As a Consignee, your shipment has arrived, but for some reasons, you have been constrained. The only option is to be granted a few days to put things together and pull your consignment off the shipping line, otherwise be issued a notice to pay. The horror note of a demurrage charges notwithstanding has negative effects you don’t want to record.
In shipping, different conditions attract different charges. In most cases, a consignee may have planned for some extra fees to be spent, but might not be certain about the major causes of some of them. The reason being that there are numerous charges as well as there are causes.
In order to get a near stressless passage at the shipping terminal, importers are required to ensure that all due processes are passed. This is to avoid possible increasing charges when importing, and one of such is known as demurrage.
What is a Demurrage Charge?
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 free days.
For simplicity, Cambridge Dictionary defines Demurrage as money that must be paid when a chartered (= rented) ship is used for longer than agreed, or when goods are collected later than the agreed time after being taken off a chartered ship.
Both importers and exporters may encounter the ills of a demurrage charge at different levels. To an importer, the fees are charged when the import containers are still full and under the control of the shipping line.
In such a situation, the consignee is yet to pick up the container and the free time for pick up (usually 5 days) set at the sea terminal is expired. Most usually, the free period starts when the container has been discharged from the vessel to the terminal. Demurrage charges are applicable from the point where free time elapses and ends on the day the container is picked out of the terminal.
Demurrage charge, regardless of preparation, is a terror-igniting compulsory charge in shipping, just like an under-declaration notice and other extra charges. It usually not a comfortable fee as it has a tendency of increasing on a daily basis, due to delay in the customs process.
Some Major Causes of Demurrage
Various factors are responsible for demurrage, all linked to some sort of delays. Although delay may not be separated from shipping, they can be avoided by ensuring all precautions are attended to.
Some of the most common reasons for demurrage are as follow:
1. Consignee did not receive the documents in time for customs clearance
2. The documentation received by the consignee is incorrect or lack sufficient details
3. Customers, Police or other authorities may stop the container for inspection of the cargo causing delays.
4. The Consignee was probably not aware of the arrival of the cargo and was unable to do the customs clearance in time
5. Lack of adequate finances to fund the clearing of the container in time.
6. Disputes between shipper and consignee
7. Wrong Cargo received was not as per the sales order.
Read Also: Groupage Freight Shipping to Nigeria
Other factors include delay in payment (or full payment). In a situation where the shipper paid only a fraction of a shipment, the freight may not be released by the vessel until full payments are made. Any delay in such payment definitely leads to cargo detention, which consequently causes demurrage.
Another major cause is errors from the paperwork. A shipper needs four documents properly processed without which demurrage charges will definitely take place. They are:
i. A commercial invoice
ii. A bill of lading or airway bill
iii. A packing list
iv. An arrival notice
These four are paramount, although there might be other specific-goods required additional documents.
Most times, the shippers or freight forwarders may be the major cause of demurrage. There are incompetent, unqualified forwarders with limited ideas about freight forwarding business who most of the time, sparks demurrage.
They ought to be avoided strategically, and early too.
But with the help of a Licenced Customs Agent or professional freight forwarder for adequate consultation, you might just be a step away from an ‘aha moment’.
Read Also: RoRo Freight Shipping to Nigeria
How long before you are charged to pay demurrage fee?
Your shipment or cargo is allowed at the terminal for 4 – 5 days free time. This implies that your cargo is likely occupying the storage that could serve other incoming shipments.
After the free duration expires, you will be charged subsequently, a daily fee for using the storage facility. This charge continues until you move the cargo from the terminal. Charges generally increase the longer the cargo stays on the terminal, and it varies.
Difference between demurrage and detention
Basically, these two are charges for shipment where the customers have used up standard free time.
Only that, while demurrage is a levy issued when the customer occupies the facility inside the terminal for longer than the agreed free days, detention is levied a customer for using the facility outside the terminal longer than the agreed free time.
These vary from one country to another. Contact us for more details.
How to Avoid or Reduce Demurrage charges?
Engage in proper Negotiate of Terms
There is likely to be an open-door policy with the Carrier or Shipping line. Take advantage of that and negotiate terms before accepting a freight quote. In the course of negotiation, endeavour to request more free days, in order to accommodate you and help avoid demurrage. Sometimes, if you have cargo or containers in large number, say from 800 containers and above, some Carriers or Shipping Lines may grant you some more free time.
Devise Alternative Plan in Case the initial flops
The major purpose of devising an alternative plan is to have something to fall back on in the event of a failure in the first. Seek alternative truck rates, truck services or nearby terminals to channel your cargo. This will help you avoid large costs.
Dispatch in Advance, Manage Time Effectively
In order to get more flexibility and lots of time frame to take care of unforeseen circumstances, you might just need to dispatch your cargo in advance. This can help avoid unforeseen challenges like backlogs at the port, and even bad weather.
Be Well-Prepared, Be Well-Informed
Adequate knowledge of the contract details is as important as the safety of your consignment. Endeavour to be acquainted with relevant information before signing a contract. The contract might be quite long but requires being read carefully. See that you are in good knowledge of the customs clearance processes and port regulations.
May we be of help?
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