Every day at busy ports worldwide, container ships come and go at a fantastic rate. Sometimes the containers sit for a while between stops. But, as we all know, nothing is free, so there are costs associated with how long containers are allowed to sit around, and shippers are the ones who pay those fees.
Containers are owned or leased by shipping lines. They, in turn, provide them to shippers or merchants for the safe and fast door-to-door transport of their goods. Demurrage refers to the charge that a shipper pays for using a container within the terminal beyond the designated free time period. Free time is the period allotted to shippers, during which they can use a shipping line’s equipment without incurring fees. Generally, shipping lines allow 4-5 days of free time for shippers to claim their cargo.
Detention fees are charged when shippers fail to return a shipping line's equipment within the allotted free time. So, the difference between demurrage and detention is where the container is located when the allotted free time expires.
The fixed rate incurred per container for every day that cargo is not picked up (demurrage fees) or every day that equipment is not returned (detention fees) is known as “per diem” (Latin for “each day”).
Clearly, demurrage, detention, and per diem fees can drive up shipping costs if shippers don’t practice careful monitoring. As we all know, things are changing at a record pace in the shipping industry. Now is the time to get demurrage, detention, and per diem fees in line with your organization’s goals.
What’s in Store for Per Diem Charges in 2023?
Currently, surplus containers are piling up at warehouses as demand dwindles, and this results in rising demurrage and detention charges, which contribute substantially to the operational costs for shippers. In August 2022, experts from Drewry, S&P Global, and Container xChange discussed the impact of charges on shippers worldwide amid the changing dynamics of container supply and demand.
FMC is On the Case
The Federal Maritime Commission (FMC) has been investigating when per diem detention charges can be billed and has determined that charging per diem when a port is closed and equipment cannot be returned is “unjust and unreasonable.” They are working with the 11 largest ocean carriers to “confirm that they are adjusting their demurrage and detention practices in line with the recent decision.”
The original intent of demurrage charges was to “incentivize” the return of empty equipment. With this in mind, the commission ensures that all parties involved in the shipping industry “are following the regulations and complying with the law.” It is expected that all parties involved in the shipping industry will take note and work towards compliance with the regulations.
Escalating Labor Issues Further Complicate Things
Imports into the Port of Los Angeles, according to Executive Director Gene Seroka, rose in March versus February of 2023, with even higher volumes expected in the months ahead. He added, "There has been widespread concern over the ongoing West Coast labor contract negotiations, and those concerns intensified last week.”
Cargo operations at terminals of the ports of Los Angeles and Long Beach were halted during the Thursday night shift, according to Seroka, coinciding with a monthly meeting of ILWU Local 13, as well as during the day shift on Good Friday. Thankfully, “Good Friday typically sees a lower volume of activity during the morning shift, so the impact to operations was relatively minor.”
But labor shortages like the Good Friday work stoppage make it challenging to find workers on-demand, leaving shippers vulnerable to per diem charges at busy ports.
The trade group MHI and consultancy Deloitte found that 74% of 2,000 supply chain leaders plan to boost their technology investments in 2023 over the past year. According to the report, about 90% of those companies will spend 24% more than the previous year, while 36% will spend 19% more. (The survey was conducted at the end of 2022.)
Results matter. According to the report, the demand to adopt 11 different technological categories will rise significantly during the next five years. Those specialized categories include Inventory & Network Optimization, Cloud Computing & Storage, Sensors & Automatic Identification, Advanced Analytics, and more. “In a world in which disruptions will be the norm, most companies are planning to either partner with vendors or build and pilot their own technologies,” according to the survey.
Inventory Gluts Lead to More Issues
Inventory gluts are leading to a shortage of warehouse capacity, which could lead to increased freight sitting in containers, thereby racking up per diem charges. Some shippers hold their products in chassis containers because of full warehouses and distribution centers. This means they’re incurring charges, which (of course) are passed on to the consumer.
Containers left on chassis create two costly problems: 1) It prevents those chassis from being used to move newly arriving containers, which puts additional stress on chassis pools throughout the U.S., especially inland rail ramp pools. And 2) shippers will be charged fees for the dwelling chassis — separate from the per diem charge shippers pay per day once the container is out of use beyond its free time.
According to Paul Brashier, vice president of drayage and intermodal for ITS Logistics, “This can lead to tens of millions of dollars in penalties.” Therefore, he predicts that per diem charges will surge in this year's second and third quarters.
With Rates on the Rise, Shippers Turn to Freight Shipment Tracking
Real-time container tracking visibility improves your business in multiple ways. From data access to an array of tracking techniques, from myriad possible data sources to seamless integration with your business system, VIZION API offers industry-leading technology that gives your organization the edge it needs for 2023.
Unparalleled Visibility Provides Unparalleled Insights
Real-time ocean container tracking gives shippers an unparalleled understanding of their current freight assets. They can see where freight is and ensure it’s ready to be moved onto the next portion of its journey.
VIZION API provides real-time container tracking visibility to shippers, logistic service providers, and other stakeholders. VIZION API automatically pushes the most complete, standardized, and detailed container tracking events to any software system or spreadsheet, giving you end-to-end visibility into the freight that drives your business.
With VIZION API, you can track shipments by container number, Master Bill of Lading, or Auto Carrier Identification:
- Track 98% of global shipments via Carrier List
- Instant On, flexible data access with documentation
- Immediately begin tracking by Container Number or Master Bill of Lading
- Industry-leading data quality + transparency
- 99+% Standardization of Raw Carrier events + AIS data
- 7,000+ unique events turned into 60 standardized milestones and ETAs
- Enrichment of multiple data sources (EDI, API, web scrape, AIS, rail, Terminal websites) offers the most complete picture of container updates
- Data feeds are refreshed multiple times daily to minimize latency
Port and Terminal Notifications Keep Shippers in the Know
It’s important to keep track of all the fees your containers might incur in port. VIZION API’s port and terminal data systems automatically push container-related Port & Terminal Events to your enterprise resource planning (ERP) system, transport management system (TMS), or other software.
- Last Free Date (or Free Time to Expire) Event – know demurrage inside and out. This event automatically alerts you to when demurrage charges begin so you can plan for pickups with drayage providers and reduce avoidable costs.
- Available for Pickup Event – eliminate wasted time and money. This event lets you know the date (when) and the terminal (where) your containers can be collected, allowing you to coordinate with drayage providers.
- Port & Terminal Events – enhanced visibility into your supply chain. Work in tandem with other events that share when containers discharge from vessels, gate out of ports, return empty, and more. Mastering Port & Terminal events empowers you to audit your detention and demurrage fees, and to verify that they are accurate.
Actionable Analytics Help Shippers Optimize Today for Success Tomorrow
Analytics, not raw data, actionable insight that your organization can use to bolster performance and avoid future mistakes. It takes analysis of past events to inform the present and make future predictions. But shippers can only craft such analysis with a clear picture from thousands of data points or knowledge of carrier performance.
VIZION API supply chain analytics software is powerful and transformative for shippers. Our capability to identify, standardize, analyze, and understand the interplay between different processes and performance insights turns raw data into valuable information. Shippers’ raw data realizes its full potential with supply chain analytics software.
The benefits of VIZION API supply chain analytics:
- By consolidating data from multiple sources, such as inventory, orders, returns, and others, analytics systems bring businesses visualization abilities and an understanding of the interplay between disparate processes and performance metrics.
- Transforming the data into actionable insights by revealing areas of risk and opportunity reduces costs, improves efficiency, and delights customers.
- Advanced reporting capabilities allow companies to make informed decisions regarding their supply chain processes, keeping them competitive and profitable.
- Data add-ons ensure supply chain analytics software grows at scale with shippers to provide the necessary scale and capabilities.
VIZION API supply chain analytics software takes raw data and changes it into transformative data for shippers.
Experience Transformative VIZION API Services to Manage Per Diem Charges & More
In the current shipping world of labor issues, rising regulatory concerns, and inventory gluts, obtaining complete visibility into your end-to-end freight operations is more important than ever. VIZION API can help you easily keep track of all the fees you might incur in port…and more.
VIZION API users realize all the benefits of a robust analytics solution. They save money, improve efficiency, and protect their brand through standardized and analyzed supply chain data. Shippers know their KPIs and can access carrier scorecards, informing present and future decisions. Their customers experience timely, comprehensive, and relevant updates from automatically pushed data. World-class supply chain analytics software from VIZION API can transform your operations.
To learn more about all the transformative services that VIZION API has to offer, book a Demo today.