All ocean carriers apply demurrage and detention fees for the pick-up of cargo and return of empty containers beyond the agreed free period stated in the contract. These charges enable them to optimize the utilization of their equipment and space in port terminals or rail yard storage while also compensating for the additional costs incurred. Detention and demurrage rates can vary significantly based on the carrier, location, and container type.
How much do demurrage and detention charges amount?
Ocean carriers provide consignees with a designated free period to pick up their cargo upon vessel arrival. Once this free time expires, demurrage fees are applied as long as the full container remains in the shipping line’s custody at a port or terminal. The invoicing period begins on the day following the last free day and demurrage charges are charged on a per-container, per-day basis until the container is gated-out for delivery.
On the other hand, detention diem fees are applied by the shipping company to the consignee in case the latter exceeds the agreed-upon free time, from the moment the full container is released until the time the empty box is returned to the port terminal or a designated container depot.
To summarize, the difference between demurrage and detention charges pertains to the specific stages of the cargo-handling process. Demurrage charges apply during the time the full container spends inside the terminal or port, while detention concerns the time the container is held by the consignees outside the terminal or port. In both cases, the free period granted by the shipping company is based on calendar days, including holidays and weekends.
There is no universal or fixed rate for demurrage and detention diem fees. Similar to freight rates, each carrier has the liberty to set its tariff, considering various parameters such as the country, port (average delay for clearance and cargo release, available storage space), container type/cargo (different rates for general containers and special containers), as well as the company’s internal policies. Moreover, the applicable tariff may also be subject to negotiation, particularly based on the annual volume of shipments handled by the shipper or the consignee. The specific terms and conditions outlined in the contractual agreements contribute to the variability of the D&D costs.
To anticipate the potential extra costs and avoid the cargo being stuck at the destination port, it is highly recommended inquiring detail about the applicable detention and demurrage fees for each carrier before initiating a shipment. However, this might not be necessary for recurrent cargo movements involving the same ports of loading and discharge. Shipping lines, agents, freight forwarders, and marine terminal operators can offer guidance and provide current rates for detention and demurrage charges.
D&T fees increase progressively per calendar day of storage. The longer the container remains, the higher the daily cost will be. Usually, carriers establish billing periods after 4 days of free time (e.g. day 5 to day 9, day 10 to day 14, day 15+, etc.) with progressively higher rates for each period.
Examples of applicable rates from some major carriers
The following tables present a comparison of a few leading carriers, showing the difference linked to location and container types: dry containers, reefer containers, and special containers (open top, flat rack, tank, etc.).
Rates for the selected countries (United States, France, and Singapore) are expressed in local currency and remain effective until further notice.
CMA-CGM (rates effective since 2022)
Country: United States
Ports: All
Country: Germany (Merged D&D rates)
Ports: All
Country: Singapore
Ports: Singapore
MAERSK
Country: United States
Ports: All (except Newark/Miami)
Ports: Newark/Miami
Ports: All
Country: Germany (Merged D&D rates)
Ports: All
Country: Singapore (Combined D&D rates)
Ports: Singapore
How are demurrage and detention charges calculated?
Determining the demurrage and detention charges to be paid requires identifying the date when the free period ends, as well as the anticipated pick-up date for demurrage or the expected date of the empty container return for detention. Subsequently, the total amount due can be calculated by multiplying the relevant daily rate by the number of days exceeding the time limit.
Nevertheless, with the aid of cutting-edge technologies, complex calculations are no longer necessary. Determining the total amount owed to the shipping line for demurrage and detention has become an effortless task, made possible by a dedicated tool available on their website or accessible through their mobile application. Users simply need to input the bill of lading number to instantly access real-time information regarding all containers associated with the contract of carriage. This includes details about the allocated free time for each container and the deadline before penalty invoicing occurs.
Several major ocean carriers, such as the Danish company Maersk, provide consignees with the opportunity to evaluate the demurrage expenses based on the expected gate-out date and detention charges considering the planned empty return date. A comprehensive breakdown of these expenses is displayed, but solely accessible to the consignee specified in the bill of lading. Other stakeholders are only permitted to see the final free day.
How are demurrage and detention fees regulated?
Although there is no universal rate for demurrage and detention, shipping lines are obligated to respect the limitations when determining their tariff. These restrictions aim to protect shippers and consignees from any abusive practices. In each country, an official body oversees the strict adherence of ocean carriers to the rules governing “fair and reasonable” demurrage and detention charges, along with other legal requirements.
For instance, in the United States, the responsibility for regulating and overseeing these aspects lies with the Federal Maritime Commission (FMC). The Commission also serves as a mediator, handling disputes and complaints related to these charges with the aim of finding the best resolution between shipping companies, shippers, and consignees.
Conclusion
Considering the demurrage and detention rates, any delays in pick-up or empty container return can quickly become a significant issue, impacting the consignee’s financial performance. Thus, it is imperative to have an efficient and streamlined supply chain to prevent incurring such substantial additional costs. Thorough sourcing and logistics planning and preparation, along with the use of automated tools, are some of the key solutions to mitigate these risks and optimize operations.
Frequently Asked Questions About Detention and Demurrage Rates
Demurrage and detention rates are charges applied by ocean carriers when cargo remains beyond the agreed free period at a port or terminal. Demurrage is for containers in the terminal, while detention applies when containers are held by the consignees. Rates vary based on carrier, location, and container type.
To calculate these charges, identify the end of the free period and the pick-up or return date. Multiply the daily rate by days exceeding the limit. Many carriers offer online tools for instant calculations using the bill of lading number, simplifying the process.
While rates aren’t universal, they are subject to “fair and reasonable” guidelines. Regulatory bodies, like the Federal Maritime Commission (FMC) in the US, oversee adherence and mediate disputes, ensuring a balanced approach between carriers, shippers, and consignees.
