Detention and demurrage are terms that often confuse people working in logistics. As a result, these fees often add up and result in severe financial losses. Port fees aren’t new but are in the spotlight more than ever.
Post-pandemic, these fees have continued to stay elevated as supply chains remain in constant flux. According to Global Trade:
“Insights from the annual Demurrage and Detention benchmark report showed that there was a major spike in D&D charges in 2021; the global average increase was 39% for standard containers whereas the charges for 20 distribution centers doubled in 2021 [...] Looking at the 2022 scenario, the trend in 2022 has been decreasing slightly. For some outlier ports, like Long Beach, Los Angeles, and Shanghai, the charges increased so much that it ended up with the value in 2022 still being higher than pre-pandemic value by 12%.”
As port fees continue to plague shippers, let’s demystify the difference between detention and demurrage fees.
How are Detention and Demurrage Different?
Detention and demurrage are extra charges that result from the storage costs most often incurred due to inefficient supply chains. Whether the cargo remains at the discharge port for too long or the container hasn’t been returned to the terminal, the clock starts ticking, with charges going up daily.
What are Detention Charges In Shipping?
Detention is also known as a “per diem” fee. It results when the container has been picked up for unpacking but not returned to the terminal within the allotted “free time.” The port often offers a free storage period of 3-5 days, but rules will vary by the terminal.
What Is a Demurrage Charge?
The shipping line charges container demurrage charges when a full container has yet to be removed for unpacking from the port/terminal within the allotted free time.
How are Detention and Demurrage Different?
Think of these accessorial charges as before and after fees. Demurrage occurs when shippers exceed their allotted free time before the container is picked up, and detention is assessed after pickup for any portion beyond free days until the container is returned.
For instance, a container may be offloaded at the port and have five days of free time to be picked up. After the pickup, the clock starts ticking with another five days to unpack and return it. If it took seven days to pick up the container and three to return it. The shipper would pay for two days of demurrage and no detention fees.
The rates for detention and demurrage often increase as more days pass beyond the free days. Traditionally, demurrage port charges for containers range from $75 to $150 per container per day and then increase after so many days pass. The shipper might offer three free days; after that, a charge of $75 per day applies for days 4, 5, and 6. After day 6, that fee might increase to $250 per day.
If the container is at the port for nine days, in this scenario, the cost would be:
- 9 days - 3 free = 6 days of demurrage
- ($75 x 3 days = $225) + ($250 x 3 days = $750) = $975
These fees add up fast, and the shipper must vigilantly remain aware of the periods before and after pick-up.
Three Strategies for Shippers to Navigate the Turbulent Waters of Demurrage and Detention
As detention and demurrage continue to eat into profits, shippers look to avoid demurrage and detention charges by leveraging technology. Technology lets them take control of their supply chains and better manage the before and after pick-up periods. Shippers gain three distinct strategic advantages from using a tech-enabled solution to manage their freight.
Invest in Data
It can be difficult enough to manage free time for one container; imagine doing so for multiple shipments. Next, add that free time and fee structures might differ when using multiple freight partners.
Data-enhanced shipping tracks for the Last Free Day container data to allow shippers to know when charges start and plan appropriately. Electronic communication with ports and terminals provides shippers with Available for Pickup events for enhanced coordination with drayage providers. They receive the information that allows them to audit and verify detention and demurrage fees.
Use Visibility to Defend Against Volatility
No one wants to travel on an airline that leaves the pilot flying blind. Likewise, shoppers shouldn’t want to be “flying blind” when moving their own freight. Real-time visibility gives them supply chain resiliency with the ability to mitigate exception events and disruptions, know their ETAs, and live-monitor their performance.
Knowing the location and state of their freight at all times, shippers take power back from volatility with the ability to manage it. They go beyond volatility management with the informed data of past performance that helps them to plan ahead.
Knowing what has caused unnecessary fees in the past and the current conditions facing their shipments mitigate the volatility that results in tremendous costs.
Streamline Supply Chain Collaboration
When all stakeholders have insight into the current supply chain performance as it happens, streamlined communication is streamlined. The days of futile time-wasting phone calls end when events and mileposts are easily shared and electronically communicated.
A freight-tracking API pushes standardized real-time freight-tracking events to any software system or spreadsheet and continuously monitors for changing updates, keeping all partners in the loop. Standardized exception codes and updated ETAs keep everyone on the same page, mitigating the chances for unnecessary detention and demurrage fees.
Technology Prevents Costly Detention and Demurrage Fees
Detention and demurrage fees add up fast, potentially turning a profitable shipment into a liability. The clock starts running both before and after the freight is moved from the port/terminal. What seems nearly unmanageable becomes knowable, plannable, communicable, and efficient when using an API tech solution to combat fees.
Visibility, collaboration, and access to crucial data through technology give shippers the power to prevent detention and demurrage fees.
Vizion API easily plugs into an existing tech stack, enabling shippers to create supply chain resiliency through total visibility, streamlined communications, and simplified access to relevant data. They better manage and prevent volatility, communicate efficiently, and respond immediately, mitigating costly detention and demurrage fees.
Book a demo with Vizion API today to see your future free of costly detention and demurrage fees.