Demurrage and Detention Charges on Container Shipments

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Jun 18, 2024

Demurrage and Detention Charges on Container Shipments

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In the fast-paced world of container shipping, demurrage and detention charges can quickly add up. Shippers need to be aware of these charges, and how they can impact drayage transportation expenses. In this blog, we cover the essential aspects of demurrage and detention charges and explore their impact on the maritime supply chain. Get ready to unlock a deeper understanding of these charges and how they can affect your shipping operations.

1. What are Demurrage and Detention Charges?

Demurrage refers to fees imposed by shipping lines when containers are held at the port beyond the allocated free period. For containers imported into the U.S., they are typically allotted a number of “free days” at the port. After the Last Free Day (LFD) if the container remains at the port, then demurrage fees will begin. It essentially is a storage fee for the container at the port. Prior to leaving the port, the container demurrage fees typically must be paid.

After the container is pulled from the port, it continues to be on the clock. Once product is unloaded from a shipping container (unless you own the container), it must be returned to the port. Detention relates to charges incurred when shippers or consignees retain containers outside the port beyond the allowed time limit. For shippers, this becomes critical to make sure containers are unloaded quickly and returned. If shippers have warehouses or unloading locations far from a port, sometimes these containers will be transloaded or cross-docked to a different shipment so the empty container does not have to travel as far.

2. The Purpose of Demurrage and Detention Charges

Steamship lines and ports employ demurrage and detention charges to incentivize efficient container turnaround and encourage timely return or pickup of containers. As import volumes and port congestion have steadily increased post-pandemic, shippers have had to become more cognizant of these charges when booking drayage shipments to mitigate unnecessary expenses.

3. Who is Responsible for Paying Demurrage and Detention Fees?

As part of its compliance with the Ocean Shipping Reform Act of 2022, the Federal Maritime Commission (FMC) implemented a new rule on demurrage and detention billing practices on May 28, 2024. Guidelines and standards for billing practices associated with detention and demurrage transactions are now as follows:

  • Carriers and marine terminal operators (MTOs) must bill for detention and demurrage charges to only one of two parties:
    • The person who contracted for the ocean transportation or cargo storage, or
    • The consignee
  • Invoices for detention or demurrage charges must be issued within 30 calendar days.
  • Billed parties have 30 days to request fee mitigation, refunds or waivers and the billing party must attempt to resolve the request within 30 days.

These new rules prohibit billing demurrage and detention fees to other parties, such as truckers who pick up or return containers from marine terminals.

4. Coordination and Collaboration is Key 

Collaboration with steamship lines and transportation partners is critical to mitigating demurrage and detention charges. Also, it is critical to understand any nuances with ports to efficiently move your shipping containers. Increased data sharing and container transparency throughout the maritime supply chain will help streamline processes and enhance accountability.

5. The Way Forward 

By following these four expert tips, you will be well on your way to optimizing your shipping operations and improving your overall supply chain efficiency.

  • Plan like a pro. Freight is on the ocean for weeks and months, so plan ahead. Trying to dispatch freight and having a plan well ahead of your Last Free Day (LFD) will help mitigate demurrage fees.
  • Have a backup plan in place. Being prepared for the unexpected is key to avoiding demurrage and detention fees. Whether it is having a backup dray provider or finding carriers at new ports if freight gets diverted and more, having a Plan B can save you from unnecessary headaches and costs.
  • Know your contracts inside out. Knowledge is power! Take the time to research and fully understand your contracts and the regulations and customs duties processes. Steamship Lines typically update contracts in the May/June timeframe, so review these and understand any changes and the impact on your freight costs. By understanding your obligations, you can avoid potential pitfalls and ensure a smooth sailing process.
  • Transloading and cross-docking. If your warehouse or destination is far from your Port of Entry, consider a transload or cross-dock solution, so you don’t have to worry about detention charges and empty miles.

Conclusion:

Understanding demurrage and detention charges is essential to reduce unnecessary container shipping costs. If you know the purpose of the charge, stay on top of industry developments and embrace best practices, you can optimize your shipping operations, minimize costs and enhance your overall supply chain efficiency. NTG is committed to equipping businesses like yours with the knowledge and insights needed to thrive in the evolving drayage shipping landscape.

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