The last free day (LFD) is a critical shipping milestone and one that starts the clock on more expenses and fees for cargo owners and NVOCCs if things don’t fall into place by that time. LFD refers to the last day of free storage cargo owners or NVOCCs get before containers must be picked up from a port terminal before incurring demurrage and detention fees. It is also the last day a container can be out of the port terminal before usage or per diem fees get assessed.
This post highlights how many free days cargo owners or NVOCCs get, the processes and items involved, and how they can leverage visibility technology to proactively plan for the last free day and ensure they avoid the detention and demurrage charges that can significantly damage customer relationships and ruin already-thin margins.
Detention vs. Demurrage Fees: Separate but Equally Costly
Demurrage and detention are the two most common fees that result from exceeding the last free day. Many operators struggle with the difference between demurrage and detention and even their place in shipping.
Shippers, cargo owners, or NVOCCs incur demurrage charges when they fail to ensure a full container moves out of the port terminal within the allowed number of free days offered by the shipping line to the importer. Detention, also known as a per diem fee, is charged when the cargo owner or NVOCC has picked up the full container but the empty container has not returned within the agreed free time.
Demurrage fees apply to import and export containers. For example, demurrage can be assessed if a container is not collected by the last free day from the port of discharge. Demurrage can also be applied if a container is delivered to the port of load before the specified date for a specific vessel.
Demurrage is like a ransom: it’s payable to a terminal or port operator before the container can be collected from the port of discharge. Therefore, knowing your LFD and proactive planning using visibility technology is the best way to eliminate demurrage fees.
How Many Free Days do Shippers Get? LFD’s Role in Detention & Demurrage
The standard is three to five days of free storage. However, each terminal has slightly different rules, which can change rapidly. In this scenario, the last free day would be Day 3, 4, or 5 before demurrage and detention fees start.
And how are the fees calculated? The port terminal assesses demurrage charges per day/per container from the date of discharge until the full container is moved out of the port or terminal. Detention is charged per day/per container from the time of the LFD until the empty container is returned to the shipping line’s terminal.
How to Proactively Plan for the Last Free Day with Visibility Technology
There are ways to proactively plan and avoid the threat of emurrage and detention fees. First, ensure you know how many free days you are entitled to and your last free day to remove your container before your free time expires. Next, ensure your documents are complete, correct, and accessible to avoid delays in clearing your cargo. This step includes ensuring your commercial invoice lists all the correct details, such as terms of sale, certificate of origin, etc.
It’s sometimes possible to pre-clear your cargo before it arrives. As long as your paperwork is complete and submitted to customs agents, you should be able to clear your shipment five days before a vessel arrives — although this is not a foolproof plan. Coordination with your transporter and freight forwarder is essential to ensure your transporter can collect your container by your last free day. Also, ensure your freight forwarder releases transport documents before your free time expires.
Some freight forwarding companies offer bonded warehouse facilities. This may be a great option to avoid demurrage accruing if something goes wrong, such as delays in the clearance of your container. The bonded warehouse option involves the collection of your container from the terminal and temporarily storing the cargo in a warehouse until you resolve the delay and then deliver the shipment to its final destination. One significant advantage of this option is that storage fees at bonded warehouse facilities tend to be much lower than demurrage fees.
These tasks — from digitizing documents to knowing the exact location, ETA, and status of your freight shipment in real time — are now more easily managed through visibility technology. Proactive steps versus reactive measures save your company money and customers.
Deploy VIZION’s Live Container Monitoring - Drastically Reduce Demurrage & Detention Charges
There will always be challenges when shipping on time and in full. And fees associated with early and late aspects of freight’s journey from a pre-first mile to final delivery. The good news is that visibility technology is powerful. That means that knowing the location and ETA - is now a reality with container tracking from VIZION. And with all of the siloed data and information available, it’s time you give your logistics professionals the firepower they need to do their jobs: making customers happy! Book your demo now!