Demurrage and detention fees have seen a rise, in years. Take a look at this blog for an overview of these additional costs. Discover the amount you’ll be charged for demurrage and detention fees as strategies to avoid them by utilizing an impartial digital community platform, for trade.
Freight forwarders and shippers are no stranger to the dreaded demurrage and detention charges. Charged by shipping lines, these surcharges have become one of the most controversial topics in the shipping industry in recent years.
In short, Demurrage and detention fees kick in when you overstay your container usage, piling up daily until the containers are returned to the shipping lines. While freight forwarders might find these escalating charges excessive, shipping lines view them as essential for maximizing container efficiency. Hurry Now and Book a Demo to learn how to navigate D&D fee charges.
A decade ago, demurrage and detention fines were a rarity. Now, they’ve become the norm, often exceeding $100 per container daily. Pervious and current events like the COVID-19 pandemic, the Russia-Ukraine conflict, china trade issues, and the US labor crisis have only amplified these fees, making them a significant concern for shippers.
Discover the impacts of disruptions, on demurrage and detention fees at 60 ports around the world. We are also diving into solutions. Alternatively if you want an option join our membership for an overview, on how to avoid these expensive charges by utilizing our shipper owned containers (SOC)
What are demurrage and detention charges?
Let explore the basics of Demurrage and Detention fee Charges
Shipping lines equip their customers with carrier-owned containers (COCs) for efficient door-to-door goods transport. But here’s the catch – these COCs come with a time limit, known as ‘free days’. This period, typically ranging from 3 to 5 days post-vessel discharge, is the golden window for using the container at no cost.
If you miss returning the COCs within a given free days? That triggers demurrage and detention fees from the shipping lines. Calculated daily, these charges are not just late fees; they’re key to keeping the shipping world on schedule.
At their core, demurrage and detention charges serve two critical purposes:
- They compensate shipping lines for extended use of their containers.
- They act as a powerful incentive for customers to swiftly return empty containers, ensuring quick turnaround times.
With these objectives in mind, let’s delve deeper into the distinct differences between demurrage and detention charges
Know the difference: Detention vs demurrage
Most people confuse demurrage and detention fees to mean the same. It’s true that conceptually both are essentially ‘late fines’ for the return of containers. Just as you’d have in a library. But the difference between the two charges depends on the location of the containers at the time of the delay.
You pay a demurrage charge for the delayed use of the container within a terminal. Demurrage charge comes into play if the full container isn’t moved out of the terminal to be unpacked within the free days.
You pay a detention charge for the delayed use of the container outside a terminal. A detention charge comes into play if the container isn’t returned empty to the shipping line within the free days.
Unfortunately, such delays are very common. In fact, you’re likely to experience demurrage and detention during both import and export. Here’s how:
Demurrage & Detention during import
Let’s picture your container has unloaded at the Port of Los Angeles. But the congestion on the roads to the port has delayed your truck to reach the port in time. As a result, your cargo container is stuck at the port beyond free days. Now, the shipping line will charge you demurrage until your container is picked up and gated from the terminal. Usually, demurrage has to be paid before the cargo is picked up from the port.
Now, let’s imagine your container has reached the distribution center. But due to the shortage of labor, you were not able to unload the cargo in time. As a result, the container is now stuck at your distribution center beyond free days. The shipping line will now charge you detention until the empty container is returned to the carrier. These charges are an attempt to decrease the container’s turnaround time and make shipping more efficient.
Detention & Demurrage during export
It’s possible for demurrage charges to occur during export. Let’s picture your container waiting to get loaded on board a vessel in the port of Shanghai. But due to issues in the documentation, the container is not able to load in time for the vessel’s scheduled departure. The container will, therefore, have to stay in the port until the next departure. The shipping line will now charge you demurrage for the storage period until then.
Now, let’s imagine you have picked up an empty container from the shipping line to load your goods. But the weather turns bad and you’re unable to send the container to the terminal in time. Typically, shipping lines allow 5 free days to pick up the container, load it, and return it to the port. The shipping line will now charge you detention for the extra days before the container returns to the terminal.
What drives demurrage and detention charges?
Well, by going through the examples above, you must have understood that almost anything can cause delays in the shipping process. If you’ve been in the container logistics industry for long, you’d know that the supply chain doesn’t always flow in time.
Containers often get stuck both inside and outside a terminal. Let’s go over some of the most common reasons for delays incurring demurrage and detention.
- Discrepancy or error in documentation
- Late receipt or loss of documentation
- Issues in custom clearance or cargo inspection
- Congestion at the port
- Labor strike or labor shortage at the port
- Delay or abandoning of cargo by the consignee
- Failure to pay freight charges in full
- Bad weather
You already have to pay so many charges in international freight shipping. Certainly, you can avoid demurrage and detention charged by taking precautions and preparing well in advance. But in the last several years, we have seen unprecedented external causes to shoot up the demurrage and detention tariffs. Let’s look at what the industry has undergone in the last few years.
Increase of detention and demurrage charges in recent years.
In the last few years, shipping lines have drastically reduced the number of free days and increased the tariff of demurrage and detention charges. These soaring demurrage and detention charges have become the most hotly debated topic in the shipping industry.
In our Annual Benchmark 2022 report, we compared these charges across 60 ports and 8 shipping lines from 2020 to 2022. Our analysis shows that the global average of demurrage and detention charges has increased from US $586 in 2020 to US $664 in 2022. It’s a steep rise of 12%!
A rise of 12% on a per-day basis can rack up to become a huge amount! And hence, shipping lines were labeled ‘abusive’ for increasing these surcharges. Especially, when the entire shipping industry is extremely volatile. Now, you must be wondering why shipping lines would do so? The answer lies in the disruptions caused by the pandemic that collectively rocked the entire industry.
With the onset of the COVID-19 pandemic in 2020, shipping lines reduced services on major trade routes. So, they were unable to reposition empty containers to key demand locations. This led to port and terminal congestion, as the empty containers couldn’t get evacuated. The carriers were then burdened by terminal storage fees and the leasing cost for each container. As a means of damage control, they began to pass on these costs to shippers in the form of increased demurrage and detention charges. Unfortunately, the industry has not yet recovered from the impact of the pandemic. In fact, the recovery has further slowed down by the new waves of disruptions caused by the Russia-Ukraine war, fresh lockdowns in China, the US labor crisis, and port congestion. And so, there hasn’t been much relief in these carrier surcharges.
Top 10 most expensive ports for demurrage and detention.
In our comprehensive report on D&D charges, we’ve ranked 60 ports on the basis of highest to lowest charges across shipping lines. Let’s look at the top 10 most expensive ports for demurrage and detention in the list.
|Top 10 most expensive ports for D&D charges
|Ranking in 2022
|Average D&D charges after 14 days for standard container in USD
|Hong Kong, S.A.R
These are the average accumulated demurrage and detention charges you will pay after 14 days for a standard container. So according to this data, if your container is stuck in New York (the US) for 14 days, you’ll have to pay the shipping line a whopping $3,182!
Plus, you can also see that the top 5 most expensive locations are all in the US. This is because the demurrage and detention charges not only differ from port to port but also on the basis of regions and circumstances.
So what has happened in the US for the charges to be this high? You must know that China is the US’ biggest trade partner. Since American ports were overwhelmed by Chinese imports during the pandemic, the former suffered from the worst congestion and container pile-up. These high charges are a result of containers stuck both inside and outside the American ports.
Top 10 cheapest ports for demurrage and detention
Now, let’s look at the top10 cheapest ports for demurrage and detention from the list of 60 ports ranked highest to lowest.
|Top 10 cheapest ports for D&D charges
|Ranking in 2022
|Average D&D charges after 14 days for std container in USD
These are the average accumulated demurrage and detention charges you will pay after 14 days for a standard container. So according to this data, if your container is stuck in Busan (South Korea) for 14 days, you’ll only have to pay the shipping line $114.
So why does Busan have such low demurrage and detention fees? This is because the South Korean port has high productivity and very few restrictions. Plus, Busan acts as a transshipment facility. This reduces demurrage and detention requirements, as cargo is just transiting through the hub.
Detention and Demurrage Charges by Popular Shipping Lines.
We have just seen how demurrage and detention charges vary on the basis of port, region, and circumstance. But the biggest decision maker about these charges are the shipping lines themselves. So, choosing which shipping line to opt for can make a huge difference in these charges.
The industry is, today, ruled by few shipping lines. Let’s look at how the demurrage and detention charges differ across 8 of such shipping lines. Here are the shipping lines ranked by highest to lowest D&D charges across ports:
|D&D charges by shipping lines
|Average D&D charges after 14 days for std. container in USD
You should be careful when narrowing down your carrier service. As seen in the table above, different shipping lines have different demurrage and detention tariffs. One informed decision can save you thousands of dollars in the long run! Let’s see this through an example.
At the port of Rotterdam, the average detention and demurrage charge at the end of the two weeks period is $469. But if you choose to ship with Maersk, the demurrage and detention fee becomes $679. Compared to the port’s average, you’d be increasing your container shipping costs by about 45%. This is huge!
Instead, you can opt for COSCO Shipping with a demurrage and detention charge of $176 at Rotterdam. This way, you reduce your container shipping costs by almost half. Therefore, carefully comparing them before making a choice can save you a lot of money.
How to prevent demurrage and detention charges?
Demurrage and detention charges are in most cases out of your hands. It’s best to plan the transportation of your goods and your finances according to these charges.
But, what if we tell you there are multiple ways to mitigate the risk of unpleasant additional charges? It’s all the more important now — when the demurrage and detention charges are leading to record-breaking freight rates.
It’s true — you can avoid demurrage and detention charges. And there are multiple ways to go about it. Let’s have a look at some of the most efficient ways of preventing these dreaded surcharges.
Be prepared for local customs
Ensure that you are aware of the customs process and the port regulations at the location your goods are headed. Most importantly, dispatch your cargo as far in advance as you can! This gives you more flexibility for unforeseen challenges, such as bad weather or backlogs at the port. The same applies to load/unloading times, where just small-time buffers can do the trick.
Leave no room for miscommunication
It’s important to be 100% sure about what “available” means. Is your container available as soon as it’s unloaded off the vessel? Or, only when a truck can actually pick up your equipment? For some ports, a container is available as soon as it hits the ground. While others argue that it needs to be accessible to be available. Even though it confuses, it all comes down to the contract you sign! In the end, shippers are almost always responsible for per diem fees.
Manage your schedule efficiently
It’s important to be on time and be prepared. Especially, with all the documentation required to move cargo from one location to another. Per diem charges quickly emerge when there are discrepancies in the address details, voyage details, and cargo or freight particulars. The worst-case scenario is obviously when you lose important documents!
Negotiate terms and free days
Try to negotiate instead of accepting a quote as it is. Negotiate with port officials or carriers. You can, for instance, request more free days for your cargo and thereby save demurrage and detention. This will buy you some more time and might work as a strategy to avoid unexpected charges. Often, port officials grant shippers with a large volume of cargo more time.
Avoid demurrage and detention charges with SOC containers
Using shipper-owned containers (SOCs) instead of COCs helps you avoid demurrage & detention fees charges. Just as the name suggests, SOCs are owned by shoppers. So when you lease containers from shippers, you’re under no obligation to pay demurrage and detention charges to carriers. Amazing, right?
You simply use SOCs for one-way use and return them to your partner’s depot at the port of destination. In fact, most of the time, you don’t even have to pay any per diem charges on top of the pick-up charges. This is because most container owners aren’t only interested in a quick turnaround. They, in fact, want you to just reposition their equipment. In that way, they can keep a good balance and charge almost no per-diem fees. It’s a win-win!
Now comes the big question: Where can you lease SOC containers from container owners directly? Well, we got that covered. Contact us for a demo.
Get SOC containers with us a member without any commission
You know by now that the shipping industry is volatile. And high demurrage and detention fees charges only add pressure on shippers. In this unpredictable market, it’s best to look for alternate container sourcing methods for flexibility and security.
And we can help you with that. You can easily lease SOC containers from genuine container owners on our online container leasing platform. We have 1000+ members leasing containers for one-way use on a daily basis in 2500+ locations globally.
All you’ve to do is state your requirement, including pick-up and drop-off locations and the container type. You’ll receive a list of offers from vetted container companies or owners in one dashboard. Compare these offers carefully to shortlist the best deal for you. You can also refer to their company profiles and peer reviews for more informed decision-making. Once you have shortlisted the deal, directly negotiate with the owner and book containers on your terms and budget.
Yes, it’s that easy to find SOC containers for your route. And you can lease these containers without paying any commission by being a member on our platform!
We have over 10,000 SOC containers on our platform. Want to know about their availability on your route? Or, do you need more clarity on how SOCs can eliminate demurrage and detention charges? You can get all your questions answered by talking to our experts directly. Contact us for a demo with expects to kickstart your journey — free of demurrage and detention.
Demurrage and Detention: Common FAQs
What are demurrage and detention charges in shipping?
Demurrage and detention charges are fees incurred when importers or exporters using carrier-owned containers (COCs) exceed the predefined ‘free days’. Demurrage applies to containers within a terminal beyond the free period, while detention fees are charged for containers held outside a terminal.
How do demurrage charges work?
Demurrage charges kick in when a container is not moved out of the terminal for unpacking within the allocated free days. This fee compensates the shipping line for the use of container space within the terminal and encourages a faster turnaround.
What triggers a detention charge in container shipping?
A detention charge is levied when an importer or exporter keeps a container outside the terminal past the free days, usually because of delays in unpacking or returning the empty container to the shipping line.
Why have demurrage and detention charges increased recently?
Global demurrage and detention rates have risen due to reduced free days and higher tariffs, in part because of disruptions from the COVID-19 pandemic, supply chain issues, and port congestion.
What are some common reasons for incurring demurrage and detention fees?
Incurring these fees can be due to a variety of reasons, including documentation errors, custom clearance delays, port congestion, labor strikes, bad weather, or cargo abandonment.
Can you negotiate demurrage and detention terms with shipping lines?
Yes, it’s possible to negotiate for better terms such as extended free days, which can give you more leeway and potentially reduce the chance of incurring these additional charges.
How can I avoid paying demurrage and detention fees?
Avoiding these fees may involve advanced planning, understanding local customs processes, managing schedules, negotiating with carriers, and using Shipper-Owned Containers (SOCs) to eliminate obligations to pay these fees to carriers.
What’s the difference between shipping with Shipper-Owned Containers (SOCs) and carrier-owned containers?
Shipping with SOCs, which the shipper owns or rents directly, can circumvent demurrage and detention charges imposed by carriers. In contrast, using carrier-owned containers involves adherence to the carrier’s terms and potential additional fees.
How can I find Shipper-Owned Containers for my shipping needs?
You can find SOCs through online container leasing platforms that connect you with container owners offering their containers for one-way use without demurrage and detention fees.
Are demurrage and detention fees applicable for both imports and exports?
Yes, both importers and exporters can face demurrage and detention fees if containers remain in the terminal past free days or are not returned on time during the importation or exportation process.
What should I consider when choosing a shipping line to avoid high demurrage and detention fees?
When selecting a shipping line, review their demurrage and detention policies, tariff rates, and free days offered. Compare them across various lines and negotiate terms to manage your container shipping costs effectively.
About Neu Marke Container
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