There are several charges associated with a shipment and demurrage, detention, port charges can be considered as “unexpected, non-budgeted, uncosted, unforeseen” charges because no one in their right minds wants to incur these charges…
Even though there are distinct differences between demurrage, detention and port charges, many are still oblivious to these differences and there have been several questions on this blog relating to these charges.
Let me explain how demurrage, detention and port charges work.
International Trade and Costs
When it comes to international trade, majority of the buyers and sellers use Incoterms to decide on what each other’s responsibilities and liabilities are in terms of the business, especially related to costs..
Generally, there is very little room to manoeuvre in terms of additional and unbudgeted costs incurred on the shipment and therefore in their own interest it is important that the buyers and sellers take necessary precautions to ensure that all known costs relating to the business are discussed and finalised before the shipment commences.
There are many entities involved in the process of shipping a container from Point A to Point B, each with their own cost component, all of which have to be covered either by the seller or the buyer.
Demurrage, detention and port charges are just some of these costs that may be applicable in a shipment.
While some of the port charges are valid and unavoidable, demurrage, detention and some of the port charges (like port storage, early arrival, late arrival, amendment, shifting etc) are entirely avoidable if everyone in the chain follows the process that they need to follow.
What are port charges..??
Port charges, as the name suggests are a set of charges levied by the port or terminal which the container passes through.
In terms of container shipments, port charges may include but not limited to below:
Terminal Handling Charge (THC)
Early Arrival Charge
Late Arrival Charge
Lift On/Lift Off
Stuffing/Destuffing of Containers
Demurrage and Detention
While some of these port charges may be unavoidable, demurrage and detention charges on the other hand are totally avoidable charges, but in a lot of cases due to mishandling, misunderstandings and not following the proper protocols, these charges occur.
When they do occur these charges may create quite a financial impact on the whole business and sometimes these costs could be so prohibitive that some customers abandon their cargoes at destination due to these costs.
Let us look at what is demurrage, detention, causes of demurrage and detention, why is it charged, who charges it and who pays for it.
Although the most common market practice is to combine demurrage and detention, there are several cases where these are charged separately and therefore it is important to know the difference between demurrage and detention.
What is Demurrage/Detention..??
Demurrage is a charge levied by the shipping line to the importer in cases where they have not taken delivery of the full container and move it out of the port/terminal area for unpacking within the allowed line free days.
Detention is a charge levied by the shipping line to the importer in cases where they have taken the full container for unpacking (let’s say within the free days) but have not returned the empty container to the nominated empty depot before the expiry of the allowed line free days.
The definition of “line free days” is the number of days allowed by the shipping line for the customer to pick up the full container for unpacking, take it to their warehouse, unpack and return the empty to the container depot nominated by the shipping line.
This free days is different from the “port free days” which is the number of days allowed by the port/terminal to keep the containers in the port/terminal area free, after which the port storage as published in the port/terminal tariff will apply.
Demurrage, Detention and Port Charges calculation scenario…
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