In the last few years, demurrage and detention charges have become a growing problem in ocean freight transportation—mainly due to volatility in an industry which has seen its fair share of disruptions, capacity struggles, labor shortages, and bottlenecks. As shippers attempt to contend with a dynamic transportation industry, many are refocusing their efforts on improving efficiency, reducing unnecessary spend, and navigating demurrage and detention charges. In this article, we’re looking at the current state of demurrage and detention and what the future holds for these fees in 2023.
Demurrage and Detention Charges are on the Rise
In 2021, demurrage and detention charges saw a steep climb, with the global average increasing by nearly 40%. Shipping containers were increasingly left at ports longer — leading to demurrage — and once picked up and destuffed, empty containers were taking longer to be returned to the port — leading to detention. Primarily, this was caused by port congestion making it difficult to secure appointments and drayage capacity to move shipping containers out of the port, especially within the allotted free time to avoid charges. The good news in 2022 was that there was a slight decrease in demurrage and detention charges on average. Unfortunately for a few ports, including Los Angeles and Long Beach, the total for 2022 was still above pre-pandemic levels.
Regulators React to Rising D&D
Just as port congestion helped reveal weaknesses in the system, rising demurrage and detention is having the same effect, drawing extra attention from lawmakers and those in the freight transportation industry.
High Port Fees Garner Attention
Recently FIATA, the International Federation of Freight Forwarders Associations, issued a call for shipping lines to return to pre-pandemic free time periods before demurrage and detention are charged. A recent report by Container xChange also revealed that the five ports in the world with the highest demurrage and detention fees are in the U.S.— the ports of New York and New Jersey, Long Beach, Los Angeles, Oakland, and Savannah – with rates ranging from $3,182 per day for New York and New Jersey to $2,210 per day for Savannah.
The White House has taken note of the rising costs and called on Congress to pass reforms to ensure ocean freight companies cannot take advantage of the situation, while also announcing a Federal Maritime Commission and Department of Justice joint initiative to promote competition for the purpose of lowering prices.
New Regulations En Route
As a result of record high demurrage and detention, regulators have taken action. Under the Ocean Shipping Reform Act (OSRA), passed in 2022, ocean carriers are required to certify that their detention and demurrage charges comply with federal regulations. OSRA also places the burden of proof on the reasonableness of charges on the ocean carrier instead of the shipper.
However, some executives at major U.S. ports have expressed concern that these regulations may affect the flow of cargo at ports by disrupting whatever current form of balance there is between carriers and shippers. U.S. lawmakers in 2023 are trying to build off OSRA to include more restrictions on carriers and address deficiencies in the 2022 proposal.
How to Avoid Demurrage and Detention Charges in 2023
As different parties react to demurrage and detention trends of the past couple years, shippers must figure out how potential changes may impact container management processes in 2023. Here are three areas that technology can help shippers reduce demurrage and detention charges.
Real-time container tracking provides supply chain visibility, enabling shippers to monitor their freight shipment locations and statuses in real-time. This helps shippers improve operational flexibility and identify potential delays or disruptions and make proactive adjustments to meet changing customer needs.
Access to Data
Shippers face challenges due to insufficient data on top of costly and time-consuming manual data collection. With an ocean freight visibility solution, shippers can use automation to streamline processes and access real-time shipment data and analytics as well as industry-wide shipping trends. This allows shippers to save time and effort while improving shipping efficiency, proactively planning for disruptions, and avoiding demurrage and detention fees.
Integrated (API) Solutions
API integration facilitates collaboration and valuable exchanges of data without the friction of other methods. Integrating a cloud-based API with a shipper’s existing TMS, provides access to vital transportation data right where it is needed — including container tracking, communication, and exception alerts. Shippers are equipped for greater agility, so they can optimize operations to help prevent demurrage and detention.
Lean on VIZION API for Reducing Demurrage and Detention
While the industry is still waiting to see the effects of the Ocean Shipping Reform Act on demurrage and detention in 2023, shippers can take steps to reduce these charges, regardless of whether they are at record highs or more reasonable rates.
By gaining real-time visibility into shipping containers’ locations and status updates, shippers can pinpoint when containers should be collected and better coordinate with drayage providers. VIZION offers port and terminal connections for alerts for this purpose, notifying shippers of their last free day, when fees will begin, and when containers are available for pickup. The visibility of VIZION API makes it easier than ever for shippers to reduce demurrage and detention.
To learn more about VIZION API’s visibility and alerts for container events, reach out to us today to schedule a demo.