Being an integral part of the industry, you must already be familiar with terms such as demurrage and detention pay. But what does it all mean and what does it entail? Read on to understand the meaning of detention pay and how you can avoid it.
Detention isn’t particularly popular amongst shippers, carriers and trucking companies. So, what is it that makes detention pay leave a bitter taste in your mouth? Why does it happen as often as it does and what can you do to avoid it? Let’s start at the beginning.
What is detention pay?
When a truck arrives at its location and has to wait to be loaded or unloaded, the driver earns something called detention pay. Most shippers and consignees are allowed a 2-hour time period to load/unload their cargo, surpassing this free-time results in detention pay charges.
If a truck driver isn’t on the move, he isn’t earning money. The longer the delay, the greater the loss of income. Besides the fact that detention pay cuts driver’s profits, it’s frustrating to have to wait for hours in one place. So, how does this affect trucking companies? Let’s dive into that a little more:
What does detention pay mean for trucking companies?
Truck detention is something that almost all truckers experience at some point. After all, it helps supplement a driver’s earnings when they’re stuck at a port or destination. However, it doesn’t always make up for what they would’ve earned by delivering on schedule.
This puts trucking companies at a loss. Industry giants are continuously looking at ways to eradicate detention, though this might not be easy, it can be managed and minimized by putting the focus on things you can control. Things such as poor infrastructure and lack of production.
Who charges detention pay?
Now that you know what detention pay is and why it happens, you’ll want to know who charges what. The shipping line charges detention pay to the shipper, and the truck driver is then paid whatever the amount is to compensate for the loss of income. So, what are the reasons for these charges?
Common reasons for detention pay charges and delays
Below are some common reasons for detention pay charges:
|Delays in production
|Fewer hands equals poor production. This leads to delays in loading and unloading, which means the driver waits and the carrier is then charged detention pay.
|It’s possible that a road wasn’t designed to endure heavy traffic that would be encountered once the project begins. This leads to inefficiency and detention charges.
|Unexpected weather conditions
|Perhaps a storm hits in the midst of loading and unloading. The driver is then forced to wait and the shipper is charged detention pay.
Some would call this ‘the snowball effect’. One thing leads to another and the next thing you know, you’re facing unexpected charges. But how do you calculate detention fees? Let’s do the math!
How to calculate detention fees
To determine your detention rate, you must first determine your operational costs. Your operational cost includes all expenses associated with running your business, such as gasoline, repairs, tires, licensing, and payroll.
To continue and calculate what your detention rate should be based on your operational costs, break it down a little further and get your operational cost per hour. From here, you’ll have a far better sense of how much a detention costs after free time, allowing you to negotiate a price during that time.
Although this is something you’d preferably like to avoid as much as possible. Here are three ways you can do it:
3 ways to avoid detention pay charges
If you’re being charged for things like detention or demurrage, you’ll want to know how best to avoid charges like these. You can avoid detention pay charges by:
- Knowing what your contract entails – Be aware of what your contract says about time allocation so that you’re able to make necessary arrangements. It helps if you have a good relationship with your carrier so you can negotiate more free time.
- Planning ahead – It’s always beneficial to plan ahead, especially in this industry. Be sure of arrival times for each shipment so that you can plan with the staff involved in offload.
- Pre-clearing your cargo – Try to clear your shipments as early and as quickly as possible so that you’re able to schedule drayage and trucking services in advance.
Demurrage and detention: What’s the difference?
Many shippers, carriers and forwarders from around the world often mistake demurrage and detention to be the same thing. Demurrage refers to a charge or a penalty owed to importers and exporters for failing to load or discharge the ship within the period stipulated.
|Refers to charges that apply for usage of containers outside the port terminal or destination.
|Refers to charges that apply for usage of container equipment within the port terminal.
|Charged by the shipping line per container, per diem.
|Charged by the carrier per container, per diem.
|The amount varies per location and container type.
|The amount charged varies per location and equipment type
Detention pay is linked with demurrage charges as they’re both penalties you pay if you’ve surpassed a certain period of waiting time in or out of a port or destination. Demurrage and detention have separate meanings, however, they’re linked in the journey of your cargo.
Here are examples of what some ports charge:
|Average D&D charges after 14 days for standard container in USD
For more insights like this check.
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Detention pay FAQs
Do carriers charge detention pay?
Detention pay is charged by carriers and shipping lines to compensate for lost time and protect their assets. Delays can cause drivers to miss scheduled delivery and run out of legal driving time.
How long does a receiver have to unload a truck?
Most shippers and receivers have a 2 hour window to load and unload a truck. Some companies offer extra time, however, they may charge an hourly rate once that time has passed.
How does detention pay work?
Drivers are allocated a specific amount of time to load/unload cargo. If there are delays and the driver gets stuck at the port, a detention fee is c