Six Strategies to Avoid Demurrage and Detention Charges in 2023

Six Strategies to Avoid Demurrage and Detention Charges in 2023

Demurrage and detention charges add up quickly, hurting profitability, and many shippers feel held hostage by these fees and powerless to avoid them. The last several years of the supply chain crises resulted in logistics logjams that pushed these fees even higher. These extra costs were punishing for freight owners when added to the much higher freight rates.

During the logistics crises, the total disaster of getting cargo through ports amounted to tremendous costs for shippers. In their blog, SupplyChainBrian states,

“At the height of the logistics crisis, members of the Harbor Trucking Association, Agriculture Transportation Coalition, and Pacific Coast Council of Customs Brokers and Freight Forwarders Associations inundated the Federal Maritime Commission with complaints about demurrage fees that reached as high as $100 million at the ports of Los Angeles and Long Beach, and $50 million at New York/New Jersey, in late 2020 alone.”

After incurring such tremendous costs during the pandemic, shippers started searching for new and innovative ways how to avoid demurrage and detention charges.

What Are Demurrage and Detention Charges?

It’s essential to understand the difference between demurrage and detention.

Demurrage means fees that are charged when containers remain at the port beyond the allowable free time. These charges incentivize shippers to pick up their containers promptly, often on a per diem basis.

Freight companies charge detention fees for holding the container beyond the allotted free time. Like demurrage, these fees are usually charged on a per diem basis as a way to encourage customers to return containers quickly.

Common Causes of Demurrage and Detention Charges

There are several reasons these hated charges might be assessed to shippers. Here are the six major causes of demurrage and detention fees.

Delays from poor documentation

Suppose there are discrepancies in the cargo particulars, voyage details, address, or other freight particulars when the bill of lading reaches the bank or receiver. If the result is an incorrect trade document submitted to customs, which requires amendment before clearing the cargo, a delay can result.

If the container has reached the port and is sitting uncleared until the documentation is corrected, demurrage or detention fees could result.

Delays due to tardy documents

There are times when documents required for cargo clearance might be delayed in reaching the receiving party for a myriad of reasons. A late bill of lading, packing list, or certificate of origin are documents that could result in cargo sitting on a dock. Potential causes of late documents include the following.

  • A misplanned document process or last-minute document gathering by the shipper
  • A delay by the shipping line in issuing the bill of lading for reasons such as technical issues, load confirmations not received from the port, or freight charges not yet paid to the shipping line.

This problem is especially prevalent in shorter ocean routes.

Delays due to missing documents

It’s not uncommon for documents to be lost, which results in one of the primary reasons for demurrage and detention fees. Lost documentation might take days to work out, especially in cases of bank guarantees.

Customer clearance or inspections delays

If an HS code is wrong, a misdeclaration results, which might result in penalties or raise suspicions. For some imports, such as retail goods, customs agents worldwide are especially vigilant, often pulling such goods for inspection.

Inspections don’t have standard time frames, and lengthy inspections are common. During this entire time period, demurrage or detention fees could add up.

Cargo release delays

The shipping line might delay the cargo release if they receive bills of lading lacking the proper endorsements, resulting in demurrage and detention fees.

An example would be a bill consigned “To Order of Shipper,” but the shipper has not endorsed the original bill of lading. When discovered while being presented at the destination, the bill of lading will need to go back to the shipper for endorsement.

Another reason for delay happens when the shipping line has yet to be paid when the cargo reaches its destination. This delay is common if the receiver misunderstands the Incoterms and is unaware of their portion of the local charge.

Unreachable receiver delays

When a shipping line cannot reach the consignee on the bill of lading, delays often result. Often the cargo has been abandoned by the receiver or shipper, but the line hasn’t been notified. Lack of notification leaves the shipping line under the impression that someone is coming to collect the cargo.

In these cases, it is not uncommon for the shipping line to asses the freight forwarder with the liability and charge fees.

Strategy Matters for Shippers

With demurrage and detention fees rising, shippers are searching for tried-and-true strategies to avoid them.

To highlight the increase in fees, Global Trade Map stated,

“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.”

Six Strategies to Avoid Demurrage and Detention Charges in 2023

While demurrage and detention charges can add up, there are strategies shippers can take to avoid them and save tremendously. Six strategies to prevent these fees are:

  1. To Avoid Demurrage and Detention Charges, Do Your Research: Know the free days outlined in the contract and ensure compliance is achievable.
  2. Transportation Experts Can Help Shippers Navigate Customs and Avoid Demurrage Costs: Speaking with shippers, customs brokers, and freight forwarders leads to an understanding of the average container processing time, potential delay causes, and strategies to help prevent fees.
  3. Avoiding Demurrage Fees Requires Understanding of Special Permissions: If there are special requirements for the cargo, know them in advance. Talk to freight experts for insights on these permissions.
  4. Harness Real-Time Ocean Container Tracking to Steer Clear of Demurrage and Detention Charges: Shippers must ensure access to real-time container visibility for cargo tracking to plan or mitigate exceptions in the supply chain.
  5. To Skip Demurrage Costs, Shippers Turn to Analytics: Modern analytics as part of a shipper’s tech stack can predict potential exceptions and help create strategies to avoid them. They will also provide customs data, vessel verification, and terminal visibility.
  6. API Shipping Streamlines Communication to Avoid Demurrage and Detention Charges: An API integrated into a shipper’s tech stack streamlines communication and makes it happen in real-time. All stakeholders have access to carrier ETA’s, standardized milestone events, and exception causes. When excellent communication is present, exception management sees exponential improvements.

When Demurrage and Detention Charges Disrupt Operations, Shippers Choose Real-Time Container Visibility Through VIZION API.

Detention and demurrage fees have been difficult to avoid in the past and became even more prevalent during the supply chain crisis of prior years. On top of elevated freight costs, these charges have tremendously cost shippers. Thankfully strategies now exist to limit or prevent profitability-destroying fees.

Demurrage and detention incidents continue to rise, making innovative, tech-enabled strategies necessary for shippers looking to avoid fees. Visibility and analytics solutions are improving supply chains, improving efficiency, and cutting unnecessary demurrage and detention fees.

VIZION API is helping shippers worldwide avoid demurrage and detention fees with ocean freight tracking. Shippers are enabled to:

  • Track 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.
  • See regularly refreshed data feeds.
  • Leverage ready-to-use enriched data to make data-informed decisions.
  • Improve operational efficiency.

Shippers transform their ocean freight shipping with VIZION API, preventing demurrage and detention fees. Book a demo with VIZION API today to see the difference.

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