What's the Difference?

Demurrage and detention are two terms that often confuse people in global trade.  These fees are levied by the shipping company if extended beyond the period of free time allowed.  This can also lead to financial losses many a time.  

Demurrage

Relates to cargo (while the cargo is in the container). This is a daily storage fee assessed by the terminal when cargo remains at the port after its contracted, the "Last Free Day". Charges can vary depending on the terminal and port but especially when combined with detention fees.  Storage fees are often applied on a progressive scale increasing the longer the container sets at the port. 

Detention

Relates to equipment (while the container is empty after unpacking or before packing). The ocean carrier charges a fee for each day past the number of free days a shipper holds the carrier’s container outside of the port/terminal. While storing cargo in the container can be a short-term solution the detention fees can make it a more expensive option than warehousing. 

How Does This Apply to You?

This means that even after you’ve moved your cargo out of the port, you need to be prompt in returning the empty containers back to the designated container yard or port. 

For example, if an importer unloads a container but fails to return it to the nominated empty depot within the required time frame, detention charges are incurred. Most shipping lines allow for 3-5 free days before charges occur. 

Ocean carriers make money by keeping their equipment in circulation. When the importer keeps the equipment for longer than the agreed time, it prevents the equipment from being used by other clients. The carrier wants to keep the containers in circulation and encourages importers to return the empties in a timely manner. 

As with demurrage charges, detention fees can vary based on the carrier and ports. Most detention fees can run around $100 p/day and can fluctuate based on seasonality, port congestion, and current market conditions.  

What Can Cause Demurrage?

Demurrage can be created by many things including but not limited to the following: Customs Delay, Port Congestion, Shortage of Truckers, Strikes, Weather Issues, etc. 

While some of these are unavoidable there are steps you can take to avoid demurrage charges. 

Strategies to Avoid Demurrage Charges

• A great strategy begins with being prepared. Supply chain leaders that are proactive should ensure they have the proper documents so they schedule customs clearance prior to the shipment's arrival. 
• Ensure you have properly communicated expectations, delivery instructions, and all relevant information with your inland carriers.  Having backup carriers are especially important during port congestion or busy seasons. 
• Avoidance begins with coordination. Be aware of the free days allowed along with having a contingency plan. Ensure you are communicating with the trucking company and keeping close tabs on real-time locations and potential delays of your shipment. 

Impact of COVID-19

COVID-19 has impacted the global flow of containers making it more difficult to avoid detention and demurrage fees. It’s important for shippers to understand these fees along with monitoring the conditions that cause them.