Difference between Demurrage and Detention in import with example

Define Demurrage & Detention in a simple language with Example.

Demurrage and detention both refer to fees incurred by importers and exporters alike when containers are either not picked up or dropped off within the appropriate amount of time. It does not matter if those containers are empty or full, nor does it matter if the containers are being stored in a port, outside of a port, terminal, or depot. 

For imports and exports alike there are time frames associated with containers. Regardless of the method used or the location where the container ends up, there is a length of time allotted for pickup and removal of the containers from the given locations. Free time is a given amount of time allotted for such pick up. If containers imported or exported are not properly picked up and removed from a port, a terminal, or anywhere else, they start to accumulate charges much like a car parked in a public location accumulating hourly charges.

Example of Container Demurrage 

A container is discharged off a ship on the 1st of June and the consignee only approaches to retrieve the container for delivery on the 11th of June. Assuming we consider the standard free days offered by the shipping line (different from port free days) is 7 days from the date of discharge, the free days should expire on the 7th of June. Therefore, the box would have been stored in the port/terminal for a total of 11 days when you collect it on the 11th of June.

 11 days – 7 days = 4 days of overstaying

 So, the shipping line will charge the consignee demurrage for 4 days (7th to 11th June) at a pre-fixed rate. 

Example of Container Detention 

Referring to the above example, the customer took the container out of the port/terminal on the 6th of June which is within the free period, but the empty container is only being returned to the nominated depot on the 18th of June. 

So, the shipping line can charge the consignee detention for 11 days from 7th (expiry is 8th of June) to the 18th of June at a pre-fixed rate.

Its Effect on Exports

These effects on exports can be rampant. Not only can It add to the cost for shippers trying to export goods but it can cause scheduling delays. If it happens regularly this can add up in terms of time wasted, delays, business lost, and fees accrued. It can also cause other delays when there is insufficient space available for incoming containers or outgoing containers because of things that are currently in storage or delays because additional containers have to be moved onto vessels for which they were not originally scheduled.

Let’s assume that one company is trying to export 5 containers at once all five of which contain items that have to reach their next port by the end of the month. With a single issue affecting one of those containers, that container might be charged with a detention fee because it wasn’t returned on time with the necessary goods for its shipment. Not only does the company face charges but that single container will not make the deadline now because it has to be rolled over onto the next available vessel which doesn’t leave for three days. Three days beyond the allotted time a cruise 3 days worth of detention charges. Subsequently, business is lost because the people relying upon that shipment arriving on time were let down by their company.

What You Should Know When Requesting an Ocean Freight Quote

What You Should Know When Requesting an Ocean Freight Quote

Ocean freight is one of the biggest costs for importers today, and it’s not exactly getting any cheaper. Ocean freight cost has been and is steadily increasing, which makes it hold a bigger and bigger piece of importers’ overall expenses. For this reason, it is critical to know how to calculate the shipping cost. It is so important to provide the most complete information to your transportation partner when requesting a quote, in order to get the most accurate ocean freight cost.

Origin/Destination:

The most basic required information is to know where the cargo needs to be picked up and where it needs to be delivered. Pay attention to your agreement with your supplier, and find out what exactly your supplier is responsible for. Are they only loading the container, and it needs to be picked up from the factory/warehouse or are they delivering the container to the closest port?

Equipment/Container Size:

The most commonly used containers are 20 ft, 40 ft and 40 ft high cube. Your supplier can provide this information according to the amount of goods you have ordered,or you can check with your forwarder.

Transit Time:

Inform your forwarder if you need a fast service or not. Some carriers have longer transit time with better rates, and significant cost savings can be made if your shipment is not time sensitive.

Merchandise Ready Date:

This is also very important information to have. Ocean freight rates are seasonal and change frequently. Even if you don’t have an exact date, provide an estimate.

Customs Clearance:

Customs clearance needs to be done at the destination country according to country regulations. Ask your forwarder if they provide that service. If not, find a broker and request a separate rate from them.

Charges at Destination:

As each country has their own regulations, just as each port has different charges. Find out if there are any additional charges at the port of destination.

Door Delivery:

If you need to deliver the container to a specific address, provide the full address to your forwarder to get an exact door delivery rate. Try to determine how long it would take to unload the container at final destination. This could prove to be an extra cost, as most truckers give 2 hours free time then charge by the hour after that.

Commodity:

Always inform your forwarder about the product that you are shipping. If it’s a hazardous shipment, it requires special permits to carry the cargo.

In order to know the market, you have to do your research. Contact several freight forwarders for rates, to get a good idea of the current rate level and whether or not your current transportation partner is providing you with competitive rates. This doesn’t mean that you base your decision on who provides the lowest rates, many other factors are important when choosing service providers.