Everything You Need To Know About Demurrage Fees

demurrage fees
Everything You Need To Know About Demurrage Fees

Transporting goods can be costly and time-consuming. When you’re hit with demurrage charges, things can become even more expensive. In this article, we'll cover everything you need to know about demurrage, including the causes of demurrage fees and how you can avoid them. 

What Is Demurrage?

Demurrage is a fee shipping carriers impose whenever freight has exceeded its allocated time in a port. The term comes from the French word, demeurer, which means “to linger or tarry,” and originated with ship chartering. Demurrage charges act as an incentive to keep goods flowing smoothly and efficiently through ports, terminals, and other logistics hubs. 

Charter companies usually have a set number of days to load or unload their cargo before incurring demurrage charges. Once that timeframe (usually 3-5 days) has been exceeded, demurrage fees can start to add up. 

The consignee is responsible for paying demurrage.

What Are The Causes Of Demurrage Fees? 

There are several causes of demurrage, including:

  • Paperwork errors - Failure to submit necessary paperwork like customs forms or bills of lading can cause delays and result in demurrage charges.
  • Delayed payment - If the fees for moving freight through a terminal aren’t paid on time, then the shipping line might hold your freight (incurring demurrage fees) until payment is made. 
  • Cargo goes unclaimed - Demurrage charges can happen due to cargo going unclaimed. If the port can’t reach a consignee, they can charge demurrage fees.

Demurrage Charges And Fees

There is no industry standard for demurrage fees. Charges vary depending on terms agreed on by shippers, carriers, and customers. They are typically calculated based on a set rate per container per day or as a fixed fee for each day of delay.

Generally speaking, you can expect to pay anywhere from $75 per container per day, to $300 per container per day. These charges can then increase after the first few days, leading to heavy fines.

A recent update to demurrage fees came with the Ocean Shipping Reform Act which was passed on June 16th, 2022 to enforce specific billing procedures for demurrage fees for ocean common carriers. One of the most significant changes in this act is the requirement for these ocean carriers to provide specific documentation when invoicing for detention and demurrage and that shippers can submit complaints to the Federal Maritime Commission on any detention or demurrage fee discrepancies.

Detention vs. Demurrage: What's The Difference?

Demurrage is not the only kind of fee you can incur when moving goods as a consignee. You can also wind up paying similar detention fees. Here's a quick breakdown: 

Demurrage Fees Relates to Cargo

Demurrage is primarily concerned with cargo. While this can and often does involve the container that the cargo is being moved in, the focus of the fees and of moving the items is centered squarely on the cargo within the containers. 

In other words, demurrage covers the length of stay of the cargo within a container. 

Detention Relates to Equipment

Detention fees, on the other hand, are focused on the containers themselves — typically empty containers. While demurrage incentivizes consignees to keep cargo moving, detention fees prevent empty shipping containers from being left in a terminal for longer than necessary. 

How to Avoid Demurrage Fees

Now that you know what demurrage is, it's time to explore how you can keep your demurrage charges to a minimum. While they aren't always completely avoidable, here are a few tips to mitigate these fees. 

Pre-clear Your Freight

You should always pre-clear your freight. That means ensuring freight moves through customs as quickly and efficiently as possible. This is usually something you can handle on your end through your logistics provider. 

However, if it isn't, you should try to coordinate with the party receiving the goods. That way, they can arrange to have your cargo pre-cleared by customs. This will go a long way towards ensuring that your cargo moves continuously, which is a great way to prevent demurrage fees. 

Ask About Demurrage Charges 

The second key way to avoid demurrage charges is to simply ask about them when you’re getting quotes. Know what a particular terminal charges for demurrage, how and when these fees accrue, and what policies they have for avoiding them. 

Nearly every terminal will have a period of “free” time when your cargo can be left in the terminal for free. So know ahead of time what this period is so that you can plan around it. 

Communicate Effectively

As covered earlier in this post, little things like paperwork delays and miscommunications can add up and lead to demurrage charges. Luckily, you can avoid this by maintaining a clear and open line of communication. 

That means ensuring that all involved parties are aware of the shipping instructions beforehand, receive updates on the movement of your cargo consistently, and that delays are reported accordingly. 

Work With A Freight Professional

Working with a freight professional is an excellent way to prevent demurrage charges. A professional can manage everything for you and help you avoid demurrage charges. 

They often have connections and pre-existing relationships with the terminals your cargo will be moving through. This allows them to process your cargo more efficiently, significantly reducing the chances of demurrage. 

If you're looking for a reliable freight shipping company, look no further than DTS. We have the expertise and experience to support your cargo needs and keep your overhead low. Reach out to our team today to learn more

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