Demurrage
What is demurrage?
Demurrage refers to the additional charges imposed on the owner or operator of a vessel, freight car, or truck for delaying the use of equipment or facilities beyond the agreed-upon time. In the context of maritime shipping, demurrage applies to the time that cargo remains at the port or terminal beyond the allotted free time for loading or unloading. These charges compensate the carrier or terminal operator for the costs incurred due to the extended use of their equipment or facilities. In essence, demurrage charges serve as a financial incentive for prompt cargo handling and transportation, encouraging efficient use of port facilities and equipment.
When do demurrage charges start?
Demurrage charges start when the allowed free time for loading or unloading cargo at a port or terminal has expired. This period of 'free days' typically begins once the vessel has arrived, is ready to discharge, and the cargo is made available. Once the last free day has past, demurrage accumulates until the cargo is fully discharged or removed.
How are demurrage charges calculated?
Demurrage charges are typically calculated based on a daily rate and accrue for each day that the cargo remains at the port or terminal beyond the free time allowed. The calculation of free time considers factors such as the type of cargo, the size of the vessel, and the port's operating schedule.
How much is demurrage per day?
Demurrage charges per day vary widely depending on factors such as the type of cargo, the shipping line, the port, and the contract terms. Typical rates can range from around $100 to $300 per day for containers, while bulk cargo demurrage rates can be significantly higher, sometimes reaching thousands of dollars per day. The specific rate is usually negotiated in the shipping contract.
Who is responsible for demurrage charges?
The party responsible for demurrage charges varies depending on the terms outlined in the transportation contract. In most cases, the consignee or the party taking delivery of the cargo is responsible for demurrage charges incurred after the free time expires. However, contractual agreements may assign responsibility differently, depending on the terms negotiated between the parties involved.
How to reduce and avoid demurrage cost
To reduce demurrage charges, ensure that all cargo documentation is complete and accurate to prevent delays in customs clearance, and plan for efficient loading or unloading within the allocated free time. Coordinating closely with port authorities, shipping agents, and trucking companies to avoid unexpected holdups is also crucial. Proactively extending free time through negotiation or securing additional storage options can further reduce the risk of incurring charges.
How to dispute demurrage charges
To dispute demurrage charges, gather evidence such as timestamps, communication records, and any documentation showing that delays were beyond your control (e.g., port congestion or customs issues). Present this information to the shipping line or terminal operator, clearly outlining the reasons for the dispute. It’s also important to review the contract terms to ensure the charges align with the agreed-upon conditions.
Demurrage vs. detention
The terms detention and demurrage are frequently confused. While demurrage relates to delays in port or terminal operations, detention refers to delays in returning equipment, such as containers, to the carrier's designated location. Demurrage charges apply to delays at the port, while detention charges apply to delays in returning equipment to the carrier's possession.