A company has to manage multiple tasks when they are in the business of shipping goods around the world. Beyond preparing the necessary documents and sticking to a schedule, companies have to understand the custom regulations of each country they are shipping to. But not everything is under the direct control of shipping companies, and external factors can always come into play. One of the factors would be demurrage fees.
What are demurrage fees?
When shipments arrive at a port, companies are given a time period to pull their cargo out from the terminal. If the containers are still there after the allotted free time frame, ports start to charge money for storage, and those are demurrage fees. Shippers will be charged a daily storage fee until they pick up their cargo. For regular shipments arriving by ocean, the standard is 4-5 days, and shipments arriving by air or rail are typically given 48-hours of free time. But each terminal will have its own set of rules.
Terminals expect shippers to settle the cost quickly, and if the fee is not paid in full, the terminal will not release the shipment. The prices can range from $75 to $150 per container per day, but charges gradually increase the longer the cargo stays there. This can be incredibly costly for smaller companies. A larger company might be able to absorb the demurrage fee, or use its clout to negotiate the charges down, but smaller companies may end up financially devastated just by one demurrage fee.
The difference between demurrage and detention fees
Demurrage fees often get confused with detention fees, but they are two different things. Demurrage fees are the charges that occur when the container is left in the port, and not picked within the free days offered by the terminal. Detention fees are raised when the importer has picked up the container, but has not returned it back to the port before the free time runs out.
Demurrage and detention fees are both costly and time-consuming for shippers. It is important for shippers to minimize the chances of accruing these charges, as they are not completely avoidable. Uncontrollable elements such as port congestion, limited chassis supplies, extended customs exams, and lack of truckers are just a few examples of what could lead the most prepared shippers to demurrage and detention fees. While unavoidable, there are steps that companies can take to minimize these charges.
How companies can minimize demurrage fees
- Plan in advance
- Send off cargo as far in advance as possible, and arrange pickup services ahead of time to ensure that there will be available truckers to transport the containers.
- Have the proper documents for customs clearance well prepared to decrease time spent in port clearance.
- Have a backup plan
- Schedule things with a time buffer to combat potential delays. And having a second trucker ready in case the first one falls through can be helpful too.
- Look for alternative storage options, like warehousing and distribution facilities. Renting a warehouse space can be cheaper than demurrage and detention fees, and some businesses include services to help shippers unload containers.
- Use real-time information
- Mistakes and miscommunication happen when shippers lose track of where their containers are. With real-time information, shippers can stay two steps ahead and know exactly when their cargo will arrive. With that information, they can then plan accordingly to minimize demurrage and detention fees.
- Demurrage fees are charged when containers do not get picked up and removed from ports within the given free time period.
- Detention fees are charged when containers have been picked up, but not yet returned.
- Demurrage and detention fees are unavoidable, but there are three ways to reduce the chances of paying them.
- Plan everything in advance and have the necessary documents ready.
- Have a backup plan, like scheduling a second trucker and looking for additional storage spaces.
- Use real-time information to stay on top of the shipment’s location through the whole shipping process.
Straight Forwarding, Inc.’s mission is to provide hassle free services to our customers, and that includes minimizing demurrage and detention fees using our excellent logistical systems and online tracking. We can ensure that your cargo travels from its origin to the destination in a timely manner, and for the lowest possible cost.