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Case StudiesDemurrage and Detention

Demurrage and Detention – Exporter vs Shipping Line

Hariesh Manaadiar
By Hariesh Manaadiar
29

Demurrage and Detention – Exporter vs Shipping Line – case study

Further to my previous posts regarding Demurrage and Detention

here is a case which one of the readers sent to me..

  1. Shipper made booking with the shipping line
  2. They requested for 14 free days at destination
  3. Line confirmed in writing with the words “We confirm 14 days free time for the respective B/L at destination”
  4. When containers reached the destination, the shipping lines agent charges the consignee demurrage after expiry of 3 free days
  5. Consignee complains to shipper who in turn takes it up with the shipping line
  6. Shipping line says their 14 free days is for “detention” and not for “demurrage”
  7. Remember –
    • Demurrage is charged when containers are still full and under the control of the shipping line and has not been cleared or picked up by the consignee
    • Detention is charged after the containers have been picked up, but container (full or empty) is still with the consignee
  8. But whether these 14 free days were for Demurrage or Detention were not specified on the free days confirmation from the shipping line
  9. The shipper was also not specific in asking for 14 demurrage free days or demurrage/detention free days
  10. Consignee is refusing to pay the shipper for the demurrage charged by the shipping line

Whoever is at fault here, moral of the story is – BE SPECIFIC WHEN REQUESTING FREE DAYS AND MENTION WHETHER IT IS REQUIRED FOR DEMURRAGE OR DETENTION OR ASK THE LINE TO OFFER COMBINED DEMURRAGE/DETENTION..

What are your views..?? Who do you think is at fault here..??

29 COMMENTS

  1. Dear Mr. Manaadiar,
    Please review the following case and comment
    1. We requested door delivery booking declaring name of the consignee in Netherland.
    2. Shipping line booked the container without checking if our customer company (consignee) had any issues with the steamship line
    3. We shipped container to the port of Houston.
    4. Now shipping line advised that the consignee is on No Business list due to past unpaid invoice (unrelated to us). Container is held and not loaded on the booked vessel.
    5. We requested to move it to the next vessel and paid $250 transfer fee.
    6. Meanwhile consignee paid the past due and removed from not to do business list. Steamship line issues new booking and finally container is shipped on the next vessel.
    7. We are invoiced $3600 demurrage for number of days loaded container was on the port between two bookings minus 7 free days.
    8. My argument is that the shipping company should not have issued a booking in the first place because name of the consignee was known to them. They failed or did not care to find out if there was any issue until container is shipped to the port..
    9. In my opinion shipping line thus is partly responsible in causing the demurrage and 100% of the demurrage invoice to us is not justified.

  2. Dear Sir,
    I hv a BL stated with terms 14 days dem/det combined. But after we had pick up and retrurn the container within 14 days, we were being charged by liner for demurrage. We complained but liner insisted it was 7 days dem + 7 days det.
    Our query is are we at the mercy of the liner on how they define 14 days dem/det combined, whether they meant 9+5 or 10+4 or 7+7?

  3. Dear sir/madam
    I’m working in a freight forwarding company. I want to know why direct b/l not involve in fob shipment.. plz anyone help me….

  4. Hello,

    I work for an SME in Manchester and we receive some goods door to door from North Africa. The supplier sends them through CMA and recently CMA have been unable to deliver within the 7 ‘free days’ as they are ‘busy’. Fair enough but then they are trying to charge us rent? Surely this is not right? If they cannot deliver surely they cannot charge rent?

    Would be good if someone could advise, as CMA’s attitude on previous queries is ‘pay it or we will take you to court’.

    If they are allowed to do this, I am not surprised they are the cheapest carrier by far for my supplier as they make all this extra on the side!

    Thanks

  5. Please advise

    I work in freight forwarding company. Recently got one query for import. Importer (consignee) asked for 14 days free time at destination. Now, our agent office in Loading port (country) has received below reply from Carrier/Liner: Please help me to understand this well, what should I tell the Importer?

    Liner reply as below for your reference.

    “*Quote*
    There is no DEM at destination, terminal storage fee is settle to terminal directly by cnee.

    For 7 days DET I can help to apply.
    *Quoted*

    Our earlier conversation:
    Subject: RE: Ocean freight rate query for 1X40’HQ
    Our reply:
    “Combined demurrage/detention free days.”

    Our Agent office in Loading country:
    “Liner is asking what is the meaning of 14 days free time in destination,
    If 14 days free detention or 7 days free demurrage + 7 days free detention?”

    Importer:
    “Free time at POD should be 14 Days.”

    • Hi Susmita, as I have mentioned in the above post, it is very important for consignees requiring demurrage/detention free days at destination to be “clear” about at what stage they require the free days.. Whether before the container is picked up for unpacking or after the container has been picked up and taken to the consignees premises for unpacking..?? Various lines handle demurrage and detention requests differently..

      In this case, I believe your client wants combined demurrage/detention, but from what I in your comment, the shipping line doesn’t have the option to provide such combined dem/det free days.. The shipping line is willing to help your customer with 7 days of Detention free days.. Which means your client has 7 free days from the time the container has been picked up and moved out of port to bring it back as empty to the nominated depot.. If the empty is not back at the lines nominated depot within the 7 days, they could be charged detention charges as per the lines tariff..

    • Please Advise, for Import shipment..

      ‘Eloma’ in Germany sold the shipment (example: parts of Refrigerator) to ‘Allied Metals’,Thailand and they sold it to ‘Doreen development’, Bangladesh. Allied Metal is the HUB. Allied Metal’s agent controlling all the shipment from Thailand. Their agent in each country (where the goods are being made) handling all the purchase and selling matters. Final destination : Bangladesh. Please help who is who here.. Shipper/ Buyer/ Customer/ Manufacturer/ Trader / 1st party, 2nd party, 3rd party… ?

      Thanks
      Susmita Golam
      Bangladesh

    • Dear Mr. Hariesh Manaadiar

      I work in a Freight Forwarding company. received one air import. But this time the HAWB shows Notify : Applicant, where the bank as consignee. My Question is, why and when do we use Applicant as Notify? is it correct only use Notify: Applicant ? Should there not be or should there be the notify Party’s full address in the HAWB/HB/L ? Applicant means who ? who is the Applicant here- Is it the Bank (consignee)? is the bank both consignee and notify party here ? What it indicates by Applicant ? Notify : Applicant means what? Is it another party? But there was no name & address. I am in dark. Please advise.

      Thanks
      Susmita golam
      Bangladesh

    • Dear Mr. Hariesh Manaadiar,

      I work in a Freight Forwarding company. Received one email from our overseas partner : “We received the bank releases from consignee.” What is Bank Release? What is difference between Bank Release and Bank NOC?

      This was Collect shipment. At First our overseas partner asked for shipper’s Bank NOC. But shipper failed to provide NOC from Bank. And then our overseas partner office wrote that they received bank releases from consignee. What does this mean? Does NOC is not necessary now if they get bank release from consignee? Please explain details. I am very poor in Bank matter related to HBL & MB/L.

      What about if it was a Prepaid shipment?

      Thanks
      Susmita Golam
      Bangladesh

    • Dear Mr. Hariesh Manaadiar,

      I work in a Freight Forwarding company. Please help to answer my below questions: I know I have asked so much questions but I really never don’t understand the below things clearly:

      Ques 1: For Export shipment (by Sea)- When does shipper Surrender the MB/L ? When does Shipper Release the MB/L? Shippers sometimes Surrender the MB/L , sometimes Release the MB/L. Based on some mistakes earlier, after we finished processing for surrender MB/L in POL then Shipper told they will Release the MB/L and they will send it direct to the buyer along with HB/L by Courier or through Bank. (much confusing….I am puzzled)
      How can I understand in advance, that this shipment MB/L is going to be Surrendered or Released? At Destination when the shipment arrives, when does buyer/notify party will need the presence of MB/L to take delivery of goods from carrier/port ? When does buyer/notify party do not need the presence of MB/L to take delivery of goods from carrier/port ?

      Ques2 : When does shipper use Bank in HB/L , HAWB? Sometimes they use Bank name in Consignee column , Notify Party: the ultimate consignee.
      Sometimes there is no bank . Consignee and Notify are same (buyer).
      Sometimes Consignee is buyer , Notify party is another company.
      Sometimes Consignee is the buyer, Notify Party is Forwarder. ( I may be wrong)
      Sometimes, shipper don’t want to indicate Bank name in HB/L, HAWB even it is L/C shipment. They instruct us don’t give bank name in HB/L , only use consignee and Notify Party name. (much confusing….I am puzzled)

      Ques 3: For Export shipment – When does bank provide NOC to shipper? When does bank provide CnF/C&F certificate to shipper? What is Bank Release?

      Ques 4: What is Swift B/L?

      Thanks
      Susmita Golam
      Bangladesh

  6. I agree with Davd’s position: “14 free days are the agreed free days, for demurrage or for detention”. Doesn’t mater if there is demurrage or detention. In law there is a principle: where the legislator/law-giver doesn’t distinguish, can’t the interpreter distinguish”.

  7. IF CONTAINER ON THE WAY BUT BEFORE CONTAINER ARRIVED AT CUSTOM RULE ARE CHGED THAN CAN SHIPPER/CONSIGNEE LIABLE TO PAID DETENTION AND DEMMURAGE TO SHIPPING LINE??

  8. Hariesh, as per a recent posting to your blog that offers a very clear and concise explanation of free demurrage/detentinon days, I believe you are absolutely correct in your response to Navin’s comment, and that is ” . . . what you have mentioned is called Combined Demurrage/Detention which some shipping lines apply.” It is sad that there is no standard in the industry with regard to demurrage and detention, because as Navin correctly points out, ” . . . it has the same impact on the liner so why demurrage and detention are not charged in totality . . .” I believe it is that the shipping lines really don’t care. They make the rules of the game and they have a free hand to make them any way they want. Is there any organization of shipping lines that sets standards for shipping lines, as there is for Incoterms and other standards in the business promulgated by the International Chamber of Commerce, the World Customs Organization, etc.? If there is, I would like to know of such an organization and whether it is possible to offer input on these subjects for the betterment of the industry.

    • Hi David, generally each country has their own Ships Agents Association etc, but i don’t think there is any organisational equal like the ICC that sets standards for Shipping Lines.. There are organisations like SAASOA in South Africa (http://www.saasoa.com/) , SSA in Singapore (http://www.ssa.org.sg/index.cfm?GPID=226), CSLA in India (http://www.bombaychamber.com/CSLA.aspx), but all these take care of the interests of their members who are mostly shipping lines or their agents..

      An organisation that would come close would be the World Shipping Council (http://www.worldshipping.org/) whose intro reads :

      “The goal of the World Shipping Council (WSC) is to provide a coordinated voice for the liner shipping industry. The WSC and its member companies partner with governments and other stakeholders to collaborate on actionable solutions for some of the world’s most challenging transportation problems.”

      I don’t think however, any organisation has jurisdiction over how each shipping line operates.. Maybe a case for the IMO..!!

  9. well the definitions of demurrage and detention are clear but the fact is that why the industry doesnt make it simple. whether the equipment is under demurrage or detention, it has the same impact on the liner so why demurrage and detention are not charged in totality – from the day equipment discharged to the day MTY equipment returned to port/line.

  10. Harriesh, thank you for clarifying the definitions of “Demurrage” and “Detention” which so many commenters seem to dwell on here. However, the original question did not involve the fine-line definitions of demmurrage and detention, but rather focused on who pays. I stand by my original analysis that since it was not specified by either the shipper or the shipping line, it makes no difference whether the free days were intended to be for demurrage or detention, or for a combination of both . . . they get their 14 free days either way or both ways because “14 free days” were agreed to by the shipping line. Sure, it should have been made more clear, but as an example of how people often make things clear, just look at the comments here. I rest my case.

    • David, yes in the broader spectrum i agree with your contention, but since each shipping line deals with the definitions differently in different countries, the blanket clause of “14 free days” and the interpretation of the same depends on the shipping line.. It is upto the customer to specify to the shipping line at which time frame they want the free days or they should simply to apply for “combined demurrage/detention” to avoid any ambiguities..

      Below are some of the definitions from some of the major lines around the world..

      CMA-CGM says below:

      “Demurrage”: the charge, related to the use of the equipment only, the merchant pays for carrier’s
      equipment kept beyond the free time allowed by the carrier for taking delivery of goods in the port,
      terminal or depot.
      “Detention”: the charge the merchant pays for detaining carrier’s equipment outside the port, terminal
      or depot, beyond the free time.
      “Free time”: the period of time allowed to the merchant free of charge, covering both demurrage
      period and detention period, beyond which additional charges such as, but not limited to demurrage
      and detention charges, will be due to the Carrier.
      Demurrage and Detention do not include storage costs and reefer services which are charged
      separately.

      Maersk Line says below :

      Import Demurrage period
      Start – day when laden container has been discharged from the vessel to the terminal
      End – day when laden container has been picked up (gate out date)

      Import Detention period
      Start – day after the date when laden container has been picked up from the Agent (gate out date)
      End – day when emptry container has been delivered to the Agent (gate in date)

      OOCL says below :

      Demurrage: What is it?

      Demurrage charges are applied for storage of laden containers whilst in OOCL’s care in a port, rail terminal, feeder terminal, inland depot or container yard. Demurrage is applied after a designated free time.

      Detention: What is it?

      Detention charges are applied for the storage or holding of containers whilst in our customers’ care outside a port, rail terminal, feeder terminal, inland depot or container yard. Detention is applied after a designated free time.

    • Harriesh, for the purposes of this particular discussion, I see little practical difference in the definitions of demurrage and detention that you provided, but since the original question was whether or not the shipping line can claim either demurrage or detention, it is clear that all of your examples say that both demurrage and detention charges apply after “free days” have been exhausted. The original question also turned upon lack of specificity in the shipper’s request for 14 free days and the shipping line’s confirmation of 14 free days, both without specification of whether those free days would be for demurrage or detention. For the shipping line to now play “bait and switch” and claim the free days were for detention, when the shipper is claiming demurrage, is unconscionable, but shows what a little power given to little men can do in business. In my opinion, whoever in that shipping line made that decision should be fired. This discussion could have been more focused if you had simply left the definitions of demurrage and detention off, because that issue was a “red herring” to the actual situation you proposed to be analyzed.

    • Sorry Hariesh, but I do not agree. The definition of demurrage and detention was not at issue in the example given, but apparently was provided simply to give readers who were unaware of those terms a basis of common understanding. What is at issue in the example was whether or not, due to ambiguity by both the shipper and the shipping line as to where the “14 free days” would be credited, whether after the fact the shipping line could apply the promise of “14 free days” any way they like. I believe that, as a matter of equity, they cannot. The promise of “14 free days” is a promise of “14 free days”, period. The shipping line cannot arbitrarily determine that the “14 free days” was intended as detention rather than demurrage, because that was never made clear by them. The shipping line did not provide “14 free days” and therefore breached their agreement as stated – ambiguous or not. One thing is very clear – the shipping line agreed to “14 free days” which they did not provide.

      It would be up to a judge to decide in whose favor the apparent ambiguity would be resolved, and my feeling is that it would be decided in favor of the shipper/consignee. The original question posed (actually by making a statement rather than asking a question) was, “Consignee is refusing to pay the shipper for the demurrage charged by the shipping line.”

      In this instance, it is the shipping line that is “out of line” and the consignee has no obligation to pay the shipping line for up to “14 free days” of either demurrage or detention.

      Of course, we all know this is a David and Goliath situation, and the consignee would most likely not get their container out of the CY until the fees have been paid. Cheers, David

  11. In most cases, the consignee will clear and pick up full container only when he is ready to unpack.. There maybe cases where he picks up the container from the port or terminal, but is not able to unpack it at the same time due to various reasons..

    In the above article, I have clarified the definition of Demurrage a bit more and also amended the definition of Detention – changing “unpacked” to “picked up” to accommodate above..

  12. Demurrage and detention has different interpretation in different countries and regions.

    1 Line demurrage and Line detention

    a)Liner Demurrage :- Line gives free time to keep their equipment for a specified period inside the port with cargo. After the given the free period Line will charge as per their tariff.

    b) Line detention :- Line gives free time to keep their equipment with the consignee / customer out side the port. After the given the free period Line will charge as per their tariff.

    Above is commonly practiced in SE

    NB: In some countries , Lines will give only total free days. Whether customer keeps container in the port or out side, tariff would be the same. No separate free time in the port and out side the port is granted. In these areas port storage is collected by Port authority separately from the consignee without the intervention of Line. Commonly practiced in ME

  13. When i first commenced my career in shipping my boss told me the principle rule to live by is the term CYA (Cover your a>>>) this is through placing things in writing.
    It dosnt assist though when although placing things in writing there is no clear clarification of instruction .I agree with David despite the fact that both parties are guilty of poor communication the impartiality remains

  14. Your description of demurrage/detention is not 100% accurate. Detention should be charged when the container is in the importer (or his agent’s) possession. Demurrage clock stops ticking when the box leaves the terminal, provided it is not still in the line’s possession (ie being delivered by merchant haul rather than carrier haul). If the container is still in the line’s possession then further demurrage may still accrue if the delivery is refused for whatever reason.

  15. I am little bit confuse in below defination for Demmurage as well Detention.. I think the 1st defination is belongs to Detention and the 2nd one is belongs to Demmurage. Because, i often paid detention charges after complition of 14 days free detention time in my shipments… Pls clear the below again..

    Remember –

    ( 1). Demurrage is charged when containers are still full and has not been cleared
    ( 2). Detention is charged after the containers have been unpacked but empty container is still with the importer

  16. The obvious answer is that since it was not specified by either the shipper or the shipping line, it makes no difference whether the free days were intended to be for demurrage or detention, or for a combination of both . . . they get their 14 free days either way or both ways because “14 free days” were agreed to by the shipping line. What dunderhead at the shipping line is playing this semantics game? But yes, both parties are guilty of not being specific enough, but it does not change the equities.

    • the detention and dumerrage are period allowance time providing for client by shipping line ,
      That is mean that if the client have 14 days for demurrage & detention and the client pick up the cntr after third day ,
      that is mean the period for demurrage end and period of detention begin that is 7 days
      it is not fair to utilization for 14 days to pick up cntr and offload .

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