How you avoid high demurrage & detention as a freight forwarder
Demurrage and Detention quickly become a shipper’s nightmare and can result in thousands of dollars in per diem charges. Costs that arise because of bad planning, unforeseen circumstances and bad communication and play such a big role in the final cost of freight. Demurrage and Detention charges are a matter of the allowed free-days – if these days are exceeded, the container user has to pay a charge calculated per day. Oftentimes carriers such as Maersk and COSCO charge up to $200 - $400 per day per container. In this article we explain Demurrage and Detentions terms and provide shippers with 5 tips how to avoid high costs when planning freight.
Meaning of Demurrage and Detention in export
Detention charges happen in export when the empty containers have been picked up for loading and is not returned within the set free-days. Typically, carriers allow for up to 5 free-days and charge shippers for extra days before the container is moved inside the terminal or depot. Demurrage charges occur when the cannot be shipped due to the lack of documentation or other non-carrier related errors. The carrier will not be able to load the container to the scheduled vessel in that case and will charge you storage costs for the period until the next scheduled vessel is ready.
Demurrage and Detention as an importer
Pick up and move your containers out of the port once they are discharged from the vessel. In conventional shipping the free-days are often somewhere between 3-5 days. A Demurrage charge is levied should it take you longer than that to get your containers. Detention refers to the time outside the port, where the sipper holds on the container beyond the allowed free-days. That is done in an attempt to decrease the containers turnaround time and make shipping more efficient.
How can I avoid Demurrage and Detention charges?
Demurrage and Detention are in most cases out of your hands and hard to control. However, there are ways to minimize the risk and avoid unnecessary charges
1. Negotiate terms
Always try to negotiate terms instead of accepting a freight quote as it is. Negotiate with your carrier and request more free days to buy you some more time. That might work as a strategy to avoid Demurrage and Detention as carriers sometimes grant shippers with large volume of cargo some more time.
2. Always have a plan b
Asses alternative truck rates, other truck services or even look for available terminals nearby in case your cargo needs to be rerouted. If everything goes wrong with the initial plan, it is important to have another option to avoid large costs.
3. Efficient time management
Most importantly, dispatch your cargo as far in advance as possible! This gives you more flexibility and a bigger time frame to unforeseen challenges such as bad weather or backlogs at the port. The same is applicable to loading times, where just small time-buffers can make it for you!
4. Be well-prepared
Don’t make the mistake and sign a contract just as it is. Always be informed and read through it carefully, as the per-diem charges and fees are ultimately determined in your contract. Further, ensure that you are in good knowledge of the customs clearance processes and port regulations. Be on the safe side and understand that even geography plays a huge role, as different countries have different definitions.
5. Bring your own container
It was always a pain in the arse to find SOC containers as you had to reach out to your network, be lucky and organize everything on your own. Container xChange made it easy now to use or supply containers for SOC/ one-way use on their neutral online marketplace. Using their online platform, you safe up to $200 to $400 or completely avoid Demurrage and Detention as their per-diem fees are below $5 per container.