When managing your logistics, you may have encountered the terms demurrage and detention and wondered what they meant.
What are Demurrage and Detention
When an importer fails to remove its goods from a port or terminal within the allotted grace period granted by the carrier, a penalty is assessed. This penalty is known as demurrage. The same happens to export shipments when a container is already at the export terminal and cannot depart within the allotted free time.
On the other hand, detention results when empty containers are not returned to the container yard or terminal within the agreed period of time.
How Much Do Detention and Demurrage Cost?
This is a question that every importer or exporter must ask him/herself before they ship. The amount per day is determined by the carrier and could range between $50 to more than $200 per day, therefore a few days of demurrage or detention can be substantial, negatively impacting the financial outcome of a shipment.
Lack of proper export documentation. It happens when a container is delivered at the shipping terminal and the exporter needs to provide all necessary and correct export documentation by the cut-off time and date and the container cannot sail as planned. In many cases, this equipment will use up the allotted free period and will incur demurrage charges.
Late customs release. This happens on import containers when the Customs Release does not take place within the allotted free time and the cargo cannot be pulled out of the terminal. The causes of the delay in the Customs Release process could vary, being the most common: incorrect HTS in the documentation, the discrepancy between commercial invoice and bill of lading issued by the carrier, errors in the manifest by the carrier, missing certificates for applicable trade agreements, among others.
Lack of transport/drivers. This is common when the importer is responsible to pick-up the loaded container and returning the empty container to the terminal but has difficulties in securing transportation.
These are some things you can do to reduce your chance of being penalized with demurrage and detentions fees:
- Plan by giving inland carriers advance delivery instructions and pre-clearing shipments whenever possible. Communicating with carriers in advance increases the likelihood that they will be able to plan ahead and complete their task during the designated free period.
- Maintain a backup drayage firm, particularly while using ports with congestion issues.
- Know your contracts and obligations by having a clear understanding of your obligations with the Carrier and knowing the free time allotted and the applicable fees when this expires.
- Negotiate. Increase your free time by negotiating with the ocean carriers for extra time.
At times it may seem complicated to avoid demurrage or detention penalties, but with careful planning and the assistance of a capable freight forwarder and customs broker like Promptus LLC, it is very achievable. Call us today at 305-687-1405!