Apr. 6, 2021

When Detention and Demurrage Get Unruly, Logistics Strategies Can Help

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In April 2020, the US Federal Maritime Commission announced updated detention and demurrage fee guidance to protect shippers from market impacts beyond their control. A year later, industry coalitions have bombarded the FMC with complaints of misapplied fees.

The confusion is more likely due to industry-wide chaos than anything nefarious. Container availability dates aren’t always reliable, port access may be tough, and the fees can get high. But some shipper groups are so beleaguered, they’re suggesting the FMC guidelines go to Congress and become law. Meanwhile, Federal Maritime Commissioners, under a newly appointed FMC chairman, are reviewing comments and considering new enforcement mechanisms.

Container Flow

The FMC’s 2020 guidance was right on time. As Covid-19 curtailed port activity last year, getting containers in and out of yards at the usual pace became impossible. A year later, on-time drayage is still a serious challenge.

But when containers linger too long, consignees have to pay. Detention is charged for extra days a container is away from port; demurrage, when the container sits in the terminal awaiting pick-up.

Once upon a time, detention and demurrage fees were the maritime equivalent of overdue library fines or a storage fee at the dry cleaners.

The fees were put in place to stop shippers from holding equipment or using terminal space for their own storage—and, ultimately, to keep containers moving. Charges were minimal, unmemorable, and, sometimes, worth it to have an extra day or two.

Now, getting the timing right to avoid day after day of fees is trickier. Port congestion, high container demand, and shifting carrier schedules have cargo bogged down.

Without the visibility of real-time shipment tracking, it can be hard to know when trucks can actually enter yards to pick up or drop off containers. Even with high visibility, available dates aren’t always reliable. Short notice can mean missing the window. Altogether, it can get expensive, fast.

Offsetting Costs

Unlike at the library or the dry cleaner, there’s no abandoning ship—or container. The consequences are too high.

Since it’s too soon to tell what the FMC will do, companies can take steps now to shield themselves from crazy fees with an audit. Make time to understand each individual carriers’ dispute policies. The recent FMC guidelines mandate these policies be clear. Then, check the actual dates used by carriers and terminals to calculate fees and ensure accuracy.

Limit fee exposure by working with freight forwarding partners to determine which routes are least likely to have formidable delays. For large orders or some LCL shipments combined with other Flexport customers, a company could try to coordinate a peel-off, a well-timed logistics move that streamlines drayage.

When negotiating new contracts, keep in mind some fees may be unavoidable. Focus on broader wins that can help offset detention and demurrage. For example, high-volume shippers could consider performance-based agreements that gear service terms towards a company’s operational requirements. Younger companies especially may value reliability while building the landed cost data that can guide future negotiations.

For more on container action, subscribe to the Freight Market Update, where Flexport highlights the week in shipping and supply chain.

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