The coronavirus pandemic by blunting demand, disrupting supply, and prioritizing the delivery of PPE and medical equipment has disrupted the flow of containers globally. Importers that can’t sell their products are stranding their containers on the quay. Others, without sufficient cash on hand, can’t get their cargoes released. Ports—already impacted by the race to deliver PPE—are operating with less efficiency. Gate in/out operations, including truck turnaround are negatively impacted, increasing congestion and raising the likelihood of detention and demurrage fees for everyone.
For all these reasons, now is a wise time to understand why conditions leading to detention and demurrage are on the rise, how the two fees differ, and what steps companies can take to help avoid them.
Demurrage is a daily storage fee assessed by the terminal when a cargo remains at port after its contracted Last Free Day. Specific charges vary depending on the port and terminal, but can be steep, especially when combined with detention/per diem fees—anywhere from $75-$200 per container, per day, is typical. What’s more, storage charges are often applied on a progressive scale, rising the longer a container dwells at port.
Detention or per diem is the fee the ocean carrier charges for each day past the number of free days a shipper holds the carrier's container outside of the port/terminal. Storing cargo in its container may be a tempting short-term solution, but detention fees can make it a more expensive option than warehousing. For shippers who run up against maxed-out or closed warehouses, there are solutions to help avoid incurring steep fees.
Given the congestion at many ports and warehouses recently, it pays to know how to minimize detention and demurrage charges. Following are a few of the areas where freight forwarders can help.
The coronavirus has impacted the global flow of containers in ways that make it harder to avoid detention and demurrage fees even as their impact may be felt more keenly than normal. Shippers should take steps now to understand these fees, monitor the conditions that cause them, and take steps to minimize them.
For more information on how to minimize detention and demurrage charges, get in touch.
Sign Up for the Freight Market Update newsletter for the latest market trends you need to know about - delivered right to your inbox.