Demurrage: FAQ’s and How to Avoid it
Imagine for a moment your freight has arrived at the port. Five days have passed, and your cargo still has not left the terminal. What could have happened? Poor communication and coordination, disputes, and lack of contingencies could explain the delay. Other than the possibility of not being able to fulfill your orders on time, there is another consequence: Demurrage.
What is demurrage?
Demurrage is a fee that importers may incur if their cargo is not picked up at the port within a prescribed amount of time.
When demurrage incurred?
The amount of time allotted before demurrage starts will vary from port to port, but some ports charge demurrage after four days. This period is called “free time.”
What is the difference between demurrage and detention?
Detention accrues after the container has been picked up and delivered to you, but the empty container has not been returned to the port before the free time has expired. (Usually 2-3 days.) More on this in another post.
How costly is demurrage?
Demurrage fees vary. In this 10-container example, a port charges $120 per container per day.
$120 fee x 10 containers x 3 days = $3,600
Demurrage can add up quickly, substantially increasing your shipping cost and eating into your profits!
What can be done to avoid demurrage?
The easiest way to avoid demurrage is obvious: pick up your containers before the last free day! This means you should regularly communicate and coordinate with your freight forwarder, customs broker, and drayage vendors. Also, it’s a good idea to have backup truckers to ensure you have pickup options, especially during peak times.
If your resources are limited, select an international freight forwarder. They are experts at coordinating between customs and drayage companies and will have contingencies in place. They will also have a strong network of drayage partners, and provide one-on-one communication and tracking tools to keep you and the trucking service apprised of any delays.
For more information or to schedule a free consultation, contact us here.