What Are Demurrage and Detention Fees?
- Demurrage relates to cargo (while the cargo is in the container)
- Detention relates to equipment (while the container is empty after unpacking or before packing)
Shippers face the risk of daily demurrage and detention fees. When a shipper schedules an ocean freight container, the clock begins to tick.
If the shipper goes beyond the allotted time, the shipper is on the hook for daily detention fees. If the carrier does pick up a full container by the port deadline, also described as “free time,” either the port or carrier may then assess demurrage fees.
The same practice applies to the destination in reverse.
The biggest threat to shippers involving demurrage and detention is how they amount to high costs.
Each shipment has the potential to result in both demurrage and detention fees during both loading and unloading.
If the prices are based on a predetermined schedule of departure and arrival, delays during loading will lead to additional fees charged upon arrival to the destination.
Carriers may also view fees with additional perspective on where the container rests. Ocean carriers may charge box demurrage for keeping the container in the terminal for too long.
Meanwhile, they may charge box detention fees for keeping a container out of the terminal for too long, notes Ari Ashe of the Journal of Commerce. Operating across multiple OTR mode carriers, the risks multiply.
Causes of Port Congestion and Its Impact on Fees,
The idea behind demurrage and detention fees goes back to a simple concept. Additional charges incentivize shippers to stick to the schedule, and load/unload containers as quickly as possible. Unfortunately, that is only one portion of the equation.
If delays occur, drivers may be unavailable to pick up freight. Moreover, drivers may be delayed, resulting in the same delays for container loading/unloading. In these instances, the driver delays may lead to demurrage and detention fees.
It’s not just how quickly shippers load and unload the freight. It’s whether it can be completed safely. Mother Nature may prevent the use of the equipment and may even lead to the closure of ports. This is a common problem. With that in mind, the fees themselves have reached a point of no return.