What is Demurrage and Detention in Shipping Terms?

Demurrage and detention are two terms frequently used in the logistics and shipping industry, and although they may seem similar, they represent distinct aspects of freight delay costs. Demurrage charges pertain to the additional fees you pay when cargo remains at the port beyond the allotted free time after unloading the shipment. This issue occurs when the import process is not completed promptly, causing cargo pickup delays. These charges serve as an incentive for customers to quickly clear their cargo from the port, thereby increasing port productivity and throughput.

On the other hand, detention refers to the charges levied when the shipping containers spend time outside of the terminal. Detention charges encourage the efficient use of containers, promoting their swift return so they are available again for shipping. Mismanagement of these aspects can lead to increased shipping costs, making it essential for businesses to understand and plan for potential demurrage and detention costs.

“Free time” refer to a pre-agreed period, typically starting from the day the cargo is unloaded (demurrage) or the day the empty container is picked up for loading (detention). This period allows shippers some flexibility to complete their processes without incurring extra costs

Charging customers for delayed pickup or late return of discharged cargo or empty containers can be done through combined demurrage and detention charges. This method, also known as merged D&D, provides a specific timeframe to clear and return the container to the port or container depot. Unlike separate calculations, charges are combined in this approach.

For instance, if the consignee receives 14 days of merged D&D, they must quickly clear and transport the goods to their warehouse, unload the freight, and return the empty container to the carrier within the specified timeframe.

According to the Container XChange report, after two weeks of holding a standard container, shippers face an average D&D charge of $664 across all 60 major ports. Though lower than the 2021 peak, this cost remains 12% above pre-pandemic levels.

After two weeks, demurrage and detention charges vary significantly across ports. Busan, Yichang, Rugao, and Zhenjiang exhibit notably lower charges compared to New York, Long Beach, and Los Angeles.

The key findings from the American Journal of Transportation show that the average D&D charge per container in major US ports has decreased by at least 25% compared to 2022, settling at a current value of $2008 per day. This is a welcome relief from the peak of $2692 in 2022.

Here are some essential points to remember when it comes to container detention and demurrage:

• Free Time refers to the number of days a supplier can use the container without incurring any fees. Anything beyond this period will result in additional charges. The free time differs between ports and carriers;
• Although separate, demurrage and detention are closely interconnected in your cargo’s journey;
• Demurrage charges are levied when a container remains inside a terminal for an extended period. These penalty fees act as a deterrent to prevent excessive storage of containers at the port;
• Detention refers to the time a container stays outside of the port. If the consignee holds onto the carrier’s container beyond the allotted free time,  fees will be imposed. In simpler terms,  charge applies when the container is not returned to the carrier on time.

Remember, understanding and managing container detention and demurrage can help streamline your logistics operations and avoid unnecessary costs.

Reputable carriers like Atlantic Project Cargo, a leading importing and exporting freight forwarder, are transparent when it comes to free time. We show it with price details at the time of your booking so you can plan your shipments better.

If the free time offered is not enough for you, you may purchase extra detention days at the time of your import booking with us so you have sufficient time to plan the arrival of your cargo at the desired destination.

.

Can I Reduce or Prevent Demurrage and Detention Charges?

Yes, container detention and demurrage charges can often be reduced or avoided with careful planning and timely execution. Proper understanding of shipping terms, efficient coordination with transport companies, and prompt clearance of goods at ports can significantly mitigate the risk of incurring these charges. However, unexpected circumstances may arise, making it necessary to negotiate terms with shipping companies that incorporate some flexibility.