Shipping Demurrage and Detention Charges Explained in Plain English

Eli DolganskyGeneral, Shipping Guide34 Comments

First things first – What is demurrage?

The basic definition of demurrage is simple – a fee leveraged on cargo that stays at a terminal too long.

Port officials (as well as railroad and airport authorities) all have the ability to enforce demurrage charges. But this definition is deceptively straightforward. In practice, it can be difficult to understand when you should actually expect to see demurrage charges show up on your bill. So if you’re confused about the term and when it applies to you, don’t worry! Plenty of other shippers are in the same boat and we’ll do our best to clearly explain everything there is to know.

As we saw, the definition of demurrage states, “cargo that stays at a terminal too long.”

But how long is too long?

In other words, how much time do you have to move your cargo before demurrage kicks in? Generally, a port will offer 4-7 free days of storage, but this figure is by no means set in stone. Each terminal has slightly different rules, and they could change at any time.

It’s also worth noting that you’re at risk of incurring fees on both imports and exports. For example, let’s say your cargo has arrived at its destination on time, but mistakes in your paperwork cause delays in the unloading process. Those full containers may end up stuck in processing for several days, which means – you guessed it – demurrage. On the other hand, maybe you’ve coordinated with a truck driver to deliver goods to a terminal for export. But then what do you find? The vessel that is supposed to pick up the cargo is running behind schedule. Four, five, six days go by, and before you know it demurrage is in full effect.

How much might I owe?

Figuring out whether or not you’ll owe demurrage is just the first step. It can be an equally uncertain process to determine just how much you’ll have to pay.

Each terminal and carrier sets their own rates, and they almost always charge on a per day, per container basis. The key takeaway here is that these fees can add up – and FAST. Whether the port charges $75 or $200 per container, just a few days of late charges for 10 containers could cost you upwards of $6,000. If for some reason your cargo gets held up at the terminal for more than a week, chances are the daily fees will increase. The longer your cargo sits in a port, the more you’ll end up paying per day. You don’t want your bill to spiral out of control so it’s important to do whatever you can to ensure the shipment goes smoothly… but that’s not always easy.

What if the delay isn’t my fault?

Demurrage is without a doubt one of the most frustrating aspects of working in trade and transportation. At times, you may even feel like terminals are intentionally looking for ways to inflate your bill, but that’s not the case.

The intent behind the fee is understandable – facilities need to turnover storage space as quickly as possible in order to make room for new customers. Demurrage exists to incentivize shippers to stay on schedule.

light hearted cartoon deciding who should pay demurrage fees

Of course, there are plenty of instances when cargo delays are out of your control, but at the end of the day, shippers are (unfortunately) almost always responsible for the fees. Whether shipping by air or ocean carrier, storing goods in rail yards or bonded warehouses, demurrage is an inevitable possibility – even if the delay isn’t your fault. The good news is that shipping with an experienced freight forwarder will go a long way in ensuring your risk of additional fees is minimized.

Demurrage vs. detention

Detention may refer to multiple situations, and shippers often confuse detention with demurrage. Despite the similarities, they are still very different fees.

The best way to distinguish the two is to think of demurrage as fees assessed on containers inside a port, and detention as fees assessed on containers outside a port. In practice, this means that even after you’ve moved your cargo out of the terminal, you need to be prompt in returning the empty containers. If not, carriers may charge you a fixed rate per container per day until they are returned. While detention costs ($50-$100 per day on average) are typically less than demurrage fees, they’ll still put a dent in your bottom line over time.

The more commonly used definition of detention is specific to issues with your inland carrier. Charges are calculated based on driver wait time and can pop up regardless of whether you’re taking goods to the port for shipment or from the port to a warehouse.

When it comes to imports, drivers have to wait for cargo to be unloaded at a warehouse before they can return the empty containers to the port. Most carriers offer a few hours for free, but any additional time is subject to a detention fee. The same goes for exports – drivers will wait for a few hours to bring the cargo to the vessel for onboarding, but if the clock keeps ticking, detention kicks in.

With the numerous congestion issues at ports recently, there has been a substantial increase in the occurrence of both detention and demurrage. Remember, even though shippers aren’t always responsible for the delays that lead to fees, they are often responsible for footing the bill.

What is per diem?

Many terminals use the terms detention and per diem interchangeably. In both cases, the fees are the result of a late container return and are applicable to both imports and exports.

How can I minimize my risk and avoid unwanted fees?

Nobody likes additional, unexpected, fees. And although by now you may be thinking demurrage and detention are inevitable, that’s not always the case.  There are many effective ways to minimize your risk. As is true with most risk-mitigation strategies, preventative measures are essential.

demurrage and detention charges are avoidable

1. Think Ahead

First of all, dispatch your cargo as far in advance as you can. There’s no use gambling with your delivery schedule – between inclement weather and backlogs at the port, there’s simply no way for you to guarantee that everything goes according to plan.  A little time buffer can go a long way in keeping extraneous fees at bay. The same attitude applies when considering loading/unloading times. Never underestimate the delays that could derail the process and have your drivers eyeing the clock.

2. Have a Plan B

On that note, a contingency plan is always a solid investment. This could mean finding an alternate trucker in case port congestion is particularly bad or even assessing the rate options and traffic patterns at neighboring terminals in case you need to reroute cargo altogether.

3. Be Informed

Just as importantly, you’ll want to read your contract with carriers carefully and make sure you are up to speed on the port regulations and customs process wherever your goods are headed. Although all of the aforementioned information is fairly standard, demurrage and detention fees are officially determined by the terms of your individual contract. Not to mention, different countries could apply definitions differently and leave more or less room for negotiation, so be sure to read the fine print! In other words, being informed is your best defense.

4. Negotiate Wisely

And since we’re on the subject of negotiation, you can always try to request more free time for your cargo. This can work on both demurrage and detention. For example, if you know that your containers are going to take more than 2 hours to unload, you might try talking to the driver well in advance. They’re more likely to be flexible if you prepare them ahead of time rather than try to rush through the unloading process and then beg for forgiveness when you run behind schedule. For demurrage, negotiating extra time can be a little bit trickier. Typically, port officials only grant time extensions to large shippers who are dealing with a substantial volume of cargo. If you ship fewer than 800-1,000 containers a year, you might want to consider another cost-cutting strategy.

5. Be as Prepared as Possible

Preparation is key, and working with a trusted freight forwarder can do wonders for your stress level. Putting in the work to pre-clear your cargo, issue instructions to delivery drivers in advance, prepare the receiving facility to handle incoming containers, and communicate effectively with customs and terminal officials may seem time consuming, but it will more likely be time saving.

Eli Dolgansky
Eli is a member of the Business Development team here at LILLY + Associates with almost 10 years in the logistics industry. Fluent in Hebrew, Russian & English, Eli handles numerous international and domestic clients helping them find the best shipping solutions worldwide while providing top level customer service.

34 Comments on “Shipping Demurrage and Detention Charges Explained in Plain English”

  1. Juan

    I liked you article. Can I have your permission to translate it into Spanish and posted in a near future in our web? Of we will honored the credits.

  2. Cláudio

    Thanks 4sharing this knowledges very important in shipping (air, road, sea and rail).
    In my opinion, sometimes the shipping lines and Port authorities face internal problems reflectig in extra/aditional costs for the consigne and they must be called to take responsibility during that time, i mean, is not fair charge the customer in those cases clearly identified that is not his fault.

    1. Eli Dolgansky
      Eli Dolgansky

      Hi Cláudio, thanks for taking the time to leave your comment. We understand that these charges can be frustrating, especially when the delay is out of your control. Our tips on minimizing risk should be helpful when dealing with these fees in the future!

  3. Denise Morris-Roblin

    Hi, What if your tanker is stuck at a port due to engine failure (waiting for a new engine) and the cargo (say crude) is not for this port but a future destination. Does demurrage apply as no movement of cargo?

    1. LILLY + Associates
      LILLY + Associates

      Hi Denise – if the delay occurs at a transshipment port and is caused by the vessel, demurrage is typically not applied. Hope this helps!

  4. Luna

    Hi, lets say you have 3 containers and upon arrival to the destination port one container gets tagged for an exam. while the one container was taken to the exam site the other 2 containers get put on hold pending the results of the exam. the 1 container being examined gets released on the last free day and is scheduled for pick up and delivery. The other two containers didn’t get scheduled for pick up until the following day and was subject to demurrage charges for 3 days – ship line states they need a full 48 hours for scheduling and the first day after the last free day didn’t allow them a full 24 hours. Should demurrage charges be applied in this scenario since the customer had no control over the handling of the two containers put on hold? Why weren’t all 3 containers scheduled with the trucker at the same?

    1. LILLY + Associates
      LILLY + Associates

      Hi Luna – unfortunately when there are multiple containers on one bill of lading and one is selected for an exam, all containers are placed on hold. Additionally, industry standard is 24 to 48 hours to schedule delivery on any container. Hope this helps!

  5. Denise

    Hi thanks for your help. Another query- have you an article on transit to trade licences/certificates? What are they, how are they sought and costs. E.g. Oil tanker travelling from say Sweden to Aberdeen Scotland . Thanks for this

    1. LILLY + Associates
      LILLY + Associates

      Hi Denise – happy to hear the article was helpful. We do not have an article that focuses on trade licences, but feel free to email solutions@shiplilly.com with any specific questions our team can help you with.

  6. Cecilia

    Dear Eli,
    I am an English teacher in business companies and despite doing an import/export training course many years ago have just discovered ‘demurrage’. Would you mind if I use your text for teaching and comments?
    Thank you for this useful info.

    1. LILLY + Associates
      LILLY + Associates

      Hi Cecilia – of course! Feel free to use any of the articles posted on our blog as long as they are sited.

  7. Alison

    Does this rule apply only to containers or would a personal box containing several books left at customs waiting for duty to be paid on it qualify also

    1. LILLY + Associates
      LILLY + Associates

      Hi Alison – demurrage only applies to cargo that has not been picked up from the port. Thanks!

  8. Manu Paul

    Dear Eli,

    I have this situation with my Contenair that was ship in Hungary to Cameroon via Germany (port of Bremenhaven).
    In Bremerhaven the Customs ordered for Inspection and after 2 weeks there the date of the inspection was given.

    Here is the comment the day of the Inspection.

    ” We got the below information from the shipping line just now, pls note it:

    “Unfortunately the inspection couldn’t arrange. Packing station started reloading tires and then it came out that customer will not agree to divide cargo into 2 containers. After long discussions the decision was made to load the tires back to the container and closing and sealing the doors.

    We checked our possibilities with our Geman colleagues, and have to inform you that only have one option to do the customs inspection and divide the cargo in 2 containers.

    Customs did not release the container and the unit will have to remain on the terminal until customer agree to divide cargo into 2 units and cover the costs for same.

    Furthermore, container cannot leave the free port area due to customs holding container.
    Regarding costs we would assume to calculate approx. 3600 EURO for reloading, surveyor, terminal moves and customs clearance. Costs do not include storage costs (demurrage), sea freight or the second container.

    I am a new Company and do not have the money to pay all these fee since my contenair is there during 30 days alredy.

    My question is: in this case since I do not have the money to pay all those fee ( almost 8.000 euro) what Can I do? what will happen with my Contenair if it said longer at the Port?

    The only way I asked them is to unload and reload my Goods on 1 contenair but they said that for security reason they will load in 2 contenair also I am not able to pay for the transport and the Custom at the destination port for 2 contenairs.

    Thank you for your time and yours suggestions

    Sorry for my English I am a Francophone.

    1. LILLY + Associates
      LILLY + Associates

      Hi Manu – unfortunately if you do not pay the fees, the government can seize your cargo.

  9. Arne

    Dear Eli!

    During the strike in Port of Gothenburgh we had to pay transportation from another habour (Helsingborg), Demurrage and Detention Charges because Helsingborg could not take car of all container coming in (from Gothenburgh) in time. The harbour was “overbooked” and all lorry’s was not enough. The transportation cost is understandable, but demurrage and Detention feels unfair because this was Force Majeure. Both fees are penalties because container is delays because of bad paperwork or to many hours emptying it. In this case when delay is because of the strike it should only be an extension of normal rent for container, not a penalty. Our forwarder can protect themselves if Force Majeure, but we as costumer cannot. OR?

    1. LILLY + Associates
      LILLY + Associates

      Hi Arne – unfortunately in these cases you are responsible for the fees, there is no way around it.

  10. Mandawa

    Really like the post.

    Can i be helped to understand through explanation of what demmurage in relation to road transport is and stating how it affects business?
    Thank you in advance

    1. LILLY + Associates
      LILLY + Associates

      Hi Mandawa – glad you enjoyed the article! Demurrage is charges the container incurs after being in the yard past the allotted free time, I am not aware of demurrage in relationship to road transportation.

  11. Eddie

    If the customer has not moved the tank car from one month to the next, do you bill when moved or for each month?

    1. LILLY + Associates
      LILLY + Associates

      Hi Eddie – demurrage is calculated daily and you are billed through the day of pickup. Hope this helps!

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