Effectively Managing Demurrage and Detention Costs
How to Avoid Demurrage and Detention Charges while Managing Container Free Time Effectively?
Planning your allotted container free time can be challenging. Free time usage is rife with in-transparency and guesswork, and up to now, it has been one of the most difficult expenses to manage effectively.
Demurrage charges are incurred when your cargo stays too long after arriving at a port. They are also levied when your containers are not sent back within the stipulated time. If these charges are eating up your profits, then you might like to know more about them.
What Constitutes Demurrage and Detention Charges?
Demurrage is a charge levied by the port on the consignee. A container, unlike a courier package, does not belong to the consignee and must be returned to the carrier after the consignee has offloaded it. Demurrage charges for containers are incurred from the day the free time has been used up. You can regard them as the storage costs for each day your cargo remains in the port. Demurrage costs are not fixed and may vary from container company to container company as well as from port to port. Average demurrage fees can range from $75- $150 per container per day. Moreover, the fee rises to as much as several hundred per day the longer the container remains in a terminal. In other words, you might end up paying exorbitant unforeseen costs if you don’t take mitigating steps.
Much like demurrage charges, detention charges (also known as per-diem fees) are also imposed at the end of a certain number of free days that the consignee is permitted to hold the container outside the terminal. The average price ranges between $50-$100 per container per day. Unlike demurrage, detention charges are charged by the shipping line or the trucker who owns the shipping container, and not by the port.
Here are some steps you can take to manage your costs
- Get an overview: Have real-time information on your container’s status
If you already have plenty of experience in shipping consignments, then you know that you cannot always rely on information provided by the carrier. Ocean Insights’ container tracking solution (CTT) is both data-driven and carrier-independent. In other words, you are not dependent on any physical tracking device that needs to be installed on a container. With real-time data, you can make proactive decisions in the event of schedule changes.
- Plan your offloading schedule in advance.
It pays to stay organized. In order to not unnecessarily escalate port charges for a container, you can keep the following details up-to-date before your container(s) arrive:
- Pre-clear customs
- Coordinate with your inland trucking carrier: Having a backup trucking provider never hurts. It is always good to be prepared for unforeseen circumstances such as port congestion, bad weather or labour shortages.
- Inform everyone involved: As the logistics supply chain interlinks many processes, it is a good idea to keep everyone informed about a container’s whereabouts. With your tracking information in place, it is easy to disseminate the information to the appropriate channels. That could include your processing units, vendors and even end-customers. Having the right information can let the decision makers take appropriate recourse.
- Learn from the data: Optimize your free time purchases based on historical trends
Analyse your past performance to identify trends and optimise your free-time allotment in the next purchasing round. After analysing your delay times, you may find you’re spending too much of your free time at one port while you should be focusing it at a different, much more congested port. You may also be able to negotiate with a Container Detention Waiver Request Letter. Even if you dispatch your cargo with the utmost degree of planning, there is always the probability of unforeseen circumstances in the operations chain. If you frequently struggle with detentions, you really should familiarise yourself with how to request additional free time from your carrier.
Instead of panicking at the 11th hour, it makes sense to have a clear overview of your entire consignment journey. A few years ago, shippers had to leave their penalty fees to fate, but with the advancement of big data, the technologies of today empower you to enjoy on-going visibility and make informed decisions.
With data compiled from the entire shipping industry at your disposal, you can integrate it into your business operations to make informed decisions. The longer you delay the decision to adopt sophisticated tracking measures, the more likely you are to end up paying for the resulting costs.
Ocean Insights’ real-time container tracking software (CTT) helps dozens of shippers to reduce their demurrage and detention charges every year. Click here to get in touch with us!