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Importers and exporters alike are often unable to differentiate between demurrage and detention. Let’s look at the differences between the two.
Demurrage vs Detention
Demurrage and detention relate to costs incurred when containers are not collected or returned within the allowed timeframe. It doesn’t matter if those containers are empty or full. It doesn’t matter if the containers are stored on a port, outside a port, terminal, or warehouse.
Detention and demurrage are not counted as terminal handling charges!
For both imports and exports, there are time frames associated with the movement of containers. In other words, there is an allotted time period to pick up and remove containers from the indicated places. When we talk about “free time,” it is a given amount of time allocated for such collection.
If imported or exported containers are not properly picked up and removed from a port, terminal, or anywhere else, they begin to accrue charges such as a parked car in a public place that accrues hourly charges.
What is container demurrage?
For import containers, demurrage fees are the fees charged when they remain loaded and under the control of the shipping line. In most of these situations, the containers have not yet been collected by their recipient. The free time for collection as defined by the ocean liner may have already expired for that particular container. Demurrage charges apply as soon as the container is kept beyond the free time allocated. Storage of the container can be in a depot, terminal, or container yard. Demurrage costs apply when the free time expires until the container is finally collected and removed from the depot, yard, or terminal.
For export containers, demurrage charges occur after a loaded export container is returned to the shipping line. Delays can occur if, for some reason, that container cannot be shipped out due to an error unrelated to the carrier.
For example, if an exporter forgets to provide the necessary documentation in time, the container may not be able to be loaded onto the ship for which it was scheduled. If that happens, it means that the container will be reassigned to a new ship on a later sailing schedule. Demurrage can hence be incurred if the container needs to be stored longer than the free time.
What is container detention?
Detention occurs when a consignee or recipient retains the container, and it is physically located outside the terminal, depot, or port. Charges are incurred once the container has been stored beyond the allotted free time. It does not matter if the container is empty or full. If it is still in the consignee’s possession and is not returned in the intended time, it attracts detention charges.
For example, if the free time is 4 days for the empty container to be returned to the shipping line after it has been collected and the recipient takes 7 days to return the container, then the ship will charge the consignee 3 days of detention.
Most vessel operators will offer 5 days of free time, during which the sender can pick up the empty container, load it and return it to the port.
Demurrage vs Detention and the effect on shippers
Both of these charges can increase the cost for shippers trying to export products. This can result in significant trade losses and accumulated charges. It can also cause other delays when there is not enough space available for inbound or outbound containers in depots yards or terminals due to lack of storage capacity.
A final word
Generally speaking, the key difference between demurrage and detention is the location of the container. If a container is in a depot, yard, or terminal then demurrage fees usually apply. If the container is outside these locations, it is subject to detention fees. In both, charges only apply if your free time has expired. Both these charges are above and on top of the rental charges for shipping containers.
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