Understanding Demurrage, Storage and Detention
Additional costs arising from international transport can lead to anxiety and frustration for the service provider and end-client alike. To ensure a better overall shipping experience, it is important for every stakeholder to familiarise themselves with the nature of these costs in advance.
It is important to:
1. Plan well
2. Prepare for all stages of transportation
3. Work with reliable contractors
4. Proactively communicate
We have curated a list of situations that often lead to increased costs, but before we proceed, let’s go over a few important industry definitions.
What is Storage?
A fee charged by the port or terminal to a shipping line or a freight forwarder, usually included in carrier tariffs.
What is Demurrage?
This is the fee charged on cargo that is left at the terminal beyond the allotted free time. Demurrage is calculated from the end of laytime allocated for unloading or loading cargo onto a ship at the port. You will be charged a daily storage fee (demurrage) until the cargo leaves the terminal.
What is Detention?
The fee associated with the extended use of a container, after it is taken out of the terminal for subsequent delivery to the final destination.
In simple terms, a container goes from storage to demurrage, which is usually followed by detention should there be any discrepancies.
In practice, charging storage, demurrage, and detention differs between countries and shipping lines. A combination of demurrage and detention can also lead to a phenomenon referred to as ‘D&D’.
D&D is the charge related to the use of equipment only, where the merchant pays a combined fee for the carrier's equipment when kept beyond the free time allowed.
Avoiding delays and penalties
Reasons for delay are classified into four main categories:
- Incorrect filing of documents
- Loss of documentation
- Customs clearance or cargo inspection
- Violation of shipment terms of goods to a consignee
1. Incorrect filing of documents
Shipping documents should be overseen and executed by logistics specialists, or submitted for examination to cargo transportation experts. Skipping this step can lead to errors in filing documents, which in turn can make it impossible to receive an order or start cargo clearance.
Correcting faulty paperwork, often done with the shipping line or customs departments, invites further delays.
2. Loss of documentation
The most common reason for delays, often the result of misplaced documents or negligent courier services. The issues increase when you factor in the tedious set of challenges that awaits the recipient, who cannot take delivery of the shipment without adequate paperwork. This leads to significant demurrage, detention, and storage charges.
The best way to avoid this is for the owner of the cargo to draw up documents in two or more copies and secure certified copies.
3. Customs clearance or cargo inspection
Delays may occur due to an incorrect definition of CNFEA codes, lack of sufficient information for registration of certificates or declarations.
Additional measures or restrictions may be applied by customs officials if the cargo or foreign trade participant (importer) is considered high-risk within the framework of the RMS (risk management system).
These may include weighing, inspection of the containers, and verification of compliance amongst others. This results in further clearance delays, which may lead to demurrage charges.
Accurate filing of documents by a specialist logistics company guarantees a smoother and faster customs clearance.
4. Violation of shipment terms of goods to a consignee
Several factors that violate shipment terms:
1. Taking an nonoptimal route
2. Inconsistencies of the vehicle owner
3. Warehouse related issues that cause delays in delivery
4. Recipient is not indicated on the bill of lading
In addition to D&D fees, cargo owners often have to pay a fine for excess storage at the port. The problem can worsen if the cargo owner is low on funds and needs time to arrange it. Delays lead to increasing fines with corresponding VAT charges.
At SeaRates.com, you can find optimal delivery routes with the best transit time and storage, demurrage, detention terms so that you'll have enough time to move your cargo.
Our specialist account managers can take you through every step, as well as handle paperwork and customs clearances efficiently and effectively on your behalf.
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