Guide to the Generalized System of Preferences30 August 2021
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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.
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.
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.
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;
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