Here at EES Shipping we try and identify the terminology that is often used incorrectly or simply not understood at all.
What exactly are these charges?
The easiest way to keep demurrage rates and detention fees straight is as follows: demurrage rates are charged on containers inside the port or terminal, whereas detention fees are assessed on containers outside the port or terminal. Shippers are responsible for the fees in order to keep the cargo moving inside and outside of ports. The primary objective of levying these charges is to ensure importers and exporters quickly return the containers. Also, levying these charges help shipping lines to recover the cost of containers. This can also be seen as the last opportunity/revenue due to delayed sailings and/or extra usage by shippers.
On the importing side, a loaded container is filled with cargo and removed from a vessel to a port or terminal. The port then allows the container to stay within its facility for a set number of days only. If the cargo is picked up and moved out within the free time, demurrage rates will not be charged. However, if it is not picked up within the free time, charges will apply.
If you have your container in your possession, then you’ll have a certain number of days before you must return the empty container. If the container is not returned within the free time, then you will be charged a detention fee. Even if the container is empty, until you return the container, you’ll be charged detention fees until the container is returned to the shipping line.
Exports work in a similar way, just backwards. When you use a container to load your cargo to be exported, you have a set timeframe to get the container filled and delivered to the port. For every day you are late based on the free time given, you’ll be charged a detention fee.
There are plenty of times when cargo is delayed beyond your control. Unfortunately for shippers, you’re still on the hook for fees. That’s why it’s important to negotiate both demurrage and detention fees within your agreed upon contract instead of just accepting the quote.
Some vendors are more willing to negotiate than others, but an experienced freight forwarder can help you navigate these negotiations to help minimize additional fees and reach out to the shipping lines/vendors where possible and negotiate more time.
Situations When Demurrage Rates Apply
As we previously mentioned, demurrage has a specified amount of free time within shipping contracts. During that time, no charges will apply. After your free time runs out, demurrage fees will be put in place.
Demurrage and Detention – Controversy
Demurrage and Detention have long been controversial topics. And this remains a point of contention between the exporters and importers and the shipping lines. The importers and exporters have long been accusing the container providers of unfair trade practices. For instance, importers and exporters say that shipping lines levy unfairly high charges for the delay. Also, the shipping lines face the accusation of reducing the free time period.
For further assistance on either detention or demurrage – please contact a friendly member of our team.