Demurrage and Detention quickly become a shipper’s nightmare and can result in thousands of dollars in per diem charges. Costs that arise because of bad planning, unforeseen circumstances and bad communication play such a big role in the final cost of freight. Demurrage and Detention charges are a matter of the allowed free-days – if these days are exceeded, the container user has to pay a charge calculated per day. In some cases, you may be charged up to $200 – $400 per day per container.
In this article, Mathez Freight asked Container-Xchange specialists to explain demurrage and detentions terms, and provide shippers with 5 tips on how to avoid high costs when planning freight.
Demurrage and detention explained
Meaning of Demurrage and Detention in export
Demurrage charges occur when containers cannot be shipped due to the lack of documentation or other non-carrier related errors. The carrier will not be able to load the container to the scheduled vessel in that case and will charge you storage costs for the period until the next scheduled vessel is ready.
Detention charges occur in export when the empty containers have been picked up for loading and are not returned within the set free-days. Typically, carriers allow up to 5 free-days and charge shippers for extra days before the container is moved inside the terminal or depot.
Demurrage and Detention as an importer
Pick up and move your containers out of the port once they are discharged from the vessel.
- In conventional shipping, the free days are often somewhere between 3-5 days. A Demurrage charge is levied should it take you longer than that to get your containers.
- Detention refers to the time outside the port, where the shipper holds on the container beyond the allowed free days. This is done in an attempt to decrease the containers turnaround time and make shipping more efficient.
5 tips to avoid demurrage and detention charges
Demurrage and detention are in most cases out of your hands as a shipper, and hard to control. However, there are ways to minimize the risks, and avoid unnecessary charges: a good freight forwarder will help.
Noone should sign a contract just as it is, but read through it carefully, as the per-diem charges and fees are ultimately determined in the transportation contract. It is always good to negotiate terms of a freight contract, and when it comes to sea freight, it is best to negotiate before the cargo vessel leaves the port, rather than after your container is stuck at the destination terminal.
It is important to know which destinations are “at risk” because of long customs clearance times: a good freight forwarder can anticipate this risk, and negotiate with the carrier more free days for your container. Carriers may grant freight agents with a large volume of cargo some more time, and that will avoid demurrage and detention charges for your cargo.
Manage your schedule efficiently
You and your sea freight agent must make sure to dispatch your cargo as far in advance as possible! This gives more flexibility and a bigger time frame to unforeseen challenges such as bad weather or backlogs at the port. The same is applicable to loading times, where just small time-buffers can make it for you!
Always have a plan B
A good freight agent will assess alternative truck rates, other truck services or even look for available terminals nearby in case your cargo needs to be rerouted. If everything goes wrong with the initial plan, it is important to have another option to avoid large costs.
Be well-prepared for local customs
To avoid demurrage and detention risks, one must be in good knowledge of the customs clearance processes and port regulations, and understand that even geography plays a huge role, as different countries have different definitions.
A good freight agent is highly knowledgeable in customs, and knows to choose the right partner at destination. Freight forwarder’s networks enable independent agents with local expertise to cooperate and deliver your cargo smoothly, all around the globe.
Bring your own container
If it is a pain to find SOC containers (Shipper Owned Containers) reaching out to your network, you or your freight forwarder can organize everything.
Container xChange has made it easy to use or supply containers for SOC/ one-way use on their neutral online marketplace. Using their online platform, you save up to $200 to $400 or completely avoid Demurrage and Detention as their per-diem fees are below $5 per container.
Container-Xchange is a platform that is actively seeking to solve the problem of ‘Empty Container Repositioning’. Connect with more than 300 container owners and users in over 2500 locations for your one-way container moves.