Whether you are importing or exporting, understanding demurrage and detention charges and the impact they can have on a company’s bottom line are crucial especially during today’s unprecedented times.
In recent weeks the COVID-19 delta variant surge has caused major delays and even port closures worldwide. Container shipping rates from China to the United States and from other origins have reached new highs, at a time when US retailers prepare for the holidays season and continue to put pressure on their suppliers. Today the stress in the supply chain is enormous and demurrage and detention charges below have become more frequent for exporters and importers.
What are Demurrage and Detention Charges?
A “demurrage charge” is a fee billed to the importer by the shipping company when a container is not moved out of the port/terminal for unloading within the specified “free time”. These fees tend to vary depending on several factors and can increase as time pass. Demurrage fees may also be assessed on export shipments when containers are held up at the export terminal beyond the free time allowed by the carrier provided that the cause of the delay originates on the shippers’ side. For example, when an exporter fails to submit all required export documents the container must remain at the terminal beyond the allowed free time until the documentation issue is corrected.
Similarly, a “detention fee” is charged when a container is picked up by the exporter/importer but not returned to the carrier’s terminal within the free time allowed. Detention fees are meant to incentivize the quick turnaround of containers to improve shipping efficiency and cost (to the Carriers).
There are steps you can take to reduce the likelihood of being hit with these unexpected additional fees:
- Prepare ahead of time: Pre-clear shipments whenever possible and offer delivery instructions to inland carriers ahead of time. When you communicate with carriers ahead of time, you raise the chances that they will be able to prepare and work within the free-time allotted.
- Have a backup drayage company: Have a “back-up drayage company, especially when dealing with a known congested port.
- Negotiate for more free time: Negotiate more ample free time with the ocean carriers.
While it might seem impossible to avoid demurrage or detention charges at some point in time, with smart planning and the collaboration of an efficient freight forwarder/customs broker like Promptus LLC, can help tremendously. Contact us today at 305-687-1405 to get your quote for our freight forwarding services!