These two
words Demurrage and Detention gets people confused most of the time. To make it
easier, demurrage relates to container storage at the terminal (charged by
the port), while detention relates to container usage (charged by the shipping
line).
In
logistics, supply chain and shipping industry, the words demurrage and
detention charges are widely used term for financial related fines. The fines
are issued in the event of shipping violations during imports and/or
exports.
Although
to the common person, the two terms Demurrage and Detention are almost similar.
However, these are not used interchangeably as they have different approaches
to handling them.
Why you Must Understand these Terms
There are
various ways to exercise proactiveness when avoiding penalties. Also, there are
different implications should one breach any agreement that could encourage a
fine.
Understanding
the types of fines is very key to both export and import as knowing them could
help save shipping costs. Every importer wants to save money
while importing their goods in order to make profits. If there
are no other reasons, this one is enough to worry about.
The Difference Between the Terms
What is Demurrage Charges
In
importation, demurrage penalty only associates with cargo while it is still in
the container or at the port. This charge occurs when the shipper’s allotted
amount of “free days” or “grace period” elapses. The allotted days are days
that the shipper has to keep their cargo at the port on arrival at the port of
destination.
Within
the “free days”, the shipper is allowed to keep their cargo for free. At the
end of these free days, demurrage begins to accrue, if cargo is not moved
out.
The levy
counts because the cargo or container are stocked under the control of the
shipping line since the free period is over until they are picked/moved from
the terminal.
Demurrage
in export is, on the other side, a levy issued when an export container being
returned to the shipping line cannot be moved out due to unforeseen
circumstances.
So to
cater for the upkeep period the container/cargo would be at the port till it is
boarded, demurrage is usually issued.
For
example, a container is discharged off a ship on the 1st of July. The consignee
approaches the shipping line to take delivery of the cargo around 10th of July.
Consignee gets some free days from the line and thus it got 5 free days from
the line.
The
shipping line free days varies from port to port.
The
stipulated free time elapses or expires on the 5th of July. Then the consignee
will be charged demurrage for 5 days. But if the consignee approaches to take
the delivery between the free days that means between 5th July then it will not
be charged.
What is Detention Charge
Detention
occurs when the consignee holds onto the carrier’s container outside the port
or terminal.
For
example, in the case of import, the consignee returns an empty import container
to the shipping line after pick up on 15th July. The consignee will be charged
a 5-day detention fee, which covers from 10th to 15th July.
But on
export basis shipper usually gets 5 days free time from the shipping line to
pick up the empty container, pack it and return it full to the port or depot.
So, if the shipper exceeds the free time, the shipping line charges him a
detention fee for the days that the container is kept with the shipper as empty
or full.
In a
nutshell, detention fee, unlike demurrage, is a financial fine incurred when
holding a sea carrier’s container against an agreed date of evacuation.
While
demurrage is levied when the consignee retains the carrier’s container outside
the port, terminal, or depot beyond the allotted free time.
The
number of days a fully loaded container stays on the terminal after the free
days, till the consignee picks it is charged with demurrage and after the
pick-up of the container, the consignee retains it beyond the free date, the
detention is charged.
Let’s Guide You Through The Process
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