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.
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.