DRAWING THE LINE BETWEEN DEMURRAGE AND DETENTION

Often times, most of us in the shipping industry find ourselves struggling to understand what exactly are demurrage and detention. Given the confusing similarities between these two concepts, it gets difficult to distinguish one from the other. However, there exists a line of difference, the understanding of which is imperative for all those involved with containerized shipping.





So what's demurrage?

It's a fee charged by the shipping line to the importers when they don't pick up a full container from the port, within the free period fixed by the shipping line. This free period starts from the day the container is unloaded and typically lasts for 3-5 days (varies from carrier to carrier). Demurrage is calculated from the expiry of the last free day, up till the day the container is moved out of the terminal. Also, these charges vary from carrier to carrier and country to country.


And detention?

It's a fee charged by the shipping line to the importers in cases where they pick up the full container for unpacking, but don't return the empty container to the nominated depot within the allotted free period (varies from carrier to carrier). Also known as per diem, detention charges also vary from carrier to carrier and country to country.



This covers the importers, but what about exporters?



Demurrage and detention apply to exporters too.
Here's how and when.

Demurrage for exporters:

When a packed container cannot be shipped due to certain non-carrier related issues, once the allotted free time has expired, the shipper is charged a penalty called demurrage. For example, if the exporter fails to provide certain documents in a timely manner, the carrier will not be able to load the container onto the scheduled vessel and will instead roll the container to a new vessel. Demurrage will be charged for the additional storage period at a rate fixed by the shipping line, till the time the full container is not shipped out.

Detention for exporters:

Detention charges are levied upon shippers when they fail to return the container picked up for loading, to the carrier, within the allotted free time. Shipping lines usually provide 5 free days to shippers to pick up the empty container, load it, and return it full to the port. If the container is not returned during this free time, detention will be charged for the additional days the container is under the shipper's possession as empty or full.

Simply put, demurrage is a fee charged when the container is under the possession of the carrier beyond the permitted time, whereas detention is a fee charged when the container is under the possession of the importer/shipper beyond the permitted time.

However, this is just a simple explanation of these two cost items. Different countries employ different definitions. Which is why it's advisable to check with your shipping line how these terms are defined in your country of business so that, you can make informed decisions and avoid incurring these unnecessary costs.

Hope this was helpful. Do let us know in the comments section below

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