What is demurrage?
Demurrage is a term often used in the shipping industry and refers to charges levied when a shipper or receiver of cargo uses the vessel longer than initially agreed upon. It is important to understand demurrage properly, as it can lead to financial consequences and delays in the logistics chain.
How does demurrage work?
1. Definition and causes of demurrage
Demurrage is usually imposed when the shipper or consignee exceeds the agreed time limit for loading or unloading cargo on the vessel. This can be due to various reasons, such as delays in transportation, problems with documentation or inability to unload cargo in a timely manner.
2. Costs and consequences of demurrage
The cost of demurrage can be significant and is usually calculated based on a daily rate set by the shipping company. These costs can add up quickly if the delay persists. In addition, delays in the logistics chain can lead to additional costs, such as storage costs or missing connecting transportation opportunities.
3. Managing and preventing demurrage
To control and prevent demurrage, it is important to lay down clear agreements and instructions in transport contracts. Good communication between all parties involved is essential to ensure the smooth flow of freight. In addition, it is important to keep the logistic processes and documentation carefully to minimize delays and errors. Maintaining timely and accurate documentation can help identify potential bottlenecks and take corrective action before demurrage costs arise.
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The difference between demurrage and detention
The terms demurrage and detention are often used interchangeably, but have different meanings and applications. Detention refers to fees imposed for using equipment, such as shipping containers, longer than originally agreed upon. This can occur when the container is made available later than the agreed upon "free time" period. The duration of free time is negotiable and is usually longer for detention compared to demurrage. This is because terminal space is limited and expensive, so shipping companies benefit from removing containers from the terminal as soon as possible. Therefore, demurrage costs are generally higher than detention costs.
The cost of demurrage and detention is at the discretion of the shipping company. The person who books the sea freight is contractually liable to the shipping company for demurrage and detention.
Frequently asked questions about demurrage:
Who is responsible for paying demurrage fees?
In most cases, the shipper or consignee of the cargo is responsible for paying demurrage charges. This is usually agreed upon between the parties in the transportation contract.
How are demurrage costs calculated?
Demurrage charges are usually calculated based on a daily rate determined by the shipping company.
