Two years of logistical deadlocks have burdened shipping companies with costly increases in demurrage, detention and storage fees.
These are additional costs charged on top of often punitive freight rates to penalize freight owners for delays that are not always their fault.
However, there are steps that can be taken to expedite cargo delivery and avoid or minimize demurrage, holding and storage fees.
demurrage refers to the fee paid by the trader or cargo owner for using the container within the terminal beyond the free time. arrest the trader or cargo owner pays for the use of the container outside the terminal or depot beyond the free time. and storage Charges are levied on cargoes when they are in waterway or inland terminals.
The definition of time allowed depends on the fine print of each contract, so the first thing you need to do is determine how much time you’re getting for free. In general, the standard time is four to five days, but it is important to check this detail before embarking on a cargo journey. After the time expires, you will be charged a daily demurrage until the cargo is removed from the terminal.
The price a shipper pays varies by terminal or carrier. Daily demurrage can range from $75 to $150 per container per day, but that’s usually only for the first five days or so. The longer the cargo stays in the terminal beyond the originally allotted time, the more the cargo owner must pay to have the cargo released.
At the height of the logistics crisis, members of the Harbor Trucking Association, the Agriculture Transportation Coalition, and the Pacific Coast Council of Freight Forwarders and Customs Brokers deluged the Federal Maritime Commission with complaints about demurrage charges, which reached as high as $100 million in ports at lot Angeles and Long Beach, and $50 million in New York/New Jersey alone by the end of 2020.
During the shutdown in US ports in 2020 and 2021, the collection and payment of these fees became the central issue in a multitude of litigation between shippers and carriers over the timely release of cargo stuck in congested ports. Below are some common reasons for the delays:
- commercial or legal disputes between sender and recipient,
- Documents were not delivered to the recipient in time to expedite customs clearance,
- False or insufficient documentation received by the recipient,
- Customs controls that took longer than expected
- Poor communication regarding cargo estimated time of arrival,
- The cargo owner lacked the means to clear the container,
- The freight received differs from that described in the original order,
- A lack of necessary equipment such as chassis for unloading cargo and
- Poor communication between shipping company and shippers regarding arrivals.
While the shipping companies, truckers and terminal operators may be responsible for these delays, demurrage and demurrage are the responsibility of the consignee or cargo owner. In times of supply chain disruptions, costly demurrage and storage fees make it especially important to be able to track and track containers.
If you are a first-time importer, it pays to do your homework before signing a contract with a shipping company or non-vessel operating common carrier (NVO) to avoid surprises upon arrival at the final destination. Below are six ways to avoid demurrage and tailing charges:
- Do your research and make sure you can keep the number of days off specified in the contract. Talk to shippers, freight forwarders, and customs brokers to learn how long it typically takes to clear a container.
- Make sure you understand if there are any special requirements for your cargo. Find a good customs agent to advise you on this.
- If you know your cargo will require special permits (such as food or hazardous chemicals), you should negotiate additional days off with the shipping company to make room for potential delays.
- Make sure you work with a shipping company or freight forwarder that can track and trace your container and offers real-time data on your cargo’s availability. Shipping companies generally accept no liability for failure to notify of the arrival of your cargo.
- Opt for a shipping company or freight forwarder that offers tools Real-time forecast data visibility and analytics to identify and fix problems rather than reacting to disruptions after they occur.
- Share freight and delivery instructions in advance with all parties including carrier, suppliers and third parties to ensure a smooth loading and unloading process and avoid delays.
With track and trace technologies and Real-time forecast data visibility and analytics, stakeholders can proactively identify and fix problems. Rather than gathering information from multiple sources, data is automatically collected, processed, and turned into actionable insights. Instead of reviewing performance after an event, cargo owners proactively evaluate and analyze reports generated from comprehensive data. This significantly reduces the risk of demurrage and detention fees.
At any point in time, cargo owners, shippers, managers, carriers and cargo owners need information about various data points, including:
- Where inventory is at a given point in time
- State of inventory after all transfers and
- Willingness for inefficiencies and bottlenecks that might arise.
Without real-time, predictive insight into these factors, shippers may be left in the dark about the location of their cargo. A tool that not only offers real-time visibility, but also has the predictive ability to address larger roadblocks can help achieve those goals. In this way, those involved can gain a competitive advantage and avoid high demurrage.
Shailesh Gupta is Chief of Staff at portcast.
