Difference between demurrage and detention Charges

what is demurrage and detention charges

There are certain charges that one has to pay for during the whole container shipping process. Demurrage and detention charges are the ones that are like a nightmare to every shipper and people always confuse between them by thinking them off as being the same. It looks like both the charges are basically for maritime containers only but in reality, they both are different from one another. Where the shipper gives one when they use a cargo container within the terminal extending the given time, the shipper pays for the other when they use the freight units outside the terminal or container depot extending the period. And these are the charges that incur huge financial losses.

The merchants either purchase shipping containers or get them on the lease by container suppliers for shipping or storage purposes. In sending or receiving empty shipping containers, you have to pay extra charges. Every shipper has to load and unload the container and vacate the port or depot within the given time frame. Those who exceed the time limit and don’t vacate the place or overuse the container beyond time have to give these charges.

When we are talking about containers and charges then first and foremost we should know about the most premium SOC containers. They give refuge from the charges that you cannot avoid in the case of COC containers.

What are COC and SOC Containers?

The carrier (controlling handling party, mostly ship owners) owns the container and controls most of the transport chain. People use them for standard shipments on busy routes. When the carrier has a significant amount of availability it would not be advantageous to use your container as it will lead to more cost consumption.

We can take the example of containers going from Hamburg to Singapore. It would be easy to use carrier-owned containers in this case as it is the most common route. The container service at such routes is available at the right cost without extra effort. Along with it, the destination point also has a good population so one can reuse the containers with much ease.

SOC containers are shipper-owned containers. The owner of goods or the shipper transports the goods by themselves by arranging their own container. They take the ship’s slot for the maritime transport and take responsibility for every other loading and unloading detail. This type of service works efficiently when the carrier has to move the merchandise to remote locations as it takes a longer time. SOC container works well where the logistics management services are not to par.

And when the shipper themselves are owning the container they don’t have to shell any money for the detention charges. By being in charge of customs clearance, drayage, loading time, etc. the shipper pre-prepares everything and saves the extra cost.

Now let’s see, “What are demurrage and detention charges?”

To know more aptly about both the charges, let’s look at both one by one in detail.

Demurrage Charges

The charge comes in the scene when the shippers don’t empty the container depot or vacate the terminal after the cargo leaves for the destination. In the case of not removing the container from the port, the shipper has to pay the penalty. They have to pay the extra amount and sometimes it is extremely high that it overextends the whole budget. The demurrage cost varies from company to company, port to port, and country to country.

Avoiding this extra cost is necessary as if you won't give it due consideration, it can burn a hole in your pocket.

Detention Charges

The detention charge comes up in the scene when the shipper uses the container and doesn’t return it to the company within a given period. It is levied by container suppliers to avoid misuse of cargo storage containers and make services smoother.

It is also levied when the customer takes the container from the shipping company but denies to return it, the charge starts getting levied from day one of completion of the free period and keeps increasing day by day.

The shipper has to complete all export and import within a given time interval to avoid the charges.

The shippers who own SOC containers are free from this charge as the shippers don’t have to return the shipping containers to any supplier.

Causes of Demurrage and Detention Charges:

Demurrage charges take place due to various reasons. But some of the major reasons that you can easily avoid are:

Incorrect Document

The cargo container needs many documents like a loading bill, commercial invoice, certificate of origin, and many other such papers, right from the start of export to import, and needs various receipts, cost clearance, and others. So, if any of the documents have discrepancies, the unloading of cargo will not be allowed by the shipping companies and this is the time when the extra charge comes in. You can easily avoid this by preparing and checking all the documents thoroughly beforehand and clearing all the amounts.

Missing Documents

In many cases, important documents like the original loading bill went missing during transit by the courier. And lost bill of loading means the shipper cannot unload the steel shipping container. Till when they try to get another loading bill, the free time gets over. And the loader the shipper has to pay an extra fine. But one can easily avoid this by safely keeping the original bill.

Missing Sailing Time

There are many times when the container is not shipped at the decided time. The delay causes the charges to increase. As when the container doesn’t reach on time, it is impossible to unload the cargo in the given time frame.

Custom Clearance

One has to get customs clearance to unload the freight container. The shipper has to file the documents with customs and documents must match the given details with the commercial invoice. The penalty comes up in the scene when the provided documents don't match.

Custom clearance takes quite a time and in some cases, it extends to a longer period. There is no certain time when the shipper will get custom clearance. Different companies have different levels of inspection and the companies can estimate the time seeing the nature of cargo before. The shipper can avoid these charges by filling in all the details correctly matching the bill.

Unreachable Receiver

There are many cases in which the consignee is not available to take ownership of the cargo. The shipping companies try to contact the receiver but do not get any response. In this case of cargo abandonment by the shipper and receiver, the charges start getting levied and when they both don’t respond to arrival notification of the cargo, the freight company is fined with the charge to clear the spot and free the cargo container.

Weather

Weather plays a crucial role in the successful completion of any voyage. There are many times when cargo doesn’t reach the destination on time due to bad weather. In this instance also the shipper has to pay the penalty. Due to bad weather, there is mostly a delay in the consignment unloading.

Charge-Free Days

Usually, 5-6 days are given to the shipper to complete all the things and unload the container, free the space and return the container to the supplier to avoid any type of penalty. The demurrage and detention charges if handled properly will save huge money because these charges are kept too high by the shipping line to cover all the costs and make the shipping procedure smooth and maintained for everyone.

By following the below points, you can save yourself from the charges.

  • The shipper can avoid such charges by taking care of all the transport requirements like completing documentation on time, following correct administrative functions, and putting all the original documents in a safe place.
  • The shipper should manage all the shipment needs before sending off the cargo to free it in the given period.
  • It is not wrong to say that communication is the key. A proper communication network with the officials, clearing agents, and others save you from these extra charges. On negotiations, the ocean carrier or supplier can also give some extra free days to clear the cargo and free the storage container.
  • The shipper and loader should be ready at the time of arrival of the container and keep the pick-up and delivery service ready so that there will be no delay in loading and unloading of the cargo. This will save you from penalties.
  • Get clearance from custom services beforehand. So that, when the shipment comes, the shipper doesn’t have to wait for extra time for the load clearance. This will save days of extra charge. This will save days of extra charge.

We have seen through this article that SOC containers come to the rescue when you are to encounter any such charges. Also, if the shipper readies everything in advance and keeps every detail in mind then they can avoid their worst nightmare of getting imposed a humungous charge of demurrage and detention. I hope the article is helpful to you!