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When it comes to IOR or shipping specific products, there are certain jargon terms that can seem confusing, making them hard to interpret or understand. Demurrage is a common term that can often crop up within the shipping industry.
Although you may feel that it doesn’t apply to you, it’s important to be clued up on demurrage and how to be prepared for it, what the potential consequences are and how to avoid them.
Demurrage refers to the charge given to containers that are left at a port or rail yard and are overdue on their allotted time. This period is also known as the ‘last free day’. This means that if a container stays longer than the free storage time given, fines will then be charged.
Staying longer than ‘the last free day’ could lead to demurrage or per diem, also known as detention charges. Demurrage costs go to the consignee for delays in the collection of goods after they have been unloaded from a shipping vessel or train.
How do Demurrage Charges Work?
If a container is unloaded from a vessel, there is a set amount of ‘free time’ allocated in order to remove and transport it from the site. Demurrage charges account for the failure to discharge or load the ship within a specific or agreed period of time. Different ports or yards have varying time periods before demurrage is charged, so it’s important to research what times are permitted at which ports or train yards when planning logistics for your containers.
Containers will usually be stored in a warehouse during the free storage period. Once these free days are over, set daily charges will apply, often per container, until they are collected.
Demurrage charges are, unfortunately, very common and sometimes unavoidable. Of course, different ports, carriers, and contractual agreements have different daily fees for demurrage. Demurrage charges usually range between $70 to $300 per container, per day. This may not seem too bad at face value, but if a container is left for 10 days until it is collected, you could easily rack up a $3000 charge per container.
What’s the Difference Between Demurrage and Detention?
Although both terms seem similar, they do have some differences that are important to be aware of. Both demurrage and detention fees differ and can be applied to different situations and pose varying costs.
Detention refers to the charges that can be applied to a shipping transport provider when an empty shipping container or recently stuffed container is not returned to a yard or port after an agreed time. Just like demurrage, charges are applied to each container per day. When an empty shipping container is taken to a consignee yard or warehouse for loading, this has to be completed on time and the loaded container returned to port within the agreed timeframe.
Both demurrage and detention charges are designed to minimise the amount of congestion that can be caused at ports or shipping yards. Both forms of charges can be applied at the same time to the same shipping containers, depending on the circumstances.
How Can I Avoid Demurrage Charges?
As we know, sometimes issues with logistics can occur. Whether pick up or delivery is held up because of transportation delays or something uncontrollable like poor weather conditions, being late in picking up your container is sometimes inevitable.
There are, however, some steps you can take to ensure that you’ve done what you can to avoid excessive demurrage charges;
- Research and plan ahead: Different yards and shipping ports charge different amounts for demurrage costs. They can also have varying lengths of ‘free days’. You should research potential shipping yards and compare demurrage costs, should your transportation or pick-up become delayed last minute. If one yard has a longer ‘free days’ period, it may be worth choosing this location instead of a potentially closer port with shorter ‘free days’ or higher demurrage fees.
- Understand your responsibilities as a supplier or buyer: Ensure that the transportation and shipping contracts you have are suitable for your needs and the transportation time frame is achievable. Don’t underestimate the time required for your transporters to arrive at the port and load or unload the containers.
- Choose a reliable and effective transportation, logistics and distribution service: TecEx is the perfect solution for your international shipping and distribution needs. TecEx acts as a single point of contact that works to provide trusted and accredited international logistics, IOR and compliance solutions for your business. Our expert teams can handle all necessary processes, including demurrage charges or helping you to prevent them.
How TecEx Can Help
TecEx are the experts in providing modernized and reliable door-to-door distribution services of specialist IT and medical equipment. We work with all types of companies to transport their goods around the world safely and securely.
At TecEx, we optimize our resources in order to provide our customers with expert knowledge. When it comes to international shipping and logistics, we are a global leader in import compliance.
Our teams are prepared to manage all aspects of import and export tasks and have experience in how to prepare and prevent any excess fees that can occur, such as demurrage charges. TecEx can work closely with you and your company to be your first point of contact for all of your logistics, IOR, or exports providers.
TecEx understands the potential stresses and hassle that can come with exporting or importing valuable goods. Whether you’re a veteran exporter or a new start-up company, we’re on hand to provide you with all the support and advice you may need.
With TecEx, you can gain access to over 200 global locations, without any legal or financial risk.
Let us handle all the necessary paperwork and planning for you so that you can focus on the more important things.
Speak to a member of our team now and we’ll be happy to answer any questions you may have.