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- by Vincy
For anyone who engages in freight forwarding, logistics, and global trade, dealing with various kinds of freight charges seems inevitable. A hard nut to crack? Yes. There are multiple factors playing roles in the final bill. And sometimes, sub-charges like demurrage and detention will conjure up, adding to the frustration.
Demurrage & Detention? Some of the freight terms look like mysteries wrapped in an enigma for new comers. Various freight charges really contribute to the complexity of the shipping industry. To help you navigate, here we offer this guide in the hope of shedding light on them. What are demurrage and detention exactly? How should we distinguish one from the other? How could we avoid them? Read on, and we can clear up your doubts. Trust us, better understanding will lead to less potential losses.
- 1. Why Are there Demurrage and Detention?
- 2. What is Demurrage?
- 3. What is Detention?
- 4. What Are the Causes of Detention & Demurrage?
- 5. How to Prevent Demurrage & Detention Charges?
- 6. Conclusions
1. Why Are there Demurrage and Detention?
The ultimate explanation: The space for storage is limited, and containers need to be picked up and given back ASAP.
Ports usually allow a certain period of free time for storing or using containers, and after the expiry of it, late fees such as demurrage and detention would be charged. Otherwise, storage issues would prevail, resulting in huge financial losses.
2. What is Demurrage?<
Demurrage relates to full containers. When they arrive at a port, and remain unpacked in the port for what exceeds the allowed free time, demurrage will occur. The exact number of free days, namely Free Demurrage, vary widely. It depends on the certain rules and regulations set by the port. Whether you are importing or exporting, you are likely to run into demurrage for taking up space of a port.
After the free storage days, demurrage will start for each additional days the container is held in storage at the terminal, and ends when the container is loaded onto the ship/when the ship departs.
After the allowed free time, demurrage will apply to loaded containers at the port of destination until they are picked up from the terminal for delivery to the consignee.
3. What is Detention?
Detention relates to empty containers. Detention fees will accrue because containers are not returned to the port on time. Likewise, there is an allowed free time (Free Detention), and shipping companies, the owners of these containers, will charge you detention fees after the free period ends. In both importing and exporting, you are likely to incur detention.
You are likely to experience detention when the time used from picking up empty containers to moving full containers into the terminal is beyond the granted free period.
If you pick up the full container from the terminal but fail to return it to the designated depot/container yard within the allowed time frame, detention charges will occur.
4. What Are the Causes of Detention & Demurrage?
Just to be fair, sea freight shipping is complicated and time-consuming. Dealing with emergency can be a daily reality. Weather-induced incidents, improper handling, and unintentional delays will strain your nerves. You cannot hold control over everything, however, you can still try your best to avoid detention and demurrage. Below we will show you some common causes for them.
Documentation decides whether a container can be unloaded smoothly, or be cleared by customs just in time. Incorrect and incomplete documentation will cause delays and incur demurrage and detention.
Multiple parties and links are involved in receiving documents. Documents are not gathered in advance, delays from banks and customs, and even system problems can lead to late receipt of documents
Shipping containers will not be picked up or delivered on time if there is congestion at the port. So pay close attention to the port situation.
You are expected to fill out the proper paperwork with customs, which means any discrepancy in the shipment details will lead to further inspection. There is no fixed time frame regarding how long it will take. Customs staff are especially vigilant, so you'd better demonstrate full compliance.
Shipments could not be picked up or delivered on time. Or, the consignee does not have the necessary budget to empty the container in time. Reasons abound. But still, they are avoidable if you use enough caution.
5. How to Prevent Demurrage & Detention Charges?
No one wants additional fees. There is no guarantee that you can 100% prevent demurrage and detention. However, putting organization, coordination, and communication together can keep the surprise bills to a minimum.
Figure out what rules and regulations the customs has imposed. Make preparations for all the documentation required. If you are unsure about Customs clearance procedures, it is advisable to find a professional customs broker or freight forwarder to navigate.
Unanticipated challenges will happen. It is important to plan in advance for contingencies. You have the right to request more free days for your goods if you negotiate with your carrier. You can schedule trucking services ahead of time to ensure an efficient picking up. Also, scheduling unloading in advance will benefit you. Your planning efforts will pay off in the end.
The whole shipping process involves communication. For example, you should communicate with port officials or carriers to grasp delivery instructions. And all participants should be informed of the latest status. Maintaining strong communication can reduce potential errors.
Keep your eyes on the real-time locations of your shipments. Pay attention to the current situation in the shipping route and port. Get updated information about loading, unloading, picking up, and delivery. The possibility of delays can be largely eliminated.
Buying SOCs instead of renting COCs can help you keep the late fees to a minimum. Using SOCs means that you don't have to assume liability for failing to pick up containers on time, so detention fees will be avoided.
In shipping industry, a seemingly small difference will greatly impact the final price of the bill. No one can grant an error-free journey for you, but experienced and dedicated freight forwarder can plan the shipping with most care, source the suited carrier, navigate customs clearance smoothly, and keep proactive communication along the way, thus minimizing the possible delays.
At Seabay Logistics, we provide professional shipping solutions. You can lean on our expertise. Even if there is a deviation from the initial schedule, we can go to all length to mitigate the impacts. Improving productivity and ensuring efficiency remain our original mission.