- Demurrage and Detention are hotly debated terms in container shipping
- Many factors may cause a container to incur demurrage and/or detention
- Most of these causes are avoidable or preventable if handled correctly
Demurrage and Detention are probably the most misunderstood, hated and most hotly debated terms in container shipping history currently even to the extent of demurrage and detention practices being investigated by the FMC..
I thought it would be a good idea to identify and discuss the “causes of demurrage and detention” and why it all happens..
There are several reasons a container(s) can incur demurrage and/or detention or combined demurrage and detention..
Here are some of the major causes for demurrage and detention..
- Delays due to incorrect documentation
- Delays due to late receipt of documents
- Delays due to loss of documents
- Delays due to customs clearance or cargo inspection
- Delays due to release of cargo at destination
- Delays due to receiver being unreachable
1. Delays due to incorrect documentation
Let’s say for example, the bill of lading reaches the receiver or their bank and there are discrepancies in the address details, voyage details, cargo particulars, or freight particulars..
Or for example, the trade documents submitted to customs at destination such as Commercial Invoice or Certificate of Origin are incorrect and customs requires the document(s) to be amended before they allow the cargo to be cleared..
There could be some delays in rectifying this situation with the shipping line and/or with customs..
By this time the container could have arrived at the destination port and lying uncleared..
As the receiver cannot get the delivery order till this incorrect documentation issue has been sorted, the container could start incurring demurrage/detention and maybe even port storage..
2. Delays due to late receipt of documents
There may also be cases wherein the documents required for the clearance of the goods such as bill of lading, certificate of origin, packing list etc may not reach the receiver in time.. These issues normally happens due to
- Shipper not planning the documentary processes at origin in advance and waiting till the last minute to gather all their documents
- Delays from the shipping line in issuing the bill of lading to the shipper due to various reasons.. It could be due to
- system problems
- customs cleared export documents or port documents not received from the shipper at origin
- container load confirmations not received from port
- freight monies paid by the customer has not yet been received by the shipping line
- Delays at the nominated bank (seller’s bank) if a Letter of Credit is involved and the documents do not reach the issuing bank (buyer’s bank) in time
Issues with delayed receipt of documents often affects shipments with a short sea transit (say Oslo to Aarhus) much more than deep sea shipments..
3. Delays due to loss of documents
A very common problem and one of the main causes for demurrage and detention.. There are several cases where the documents may go missing during transit by courier.. Most problematic could be when an original bill of lading is lost..
There are several steps to be taken when an original bill of lading is lost..
Some of these steps may take days to sort out, especially if there are bank guarantees to be given.. Sometimes the customer may not have the capability to pay 200% or 300% of the value of the goods that are required by the shipping line as part of the guarantee..
Live comment received from a reader :
Our original Bl is lost by FedEx courier to Russia. Shipping line is asking for 200-300% BG. Value of goods is around USD 50,000.
We are not in position to give any BG as bank will treat as full deposit which will incur a cost of 15% per annum accounting to 2 times invoice value loss in interest only in period asked by them for 6 years.
What should we do in this case. my goods are already in demurrage in Russia for last 15 days.
In such cases, the receiver faces a real tough time as they cannot get release without the documents and the container(s) might end up incurring heavy demurrage, detention and storage..
4. Delays due to customs clearance or cargo inspection
Let’s say for example, the documents are all in order, the container reaches the destination and the receiver approaches customs to clear the goods..
In all countries, the receivers are expected to file documents with customs providing details of the cargo being imported..
The details on the customs documents needs to match with the details on the commercial invoice submitted along with the customs clearance documents..
One of the key items that customs checks is the HS Code to ensure that the goods have been properly classified and declared.. Different HS codes attract different levels of Customs Duty and it is the receiver’s responsibility to ensure that they declare these details correctly..
Misdeclaration of HS code could lead not only to penalties but also suspicion surrounding the activities of the receiver.. In any case, in most parts of the world already customs are especially vigilant regarding the imports of retail goods such as garments, shoes, accessories, electronic goods etc as part of the Anti-Dumping measures of the WTO..
It is not uncommon for these commodities to be pulled over and inspected by customs..
Delays due to customs inspection in such cases are very common and there is no fixed time frame as to how long such inspections may take.. Different countries experience delays at different levels when it comes to customs inspections and all the while the container(s) could be incurring demurrage, detention and storage..
5. Delays due to release of cargo at destination
Release of cargo at destination could also be delayed due to shipping line receiving original bills of lading without proper endorsements on the bill of lading.. This is also a very common occurrence and cause for demurrage and detention..
For example, lets say a bill is consigned “To Order of Shipper” and the shipper has not endorsed the original bill of lading and this is only noticed at the time of original bill being surrendered at destination..
This then means that the original bill of lading must be sent back to the shipper in order for them to endorse it and send it back..
Another common reason for delay in release of cargo at destination is due to the shipping line not receiving their monies from the receiver at destination..
This usually stems from a lack of understanding of the Incoterms used for the shipment by the receiver who assumes that some or all of the local charges needs to be paid by the shipper..
Here again, the container(s) could be sitting at the port/terminal awaiting clearance while the meter is running on the demurrage, detention and/or port storage.. Tick Tock Tick Tock……………….
6. Delays due to the receiver being unreachable
Last, but not the least, there are also problems whereby the shipping line maybe unable to get hold of the consignee or notify party mentioned on the bill of lading.. In most cases it may be that the cargo has been abandoned by the shipper, receiver or both but the shipping line has not been told or notified of this..
The shipping line is still under the impression that someone will come to collect the release of the goods based on the cargo arrival notification that has been sent to the notify party..
Does the “notify party” have any legal obligation/liability for payment of ocean freight, storage, etc if the consignee or the shipper does not pay the shipping line? We are Customs brokers. The foreign shipper listed us as the Notify Party. Now MSC wants to hold us liable for payment because the shipper abandoned the cargo, didn’t pay ocean freight, storage charges, etc. Are we legally liable?
In a lot of such cases where no one comes to claim the cargo at destination, it is not uncommon for the shipping line to hold the freight forwarder liable for uncleared, unclaimed and/or abandoned cargo and all charges including demurrage, detention and/or port storage incurred due to this..
Regarding to abandonment cargoes while we are middle man ( Forwarding agents for shipper), we are also claimed by the shipping line due to overdue charges that the cargoes have been long staying. How to void such liabilities and void payment of charges since we cant trace shipper anymore.
Also, read a recent live case study on this blog about a freight forwarder’s liability on uncleared cargo..
Conclusion
As you can see, there are several causes of demurrage and detention but almost all of them are avoidable and preventable if all parties involved in the shipment follow the proper documentary processes required..
If you are unclear on certain processes that needs to be followed for import containers, this Beginner’s Guide to Importing may help you whether you are a Beginner or a regular importer.. It is always good to refresh one’s mind and identify any gaps in the processes..
If there any other causes of demurrage and detention that you would like to add to the above list, feel free to comment in the comments section..
Article republished after critical updates
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Hi
We shipped our household belongings via international mover Melbourne to Jakarta. We have been presented with a massive demurrage bill allegedly caused by the seal on our container being removed and replaced in transit resulting in mismatched BL numbers. We are told by the international movers that this is our liability. To further confuse the issue, the demurrage commenced one month prior to the container being unloaded at port.
Advice?
Hi Jonathan, not sure why there would be a mismatch in BL number if the seal has been tampered.. You would need to put the carrier (the one that issued you the bill of lading) on notice for loss/damage of cargo as the container would have been in their custody.. Carrier may be within their rights to charge demurrage from the time it was applicable if the goods were not cleared in time.. However if the goods were not cleared due to seal discrepancy, then carrier should not charge for same.. I would suggest you employ the services of a reputed surveyor in Jakarta to handle any survey/claims related matters..
Hi Hariesh,i hope i am in the correct thread…I hope that someone can assist me with the reason why i should pay for demurrage and storage while my container is with the Border Police for an inspection.This is becoming a recurring event and over the years and for over 15 years everything has been found to be perfectly in order…!We have lost nearly R 300 000 in what i consider to be unfair charges.If we were found to be at fault,i would find it easier to accept charges,fine etc…So far i see it all as being stopped at a road block personally and having to blow,finding not guilty,but then still being fined… All replies or assistance will be most appreciated…Thanks,Eric.
Hi Eric, the logic is quite simple.. While a container remains in the custody of a customer, the shipping line is unable to use the container for any other customer or business which means a loss of revenue for them as any movable asset makes money only when it moves.. While the reasons for the container being stuck may be beyond the customer’s control, the lines sometimes don’t have any ways of ascertaining this.. Therefore it is best that this is discussed with the line in question to see if they can give you any relief on the demurrage charges..
Another cause of detention/demurrage is availability of Railway Wagons for consignment to be transported by railway
Hi Julius, if the cargo is enroute and under the control of the carrier, they may not charge it unless they give alternate option to customer in case where rail is not available..
Hello,
I just got a message today that the shipping company that is carrying our consignment is asking for extra charges on their container. This is the issue, we booked a vessel in mid May 2021 and was told the departure date is May 22nd 2021 and when we asked our shipper we were told by our shipper that the vessel left May 28 2021, and we start communicating for the original documents only for the shipper to inform us on 21st June, 2021 that they were vessel delay and the vessel has not depart. Today (1/7/21) the shipper sent a message that the closest departure date given to them is 12/7/21 and the shipping is asking us to pay extra charges for the containers as demurrage. My question:
1. why should we pay for container demurrage when we were not even told about the delay of vessel
2. if anybody should asked for compensation it should be we and not the other way round
3. they are now telling s if we did not pay they will hold up to the goods and still continue to charge us on the containers daily.
4. we need advice as this is not right
Thank you
Hi Sylvanus in this case, you are being asked to pay “export demurrage” possibly because the full containers have not yet left the POL.. You can ask your shipper why the packed containers have not yet been loaded.. If it is due to space issues with the shipping line (assuming containers are in the port awaiting shipment) or any other reason why shipping line has not loaded the containers, then it is their problem and not yours or your shipper’s..
If however, the shipper (or your agent at POL) has picked up the containers but not returned it packed to the port for any particular vsl, then there could be container detention and/or demurrage..
You should ascertain 1) where are the full containers right now 2) if they are in port why have they not been loaded 3) If they are not in port but has been released by the shipping line, then where are the empty containers..
Good luck..
Hi
It seems like changing the vessel schedule and you should not be charged.
The date 22nd maybe was cut off and should be re-checked with the shipper.
Anyway depending on the experience with shipping lines that they will not wave the charges but try for a discount.
Regards
What we can do (as seller) if the buyer refused to pay (payment CAD)? the containers are still for a long time at POD also the buyer refused to cooperate to give NOC to amend the docs to another buyer?
Can we claim Demurrage and detention charges to supplier due to late receive documents.
If the demurrage and detention were caused due to the late receipt of documents yes..
Hi, would you please help us to understand that who will if demurrage/port storage charges occurred on export containers due to late arrival of vessel at POL
Dear Freight Professionals,
What if the carrier lost track of a container in the transhipment port and then after 3 months it is found in destination port and immediately collected, but our customer received a huge bill for the demmurrage although container couldn’t been tracked for over 3 months. Is that correct or should we (our customer) claim reimbursement for the demurrage charges?
Marek, surely consignee should have been checking the status with the line from around the period that the container was expected to arrive at destination.. If they had been asking, then the line would have been telling the client if they can’t track or have been looking for the box.. That would be proof from consignee to dispute the dem/det charges..
Would appreciate your insight on a situation we currently find ourselves.
We completed a CIF contract sale with our buyers and we delivered the product at the discharge port but we did not receive the full outstanding amount. The payment delayed 3 days to arrive which caused the demurrage to kick in.
Now the buyers are saying that there was bad weather during this 3 day period and they want that deducted from the demurrage claim. However, as the seller we would not discharge the cargo (good or bad weather) without the full amount.
In this situation, does the buyer have a point? Or must they still pay the full demurrage amount?
Hi Leo, you are referring to a bulk shipment..?? If so, then you should be guided by the terms and conditions of the C/P and what reference it makes to payment and breaking bulk..
incorrect documentation,late receipt of documents, loss of documents, customs clearance or cargo inspection, release of cargo at destination ,receiver being unreachable i think this all company must understand back real, it is big problem in logistic so very company can participates to solve unwanted time .
All I see is Delays, Delays, and more Delays this needs to stop.
Very interesting article. Thanks for sharing.
What could be the reason for a buyer / Importer to INSIST on 21 free days of Demurrage against the Liner’s offer of 21 days free detention..?? If the Warehouse capacity of the buyer is scanty on arrival of goods, …how to make use of available Free Demurrage OR Free Detention until clearance of goods ?? …Thanks for Ur response.
Rgds, SUNDAR.
Nasser Al Naamani
Another issue is when consignee mentioned in the bill of lading is a foreign Cnee while notify party is a local consignee so the Shipping line will require an NOC letter from foreign Cnee to the Shipping line that they don’t have any objection the Delivery Order to be releised to a notify party
Hi Nasser, yes such delays also happen.. Thanks for that..
Hello All,
I’d like to add a couple more reasons for demurrage specifically ;
1. The inability to get through to the s.s. line as everything is through 1-800 numbers or group emails and there is no single point of contact who takes ownership of things. Even though your shipment has cleared customs and you have paid the carrier days or even weeks ahead of time, send them the cheque copy as proof along with tracking details for the original cheque that shows that it was received by their freight cashier.
This is a very frustrating situation because on the one hand, your client is annoyed that their goods are being held up for no reason and on the other, you do actually have everything you need to get the shipment moving but can’t because of the structure, bureaucracy and the way the s.s. line operates.
2. Human Error – Cargo has arrived at the port of destination but employee/s in charge of the file forget to check and track the shipments on a regular basis.
In conclusion, it’s Logistics, things like this can always happen just by the very nature of the fast paced and far reaching industry. The key is to ‘experience and adjust’ based on those experiences gathered so that the same mistakes to keep occurring (as they can be costly).
Thank you
Martin
in some countries some products are stuck in containers due to lack of alingment of procured quantities and available warehouse space. Resulting in backlogs and huge detention charges. Wiping out any price advantages due to bulk buying. HH
We have seen the above narrations correctly,and they among the causes of delays of the cargo..am not sure about detentions,but in many cases are caused by non availability of proper documentation,and permits that are required…
The non availability of an Import permit or licence to import a particular product?
Hi Errol, yes for sure that is also one common cause.. Thanks for that..
yes sir. you are right.
Due to “DELAYS” unnecessary additional charges we incur. I do frequent follow up in all the stages and ensure Originals reach us atleast 3 days early to vessel arrival.
i have a practice of analyzing each and every shipment and ” Where exactly the DELAY” happened from the start date of shipment, Receiving copy documents, Receiving Originals, check with our bank originals arrived on date, Bank intimation date, Supplier communication date…and so On till the end of shipment clearence and container return back to yard.
Now I am proud to share that from past 5-6 years handling Imports without any detention & demmurage “0” . Days and Exact Dates play an important role in avoiding det/dem.
Another method i have opted is interacted with our Freight Forwarders and Liners and got an extention of free days from “14 Free days” to ” 21 Free days” and also had meetings with CFS and increased their free days from ” 3 days” to “14 days”
Thank you so much for providing me to share my knowledge in this blog.
best regards,
Asha(Ms)
Hi Asha, thanks for sharing your comments which are quite useful and very practical.. This is the right way to go and many of the importers can learn from this.. 🙂