Containers are normally owned or leased by shipping lines that provide them to their customers (shippers or merchants) for the safe and fast door-to-door transport of their goods. Because the cost of using the container during door-to-door transportation is included in the freight, it is essential for shipping lines to turn around their containers as fast as possible. As a result, and with the objective to encourage merchants to move or return their containers swiftly, shipping companies will deter traders who exceed their free time by charging demurrage and detention fees.
Demurrage and Detention
It is an obligation for shipping lines to provide a reasonable free period during which no demurrage and detention charges will apply. This free period is supposed to allow the trader a realistic period of time for:
- The loading and delivery of the container for an export
- The pick-up, unloading and return of the empty container for an import
If a container is unloaded off a ship on 1 March – The consignee prepares to take delivery of the cargo around 11 March. Working off a standard 7 free days from the date of discharge, the line-free days (different to port-free days) expires on 7 March. So, the line will charge the consignee DEMURRAGE for 4 days from 8 to 11 March at the rate fixed by the line.
After the full container has been picked up by the client, for example, if they take another 7 days to return the empty container, then it is known as DETENTION which again will be charged at the rate fixed by the line.
In the case of exports, typically lines give about 5 free days within which the shipper must pick up the empty container, pack it and return it full to the port. In case of delays of more than 5 days, the line charges Detention (generally the same tariff as import detention) for the days that the empty container is kept with the client as empty or full.
Once the container is packed and the shipper is unable to ship the same due to any reason, then the Demurrage will be charged at the rate fixed by the line till the full container is shipped out.
These charges are used as an incentive to return the equipment or free up the storage space as quickly as possible. As it is often perceived as an unexpected additional freight cost, it can prove frustrating to ocean freight customers.
In most South American countries, the meaning of “demurrage” and “detention” is inverted. In these countries, “demurrage” refers to the time containers spend outside the port, while “detention” refers to the time spent on port grounds.
While these charges cannot always be avoided, they can be significantly reduced with coherent planning and proactive communication.