Demurrage

No one likes getting hit with hidden fees, especially when it comes to shipping. Whether you're a business owner who ships products or an individual sending a package to a friend, unexpected shipping costs can really put a damper on things. And when those costs come in the form of penalties, they can be even more frustrating.

One of the fees involved in international shipping is demurrage. In this article, we talk all about what it is, why it’s charged, who has to pay it, how much it costs, and how to avoid it.

Demurrage Definition

Demurrage is a term used in international shipping to describe the charges that may be incurred for the use of a vessel beyond the agreed time period. It is also sometimes referred to as 'laytime' or detention charges.

Under normal circumstances, demurrage would not be charged if a vessel is used within the agreed time. However, if a vessel is used for longer than this, then the owner of the vessel may charge a fee for the 'extra' time that has been used.

Demurrage charges can vary depending on the length of time that a vessel has been used and the circumstances surrounding its use. However, they are typically calculated on a daily basis.

In some cases, demurrage may also be charged if a vessel is not used within the agreed period. This is known as 'despatch.'

Reasons for demurrage charges

Demurrage charges are assessed when a container remains at a port or terminal beyond the allotted free time. The charges are designed to encourage shippers to move their containers on time and help minimize congestion at ports and terminals.

There are several reasons why a container might remain at a port or terminal longer than the allotted free time. For example, a container might be waiting for customs clearance or transport to its final destination. In some cases, shippers may deliberately keep a container at a port or terminal longer than the free time to avoid paying storage fees at their facilities.

Whatever the reason, demurrage charges are typically assessed on a per-day basis and can quickly add up. For instance, a container that remains at a port or terminal for 10 days would be subject to demurrage charges of $500-$1,000.

Who has to pay demurrage?

The owner of the ship is typically responsible for paying demurrage fees, which can be significant. In some cases, the charterer (i.e., the party who rented the ship) may be responsible for paying demurrage fees. Demurrage fees are meant to compensate the ship owner for the lost time and revenue associated with the delayed use of the vessel.

How long before demurrage charges apply?

Demurrage is a charge assessed by a carrier for the detention of equipment beyond the allowed free time. The length of time before demurrage charges apply varies by carrier but is typically 24-48 hours.

Once demurrage charges begin accruing, they continue to accrue until the equipment is released or returned to the carrier, even if it is only detained for a short period of time. Demurrage charges can be significant, so it is important to know the policies of the carrier you are using and ensure that your equipment is returned promptly.

How much are the charges for demurrage?

According to the International Chamber of Shipping, demurrage fees are typically charged at $50 to $100 per day. Per-day rates may be higher or lower depending on the particular circumstances surrounding a given shipment. Shippers should consult their shipping contracts for specific information about demurrage fees.

In some cases, shippers may be able to negotiate lower demurrage fees with their shipping company. For example, if a shipment is delayed due to circumstances beyond the shipper's control, the shipping company may be willing to waive or reduce the demurrage fee.

Shippers should always consult their shipping contracts and speak with their shipping company representative to determine if they are eligible for any discounts on demurrage fees.

How is demurrage calculated?

Demurrage is calculated based on the number of days a container remains at a terminal beyond the free time allotted by the carrier. The rate is usually assessed per day and may be charged in addition to other fees, such as storage charges. For example, if a container is supposed to be picked up within five days of arrival at a terminal but is not picked up until the 6th day, the demurrage fee would be assessed for that one day.

How to avoid demurrage

Demurrage is typically assessed daily and can add up quickly, so it's important to avoid it if possible. One way to do this is to ship your goods during off-peak times when there is less demand for shipping services.

You can also try to negotiate a longer free time period with your shipping company. If you end up being charged demurrage, keep track of the days so that you can dispute the charges if necessary.

If you are shipping internationally, there may be additional fees or charges you are unaware of. It is always best to check with your shipping company beforehand to budget any additional costs. In some cases, it may be cheaper to use a different shipping route to avoid demurrage charges.