Avoid Demurrage Fees with these 6 Tips

There are number of causes for detention and demurrage charges especially during the peak seasons and the most common are: port congestion, capacity constraints, unusual weather phenomena. Then we have more standard reasons such as delays due to late receipt of documents, loss of documents, customs clearance or compulsory cargo inspection and fumigation. Although delays caused by the aforementioned are sometimes outside the shipper’s control, it is usually the shipper who is responsible for the bill. 

Demurrage waiver claims are part of the cargo claims process.  The terms demurrage and detention are often used interchangeably; however, they are not the same thing! 

To confuse things even further, rates and policies differ from port to port, and from shipping line to shipping line. 

Regardless of the cause of a container being left at a port too long or if there’s a delay in returning empty equipment, surprise demurrage and detention charges can make a huge dent to a shippers’ bottom line. 

What is Free Time? 

To understand when demurrage and detention fees will begin to accrue, it is important to know the “free time” applied to your specific shipment. As the free time or period will differ from port to port and carrier to carrier you will need to request this information from your shipping line for each shipment you book. Related to free time is “Last Free Day” or LFD. LFD refers to either one of two situations:  

1. The last free day at the port of discharge before a carrier starts charging demurrage, or

2. The last free day that a container that has been removed from the port for destuffing should be returned before a carrier starts charging detention. 

What is Demurrage? 

Demurrage charges are costs incurred for a full container is left at the port of discharge for longer than the free time granted by a carrier. Demurrage is charged when containers are still FULL and UNDER THE CONTROL OF THE CARRIER and have not been collected by the consignee at the port of discharge. Once free time expires, you will be charged a daily fee for using the container until your cargo is removed. 

Demurrage fees apply to both import AND export containers: 

IMPORT: Demurrage can be applied if a container is not collected within the free time from the port of discharge. 

EXPORT: Demurrage can be applied if a container is delivered to port of load before the specified gate in date for a specific vessel. 

Demurrage is payable BEFORE the container can be collected from the port of discharge, therefore, knowing when you free time expires and advance planning is the best way to limit your exposure to demurrage fees.

Demurrage fees are usually paid to a terminal or port operator. 

Tips to avoid demurrage charges: 

1. Proactive planning: Make sure you are aware of how many free days you are entitled to and your last free day to ensure you remove your container from the POD before your free time expires. 

2. Ensure your documents are in order to avoid delays in clearing your cargo at POD: This entails ensuring your commercial invoice reflects all the correct details, such as terms of sale, certificate of origin, etc. The following is a list of documents you will require to clear your shipment: 

●     Commercial invoice

●     Bill of lading

●     Packing list

●     Arrival notice from the carrier, etc.

3. Pre-clearance of your cargo: It is possible to pre-clear your cargo before it arrives at POD. As long as your paperwork is complete and submitted to customs agents, you should be able to clear your cargo five days before a vessel arrives at POD. This will also assist when coordinating with a trucking or rail company for inland transport. 

4. Coordination with your transporter and with freight forwarder: Whether the inland journey is via road or rail, it is important to make sure your chosen transporter can collect your container well within your free time in order to avoid demurrage accruing. Also, ensure your nominated freight forwarder releases transport documents before free time expires.

5. Consider the services of a bonded warehousing facility: Some freight forwarding companies offer bonded warehouse facilities. This may be a great option to avoid demurrage accruing if something goes wrong, such as delays in the clearance of your container. The bonded warehouse option involves the collection of your container from the terminal (hopefully before demurrage starts to accrue), and temporarily storing the cargo in a warehouse until you manage to resolve the delay and then deliver the cargo to its final destination. One major advantage of this option is that storage fees at bonded warehouse facilities tend to be much lower than demurrage fees. 

6. Request free time extension: Communication with your shipping line is important, at the time of booking your shipment, it is often possible to negotiate a longer free period at a POD.

Demurrage in most cases is out of importer or exporter hands. However, there are multiple ways to mitigate the risk of unpleasant additional charges.

Try to negotiate instead of accepting a quote as it is. Always check invoices received from the carriers, you will be surprised how often they overcharge you. At Recoupex we witness many successful demurrage waiver requests being granted by the shipping lines. The most important thing remains to justify your claim and to submit the claim timely. Timing is everything!

Recoupex is a hub of transport lawyers – experts in cargo claims. We assess your case quickly. We have successfully recovered claims from Maersk, Sealand, Hapag-Lloyd, Mediterranean Shipping Company – MSC, CMA CGM, and other carriers.

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