out that if your cargo requires some special legalities or formalities, then get all the things arranged on time beforehand to avoid last-minute hurry. Also, ask your carrier to provide some extra free days to arrange the documents.
  • Make sure that you have seen the sample of the ordered product so that you do not have to wait for verification of the goods at the port.
  • Keep tracking your shipment. You may also ask your shipper to provide you with updated status about the shipping, documents required and delivery date, and free time allotted in the port, etc.
  • If your shipment is under a Letter of Credit, then the time taken for the communication with the banks and the release of documents must be considered. Ask your shipper to use an Express Release instead of an original bill of lading if your shipment is not under Letter of Credit or if you do not require the original Bill of Lading.
  • Share cargo shipment and delivery related instruction with all the helping parties and inform them before the time for smooth handling of your cargoes.
  • Book trolley or transport operator in advance to avoid shortage later.
  • Employee an experienced carrier company or freight forwarder who is expert in all kinds of handling and who can take you out from any kind of custom related issues.

What is detention charge?

Also known as per diem fee, detention is imposed when the importer has picked up the container from the shipping line and hasn’t returned the container within the agreed time.

Let say you leased a container for the freight transportation where your carrier company agreed for a 15 days deal. Meanwhile, the container got stuck due to some reason and you returned the containers back to the carrier company after 20 days. In that case, the company will impose an extra fee for five extra days called detention.

Detention is also imposed in another form when the importer has picked up the container from the port for unpacking but did not return the empty container to the nominated container depot on time. Generally, importers are given 5 to 6 days of free days. However, each port and terminal have their own rule and there is no other way to safeguard from these charges other than complying with their rule.

What are the possible ways to avoid detention charges?

  • Manage shipment in a planned way as per your allotted free time.
  • Avoid urgent shipment during peak season because the bottle-necking could make unable for you to hire a trolly or truck
  • Try not to take containers outside the port for long. You can arrange your own trolley or truck and get the entire cargo loaded and set off the container free at the port itself.
  • Arrange transport operator prior to your shipment and schedule the pick-up and /or delivery. Make sure that the loading party (for exports) or the unloading party (for imports) is ready to take action when the container arrives.
  • Try negotiating on free time given by the carriers. Sometimes you suspect early that there could be a delay in shipment. Negotiating more time would help you to escape from these heavy charges. At least then you can be cognizant of the coming fees while loading/unloading the container.

The horror of receiving an unexpected bill showing demurrage or detention charges could be unexpected and daunting. We will never want you to face any such complications in your shipment. Through this article, I hope, I am able to provide you with the necessary information and ways to escape from such filthy charges.