What is Demurrage?

Depending on the type of freight you haul, you may encounter the term “demurrage” in your trucking contracts, especially if you’re handling container freight transported by a shipping line for supply chain purposes. Demurrage refers to storage charges incurred when cargo containers remain in a port terminal beyond the agreed time frame. These charges are set by the container yard or terminal and typically begin after the allowed free days have passed.

In simple terms, demurrage fees are payments to the shipping company for the failure to load or unload within the specified time. These fees can affect the bottom line of shippers and consignees who work with freight forwarders or in close proximity to shipping ports.

How to Avoid Demurrage Fees 

Demurrage fees or extra storage fees usually start when a container is left in the port beyond its allotted free time, which delays the shipping line‘s operations. Here are some ways to avoid these additional costs:

• Punctuality: Arrive at the port on time to avoid storage charges.
• Delivery Instructions: Work with the shipper to obtain clear delivery instructions in advance, particularly in high-traffic ports.
• Pre-clearance and Paperwork: Ensure that essential documents like the bill of lading and customs clearance paperwork are ready before arriving at the terminal. This streamlines your process, especially in case of port congestion or delays.
• Prepare for Port Conditions: Be aware of possible issues like weather conditions or customs hold-ups that might affect container pickup.

Demurrage Free Time 

The term “free time” refers to the designated period during which cargo can remain at the port without incurring demurrage fees. The number of free days varies by port authority and terminal operator, so it’s essential to know the rules for each location. Once the last free day passes, demurrage rates apply until the container is moved out of the port terminal. To manage costs, truckers and shippers should account for any potential hold-up or delays that may exceed the allowed free time.

Demurrage vs Detention 

While demurrage and detention charges may seem similar, they apply to different stages of the shipping process:

• Demurrage: This fee applies when a full container remains at the port terminal past the allowed free period, causing delays in ship schedules.
• Detention: Detention charges occur after the container leaves the port. If the empty container is not returned within the designated free days, detention fees begin.

Both fees impact the shipping process, especially when delays arise in returning the empty container to the container yard or rail yard.

Causes of Demurrage 

Several factors can cause demurrage, affecting the cost of demurrage fees:

• Port Congestion: High port traffic often causes delays in unloading and pickup.
• Weather Conditions: Bad weather can lead to a backlog of shipments and delays.
• Customs and Clearance Delays: Slow processing or lack of required documentation can hold up the cargo.
• Pandemic and Other Unforeseen Circumstances: Situations like the recent pandemic have created additional supply chain delays.

Understanding these causes can help shippers and consignees prepare and work to avoid incurring additional fees.

If you want to avoid demurrage or detention fees, our team of experts can help. Call us at 913-393-6110 for tailored solutions to improve your shipping efficiency and manage supply chain costs.