Demurrage and Detention
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 detention 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.
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