Demurrage and detention charges have drastically increased in recent years. Read this blog to get a complete overview of these notorious surcharges. Know how much demurrage and detention charges you’ll pay and how to avoid them with xChange.
Freight forwarders and shippers are no stranger to the dreaded demurrage and detention charges. Charged by shipping lines, these surcharges have become one of the most controversial topics in the shipping industry in recent years.
In short, you pay demurrage and detention charges when you exceed the use of containers. They continue to add up every day on a per-day basis till you deliver the containers back to the shipping lines. Such high charges may be “unjust and unreasonable” for freight forwarders. But for shipping lines, they ensure the efficient use of their containers.
Ten years ago, these fines were rare. But today, they are quite common and can easily exceed $100 per container per day. And even more with disruptions like the COVID-19 pandemic, the Russia-Ukraine war, and the US labor crisis skyrocketing these fees!
We’ll see what impact these disruptions have had on demurrage and detention charges in 60 ports across the world. And look for solutions. But you can also simply cut to the chase and get a quick lowdown of how xChange can help you avoid these expensive fees with shipper-owned containers (SOC). Or, click on the banner below to hear it directly from our experts. They’ll answer all your doubts and queries.
What are demurrage and detention charges?
Let’s start from the basics.
We know shipping lines provide containers to their customers for door-to-door transportation of their goods. These containers are called carrier-owned containers (COCs).
For shipping lines to turn around their containers, shippers need to return these COCs within a stipulated time called ‘free days’. The free days determine the number of days a shipper can use the container for free. In conventional shipping, the free days are often somewhere between 3-5 days after the container has been discharged from the vessel.
If you fail to return these containers within the free days, the shipping lines start charging late fees called demurrage and detention. These charges are usually calculated on a per-day basis.
In principle, demurrage and detention have two main purposes:
- Compensating the shipping line for the use of its container
- Working as an incentive for the customers to return empty containers and have a fast turnaround
Now, let’s understand the difference between demurrage and detention charges.
Know the difference: Detention vs demurrage
Most people confuse demurrage and detention fees to mean the same. It’s true that conceptually both are essentially ‘late fines’ for the return of containers. Just as you’d have in a library. But the difference between the two charges depends on the location of the containers at the time of the delay.
You pay a demurrage charge for the delayed use of the container within a terminal. Demurrage charge comes into play if the full container isn’t moved out of the terminal to be unpacked within the free days.
You pay a detention charge for the delayed use of the container outside a terminal. A detention charge comes into play if the container isn’t returned empty to the shipping line within the free days.
Unfortunately, such delays are very common. In fact, you’re likely to experience demurrage and detention during both import and export. Here’s how:
Demurrage & detention during import
Let’s picture your container has unloaded at the Port of Los Angeles. But the congestion on the roads to the port has delayed your truck to reach the port in time. As a result, your cargo container is stuck at the port beyond free days. Now, the shipping line will charge you demurrage until your container is picked up and gated from the terminal. Usually, demurrage has to be paid before the cargo is picked up from the port.
Now, let’s imagine your container has reached the distribution center. But due to the shortage of labor, you were not able to unload the cargo in time. As a result, the container is now stuck at your distribution center beyond free days. The shipping line will now charge you detention until the empty container is returned to the carrier. These charges are an attempt to decrease the container’s turnaround time and make shipping more efficient.
Detention & demurrage during export
It’s possible for demurrage charges to occur during export. Let’s picture your container waiting to get loaded on board a vessel in the port of Shanghai. But due to issues in the documentation, the container is not able to load in time for the vessel’s scheduled departure. The container will, therefore, have to stay in the port until the next departure. The shipping line will now charge you demurrage for the storage period until then.
Now, let’s imagine you have picked up an empty container from the shipping line to load your goods. But the weather turns bad and you’re unable to send the container to the terminal in time. Typically, shipping lines allow 5 free days to pick up the container, load it, and return it to the port. The shipping line will now charge you detention for the extra days before the container returns to the terminal.
What drives demurrage and detention charges?
Well, by going through the examples above, you must have understood that almost anything can cause delays in the shipping process. If you’ve been in the container logistics industry for long, you’d know that the supply chain doesn’t always flow in time.
Containers often get stuck both inside and outside a terminal. Let’s go over some of the most common reasons for delays incurring demurrage and detention.
- Discrepancy or error in documentation
- Late receipt or loss of documentation
- Issues in custom clearance or cargo inspection
- Congestion at the port
- Labor strike or labor shortage at the port
- Delay or abandoning of cargo by the consignee
- Failure to pay freight charges in full
- Bad weather
You already have to pay so many charges in international freight shipping. Certainly, you can avoid demurrage and detention charged by taking precautions and preparing well in advance. But in the last several years, we have seen unprecedented external causes to shoot up the demurrage and detention tariffs. Let’s look at what the industry has undergone in the last few years.
Increase of detention and demurrage charges in recent years
In the last few years, shipping lines have drastically reduced the number of free days and increased the tariff of demurrage and detention charges. These soaring demurrage and detention charges have become the most hotly debated topic in the shipping industry.
In our Demurrage & Detention: Annual Benchmark 2022 report, we compared these charges across 60 ports and 8 shipping lines from 2020 to 2022. Our analysis shows that the global average of demurrage and detention charges has increased from US $586 in 2020 to US $664 in 2022. It’s a steep rise of 12%!
A rise of 12% on a per-day basis can rack up to become a huge amount! And hence, shipping lines were labeled ‘abusive’ for increasing these surcharges. Especially, when the entire shipping industry is extremely volatile.
Now, you must be wondering why shipping lines would do so? The answer lies in the disruptions caused by the pandemic that collectively rocked the entire industry.
With the onset of the COVID-19 pandemic in 2020, shipping lines reduced services on major trade routes. So, they were unable to reposition empty containers to key demand locations. This led to port and terminal congestion, as the empty containers couldn’t get evacuated. The carriers were then burdened by terminal storage fees and the leasing cost for each container. As a means of damage control, they began to pass on these costs to shippers in the form of increased demurrage and detention charges.
Unfortunately, the industry has not yet recovered from the impact of the pandemic. In fact, the recovery has further slowed down by the new waves of disruptions caused by the Russia-Ukraine war, fresh lockdowns in China, the US labor crisis, and port congestion. And so, there hasn’t been much relief in these carrier surcharges.
Top 10 most expensive ports for demurrage and detention
In our comprehensive report on the latest trends of demurrage and detention charges, we’ve ranked 60 ports on the basis of highest to lowest charges across shipping lines. Let’s look at the top 10 most expensive ports for demurrage and detention in the list.
|Top 10 most expensive ports for D&D charges|
|Ranking in 2022||Port Location||Average D&D charges after 14 days for standard container in USD|
|7||Hong Kong, S.A.R||$1,062|
These are the average accumulated demurrage and detention charges you will pay after 14 days for a standard container. So according to this data, if your container is stuck in New York (the US) for 14 days, you’ll have to pay the shipping line a whopping $3,182!
Plus, you can also see that the top 5 most expensive locations are all in the US. This is because the demurrage and detention charges not only differ from port to port but also on the basis of regions and circumstances.
So what has happened in the US for the charges to be this high? You must know that China is the US’ biggest trade partner. Since American ports were overwhelmed by Chinese imports during the pandemic, the former suffered from the worst congestion and container pile-up. These high charges are a result of containers stuck both inside and outside the American ports.
Top 10 cheapest ports for demurrage and detention
Now, let’s look at the top10 cheapest ports for demurrage and detention from the list of 60 ports ranked highest to lowest.
|Top 10 cheapest ports for D&D charges|
|Ranking in 2022||Port Location||Average D&D charges after 14 days for std container in USD|
These are the average accumulated demurrage and detention charges you will pay after 14 days for a standard container. So according to this data, if your container is stuck in Busan (South Korea) for 14 days, you’ll only have to pay the shipping line $114.
So why does Busan have such low demurrage and detention fees? This is because the South Korean port has high productivity and very few restrictions. Plus, Busan acts as a transshipment facility. This reduces demurrage and detention requirements, as cargo is just transiting through the hub.
Detention and demurrage charges by popular shipping lines
We have just seen how demurrage and detention charges vary on the basis of port, region, and circumstance. But the biggest decision maker about these charges are the shipping lines themselves. So, choosing which shipping line to opt for can make a huge difference in these charges.
The industry is, today, ruled by few shipping lines. Let’s look at how the demurrage and detention charges differ across 8 of such shipping lines. Here are the shipping lines ranked by highest to lowest D&D charges across ports:
|D&D charges by shipping lines|
|Ranking||Shipping Lines||Average D&D charges after 14 days for std. container in USD|
You should be careful when narrowing down your carrier service. As seen in the table above, different shipping lines have different demurrage and detention tariffs. One informed decision can save you thousands of dollars in the long run! Let’s see this through an example.
At the port of Rotterdam, the average detention and demurrage charge at the end of the two weeks period is $469. But if you choose to ship with Maersk, the demurrage and detention fee becomes $679. Compared to the port’s average, you’d be increasing your container shipping costs by about 45%. This is huge!
Instead, you can opt for COSCO Shipping with a demurrage and detention charge of $176 at Rotterdam. This way, you reduce your container shipping costs by almost half. Therefore, carefully comparing them before making a choice can save you a lot of money.
There are many such tips, comparisons, learnings, comments, and the latest analysis to discover in our report. You can access all this information for free in our Demurrage & Detention: Annual Benchmark 2022 report. Get an in-depth overview and industry insights about demurrage and detention charges across 60 ports and 8 shipping lines for free. Click on the banner below to get your copy today!
How to prevent demurrage and detention charges?
Demurrage and detention charges are in most cases out of your hands. It’s best to plan the transportation of your goods and your finances according to these charges.
But, what if we tell you there are multiple ways to mitigate the risk of unpleasant additional charges? It’s all the more important now — when the demurrage and detention charges are leading to record-breaking freight rates.
It’s true — you can avoid demurrage and detention charges. And there are multiple ways to go about it. Let’s have a look at some of the most efficient ways of preventing these dreaded surcharges.
Be prepared for local customs
Ensure that you are aware of the customs process and the port regulations at the location your goods are headed. Most importantly, dispatch your cargo as far in advance as you can! This gives you more flexibility for unforeseen challenges, such as bad weather or backlogs at the port. The same applies to load/unloading times, where just small-time buffers can do the trick.
Leave no room for miscommunication
It’s important to be 100% sure about what “available” means. Is your container available as soon as it’s unloaded off the vessel? Or, only when a truck can actually pick up your equipment? For some ports, a container is available as soon as it hits the ground. While others argue that it needs to be accessible to be available. Even though it confuses, it all comes down to the contract you sign! In the end, shippers are almost always responsible for per diem fees.
Manage your schedule efficiently
It’s important to be on time and be prepared. Especially, with all the documentation required to move cargo from one location to another. Per diem charges quickly emerge when there are discrepancies in the address details, voyage details, and cargo or freight particulars. The worst-case scenario is obviously when you lose important documents!
Negotiate terms and free days
Try to negotiate instead of accepting a quote as it is. Negotiate with port officials or carriers. You can, for instance, request more free days for your cargo and thereby save demurrage and detention. This will buy you some more time and might work as a strategy to avoid unexpected charges. Often, port officials grant shippers with a large volume of cargo more time.
Avoid demurrage and detention charges with SOC containers
Using shipper-owned containers (SOCs) instead of COCs helps you avoid demurrage & detention charges. Just as the name suggests, SOCs are owned by shoppers. So when you lease containers from shippers, you’re under no obligation to pay demurrage and detention charges to carriers. Amazing, right?
You simply use SOCs for one-way use and return them to your partner’s depot at the port of destination. In fact, most of the time, you don’t even have to pay any per diem charges on top of the pick-up charges. This is because most container owners aren’t only interested in a quick turnaround. They, in fact, want you to just reposition their equipment. In that way, they can keep a good balance and charge almost no per-diem fees. It’s a win-win!
Now comes the big question: Where can you lease SOC containers from container owners directly? Well, we got that covered on xChange.
Get SOC containers on xChange without any commission
You know by now that the shipping industry is volatile. And high demurrage and detention charges only add pressure on shippers. In this unpredictable market, it’s best to look for alternate container sourcing methods for flexibility and security.
And xChange can help you with that. You can easily lease SOC containers from genuine container owners on our online container leasing platform. We have 1000+ members leasing containers for one-way use on a daily basis in 2500+ locations globally.
All you’ve to do is state your requirement, including pick-up and drop-off locations and the container type. You’ll receive a list of offers from vetted container companies or owners in one dashboard. Compare these offers carefully to shortlist the best deal for you. You can also refer to their company profiles and peer reviews for more informed decision-making. Once you have shortlisted the deal, directly negotiate with the owner and book containers on your terms and budget.
Yes, it’s that easy to find SOC containers for your route. And you can lease these containers without paying any commission to xChange!
We have over 10,000 SOC containers on our platform. Want to know about their availability on your route? Or, do you need more clarity on how SOCs can eliminate demurrage and detention charges? You can get all your questions answered by talking to our experts directly. Simply click on the banner below to kickstart your journey — free of demurrage and detention.
Demurrage and detention: Common FAQs
Why is demurrage charged?
Demurrage is charged when shippers fail to move the containers out of a terminal within the free days. It's a fine for the delayed use of shipping line's containers inside a terminal.
Who is responsible for detention charges?
Shippers and consignee are responsible for detention charges for the delayed use of containers outside a terminal.
What is detention free time?
Detention free time refers to the number of days a shipping line allows a consignee to use the container outside a terminal for free. Once the free time ends, the shipping line will start charging detention charges on a per day basis.
What is a detention fee?
Detention fee is a surcharge levied by shipping lines for delayed use of container outside a terminal by a shipper.