Demurrage and Detention- Reducing Fees and Boosting Efficiency

Demurrage and detention fees are significant cost drivers in the logistics industry, impacting supply chain efficiency and profitability. This post seeks to offer an exhaustive comprehension of these fees, their distinctions, and how they can affect your company operations.

Explore the factors contributing to high demurrage and detention charges, including port congestion issues affecting dwell times as well as the role of regulatory environments in fee imposition. In addition, this post will highlight internal organisational inefficiencies such as communication breakdowns causing delays and the importance of proper documentation procedures and how digital solutions, such as Demurrage & Detention dashboards by CARGOES Flow, can successfully address these challenges. 

This post will outline:

• best practices for minimising exposure to demurrage and detention fees through clear communication with carriers regarding shipment status
• utilising real-time tracking systems for better container management
• negotiating contracts with extended free time allowances and reasonable fee structures 
• identifying alternative transport routes during unforeseen disruptions and ensuring efficient coordination between internal departments.

Understanding Demurrage and Detention Fees

Demurrage applies when import containers are still under the carrier's control at port terminals.

Detention arises when exporters hold onto equipment outside of terminals beyond agreed-upon periods.

The distinction between these two fees is essential as it affects who bears responsibility for the costs.

Differences between demurrage and detention charges

Demurrage: Charged when cargo remains in the terminal after allowed free time expires.

Detention: Imposed if a container is held outside the terminal longer than permitted.

Impact on supply chain efficiency and profitability

Incurring high demurrage and detention fees can negatively affect your company's bottom line, disrupt supply chain operations, and damage relationships with carriers. Adopting proactive strategies to minimise exposure to these penalties is crucial for maintaining efficient logistics processes.

Factors Contributing to High Demurrage and Detention Charges

Several factors contribute to high demurrage and detention charges, impacting supply chain efficiency and profitability. 

Port congestion: Congestion at ports can increase container dwell times leading to higher fees.

Regulatory environment: Regulations may allow carriers more leeway in charging demurrage and detention fees.

Labour disputes: Disputes can cause delays and increase fees.

Weather conditions: Bad weather can disrupt port operations and lead to higher fees.

Infrastructure limitations: Inadequate infrastructure can cause delays and increase fees.

Unforeseen events: Events like the COVID-19 pandemic crisis can significantly impact port operations and increase fees.

To minimise exposure to these costs, logistics managers should stay informed about port conditions and be prepared for potential disruptions that could impact their operations, such as:

Internal Organisational Inefficiencies: Demurrage and detention fees can often be attributed to internal organisational inefficiencies, such as poor communication between departments or lack of proper documentation, resulting in increased costs.

Communication Breakdowns Causing Delays: Effective communication among various departments within an organisation is crucial to avoid unnecessary penalties associated with demurrage and detention charges, ensuring prompt resolution of potential issues.

Importance of Proper Documentation Procedures: Proper documentation procedures play a significant role in preventing delays that could lead to demurrage and detention fees, expediting the clearance process and container utilisation.

Don't let demurrage and detention fees eat into your profits - take proactive steps to avoid them.

• Communicate clearly with carriers: Provide carriers with regular updates via email or phone to prevent misunderstandings delays.

• Track shipments in real-time: Use a container tracking solution to monitor your cargo and take action quickly if issues arise.

• Negotiate favourable contracts: Work with carriers to secure extended free time allowances and reasonable fee structures.

• Plan for disruptions: Identify alternative transport routes to minimise disruption when unexpected events occur.

• Coordinate efficiently: Streamline processes and decision-making to reduce exposure to demurrage and detention charges.

Boosting Efficiency- Demurrage and Detention Dashboards in CARGOES Flow

The Demurrage and Detention Dasboard in CARGOES Flow users can toggle between table view and graph view, as well as between demurrage (or detention) days by carrier or by port, so all charges are presented in a customisable view. Clicking on any section of the bar graph or the legend opens a side modal, with the details specific to the chosen selection. This enables a quick infographic showing the high-level status of demurrage and detention, without dedicating extensive time. 

With demurrage and detention filters, CARGOES Flow users can filter shipments which are incurring demurrage/detention at origin or destination, enabling users to stay connected and informed of all charges.

Demurrage and detention charges can seriously impact your bottom line, so it's important to understand the differences between them and take steps to minimise their impact. Clear communication with carriers, real-time tracking systems, and smart contract negotiation can all help you avoid these fees, while identifying alternative transport routes and coordinating effectively between departments can keep your supply chain running smoothly.

FAQs in Relation to Demurrage and Detention

What are Demurrage and Detention Charges?Demurrage and detention charges incentivise timely cargo movement, ensuring efficient use of carriers' equipment.Demurrage fees apply when import containers remain at the port beyond their free time, while detention fees occur when exporters hold onto containers outside the terminal past their allotted period.These charges help maintain smooth operations in ports and terminals.

What factors contribute to high Demurrage and Detention Charges?The most common factors include port congestion, inefficient internal processes, communication breakdowns, improper documentation procedures, and unforeseen disruptions affecting transport routes. Port congestion is a significant contributor to these charges.

What is the difference between Demurrage and Detention?Demurrage refers to fees incurred due to excess container dwell time at a port or terminal after its allowed free time has expired.Detention pertains to additional costs charged for holding a carrier's container outside the terminal beyond the agreed-upon period.

What are some examples of Demurrage and Detention charges?If an importer fails to clear customs within five days (free time) after arrival, they might incur daily $100 per day (demurring rate) until clearance occurs.Similarly, if an exporter holds a container for ten days instead of seven (allowed), they may face $50 per extra day as a penalty (detention fee).In 2023, the average accumulated demurrage and detention charges for the port of New York after 14 days for standard containers is $2,478. More examples of these charges can be found here. 

Start saving on Demurrage and Detention fees today- book your CARGOES Flow