Intermodal rail tracking keeps global supply chains moving, adding real-time visibility to a shipping industry once stricken by blindspots. Where tracking containers by sea, road, and rail used to be problematic, intermodal rail tracking coordinates and optimizes entire logistics operations.
And intermodal rail tracking keeps getting better. How? New technological advancements. The Internet of Things (IoT), GPS and geofencing, Blockchain technology, AI and Machine Learning (ML), advanced analytics platforms, and integration with supply chain management systems are just some of the tech advancements happening in intermodal rail tracking.
With each new technology comes a smarter way to manage supply chains. But why is this so important in the bigger picture of global supply chains?
Every delay and extra day shipping containers sit idle comes with a cost. Two of those costs are demurrage and detention fees. To prevent port congestion and to keep global supply chains moving, demurrage and detention fees serve as an 'incentive' for shippers and shipping providers to keep containers moving.
Demurrage and detention fees increase the financial burden on shipping lines, freight forwarders, and shippers. But without them, global supply chains can grind to a halt. If there are no consequences for untimely container movements, everyone suffers. These charges aren't going away, but intermodal rail tracking reduces the risk of fines.
Understanding Demurrage and Detention Charges
Demurrage and detention charges represent the cost of delays in the supply chain. They are applied for a number of reasons, including:
- Port operation optimization: Demurrage charges encourage importers and exporters to expedite the loading and unloading of containers at ports to reduce congestion and improve port efficiency.
- Maximized equipment use: Detention charges encourage the prompt return of shipping containers and other equipment to shipping lines or leasing companies. The timely return of containers increases availability for subsequent shipments, minimizes container shortages, and optimizes asset use across supply chains.
- Balancing supply and demand: Demurrage and detention charges help to balance supply and demand. In times of high demand or congestion, these charges deter prolonged storage of cargo and containers.
The Role of Free Time in Calculating Charges
Free time is a grace period offered by carriers to shippers, allowing containers to be used or stored without additional charges. However, once the allotted free time is exceeded, demurrage and detention fees start to accrue, adding to the overall cost of shipping.
Here are some examples of the role of free time in calculating demurrage and detention charges.
Demurrage
A shipping container arrives at a port for unloading. The free time allotted to the container is five days. However, customs clearance has delayed the container, and will remain at the port for three more days. Demurrage charges apply for the extra three days.
- Demurrage rate: $100 per day
- Total demurrage charges = (Number of days outside free time: 3) × (Daily demurrage rate: $100)
- Total cost: = 3 days x $100 per day = $300
Detention
A shipping line leases a container. The agreed free time for the shipping container is seven days. After the cargo is unloaded from the container, the customer retains the container for an extra four days before returning it to the shipping line.
- Detention rate: $50 per day
- Total detention charges = (Number of days outside free time: 4) × (Daily detention rate: $50)
- Total detention charges = 4 days × $50 per day = $200
Differences Between Demurrage and Detention
Demurrage and detention charges are shipping fines. But they are applied under different circumstances.
Demurrage charges apply to shipping container storage that exceeds the allotted free time at a port or terminal. This means fees are incurred when cargo remains within the confines of a port or terminal beyond the agreed free time for loading or unloading.
Demurrage charges are typically associated with delays in cargo handling, customs clearance, or other operational processes within the port.
These charges aim to incentivize prompt cargo movement to ease port congestion.
Detention charges apply to containers that are retained outside a port or terminal. Fees accrue when containers are held outside port premises at a warehouse or distribution center beyond the allotted free time.
These charges are typically associated with delays in returning empty containers to a shipping line or leasing company, causing equipment shortages and operational disruptions.
The point of detention charges is to incentivize the timely return of containers, optimize equipment use, and minimize supply chain disruptions.
Global Trends and Regional Variations
Demurrage and detention charges differ across global regions and are influenced by several factors, including port efficiency, infrastructure quality, labor costs, and regulatory frameworks. Regions with congested ports and stringent regulations tend to charge higher fees.
European and Middle Eastern Ports
According to a Container xChange report, Europe averages an accumulative demurrage and detention fee of $449 at 14 days. In European ports, particularly in Northern Europe, demurrage and detention charges tend to be higher compared to Southern Europe and the Middle East.
This discrepancy stems from higher operational costs in Northern European ports, including labor expenses, infrastructure maintenance, and stricter regulations. Plus, Northern European ports often experience higher congestion levels due to their strategic locations and heavy traffic, resulting in increased waiting times and, subsequently, higher charges.
In contrast, Southern European ports benefit from lower operational costs and less congestion, leading to comparatively lower demurrage and detention charges.
Similarly, ports in the Middle East offer competitive rates averaging $231, due to a modern infrastructure, efficient operations, and strategic positioning along major trade routes.
Asia's Trade Hub Dynamics
The Container xChange annual benchmark report shows that China has some of the lowest demurrage and detention fees, averaging $164. China and Southeast Asia represent vital trade hubs where efforts to manage congestion and reduce demurrage and detention charges are taking shape.
In China, initiatives such as expanding port capacity, optimizing logistical processes, and implementing advanced technologies aim to ease congestion and streamline operations. The Belt and Road Initiative also facilitates infrastructure development, enhancing connectivity and reducing bottlenecks.
Southeast Asian countries like Singapore and Malaysia prioritize efficiency and innovation to mitigate congestion and minimize charges. Investments in port infrastructure, automation, and digitalization enable smoother cargo handling and shorter turnaround times.
Plus, increased collaboration between public and private sectors is driving regulatory reforms and operational improvements, enhancing the region's competitiveness.
The Impact of Legislation and Industry Standards
Governments and regulatory bodies have aimed to tackle the challenges of demurrage and detention charges with new legislation and industry standards, which focus on fairness, efficiency, and transparency across supply chains.
Ocean Shipping Reform Act of 2022 (OSRA 22)
Unprecedented port congestion during COVID-19 meant demurrage and detention charges reached record levels for shippers. The Ocean Shipping Reform Act 2022 (OSRA 2022) was introduced to stop carriers from charging excessive fees.
Under OSRA 22, carriers must provide transparent and reasonable detention and demurrage charges, which prevents fees from being abused and ensures fair treatment for shippers. Carriers can now be fined if they charge demurrage and detention fees for situations beyond a shipper's control.
Industry Best Practices and Guidelines
To govern demurrage and detention charges, the International Federation of Freight Forwarders Associations (FIATA) has been instrumental in establishing fairer practices through various initiatives, including:
- Guideline development: FIATA develops guidelines that outline best practices for assessing, disputing, and resolving demurrage and detention fees, ensuring that all parties involved understand their rights and responsibilities.
- Education and training: FIATA organizes workshops, seminars, and training programs to educate freight forwarders, shippers, and other stakeholders about demurrage and detention charges.
- Collaboration with stakeholders: FIATA collaborates with shipping lines, port operators, customs authorities, and other stakeholders to address common challenges related to demurrage and detention charges.
Strategies to Mitigate Demurrage and Detention Costs
Demurrage and detention charges may seem like unavoidable costs, but there are strategies to minimize their impact.
- Use supply chain technologies: Platforms like Vizion API offer advanced tracking and predictive analytics capabilities, equipping companies to anticipate and mitigate potential delays before they occur.
- Manage documentation efficiently: Proper documentation is essential for avoiding disputes and delays that can lead to demurrage and detention charges. Use digital documentation solutions to streamline this process and reduce administrative overheads.
- Understand free days: Closely monitor free time allowances and proactively manage container movements to avoid unnecessary demurrage and detention fees.
- Optimize supply chain efficiency: Investing in process optimization and automation can help streamline logistics operations, reducing the risk of delays and minimizing associated costs.
- Stay informed and adaptive: Keep up with industry trends, regulatory changes, and market shifts to adapt strategies and mitigate risks effectively.
Ship with Certainty Using Vizion API
VIZION API is helping shippers worldwide avoid demurrage and detention fees with ocean freight tracking. Shippers can:
- Monitor shipments by container number, master bill of lading, or auto carrier identification.
- Track 98% of global shipments.
- See over 7,000 unique events translated into 60 standardized milestones and ETAs.
- Access instant-on data with documentation.
- Get ready-to-use enriched data to make data-informed decisions.
Book a demo with VIZION API today to learn more about controlling demurrage and detention fees.
