Demurrage

What Is Demurrage?

Demurrage is a fee charged to cargo containers that have been at a port, railyard, terminal, or other location past its allotted or contracted free time. How much the demurrage charge is can vary depending on a number of factors and is typically enforced by port officials. 

Free storage time allotted for containers at ports can vary, usually from 4-7 days. That said, it is critical to be cognizant of individual port policies and procedures pertaining to demurrage along the entire transportation route. Generally, rail and air cargo shipments are allotted 48 hours free of charge to store containers. Less time is usually allotted if the container has special requirements or is open top. The amount of time allotted to pick up cargo can also vary depending on vendor agreements.

Key Takeaways

• • Demurrage is applied when containers are not unloaded or moved from a site in a timely manner.
  • Demurrage charges can vary based on things like location, vendor, and market conditions.
  • Demurrage risks can be mitigated by having a backup carrier and using demurrage software solutions.

What Factors Influence Demurrage Charges?

Several factors influence demurrage charges:

• Port Policies: Different ports have varying rules and fees.
• Type of Cargo: Hazardous or perishable goods may incur higher charges.
• Duration: Longer storage times increase costs.
• Seasonality: Busy seasons may lead to higher rates.
• Container Size: Larger containers typically attract higher fees.

What Are Demurrage Charges and How Can Shippers Avoid Them

Demurrage charges are applied to cargo containers at ports, rail yards, etc. that are scheduled for pickup, yet remain past their allotted free time. This is commonly referred to as the “Last Free Day”, after which shippers are charged each day for the number of container(s) that remain on-premise until the cargo is transported elsewhere.

Shippers can avoid demurrage charges by:

• Efficient Planning: Schedule pickups and deliveries to avoid delays.
• Clear Communication: Coordinate closely with all stakeholders.
• Documentation: Ensure all paperwork is accurate and complete.
• Using Technology: Employ tracking and management tools to monitor shipments.
• Negotiating Terms: Discuss flexible terms with carriers and ports.

What Are the Differences Between Demurrage and Detention?

Demurrage: Charges for using the port’s space and equipment beyond the free period, usually at the import terminal.

Detention: Fees for holding onto the carrier’s container outside the port, typically after it has been picked up for delivery or before it’s returned after unloading.

How Does Demurrage Affect Overall Shipping Costs?

Demurrage significantly impacts overall shipping costs by:

• Increasing Total Expenses: Additional fees add to the total cost of logistics.
• Cash Flow Strain: Unexpected charges can disrupt budget planning.
• Operational Delays: Financial pressure from demurrage can slow down other operations.
• Competitive Disadvantage: Higher costs may make services less competitive in the market.

How Much Do Demurrage Charges Cost

Unfortunately for shippers, there is not a single governing body that determines demurrage charges and rates, so these costs can vary from location to location. Industry estimates range from $100 per container per day, up to $300 and more dependent on market conditions.

Having containers held up in customs when crossing borders is a  common source of demurrage charges in the shipping industry. The party responsible for demurrage costs incurred can mitigate risk by contracting a backup courier should problems arise with the original courier.