In international shipping and logistics, “demurrage” and “detention” are commonly encountered. Demurrage and detention can significantly impact shipping costs. These charges arise when delays occur in container handling, but they apply in different scenarios. For businesses involved in global trade, understanding the critical differences between demurrage and detention is essential to avoid unexpected costs and ensure smooth supply chain operations.
What is Demurrage?
Demurrage is a fee imposed by the shipping line or port authorities when containers exceed the allowed free time at the terminal. Typically, shipping lines allow a certain period, known as “free days,” for importers or exporters to load or unload goods from containers at the port. Demurrage charges apply if the container remains at the terminal beyond this free time. These fees are meant to incentivize quick unloading and prevent port congestion.
Example of Demurrage in Action:
When an importer’s cargo arrives at the destination port, the port allows five free days for customs clearance and container pickup. However, due to a delay in customs documentation, the container stays at the terminal for three extra days. The shipping line charges the importer a daily demurrage fee for those additional days.
Key Factors Leading to Demurrage Charges
Customs Delays
Incomplete or inaccurate documentation can slow customs clearance.
Payment Delays
Financial holdups can delay the release of goods.
Operational Delays
Internal delays in pickup logistics can result in containers staying beyond the free time.
What is Detention?
Detention, on the other hand, applies to containers after they have left the port but are not returned within the agreed-upon timeframe. Shipping companies grant a limited number of days, or “free days,” for the container’s return. If the container is not returned by this time, the shipping company charges a detention fee. This fee encourages timely container turnover, ensuring containers remain available for other shipments.
Example of Detention in Action:
An exporter uses a container to transport goods to the loading port, with five free days for container return. Due to production delays, the container is held for an additional four days beyond the allotted time. The exporter incurs detention charges for each extra day.
Key Factors Leading to Detention Charges
Delays in Loading/Unloading
Logistics delays can hold containers past the free time.
Transport Delays
Issues in inland transport can affect the container’s timely return.
Unexpected Operational Issues
Labor strikes, production setbacks, or other disruptions can lead to late container returns.
Key Differences between Demurrage and Detention
| Factor | Demurrage | Detention |
| Applies to | Containers staying beyond free days at the port | Containers not returned within the free days after leaving the port |
| When It Occurs | When importers/exporters don’t pick up containers within allowed free time | When containers are held beyond the free time and not returned to the shipping line |
| Charged By | Shipping line or port authorities | Shipping line |
| Reason for Charges | To prevent port congestion and encourage timely container pickup | To ensure container turnover and availability for other shipments |
| Common Causes | Customs delays, document hold-ups, port congestion | Transport delays, loading/unloading issues, operational disruptions |
Frequently Asked Questions (FAQs)
1. Are demurrage and detention charges avoidable?
Yes, it’s possible to reduce or avoid these charges with efficient planning, coordination, and communication. However, some delays are beyond our control, such as those caused by unexpected customs holdups.
2. Can I negotiate demurrage or detention fees?
In some cases, shipping lines may be open to negotiation, mainly if delays are due to circumstances beyond the shipper’s control. Building a good relationship with carriers can increase the likelihood of securing fee reductions or additional free days.
3. What is “free time,” and how is it determined?
Free time is the period the shipping line allows for a container to remain at the terminal (demurrage) or with the shipper (detention) without incurring charges. It varies by carrier, port, and sometimes by region.
Conclusion
Demurrage and detention are critical concepts in the shipping industry that directly impact supply chain costs. Demurrage applies when containers stay at the port beyond the allowed free time, while detention occurs when containers are not returned within the designated period after leaving the port. Although both are intended to promote efficiency, they can lead to substantial costs if not managed effectively. By understanding these differences, companies can better navigate international logistics, avoid unnecessary expenses, and enhance operational efficiency.
