What Is Demurrage and Detention in Shipping?

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Trying to ship goods comes with challenges, especially if you have no idea what you are doing. In addition, making a mistake during the shipping process can lead to you paying extra charges.

Some of the charges you can face during the shipping process are demurrage and detention charges. If you hear the names of these charges for the first time, you won't be the first to be confused.

Demurrage and detention are charges assessed by carriers for using their equipment beyond the allotted free time. These fees are generally calculated per day, and they can be applied to both import and export shipments.

In most cases, demurrage is charged on containers, while detention is assessed on all other types of equipment, such as chassis or trailers.

Demurrage and detention fees can vary depending on the carrier, but they are typically passed along to shippers in surcharges. These fees can add up quickly, so shippers need to be aware of them when planning their shipments.

We will cover everything you need to know about these charges, so you can better prepare and, better still, avoid them altogether.

What Are Demurrage Charges?

Demurrage charges are fees that may be charged by a shipping company or port for the delays of their customers in loading or unloading cargo.

Demurrage charges are meant to compensate the shipping company or port for the opportunity cost of having its equipment and facilities idle while waiting for the customer to complete the loading or unloading process.

In some cases, shipping companies may also use demurrage charges to cover the costs of storage and handling of cargo that has not been promptly loaded or unloaded.

If you wonder how much demurrage costs per day, bear in mind that it is expensive. The average demurrage cost is about $75 per container/per day.

What Are Detention Charges?

Detention charges are fees charged by a shipper or carrier for the detention of goods. These charges are typically assessed per day and can add up quickly if not paid promptly.

Often, detention charges will be invoiced separately from the freight bill and may be subject to dispute if not clearly stated in the contract between shipper and carrier.

Detention charges may sometimes be waived or reduced if the detention is due to circumstances beyond the shipper's control.

There are other charges to take note of in the shipping industry. These charges are:

Per diem charges

Per diem charges are fees assessed per day on certain types of shipments. These fees are generally levied for storage or detention time beyond what is agreed upon in the shipping contract.

The per diem fee may be a set daily rate or a variable rate based on the length of time the shipment is delayed at the container freight station.

In some cases, per diem charges may be negotiable between the shipper and the carrier.

Port storage charges

There are allowable free times for storage at the port, after which charges will apply. These acceptable free times vary by port and commodity, so checking with your specific port before shipping is essential.

For example, the allowable free time for soybeans at the Port of New Orleans is five days, while the corn has an allowance of seven free days.

After free days have expired, storage charges will accrue at $15 per day for soybeans and $20 per day for corn.

Each shipping line and port defines these charges in a specific way. For example, Shipping line A has a different way they deal with demurrage charges than Shipping line B.

Importance of Demurrage and Detention Charges in Shipping

Detention charges are an essential part of the shipping industry and play a vital role in ensuring that goods are moved promptly and efficiently.

In many cases, these charges are necessary to cover the costs of detaining goods, such as storage, handling, and transportation. Shippers and carriers would likely incur significant losses due to delays in moving goods without detention charges.

In some cases, shipping companies may also use detention charges to encourage prompt payment for freight services.

Ultimately, detention charges help to ensure that the shipping industry runs smoothly and efficiently.

There are instances where shipping lines charge detention fees and demurrage simultaneously, regardless of whether your cargo is in or outside the port.

Usually, you are allowed to use the containers for a specific time. If you fail to return the container on time after moving it outside the port, you can incur a demurrage and detention charge. The shipping line does not care whether it is an empty container.

Now that we've discussed the purpose of detention and demurrage fees, let's take a look at some of the reasons a shipper might be charged these fees.

Causes of Demurrage and Detention Charges

Various factors can cause both demurrage and detention charges. Here are some of the most common causes:

One of the most common causes of demurrage is poor planning and coordination between the shipper and consignee. It can lead to delays in loading and unloading the vessel, which can lead to demurrage charges.

Bad weather conditions are another common cause of demurrage and detention.

If the weather is terrible, it can delay the vessel from arriving at its destination, leading to demurrage charges.

Another cause of demurrage and detention is congestion. If there are a lot of vessels trying to enter or exit the port at the same time, it can cause delays and lead to demurrage charges.

Loss of documents is also a cause of detention and demurrage. In addition, when you lose documents needed to clear your goods, it can lead to a delay.

The loss of documents prevents you from getting access to your goods. Trying to sort out this issue takes time and leads to detention charges.

How to Avoid Demurrage and Detention Charges

There are a few ways that you can avoid demurrage charges. Consider the following:

One way is to plan and coordinate with your shipper and consignee. It helps you avoid any form of delay in loading or unloading the vessel.

Another way to avoid detention or demurrage charges is to watch the weather conditions.

If you expect inclement weather, you can try to avoid it by rescheduling your shipment.

Also, ensure that you protect all your necessary documentation. You cannot get access to your goods unless all the documents are available. Therefore, being careful about your paperwork can help you avoid both charges.

Finally, another way to avoid charges is to avoid port congestion.

You can do this by planning your shipment around times when there are fewer vessels at the port.

Why Is Driver Detention Charged?

There are a few reasons driver detention may be charged.

One reason is poor planning and coordination between the shipper and consignee. Poor communication can lead to delays in loading and unloading the vessel, which can lead to driver detention charges.

Another common reason for driver detention charges is the weather. If the weather is terrible, it can delay the vessel from arriving at its destination, leading to driver detention charges.

Finally, another reason driver detention may be charged is port congestion.

If there are a lot of vessels trying to enter or exit the port at the same time, it can cause delays and lead to driver detention charges.

How Are Demurrage Fees and Detention Calculated?

Most demurrage fees are calculated based on the number of days a vessel is delayed. Therefore, the longer the vessel is delayed, the higher the price.

Demurrage fees can also be calculated based on the size of the vessel, the type of cargo, and other factors.

Detention fees in shipping are calculated based on the number of days a ship is detained at a port.

The fee is typically charged per day and can vary depending on the port and the type of ship.

For example, a typical detention fee for a large container ship at a major port might be $500 per day, while a smaller vessel might be charged $250 per day.

In some cases, shipping companies or port authorities may also reduce detention fees for ships that are delayed due to weather or other factors beyond the shipper's control.

Demurrage and Detention Charges Free Days

Most shipping companies offer what is known as free time or free days. It's a set amount of time to have your cargo on board the ship without being charged any fees.

Once these free days expire, you will be charged for each day that your cargo remains on the ship.

The length of the free time varies from company to company but is typically between 3 and 7 days.

After the free period expires, a charge is incurred each day the cargo or container remains on board the ship. The charges can vary depending on the shipping company but are typically around $50-100 per day.

If you are expecting your cargo to arrive late, you can often negotiate with the shipping company for an extension on the free period.

This period is usually termed the grace period, and the period length varies depending on the company, but it is usually from 2-3 days.

It is important to note that demurrage and detention charges are not the same things.

Remember that demurrage charges apply when your cargo arrives late and you are not able to negotiate a grace period.

Detention charges apply when your cargo arrives early, and you are not able to take possession of it right away. These charges can be expensive, so it is important to plan accordingly.

5 Tips to Reduce Demurrage, Detention, and Storage Charges

The following are some of the ways to reduce demurrage and detention charges;

1) Communicate and negotiate terms

You are already aware that most shipping lines and ports give you free time for pick-up before any form of demurrage and detention fees are addressed. However, one way to reduce or prevent any extra costs is by communicating and negotiating terms.

If the pick-up takes longer than expected, you can negotiate lower fees or ask for longer free time.

2) Compare shipping lines and ports

Every shipping line and port has its own demurrage and detention charges. Therefore, when choosing a shipping line or port terminal, you have to compare their demurrage and detention charges with others to find the best rates.

Although having a plan to avoid detention fees should be the major concern, anticipating a charge helps. You can add it to your budget or your backup plan.

3) Always prepare for customs clearance

If you are familiar with how customs clearance works, then you know this process can sometimes create delays. This usually happens if you don't meet all the requirements needed for clearance.

If you are new to the process, ensure you have a thorough understanding of the processes during customs clearance.

These processes vary in every country, so make it a point to understand the processes of the country you are in. Also, ensure that you have every documentation ready.

4) Automate your processes

You can automate all your processes to help run your supply chain smoothly.

Automation makes it easy for you to notify everyone of anything, especially when there is a complication. It also gives you real-time data (for example, monitoring the progress of your goods) that can be helpful at any point in time.

5) Use your container

Having your personal container makes it easy to move your goods from the port or shipping line to your destination.

Getting your own container can be difficult, but it can help you reduce demurrage and detention charges. Bear in mind that renting a container from a private company comes at a different cost.

Frequently Asked Questions

These are some of the most frequently asked questions related to the demurrage and detention charges;

What is the difference between demurrage and detention?

These charges are similar but are incurred differently, depending on where the container is located.

Demurrage is a charge incurred when the container is inside the port. However, detention is incurred when the container is located outside it.

What is free time?

Free time is the period given by the shipping line or port to merchants that covers the demurrage and detention period.

You are given the opportunity to move your goods free of charge during this time. You are only charged after the period expires.

What is driver detention?

Driver detention occurs when the driver handling the transport of the container is delayed, either during pick up or at the destination.

Conclusion

Any delay in the shipping process of goods usually leads to demurrage or detention charges incurred by the customer.

To avoid incurring any extra costs, you need to plan properly. Another way to avoid these costs is by employing the services of shipping companies.

At A-1 Auto Transport, we've been in the vehicle shipping industry for many years.

We have years of experience which makes us qualified to help you with your next shipping schedule and can help you avoid all these charges.

If you need help on any issue related to demurrage and detention charges, especially if it is for your vehicle or automobile, do contact us at any time.

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