Importers and exporters alike always run into questions differentiating demurrage and detention for their shipping containers. The easiest way to differentiate the terms is to break it down between import and export containers.
Definition of Demurrage, Detention, Demurrage and Detention Combined, and Free Time
Demurrage and detention both refer to fees incurred by importers and exporters alike when containers are either not picked up or dropped off within the appropriate amount of time. It does not matter if those containers are empty or full, nor does it matter if the containers are being stored in a port, outside of a port, terminal, or depot.
For imports and exports alike there are time frames associated with containers. Regardless of the method used or the location where the container ends up, there is a length of time allotted for pickup and removal of the containers from the given locations. Free time is a given amount of time allotted for such pick up. If containers imported or exported are not properly picked up and removed from a port, a terminal, or anywhere else, they start to accumulate charges much like a car parked in a public location accumulating hourly charges.
Example of Container Demurrage
For import containers, demurrage fees are fees charged when import containers remain full and at the same time or under the control of the shipping line. In these situations, the containers have yet to be picked up by their consignee, and the length of free time for the pickup as defined by the ocean liner has expired on that particular container. Demurrage charges get applied as soon as the container has to be stored while it is in a rail terminal, a steamship line terminal, an inland Depot, or a container yard. Demurrage costs are applied from the moment the free time expires until the end of the day when the container is picked up and removed from the terminal.
For export containers, Demurrage charges take place after a loaded export container is returned to the steamship line but for whatever reason, that container cannot be shipped out because of a non-carrier related error. If there is an error and it takes place within the allotted free time, the container problem can be rectified and the container shipped out properly.
For example, if an exporter forgets to provide the necessary export information or documentation in a timely fashion, the steamship might be unable to load that container onto the vessel for which it was originally scheduled. If that happens it means that the container will simply be rolled over to a new vessel. However, if the required export information or documentation is not provided in a timely manner, demurrage charges will be applied for whatever length of time the container has to be stored before it is put onto the next vessel.
Example of Container Detention
Detention takes place when a consignee holds on to the container for a carrier but that container is physically located outside of the terminal, the Depot, or the port. The same timeline applies here such that the container has been stored beyond the allotted free time. With imported containers, it does not matter if the container is empty or full. If it is still in possession of the consignee and is not returned in the provided length of time, it faces detention.
For example, if the free time is 5 days at which point and empty in port container must be returned to the steamship line after it has been picked up, if the consignee takes 7 days rather than 10 to return this container to the appropriate location then the steamship will charge the consignee for 2 days of detention.
For export containers, detention gets charged when an empty container has been picked up for loading and is not returned within the allotted time frame. Most steamships will offer 5 free days during which time the shipper can pick up the empty container, load it, and bring it back to the port. If that container is not brought back within the five-day timeline, the line is likely to charge detention for the additional days during which time that container remains in the possession of the consignee.
Effect on Exports
These effects on exports can be rampant. Not only can It add to the cost for shippers trying to export goods but it can cause scheduling delays. If it happens regularly this can add up in terms of time wasted, delays, business lost, and fees accrued. It can also cause other delays when there is insufficient space available for incoming containers or outgoing containers because of things that are currently in storage or delays because additional containers have to be moved onto vessels for which they were not originally scheduled.
Let’s assume that one company is trying to export 5 containers at once all five of which contain items that have to reach their next port by the end of the month. With a single issue affecting one of those containers, that container might be charged with a detention fee because it wasn’t returned on time with the necessary goods for its shipment. Not only does the company face charges but that single container will not make the deadline now because it has to be rolled over onto the next available vessel which doesn’t leave for three days. Three days beyond the allotted time a cruise 3 days worth of detention charges. Subsequently, business is lost because the people relying upon that shipment arriving on time were let down by their company.
Recap of the Differences, Simplified
Essentially the key difference between demurrage and detention is the location of the container. If a container is in a Depot, or otherwise within a location where it initially reaches land it is susceptible to demurrage charges. If the container is outside of those initial sections it is subject to detention. In both, the charges only apply if the free time has expired.
6 Comments on “Demurrage, Detention and Free Time Explained in Plain English”
I have a question.
A Container can get demurrage and detention at the same time.
What about if the demurrage or detention is it cause for a strike in the country of origin.
I have this problem in Mexico I paid double fee with a 20′ feet container.
Hi Oscar – Demurrage fees are charges billed by the carrier when the container is fully loaded and has not been released or picked up by the Importer. Detention charges are accrued when the Importer keeps the carrier’s container in the possession for a longer period than the time allotted. Unfortunately, Carriers hardly ever reduce any of these charges due to port strikes. Thank you for reading us
Thank you for the article. I am wondering how liability for demurrage is affected by the incoterm agreed upon. Right now we use CFR for shipments that our customers request we arrange. When we use CFR, are we then, as the one paying the freight forwarder, responsible for any demurrage fees that might arise? Would we be exposed to less liability if we agreed on FOB for these shipments?
Thank you,
Dan
Hi Dan – You would certainly be exposed to less liability if selling on FOB terms. The Port will not release a container unless the demurrage fees have been settled so on CFR terms, unless the container is abandoned or delays have been incurred due to documentation issues, you should not be held liable for demurrage charges. Thank you for reading us.
There is a briefcase that is supposed to be delivered to me from Turkey. Now the guy bringing it says I need to pay demurrage. Is that fair. High fees were already charged by the freight company.
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