Demurrage and detention are costs that because of poor planning, unforeseen circumstances or bad communication, often can cost your company thousands of dollars. Even though Demurrage and Detention plays such a big role in the final cost of freight, the terms are often not understood by shippers or intertwined. Luckily, xChange now provides you with an easy explanation.
Cut to the bone: Demurrage and detention are a matter of the allowed free-days, determining the number of days you can use the equipment for free. If these days are exceeded, the user has to pay a demurrage and detention charge, often calculated per day.
Demurrage and detention regarding imports
Referring to the time in port after arrival, demurrage is the charge levied when the full container has not been picked up and moved out of the port for unpacking within the set free-days. For conventional shipping, the freedays are often somewhere between 3-5 days.
Detention refers to the time outside the port, where the shipper holds on to the carrier’s container beyond the allowed free-days. Thus, a detention charge is applied when the container has been picked up, but not returned to the carrier. That is done in an attempt to decrease the container’s turnaround time and make shipping more efficient.
Demurrage and detention regarding exports
Demurrage charges occur when the container is with the carrier but cannot be shipped due to lack of documentation or other non-carrier related errors. In this case, the carrier will be unable to load the container to the scheduled vessel, and hence the container will have to stay in the port until the next departure. Demurrage charges are then applied to the storage period until the next scheduled vessel.
Detention in exports happen when the empty container has been picked up for loading and is not returned within the set free-days. Typically, carriers allow for 5 free-days, and detention charges are applied to the extra days before the container returns to the port.
xChange’s demurrage and detention terms
On the xChange platform, we have merged the concepts of demurrage and detention into one in a simple manner. Therefore, the xChange platform works with free-days and a per diem charge to be paid when the allowed free-days are exceeded. That’s it.
Not only is our platform simple, it also saves you money. Often, demurrage and detention charges are up to $100 per day per equipment, quickly turning a few days into a huge cost. Just a few days of charges for 10 containers can cost up to $6000. Our platform’s equivalent per diem charge is in most cases only 1.5 dollar per equipment per day, a price that typically ranges from $1.0-3.0.
Thus, xChange is able to provide a cheaper, more worry-free and, simple container platform.
How to avoid demurrage and detention
Demurrage and detention are in most cases out of your hands and hard to control, however, there are multiple ways to mitigate the risk of the unpleasant additional charges:
Try to negotiate instead of accepting a quote as it. Negotiate with port officials or carriers, for instance, request more free-days for your cargo and thereby save demurrage and detention. This will buy you some more time and might work as a strategy to avoid unexpected charges. Often, port officials grant shippers with large volume of cargo some more time.
If everything goes wrong with the initial plan, it is a good idea to have a plan B to avoid the large costs of demurrage or detention fees. This could imply assessing alternative truck rates, other truck services or even look for availability in nearby terminals in case your cargo needs to be rerouted.
Efficient time management
Most importantly, dispatch your cargo as far in advance as you can! This gives you more flexibility to unforeseen challenges, such as bad weather or backlogs at the port. The same is applicable to loading/unloading times, where just small-time buffers can do the trick.
Always be informed by reading your contract with carriers carefully, as the terms of demurrage and detention charges are ultimately determined in your contract.
Further, ensure that you are aware of the customs process and port regulations in the respective location your goods are headed. Geography also plays a huge role, as different countries have different definitions and leave more or less room for negotiation when it comes to demurrage and detention.