Please wait...

Demurrage Charges

What are demurrage charges?

Delays in shipping are common, which may lead customers to incur a multitude of some extra charges which the customers have not catered for. One such extra charge is the Demurrage charge.

“Demurrage is basically a charge that is levied by the shipping line to an importer for case where they do not take the delivery of the full consignment and apart from it they move it out of the port or the terminal area for unpacking the container within the allowed free days.”

Demurrage charges may vary from one country to another as well as by the carrier to. Further, fees will be applied per container and per day basis after the designated free time. Free time also varies from one carrier service to another.

Demurrage can be caused because of a variety of reasons. Most common among these are:

  • Importer did not receive the relevant documents in time for the customs clearance process.
  • Documentation received was not enough or may be incorrect.
  • Container being stopped by legal officers, police or other authorized authorities for inspection purpose of the cargo which may result in taking longer than the expected one.
  • Consignee was not aware about the arrival of the cargo and thus was unable to perform customs clearance within the mean time.
  • Importer does not have the required finance for clearing the container in time.
  • Dispute occurrence between shipper and consignee
  • Cargo received was not meeting the consignment being ordered.

Demurrage is considered to be an avoidable cost. Moreover, if not controlled in an effective manner, demurrage charges can even overtake the price of consignment. And such huge charges can leave consignees with only option of abandoning the cargo.

For understanding this let us consider an example, there is a buyer who imports 10×40’ containers of machineries, but the containers were not cleared due to the absence of required documentation.

The demurrage charges of shipping line are USD 120/40’/day for the first 10 days. These charges will be applicable after the free days.

If the containers stand over the dock for let say 7 days after the expiry of free days, these 10×40’ will incur almost demurrage charge of US$ 120 x 10 x 7 = US$ 8400/- just because of documentary delays.

This can be clearly understood that any kind of delay caused can result in huge extra as well as avoidable costs for you.

10 tips to avoid demurrage charges

  1. If you are new to trade as an importer, clearly identify the do’s and don’ts of importing.
  2. Identify if there exists a few special requirements for importing your cargo that might be held by customs officer or other authorities.
  3. If you are aware about the fact that cargo requires some special permissions (like foodstuff, animal goods etc) then request the shipping line for arranging more extra free days in terms to cater for this potential delay.
  4. Ensure the commodity that you are buying is relevant so that you will not have to go through problems at its arrival and doesn’t match your expectations.
  5. Have clear communication with your supplier as well as the shipping line about status and relevancy of shipping documents respectively.
  6. If your shipment is related with Letter of Credit, then it is crucial that the time taken should be taken into consideration in advance which includes communication times with the banks and the time taken in release of documents.
  7. If your shipment does not fall under a Letter of Credit or if there is no requirement for an original bill of lading, then ask the supplier for using an Express Release in spite of an Original Bill of Lading in terms to avoid delays due to waiting for an Original Bill of Lading.
  8. If the shipper insists for an Original Bill of Lading in order for safeguarding the payment, then once he is paid, do arrange the Telex Release for avoiding delays by waiting for an Original Bill of Lading.
  9. Share cargo as well as shipment delivery instructions with all the involved parties i.e. the carrier, vendors and third-party providers for the smooth loading and unloading process and for avoiding delays.
  10. Contact to professional freight forwarder companies to get freight forwarders who will monitor the whole shipment in your place and will ensure that the cargo arrives in time.

Demurrage free time

It is imperative to know what the free time or available time after which demurrage charges will be applicable. It may vary as per various shipment types. For instance the demurrage charges will be different for dry cargo as compared with reefer cargo.