I. Core Definitions and Logic of Demurrage and Port Demurrage
Demurrage and port demurrage are charges paid to shipping companies and terminals/yards, respectively, for overtime occupancy of cargo not promptly processed after arrival. The two charges are levied by completely different entities, targets, and scenarios, and therefore require a clear distinction:
- Demurrage: Charges for Overtime Container Usage
Definition: To ensure efficient container recycling, shipping companies offer shippers (or consignees) a certain “free container usage period.” If the shipper fails to return the empty container to the shipping company’s designated yard/terminal within the free period, the shipper must pay a fee to the shipping company per day/container for the remaining days, which is known as demurrage.
Core Principle: The fee is charged by the shipping company for the overtime occupancy of the container itself, and is essentially compensation for container resource usage. Free period rules: Typically 7-14 days (calculated from the time the container is lifted from the terminal yard until the empty container is returned to the yard). The specific duration is determined by the shipping company, route, and cargo volume. During peak season, the free period may be shortened to 5 days, and long-term large customers can apply for an extension to 21 days.
- Detention/Storage Fee: Charges for excessive storage of cargo
Definition: After cargo arrives at the port, the terminal/yard provides the consignee with a certain period of “free cargo storage.” If the consignee fails to complete the delivery procedures (such as customs clearance or bill of lading exchange) within the free period, resulting in the cargo remaining at the terminal/yard, the consignee must pay a fee to the terminal/yard for the additional days, calculated on a per-day/container or per-day/cubic-meter basis.
Core of the issue: Charges for excessive storage of cargo at the terminal/yard are levied by the terminal operator (such as the port group), essentially serving as compensation for terminal space occupation.
Free period rules: Typically 3-7 days (calculated from the time the vessel arrives at the port and the cargo is unloaded at the terminal yard, until the cargo is picked up from the terminal). This period may be shortened to 2 days in the event of congestion at the destination port, and extended to 10 days at some remote ports.
II. Common Scenarios for Demurrage and Port Demurrage
Both types of charges arise from “process delays,” but the delays are triggered at different stages. The specific scenarios can be categorized as follows:
- Typical Scenarios for Demurrage
Delayed customs clearance leading to late container pickup: The consignee fails to complete import customs clearance in a timely manner (e.g., due to missing documents or incorrect declarations), and is unable to pick up the loaded container from the terminal on time. This results in the container being picked up near or beyond the free period, compressing the time for subsequent unpacking and return of the container, ultimately exceeding the free period.
Inefficient unpacking and cargo handling: After loaded containers arrive at the warehouse, unpacking and counting the goods can take an inordinate amount of time due to labor shortages and limited warehouse space (e.g., a 10-day free period may take 8 days to unpack, leaving only 2 days for returning the container. Transportation delays can cause the free period to expire).
Errors in route planning for empty container returns: Failure to check the shipping company’s designated storage yard location before returning the container, or delays due to traffic congestion or overflowing storage yards, can lead to delayed returns and thus exceed the free period.
Time-consuming handling of special cargo: For example, large equipment must be disassembled before return, and dangerous goods require special unpacking facilities. Failure to reserve sufficient time in advance can easily lead to delays.
- Typical scenarios for demurrage charges
Delays in bill of lading exchange and customs clearance processes: The consignee fails to receive the original bill of lading in a timely manner (e.g., due to courier delays), making it impossible to exchange the bill of lading. Alternatively, customs clearance documents may be missing or incorrectly declared, leading to customs returns, resulting in cargo storage exceeding the terminal period.
Delays due to customs inspection: If goods are subject to random inspection by customs, the customer must wait for inspection notification and cooperate with unpacking and verification. The entire process takes 3-5 days (far exceeding the standard 3-day free period). Failure to apply for an extension promptly will result in demurrage charges.
Errors in cargo pickup arrangements: After customs clearance, the towing company is not contacted promptly to pick up the goods, or the towing company is unable to arrive on time due to insufficient capacity, resulting in continued storage of goods at the terminal.
Port of destination policies and congestion: Unloading delays due to strikes at the destination port or equipment malfunctions can prevent goods from arriving at the yard promptly upon arrival. Alternatively, if the terminal’s storage capacity is full, overdue storage fees may be imposed.
III. Strategies for Avoiding Demurrage and Port Demurrage Fees (Full-Process Management)
Avoiding these two types of fees requires comprehensive attention throughout the entire process: pre-arrival preparation, post-arrival operations, and exception handling. The key is advance planning, efficient coordination, and proactive communication:
- Pre-arrival: Plan ahead to shorten process times
Predict the free period and apply for an extension in advance. Before picking up cargo, confirm the specific free period with the shipping company and terminal through your freight forwarder (e.g., “demurrage-free period is 10 days, port demurrage-free period is 5 days”). If you anticipate that you will not be able to pick up, unpack, or return the container within the free period, apply for an extension 3-5 days in advance.
Demurrage: Submit a “Demurrage Extension Application” to the shipping company, stating the reason (e.g., “Cargo requires customs inspection, expected return delay of 3 days”). For long-term customers or large cargo volumes, shipping companies can usually approve an extension of 3-7 days.
Demurrage: To apply for an extension through the terminal agent, you must provide proof of customs clearance progress (such as a customs inspection notice). Some terminals may waive the fee for 1-3 days.
Prepare all documents in advance to expedite customs clearance and bill of lading exchange. Request a complete set of customs clearance documents (bill of lading, invoice, packing list, license, etc.) from the shipper 7 days before arrival. After verifying the information, forward it to the customs broker at the destination port to initiate “pre-clearance” (some countries support pre-arrival declaration). If the bill of lading is telex release, confirm the bill of lading exchange process with the shipping company’s agent in advance. Complete the exchange within one business day after arrival to avoid delays in picking up the goods due to delayed documentation.
Plan the pickup and return process. Before customs clearance, contact a reliable towing company to confirm the pickup time and route. Check the shipping company’s designated return yard in advance and choose the one closest to the devanning warehouse to reduce return shipping time. (If the devanning warehouse is in Pudong, prioritize a return yard in Pudong to avoid cross-regional transportation delays.)
- After Arrival: Efficient Operations, Reduced Time
Quickly Complete Customs Clearance and Pickup After cargo arrives at the port, monitor the customs broker’s clearance progress daily. If there are any declaration issues (such as missing declaration elements), provide additional information within one hour. After customs clearance is complete, arrange for a truck to collect the cargo immediately to avoid overnight storage at the terminal (especially at ports with short free shipping periods).
Optimize the Unpacking and Returning Process: After loaded containers arrive at the warehouse, prioritize cargo that needs to be returned. Assign dedicated personnel to unpack and count the containers to avoid a chaotic and time-consuming unpacking process. Immediately clean the empty containers (remove shipping marks and debris) after unpacking, and arrange for a truck to return the containers within 24 hours to ensure they are returned before the free shipping period expires.
Proactively Monitor Customs Inspection Progress: If cargo is subject to customs inspection, immediately arrange for personnel familiar with the cargo to assist (such as providing product manuals and assisting with unpacking). Explain the cargo’s attributes to customs to expedite inspection. Upon completion of the inspection, urge the customs broker to submit the inspection results to customs the same day to facilitate customs clearance and reduce the time cargo is stored at the terminal.
- Abnormal Situations: Respond promptly to reduce accumulated costs
In case of customs clearance delays: Prioritize “departure from the terminal” for further processing. If customs clearance is delayed due to missing information or declaration errors, and the demurrage-free period is approaching, you can apply for “guaranteed delivery” (paying a deposit to customs and having the goods delivered to a customs-designated supervised warehouse). At this point, the goods are removed from the terminal yard, no demurrage will be incurred, and customs clearance will be handled at the supervised warehouse later (the deposit is refundable after customs clearance is completed).
In case of yard/terminal congestion: Change the container return location or negotiate a waiver. If the container return yard is full and you cannot return the container promptly, contact the shipping company to request “off-site return” (returning the container at a non-designated yard will incur a small off-site fee, but it is lower than the demurrage fee). If the cargo cannot be delivered due to a terminal strike or equipment failure, retain the official certificate issued by the terminal and apply for a full demurrage waiver from the terminal later.
Monitor charges in real time. Check the status of demurrage and port detention charges on the shipping company’s official website and the terminal’s system. If you’ve been charged without requesting an extension, immediately contact the freight forwarder to verify the situation with the shipping company/terminal, explain the situation (e.g., “I’ve requested an extension, but the system hasn’t updated”), and request a reversal of the erroneous charge.
- Long-term Strategy: Establish Partnerships to Reduce Baseline Risk
Build strong partnerships with high-quality partners. Use the same shipping company, freight forwarder, and customs broker for a long time to establish stable partnerships. Shipping companies will offer longer free periods and extensions, freight forwarders can assist in coordinating with the terminal/customs department, and customs brokers can provide early warning of customs clearance risks (e.g., “This port is currently cracking down on under-declared cargo values; invoices must be prepared in advance”).
Optimize cargo and order management. For time-sensitive cargo that requires extended processing time (e.g., large equipment, multi-size LCL cargo), prioritize shipping companies with long free periods (e.g., some Southeast Asian shipping companies offer up to 21 days). Negotiate a “customs clearance delay waiver clause” with the buyer to avoid additional commercial disputes over fees.
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