How To Avoid High Demurrage & Detention Charges
This is a guest post by Florian Frese.
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 can 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. Oftentimes, carriers such as Maersk and COSCO charge up to $200 – $400 per day per container.
In this article, we explain Demurrage and Detention terms and provide shippers with 5 tips how to avoid high costs when planning freight.
Meaning of Demurrage and Detention in Export
Detention charges happen in export when the empty containers have been picked up for loading and are not returned within the set free days. Typically, carriers allow for up to 5 free days and charge shippers for extra days before the container is moved inside the terminal or depot. 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.
Demurrage and Detention for Importers
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 from 3 to 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 the container beyond the allowed free-days. This is done in an attempt to decrease the containers turnaround time and make shipping more efficient.
How can I avoid Demurrage and Detention charges?
Demurrage and Detention are in most cases out of your hands and hard to control. However, there are ways to minimize the risk and avoid unnecessary charges.
Always try to negotiate terms instead of accepting a freight quote as it is. Negotiate with your carrier and request more free days to buy you more time. That might work as a strategy to avoid Demurrage and Detention as carriers sometimes grant shippers with large volumes of cargo some more time.
Always Have a Plan B
Asses 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.
Efficiently Manage Time
Most importantly, dispatch your cargo as far in advance as possible! This gives you more flexibility and a bigger time frame for handling 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!
Don’t make the mistake of signing a contract just as it is. Always be informed and read through it carefully, as the per-diem charges and fees are ultimately determined in your contract. Further, ensure that you are in good knowledge of the customs clearance processes and port regulations. Be on the safe side and understand that even geography plays a huge role, as different countries have different definitions.
Bring Your Own Container
It was always a pain in the arse to find shipper owned containers (SOC) as you had to reach out to your network, get lucky, and organize everything on your own. Container xChange now made it easy to use or supply containers for SOC for 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.
This was a guest post by Florian Frese.
About the Author
Florian Frese is the marketing lead at Container xChange – the world’s first marketplace that connects users and suppliers in container logistics. Florian is an advocate of pushing forward tech and data standards in container logistics. Did you know that every third container is being moved empty? That’s a $20 billion problem not only for the shipping industry, but also for the environment.