Tips in avoiding demurrage and detention charge ( Ocean shipping Chapter)
Updated: Dec 10, 2019
Demurrage and detention charges are shipper, consignee, forwarder and broker's nightmare. If anything goes wrong, hundreds of and even thousands of dollars are easily gone with the wind.
Last week I talked about the demurrage charge from airline shipping. When it comes to ocean shipping, it is as stressful as airline shipping simply because you will face two types of charges: Demurrage & Detention
What is the difference between Demurrage VS Detention
In general, demurrage and detention are costs that arise due to poor planning, unforeseen circumstances, and bad communication. Simply put, these are the charges account for time and space in a container and a port.
Terminal operators are responsible for charges associated with the use of port space and infrastructure, while ocean carriers charge fees for the use of their equipment, the cargo container. While the bill(s) can come combined together, or independently, depending on the port, the charges are issued by the terminal and/or carrier directly.
Demurrage charge usually occurs after 5 working days after the container has not been picked up and detention charges usually occur after 5 working days container has not been returned empty to the carrier. Below is the charge list from the Ocean network carrier.
Let us say your shipment is on hold on the 5th day, and finally, your broker fixed the problem on the 6th day morning. Now he has to guarantee charge from the 6th day to 7th day because the shipping line takes 24 hours to post the payment ( i know that is crazy even you do wire transfer payment) and the trucking company needs 24 hours notice to arrange next day pickup. So you would pay several hundred dollar demurrage at least.
So this was during July this year we got a new business from our existing client. They booked 7 refer containers to Port Newark Container Terminal. As this requires live unload in customer warehouse and the warehouse only allow 3 appointment time slot a day. The result is such a mess to prove that this was poor planning.
first of all. refer containers only gets two days' free time at the port and two working days to return empty containers back to the shipping line. It was very challenging for the trucker. Second, refer the container paperwork department is closed 4 pm at PNCT terminal and the waiting time is longer than the regular dry container. Thrid, PNCT is a very congested port compared to bigger ports like Maher terminal. Forth, the warehouse has a very limited appointment time. Once it fills out, they cannot take any shipment that day. It gives extra pressure to the trucker to manage their schedule to return empty containers within 2 free working days if the warehouse cannot accommodate the trucker.
We end up with paying more than 5000 USD in the combination with demurrage and detention charge. Even charges are split between consignee, the trucking company and us but it was just like a nightmare experience. Poor planning can really result in severe financial loss on the destination side.
Tips in avoiding demurrage and detention
There is a saying, If you fail to prepare, you are preparing to fail. So how we can prepare to minimize the risk of paying this surprise bill?
Make sure your broker pre-clear your shipment before the vessel arrived.
Try to use the telex release cargo method instead of mailing the original bill of lading. BOL old is one of the most commonly seen reasons to puts the cargo at the risk of getting demurrage.
Make sure your freight forwarding company and custom brokerage company consigned in the bill of lading so they can get arrival alert from shipping line
Schedule your loading/unloading with the detention clock in mind. This is important with dropped containers. You may think you have longer than you really do.
Book the vessel to a less congested port. For example, APM terminal is more congested than Maher terminal in NY/NJ area.
Always have plan B. If your broker's partnering trucking company has difficulty, you can offer an alternative choice to pick up the cargo right away
Keep active communications with all parties is very important. Closely monitor the progress of your containers, to know exactly when a container has been discharged in the import terminal, waiting for pick-up. Here is the tool: https://www.track-trace.com/
Please feel free to provide your suggestions about how to avoid demurrage and detention charges. Let 's us chat