Demurrage and detention are two terms that often confuse people involved in international trade, shipping, freight and logistics. If you do not understand them, then there is a risk of losing money and harming your business. Let’s consider these concepts in more detail.
Demurrage refers to the cargo (as long as the cargo is in the container). Demurrage is, in fact, a fine for the seller from the service provider. This penalty is issued when the buyer fails to comply with the requirements set out in the agreement made between the two parties. Most often, this fee occurs when the owner of the chartered vessel does not fill or ship the vessel. This can also happen when the goods are not taken out of the port terminal within the agreed timeframe. As a rule, importers are given several days for their goods or containers to be delivered to ports. These are the aforementioned free days. After this time, additional fees will apply.
Detention refers to the equipment (as long as the container is empty after unpacking or before packaging). Detention is also known as per diem. The fee is charged when the containers are out of the port beyond the time agreed by the shipping company. Shipping companies usually offer free days to load or unload containers. For export, the free days start with the reception of empty containers and end with the transfer of full containers to the port. When importing, free days begin with the removal of full containers from the port and end with the return of empty containers. These fees are levied to incentivize customers to return containers as soon as possible. Shipping companies have to ensure a fast turnaround of containers due to the high price and lack of containers.
Let’s see how it works:
Import
The container is unloaded from the ship on July 3 – The consignee comes to the shipping line to receive the cargo around July 13. free days) expires on July 9. Thus, the line collects demurrage from the consignee for 4 days from July 10 to 13 at the rate set by the port.
Once the client has taken the full container, for example, if it takes another 7 days for the client to return the empty container, then this is called detention, which will again be charged at the rate set by the port.
This means that before the full container is lifted, demurrage is charged (after the expiration of the free days that are given to take the container out), and after the container has been lifted, until the empty container is returned to the designated line depot, already charged Detention.
Export: In the case of export, the lines usually give about 5 free days. During this period, the shipper must pick up the empty container, pack it and return it to the port. In case of a delay of more than 5 days, the port will already charge a delay fee. (usually the same rate as import delay) for the days that the empty container is held by the customer.
Once the container is already packed and, for example, the shipper cannot ship it for any reason, demurrage will be charged at the rate set by the port until the full container is shipped.
However, it should be noted that this variant of understanding the terms is the most common form of using these two terms, but is not the only one. There is a difference in the use of these terms by different shipping lines in different parts of the world.
In some countries, the term “combined demurrage” is used, while in Japan and Saudi Arabia, the concept of “demurrage” is considered to mean storage in a port / terminal.
