- September 01, 2023
- 4 read
Understanding Demurrage vs. Detention Fees in Supply Chain Container Shipping
In the intricate world of supply chain container shipping, many factors and variables play a pivotal role in ensuring cargo reaches its destination promptly and efficiently. Understanding the costs involved, especially regarding demurrage and detention fees, is crucial for businesses.
If not managed correctly, these fees can spiral and significantly increase overall shipping costs. With the mission of QuayChain to fill supply chain gaps and deliver real-time data, understanding these charges becomes even more vital.
Demurrage and Detention: The Basics
Before delving into the differences, it’s essential to understand these two terms individually.
This term refers to the fee imposed by shipping lines if an import container lies at the port beyond the allowed free time. The shipping line will impose a demurrage fee if this container isn’t cleared and moved out.
When goods are shipped using containers, both shipping lines and customers must adhere to specific timelines. This is crucial for efficient supply chain operations. After all, any delays can lead to costly repercussions.
Detention is the fee shipping lines charge when a container is picked up from the port and is in the receiver's custody but not returned within the stipulated free time. This fee is also charged if the cargo isn’t loaded into or unloaded from transportation equipment within a certain period. Regarding responsibility, it’s up to the receiver to return the container within their allocated free time and avoid incurring such charges.
Differentiating Demurrage and Detention
Next, we’ll break down the key differences between demurrage and detention fees to help you better understand these two related yet distinct charges.
Nature of charges
The first key difference between demurrage and detention concerns the nature of the charges. Demurrage is the fee for holding a container within the premises of the port, terminal, or depot beyond the free period.
Conversely, detention is charged when a container is held outside these premises beyond their allocated time frame. If you receive an import shipment and it’s not cleared from the port within the free time, you will be liable to pay demurrage fees. Detention charges may apply if you fail to return an export shipment within the given time frame.
The second difference between demurrage and detention fees relates to who pays them. Generally, the receiver is responsible for paying demurrage charges associated with their import shipments. On the other hand, detention fees are usually paid by the shipper as they’re responsible for returning goods within their designated free time.
Location also plays a role in distinguishing demurrage and detention fees. As previously discussed, demurrage is charged when a container remains within the port or terminal premises beyond its free period. Detention, on the other hand, applies to cargo held anywhere outside these premises.
Lastly, one of the main differences between demurrage and detention is how time is calculated.
Demurrage starts counting after the free period at the port or terminal expires. Then, it usually stops when you move out the container.
In contrast, detention commences once the container is out of the port or terminal and ends when it’s returned to the shipping line.
The Importance of Accurate, Real-time Data
In a continuously evolving world, the significance of real-time data cannot be overstated. When cargo and its associated equipment change hands, transfers take place in multimodal locations frequently outside of reliable wireless coverage. This absence can create tricky blind spots in understanding when and where demurrage and detention charges might kick in.
We have partnered with the Port of Oakland to bring digitization (and, more powerfully, timely data) to ports. Learn more.
With QuayChain’s dedication to bridging these data gaps, stakeholders in the supply chain can now get timely alerts and insights. This ability not only aids in avoiding unnecessary fees but also ensures a more efficient, resilient, and sustainable supply chain operation.
Speaking of data gaps, read about our efforts to reduce them by better connecting US ports here.
FAQ: Demurrage vs. Detention Fees
If you have remaining questions about demurrage and detention, browse this FAQ section to look for the answers you need.
What is the difference between demurrage charges and detention charges?
Demurrage charges apply when a container remains at the port or terminal beyond the free time. In contrast, detention charges apply when a container is held outside the port, typically at the consignee’s premises, for longer than the agreed-upon time.
Is demurrage the same as detention?
No, demurrage and detention are distinct charges. Demurrage relates to the container being within the port or terminal premises, while detention pertains to the container being outside these locations.
What is the difference between demurrage and detention time?
Demurrage time refers to a container's period at the port or terminal beyond the free days. In contrast, detention time refers to the period a container is held outside the port after being picked up and before it’s returned to the shipping line.
Do I always have to pay demurrage and detention fees?
No, these charges are only imposed when a container is held beyond the free time in either scenario. If the container is moved out within the specified period, no demurrage or detention charges will be applicable.
How can I avoid paying unnecessary demurrage and detention costs?
The most effective way to avoid unnecessary fees is to ensure that all processes involved in the container’s movement are carried out as quickly and efficiently as possible.
- Customs clearance
- Shipment delivery activities
All stakeholders in the supply chain must be aware of their roles and responsibilities. This allows them to work together to prevent any delays in the movement of containers. Regular communication between all parties is integral to a successful supply chain.
Understanding the intricacies of demurrage and detention fees is pivotal for businesses looking to optimize their supply chain operations.
With timely and accurate data, courtesy of QuayChain, businesses can be better equipped to:
- Make informed decisions
- Avoid unnecessary charges
- Ensure a smoother flow of goods globally
It’s not just about reducing costs but creating a more resilient, secure, and sustainable supply chain for all involved.
Remember, knowledge is power. With the right insights, the complex world of container shipping becomes much more navigable.
Learn more about how QuayChain improves your supply chain operations today.
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- Top 5 Supply Chain KPIs and Metrics To Track