What are Demurrage and Detention Fees?

  • 2 min read

Shipping containers are used in transporting freight from port-to-port via container ships. They allow for the easier and more efficient flow of cargo from origin to destination.

Containers are either owned or are leased by shipping lines who provide them to their customers (shippers or merchants) for the safe and fast door-to-door transport of their goods. Because the cost for using the container during the door-to-door transport is included in the freight, it is essential for shipping lines to turn around their containers as fast as possible.

As a result, and with the objective to encourage merchants to move or return their containers quickly, shipping lines discourage merchants who exceed the free time by charging demurrage and detention fees.

Demurrage refers to the charge that the merchant pays for the use of the container within the terminal beyond the free time period. Detention refers to the charge that the merchant pays for the use of the container outside of the terminal or depot, beyond the free time period.

It is an obligation for shipping lines to provide a reasonable free period during which no demurrage and detention charges apply. This free period is supposed to provide the merchant with a realistic period of time for:

  • The loading and delivery of the container for an export
  • The pick-up, unloading, and return of the empty container for an import.

It’s important that all shippers are aware of the length of the free period offered by their shipping lines prior to importing and/or exporting. This will allow them to plan out their loading and delivery processes better and avoid demurrage and detention fees.

For a complete logistics solution that helps you avoid unnecessary expenses and fees, get in touch with ISS today.