What is Demurrage? Detention / Laytime / Despatch

Here we are going to identify a special kind of penalty in the shipping industry that is called demurrage. An importer, exporter, freight forwarder, or any related party involved in the shipping industry should know about demurrage.

 What is demurrage?

The shipping industry used the term demurrage. The meaning of demurrage is If any case exceeds the agreed time of the loading or unloading process charter party company needs to pay the shipowner a penalty.it‘s called demurrage.

Related video, Demurrage/Detention / Laytime / Despatch

What are the Reasons or causes for demurrage?

Some reasons are under the control of the shipper, while others are not. Here are some common causes to identify for demurrage.

1. The Consignee who is the person responsible for receiving goods is not aware of the correct arrival time or receiving date. Therefore, the shipment could not be customs clearance and picked up on time.
2. When not receiving relevant custom clearance documents to the consignee on time.
3. Received documents were incorrect or incomplete, consignee cant releases the goods.
4. The cargo is not matching with sales order
5. The delays occurring to the container due to custom examination hold.
6. If there was a dispute between the supplier and the consignee.

How to avoid demurrage fees?

Demurrage charges are common and most of the time unavoidable. But there are a few ways demurrage charges can be avoided.

1. The better planning process for clearing the shipment.
2. Need to arrange the pickup of the shipment as soon as possible. This will help available truckers to handle the shipment.
3. Keep alternative plans
4. In shipping, it is better to keep a backup plan as a second trucker. So, there are no delays.
5. Always keep in touch with the forwarder to get information regarding your shipment status
6. Giving correct instructions on-time delivery for those involved with your shipment to avoid any delays or misunderstandings.

What is the purpose of charging Demurrage?

• Encourage the importers to release the cargo as soon as possible.
• Discourage the exporters to bring the containers too early.

How to charge demurrage?

• Generally, demurrage applies per day and per container, per shipment wise, however, it varies with the carrier, terminal, and warehouse.

• If you are importing LCL (less than a container load), no need to pay demurrage for the full container(FCL), the carrier will design to pay fees according to the spaces you occupied at the container freight station(CFS).

Demurrage for ships/vessels?

When the agreed laytime exceeds the specific ports, the charterer is obliged to pay demurrage as a penalty to the ship owner. It is an extra cost to a charterer.

Who is liable for paying demurrage for ships?

Charterer is liable to pay demurrage for exceeding the laytime.

To whom pay demurrage for the vessel?

Demurrage paying to the shipowner.

Why pay demurrage?

Charterer is taking extra time for the loading and unloading process means which creates a delay. On the shipowner’s side time is the cost. So as a penalty charge charter need to pay the shipowner.

Demurrage for containers?

As a container user, you need to pay demurrage charges when extra usage for the container. They add the demurrage charges adding by days until containers return to the shipping line. Normally demurrage charges on a per-day basis. Sometimes it is an unreasonable cost to freight forwarders. But ensuring shipping line efficiency and availability of the containers shipping line has `a charge for demurrage.

What are the demurrage-free days for containers?

Shipping lines provide containers for their customer for door-to-door operations. It’s called carrier-owned containers (COC). So, need to return containers within the specific time period. That time period’s days are called demurrage “free days”. If exceed the free days, you are liable to pay demurrage for the shipping line or container owners.

There are main two purposes of demurrage,

• Paying money to the shipping line for the container additional usage
• Demurrage act as an incentive for the customer for returning empty container to the shipping line quickly.

How to apply Demurrage for importers?

After arriving at the ship port, the container arrived at the port terminal, and the importer or consignee can release the container. If any case container couldn’t release after the free days, the importer has bare demurrages.

How to apply Demurrage for exporters?

What is the difference between Detention and Demurrage?

Detention and demurrage both are late fines. But there is a difference with the location of the container.

Demurrage chargers are needed to pay for the container delays at the terminal. if a full container has not moved out of the terminal and unpacked within the free days, you need to pay demurrage charges as a fine of late charges.

If the occurring delays in container use out of the terminal, you need to pay late charges as a detention charge. Detention chargers have come into the scenario when empty containers return after the free days.

Common reasons for demurrage and detention charges?

• Documentation errors or discrepancies
• Loss of documentation
• Issues with the customs inspection and clearance process
• Congestion at the port or terminal
• Payment failure of freight chargers and port handling charges in full
• Labor issues at the port or terminal. Such as labor strikes or labor shortage
• Bada weather conditions-affect to port and terminal operations
• Issues with equipment cargo handling-Lack of cargo handling equipment and failure of machines and equipment
• Delays of consignee

Prevention of the demurrage and detention charges?

• Prior to preparing for the local customs procedure
• Follow up on shipment status from the loading of the first carrier until the port arrival.
• Be prepared for shipment clearance as the schedule of the shipment
• Negotiate terms and conditions and free days

Who is responsible for detention charges?

Shippers and consignees are responsible for the extra usage of the container out of the terminal. So detention chargers need to pay the shipper or consignee for the container owner.

What is the detention free time?

It is the time period that has provided shipping lines for container operation out of the terminal. If any case exceeds the free time period which is agreed before, then starting detention chargers on per day basis.

What is a detention fee?

It is a fine for exceeding free time of the agreement with the shipping line or container owner out of the terminal till returning the container.

What is the opposite of the demurrage charges?

Demurrage is a fine for late chargers. So opposite of demurrage is saving time called despatch.

What is despatch?

Demurrage chargers and despatch chargers can be applied for bulk cargo shipment which is covered and governed by charter parties. If the loading and unloading have been completed before the agreed time period, it is saving time as well as it is beneficial to the shipowner. Despatch is like a bonus payment for the shipowner. Commonly dispatch rate is haft of the demurrage, but it varies with the shipowner, charter party, and contract.

What is lay time?

Laytime is an agreed time period for a charterer is allowed to complete the cargo loading and unloading process at a specific port.

What kind of time does not count as laytime/ what are the exemptions of lay time?

• Waiting time for a berth
• Bad weather conditions at the port
• Port strike

Related video, Demurrage/Detention / Laytime / Despatch

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