What Is Demurrage And Detention & How Can Visibility Tech Help Manage Them?

What Is Demurrage And Detention & How Can Visibility Tech Help Manage Them?

The mere mention of demurrage is enough to send ripple effects of angst that reach from the C-suite to any number of supply chain transportation partners. But exactly what is demurrage and, more specifically, what is the meaning of demurrage in an ocean shipping context? By understanding what demurrage is, those charges can be mitigated or even avoided altogether. In this article, we will define demurrage and explain how a robust visibility technology solution that incorporates application programming interfaces (APIs) can manage the costs associated with demurrage.

What Is Demurrage?

When a container vessel arrives at a port, there is a “free period,” usually anywhere from five to seven days, for the full container to be moved out of port and the cargo unloaded and dispersed,  via drayage or other transportation services. Demurrage, as defined in the context of shipping ocean containers, is a charge assessed by a shipping line or port authority when a container sits idle at a port beyond the established free period.

Defining demurrage charges can be a bit trickier, though. True, demurrage charges are assessed per container, per day. However, each shipping line and port can set its own timeframes for free time and the amount charged for demurrage, meaning shippers often feel as though they have very little control over these charges.

Here’s another way to define what is demurrage charges: a cash-flow-sucking, headache-inducing, sleepless-night-causing blow to importers that can quickly spiral out of control.  To give some context to this demurrage definition in shipping, consider this: In November 2020, the Journal of Commerce reported that a coalition of truckers, shippers, and customs brokers representing more than 40 organizations asked the US Federal Maritime Commission “to consider suspending detention and demurrage charges at the ports of Los Angeles and Long Beach and New York-New Jersey until congestion at the country’s two largest gateways dissipates.” At the time, coalition members claimed they had “paid well over $150 million in unreasonable detention and demurrage charges in the twin Southern California ports and the Port of New York and New Jersey due to the massive congestion created by record-setting volumes, coupled with a shortage of both skilled labor and available chassis.”

Let’s consider two things here. First, that $150 million figure mentioned above represents both demurrage and detention charges. Two separate, yet equally important costs to control. When defining demurrage charges, don’t confuse them with detention charges, which are also known as per diem charges. We explain the difference here.

Second, ports all over the world — not just those in the US — are feeling the squeeze of congested ports. With the exponential growth of e-commerce and consumer demands continuing to escalate, port congestion is escalating and so is demurrage, meaning importers must find an answer to controlling this cost.

Visibility Technology Could Redefine Demurrage in Shipping

So, now you know the demurrage definition in shipping terms. The answer to controlling or even eliminating demurrage is even easier to understand.

A robust ocean container visibility solution built around API technology can track international shipments in a variety of ways, moving beyond location track-and-trace capabilities to include tracking rates and bookings, as well as providing detailed document management. By connecting their ERP, TMS, or other systems to a container tracking API, stakeholders will get an immediate complete view of all shipments, including alerts of delays that can help you identify potential demurrage.

They will also be able to secure customs clearance prior to the shipment’s arrival, have documentation readily available, and have duties paid in advance. More precise ETAs will guide the planning to ensure things go smoothly. This includes communicating delivery instructions with drayage service providers and possibly lining up a backup carrier at heavily-congested ports. This provides a larger degree of control over demurrage that all stakeholders want and deserve.

Reduce Demurrage Charges with VIZION’s Container Tracking API

What is demurrage charges? It’s a completely controllable if not avoidable cost of shipping containers! VIZION offers real-time door to door API shipment and container tracking, direct from steamship lines, port terminals, US drayage operators, and AIS satellite-based vessel tracking. Our container tracking platform can connect you to data from more than 32 shipping lines and 800+ seaports. This kind of unified access solves the challenges of handling demurrage. To learn more, Book a Demo today.

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