Learn about detention and demurrage charges in shipping, including free container and storage periods, and practical tips to avoid extra costs.
Detention Charges
Detention charges are additional fees imposed by shipping companies when a container is used beyond its designated period. These fees compensate the shipping company for losses incurred due to the container not being returned on time. Detention charges are typically calculated daily, starting from the day after the free usage period ends. The specific amount depends on the shipping company's regulations and the type of container. For example, the free period for standard containers may be 7 days, while special containers like refrigerated or hazardous containers may have a longer free period.
Demurrage Charges
Demurrage charges, also known as storage fees, are imposed by the port when cargo remains in the port yard beyond the free storage period. These fees compensate the port for the additional storage costs incurred due to the cargo not being cleared or picked up on time. Demurrage charges are usually calculated daily, starting from the day after the cargo arrives at the port. The specific amount depends on the port's regulations and the type of cargo. Most ports provide a free storage period, typically 7 days, after which demurrage charges begin to apply.
Free Container Period
The free container period refers to the time during which the user can use the container for free. This period starts from the time the user picks up the container from the yard until the user returns it. The length of the free container period depends on the shipping company's regulations, typically 7 days, but it can be extended based on an agreement between the user and the shipping company. If the user fails to return the container within the free period, detention charges will start to apply.
Free Storage Period
The free storage period refers to the time during which cargo can be stored in the port yard for free. This period starts from the time the cargo is unloaded from the container until the cargo is picked up. The length of the free storage period also depends on the port's regulations, generally 7 days, but some ports may offer shorter or longer free storage periods. If the cargo is not picked up within the free storage period, demurrage charges will start to apply.
Understanding the calculation methods and deadlines for these fees is crucial for avoiding additional costs in international trade and logistics.
How to Avoid Paying Detention Charges
What Are Detention Charges?
Detention charges refer to additional fees that shippers need to pay to the shipowner or freight company when cargo remains in the container beyond the free period. These fees compensate the shipowner or freight company for losses incurred due to the cargo occupying the container.
How to Avoid Paying Detention Charges
Understand Contract Requirements: Carefully read and understand the contract provisions regarding time allocation to ensure you are aware of the length of the free period and make appropriate arrangements.
Plan Ahead: Plan the arrival time of each batch of cargo in detail and work with staff to develop an unloading plan to ensure timely processing.
Clear Customs Early: Complete customs clearance procedures for the cargo as soon as possible to arrange for the timely pickup and transportation of the cargo, avoiding detention charges due to clearance delays.
Choose a Reasonable Container Pickup Method: Consider picking up the container directly to the empty container yard for unloading, which can avoid additional transport steps, saving time and reducing detention charges.
Cooperate with the Yard: Understand from the shipowner which yard the container will be returned to and contact the yard for direct pickup and unloading, allowing the container to be counted as empty and avoiding detention charges.
Precautions
Detention charges are usually calculated from the first day after the free period ends, and the specific fee standards may vary by shipping company. When importing a large number of containers, using these methods can prepare more time for customs clearance and release, reduce intermediate steps, save empty container return fees, and avoid or reduce detention charges.
By following these measures, you can effectively avoid or reduce detention charges and lower transportation costs.
Why Do Some Cargoes Incur Demurrage Charges Instead of Detention Charges?
Demurrage charges and detention charges are two different fees applicable in different scenarios.
Demurrage Charges
Demurrage charges refer to the fees for the overdue use of cargo at the destination port terminal or yard, typically incurred before the consignee clears customs and picks up the cargo. If the cargo stays at the port longer than the free storage period, demurrage charges will apply. These fees are collected by the port authorities to compensate for the additional costs incurred due to delayed cargo clearance.
Detention Charges
Detention charges refer to the fees for the overdue use of containers under the control of the consignee, i.e., after the consignee clears customs and removes the container from the yard or terminal but fails to return the empty container within the specified time. If the container is used beyond the free period at a location outside the consignee's control (such as a logistics center), detention charges will apply.
In summary, demurrage charges apply to cargo that exceeds the storage time at the port, while detention charges apply to containers used beyond the specified period outside the port area. The choice of which fee to pay depends on where the cargo is stored overdue and who is responsible.