Demurrage, Detention, Per Diem… Oh My! 6 Tips to Avoid Additional Charges

Can't bear another detention or demurrage fee?

If you’re like most importers or exporters, you probably shuddered when reading the subject line.   Oh, the horror of receiving an unexpected bill showing demurrage, detention, or per diem!  Not only did you not plan for those fees, you may not be completely certain of the cause for such charges.

Well, I’m here to set the record (somewhat) straight.  Let’s talk about when you may see these charges and how you might be able to avoid them.

Demurrage

Demurrage is assessed on cargo that is left at the terminal beyond the allotted free time.  Free time in contracts can vary, so be sure to check yours to ensure you understand exactly how much free time you get.  Generally, the standard is 4-5 days.  Once that free time expires, you will be charged a daily storage fee (demurrage) until you pull the cargo from the terminal.  Demurrage amounts may differ based on terminal or carrier and often increase after an initial period of time.  Daily demurrage charges can typically range from $75 to $150 per container per day, but that’s just for the first 5 days or so.  Charges generally increase the longer the cargo stays on the terminal.

How can you avoid or minimize demurrage?  Here are three tips:

  1. Pre-clear your cargo and issue delivery instructions to your inland carrier in advance.  If you work with a proactive broker like Shapiro, your cargo will be pre-cleared whenever possible so that coordination with the truckers can begin well before free time expires.
  2. Have a trucker “back-up” plan.  If you’re dealing with a particularly congested port, having an alternate option for a trucker could be a life saver when time schedules become tight.
  3. Request extended free time.  This only works for large shippers though, since they are based on the volume of containers you have arriving on a vessel at any given time.  You might be wondering how much shipping would get you to the “large shipper” status.  That really varies from carrier to carrier but you’ll probably need to be moving at least 800 containers a year to be even considered for this perk.

A final thought about demurrage:  Because it must be paid before the cargo can be picked up from the port, you’ll often know about these fees early. While you can’t guarantee that you’ll never face a demurrage charge, advanced planning is the key to mitigating your exposure.

Detention & Per Diem

Detention is a tough one since you can hear it used in several contexts.

As with on-terminal storage, you also have a set amount of free time with the container itself.  Keeping the container beyond that free time often results in a detention charge, frequently called a per diem (per day) fee.   The amount of this charge can vary by carrier and port but usually ranges between $50 and $100 a day.

This is where it can get confusing.  You may also see a detention charge from your inland carrier as a trucking-related fee based on driver waiting time.  Typically, for imports, drivers will allow 1 to 2 hours free of charge to have the container unloaded so they can bring back the empty back to the port.  For exports, drivers will normally wait the same to bring the loaded container to the terminal for onboarding onto the vessel.  Anything beyond that waiting time will be charged as a driver detention charge.  With the domestic trucking market in a bit of disarray, courtesy of driver and chassis shortages, new restrictions on hours of service, equipment issues, and port congestion, driver wait times appear to be at an all-time high.

So how can you limit your exposure to detention fees?  Here are three tips:

  1. Dispatch cargo as far in advance as possible.  This gives the trucking company time to schedule the pick-up and/or delivery.  Make sure that the loading party (for exports) or the unloading party (for imports) is ready to take action when the container arrives.
  2. Negotiate more time for live loads/unloads.  If you know the container takes longer than the allotted free waiting time to load or unload, try to strike a deal in advance for a bit of extended time.  Otherwise, make sure you know your allotted free time and when the clock for billing starts.  At least then you can be cognizant of the coming fees while loading/unloading the container.
  3. Schedule your loading/unloading with the detention clock in mind.  This is important with dropped containers.  You may think you have longer than you really do.

Oh My!

I know that was a lot to take in so let’s do a quick recap.  Demurrage is issued when your cargo exceeds time allotted sitting at the terminal, and detention/per diem is the fee associated with keeping the equipment past the contractual time frame or could also mean the fees for making truckers wait extra time when loading/unloading containers.  Demurrage is paid to the port, and detention is paid to the steamship line that owns the cargo container and/or to the trucker.  If you get a bill for any of the above, it can’t hurt to double check both the terminal records as well as the proof of delivery from the carrier, just to confirm the dates/times.  With all the moves a container makes, mistakes can happen, so do a little checking to make sure there are no errors.  As always, we recommend partnering with a Customhouse broker and freight forwarder that helps you mitigate these additional charges by making sure your cargo is moved timely.

Do you have any horror demurrage or detention stories to share?  (Who doesn’t, right?)  Also feel free to ask us any other questions on this issue below.

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-- Angela Czajkowski
Director, Supply Chain

Comments

  • Mujeebur Rahaman

    Very useful tips

  • raffique ali

    Very useful info. I would like to use the info for presentation to a local chamber of commerce as it relates to cutting importation costs.

  • Shapiro

    We are so glad this information is proving useful!

  • Kerri McAlarey

    Would /should Bobtail charges be applicable if you have a drayage contract with a 3PL company ?.

  • Shapiro

    Hello Kerri,

    Thank you for posing this questions to us! The issue of bobtail charges, whether with a 3PL or a drayage provider, depends on the contract terms with your provider. If a special service was requested outside the scope of your normal agreement, you would need to pay the additional charges. However, you should try and leverage whether or not you were notified of the bobtail fees before the freight was moved to see if you could receive a reduction or have it eliminated.

  • Margaret

    Good day do you have to pay dumurrage for consignments through the airport also

  • Shapiro

    Hello Margaret,

    For air freight, it is recognized as storage, but the concept is similar. Due to how quickly air cargo is shipped, importers typically have 1-3 free days before any charges are incurred, but this also depends on the carrier as well as the airport.

  • Ibrahim Ghalib

    Here in Maldives , Port is managed by a public limited company. Per 20’FCL we have to pay US $186 and double this amount for 40’FCL at first as the handling charges.
    10 day period is given to clear the shipment and days are counted starting from the next day afterthe container discharged date. Consignee have to complete the Customs documentation process and lodge a container shifting request to the Port company through their online portal everyday sharp at 6pm, to make the container available for clearance. Only a limited number of containers can be requested per day based on a quota set for both 20ft and 40ft. All the consignees has to be at computer ready to click the request because the quota gets exhausted within seconds! Whoever fails has to try again next day at sharp 6pm again and so and so.
    For our recent shipment of 20ft, Shipping Line has put a wrong date on the Delivery Order as the due date and i was trying hard to do the online request to the Port to clear the shipment before due date (not knowing the due date shown is incorrect) and barely managed to lodge the request to clear on the last day. But at the last minute Ports Company informed that my container has past due date by one day and forced me to pay storage fees for 11days (including the free days as well) saying that its their regulation.
    Shipping line washed their hands away and no one took the responsibility and had no choice but to eventually US $ 55 per day for 11 days and thus over US $ 600 with tax.
    I personally do not believe that it is fair and justifiable in any manner to charge for 11days including the free days and even thought of challenging this at court but have to first study the laws and regulations here and discuss with a lawyer.
    When the cost of shipment goes like this ultimately prices had to be increased to cover the loss and end customer will have to face huge prices which is again not fair for the customer.

  • Tina

    I have a question? Our container arrived from Germany at Port Everglades on Friday the 30 of September. It cleared on Tuesday the the 4 th of October. They closed the port on Wed due to Hurricane Matthew. By Law can they charge me or is this price gouging ? We paid a door to door service .
    Thank you for any info I can get.

  • Shapiro

    Hi Tina,

    We’re sorry to hear about the delays caused by hurricane Matthew.

    It’s a tricky situation since the ports are run by different companies and each has their own tariffs. In some cases the port will allow an extra day if there is a unforeseeable reason for the port closure, but it depends on the terminal and port at which your container arrived.

    You should contact your broker to see if they can reach out to the port for leniency given the uncontrollable events that took place after the hurricane.

  • Marguerite

    I contracted with a French Co. to ship a 494 CFT container from France to Chapel Hill, NC, via Norfolk, VA. The French Co. partnered with a CA based Co., Schumacher Cargo Logistics, to handle Customs clearance and delivery to my home address. I paid Schumacher $ 1 150 for Demurrage, and $ 970 for Per Diem among other charges. My container was delivered to me on 31 July 2015. One full year later, the Carrier, CMA CGM sent me a bill for $ 1 250 for Demurrage and detention. I am arguing that I have already paid those charges, but the carrier insists I must pay them again. Is that legal ?
    Thank you very much for your help.

  • Shapiro

    Hi Marguerite,

    Thanks for checking out our blog!

    This should be a fairly simple situation to resolve since your Customs broker will have the invoice you paid for the charges. Simply reach out to your broker and explain the situation. They will be able to work with the CMA to show proof that the charges were indeed paid.

    Please let us know if you have any other questions!

  • Laurie

    We loaded a container and returned it ti the port. We then discover that we needed to get the container returned due to an error. How much does the port charge to have a carrier pickup this loaded container to return it later in the day

  • Shapiro

    Hi Laurie,

    Thanks for reaching out to Shapiro!

    You will need to contact your customs broker/forwarder to have them contact the port and determine what additional costs would be associated with getting the container returned. You will be responsible for the trucking charges, but there may be additional charges for pulling the container if for instance it is under a stack of other containers.

    Good luck with getting your container returned to your warehouse.

  • Mike

    Today I got an email from my freight forwarder saying “Today I get an email from them saying “there was waiting time during the pickup at the port. The warehouse is currently unloading the container. I will keep you updated with the pallet count once available.
    3.50 hours @ $45 = $157.50 waiting time”

    I’ve been working with them for a year and never received a note like this before. Why should I pay them for this? It strikes me as a moneygrab because maybe things in the home office are a little tight. The quote doesn’t say anything about possibly incurring this fee. Thoughts?

  • Shapiro

    Hi Mike,

    We understand your frustration with the situation.

    Depending on wait times at the port, truckers will bill for time spent waiting to gain entry and pick up the container. This has become more prevalent in the past couple years due to terminal inefficiencies and higher capacity vessels being unloaded.

    Your freight forwarder should be able to provide you with an invoice from the trucker highlighting the charges so you can see exactly what was billed. We recommend that you speak with your forwarder to determine if there were other factors that caused the delay and how to avoid them moving forward.