What Are Demurrage and Detention Fees?
If you’re shipping goods overseas in containers, you might come across two extra charges: demurrage and detention fees. These charges are essentially late fees for holding a container longer than allowed, and they can add up quickly if not managed properly. Let me explain these fees in simple terms.
Demurrage Fees
Think of demurrage as a “parking fee” for your container at the port. Here’s how it works:
When a container arrives at the port (for import or export), the shipping line gives you a few free days, called free time, to pick it up (import) or get it loaded onto a ship (export).
If the container stays at the port longer than those free days, you’ll be charged demurrage for every extra day.
Example:
If you’re importing and your goods arrive at the port but you don’t collect the container in time, you’ll be charged demurrage. Similarly, for exports, if your container is dropped off at the terminal but isn’t loaded onto a ship right away, demurrage applies.
Detention Fees
Detention fees are like a “rental fee” for the container when it’s outside the port. Here’s how it works:
After picking up a container for import or loading it for export, you need to return the empty container to the shipping line within a set number of free days.
If you keep the container longer, the shipping line charges detention fees for each extra day.
Example:
If you’re importing and don’t unload the container and return it to the depot on time, detention fees kick in.
Why Are These Fees Charged?
Shipping lines use these fees to keep their containers moving. Containers are a shared resource, so when they’re delayed, it disrupts the system. These fees ensure that everyone returns containers on time.
Who Sets These Fees?
Every shipping line has its own rates and rules for demurrage and detention. Free time and daily charges vary depending on the carrier and the container type (e.g., 20ft, 40ft, reefer).
Before booking, it’s important to ask for details about:
- Free time for demurrage and detention
- Daily charges after free time expires
This helps you avoid surprises and compare the total cost when choosing a shipping line.
Who Pays These Fees?
Responsibility for these fees depends on your shipping terms (called Incoterms). For example:
- EXW (Ex-Works): You, the buyer, handle transportation and are responsible for fees.
- DDP (Delivered Duty Paid): The seller covers transportation and fees.
- FOB (Free On Board): The buyer takes responsibility once the goods are loaded onto the ship.
Ultimately, the party that signs the shipping contract with the carrier is liable for these fees. So, check your shipping terms carefully!
How to Avoid Demurrage and Detention Fees?
Avoiding these fees takes good planning and communication. Here are some tips:
- Book Early: Reserve your container space with the shipping line well in advance.
- Coordinate with Suppliers: Make sure your goods are ready and delivered to the terminal on time.
- Monitor Vessel Schedules: Know when the ship arrives or departs to avoid delays.
- Handle Customs Early: Start customs clearance before the container arrives at the port.
- Unload Quickly: Arrange for your container to be unloaded as soon as possible.
- Return the Container on Time: Ensure the empty container is returned to the depot before free time ends.
A reliable freight forwarder (like us!) can help you stay on top of these steps and avoid unnecessary charges.
How Are These Fees Calculated?
Demurrage and detention fees are charged:
- Per container (e.g., 20ft, 40ft, reefer)
- Per day beyond free time
- Based on the carrier’s rates
Most shipping lines offer around 3-5 free days for demurrage and detention, but this can vary. Always confirm these details in your freight quote.
Why Planning Matters
Delays can happen for many reasons, like customs inspections, supplier issues, or port congestion. By planning ahead and working closely with your forwarder, you can minimize the risk of extra charges.
If you have any questions or need help managing your shipments, we’re here to guide you every step of the way. Let’s keep your cargo moving smoothly and your costs under control!