What do you mean by per diem charges in shipping?

Explaining Per Diem Charges in Shipping: Understanding Industry Terms

Per diem charges in shipping are additional costs that the consignee, shipper, or concerned logistics service provider pays the shipping company if they fail to procure the container on time. The shipping containers are temporarily held at one of the port facilities, commonly the container terminal, until the designated shipping party takes ownership. Sometimes, for various reasons, the consignee, 3PL or 4PL, fails to take charge of the goods within the time allotted to the ocean carrier. In such cases, an extra fee is levied as per diem fees. Let us learn more about per diem charges in shipping. 

What is the per diem fee? 

Per diem charges in shipping refer to the extra charge levied daily if the importer does not pick up or return the containers to the shipping company within the agreed tenure. The maritime industry regularly manages numerous incoming and outgoing ships and shipping containers. Shippers worldwide transport their goods into steel boxes, which the importer receives. A bill of entry is filed by the importer or the 4PL service provider on behalf of the importer to relieve the shipment from the customs at the destination port. Once the shipment arrives at the destination port, the importer or logistics service provider must receive, unload, and return the container to the shipping company if required.  

Generally, shipping companies grant a set number of “free” days that give importers some extended time from the shipment’s arrival date to its unloading deadline. This tenure ranges from 7 to 14 days, within which the importer must return the shipping container and equipment to the shipping company. It encourages importers to pick up their containers or return them in a timely manner. 

Why is a per diem fee charged? 

Once the goods arrive at the destination port and the importer retrieves the shipment or relieves the container and port equipment, no extra fee is charged. However, upon exceeding the discussed “free” day limit, the importer is liable to pay extra fees or fines to the shipping company as per diem charges. The free time differs from one shipping company to another and depends upon the negotiated terms of the shipping contract. This fee is charged to incentivise the importers as delays in unloading disturb cargo movement due to the unavailability of resources.  

Shipping containers waiting for loading are often transferred to container terminals. If not taken from there within the allotted time, they cover the space allotted to other containers. By implementing per diem charges in shipping, the maritime authorities prompt importers to use container assets efficiently and prevent container unloading delays.  

How to avoid per diem charges? 

Shippers, consignees, freight forwarders and other logistics service providers involved in transportation can avoid per diem charges in shipping by following these tips. 

  1. Be aware of the free time – Most shippers and other transportation parties overlook the terms and conditions mentioned in the shipping contract, which leads to additional charges in the shipping rate. It is essential to know the number of free days allotted by the ocean carrier and the per diem charges. 
  2. Filing bill of entry timely – The bill of entry must be filed before the shipment arrives at the destination port. After filing, the customs authorities issue the bill stating that the incoming cargo has been verified and is ready to be handed over to the consignee or logistics service provider. Delays in submitting the bill of entry will lead to delays in customs clearance and increase the chances of per diem charges. 
  3. Transportation coordination– In intermodal transportation, where goods unloaded from the ship are transported to another destination using trucks, it is better if the consignee or logistics service provider collaborates with a trucking company and makes pre-bookings. Delays in getting trucking schedules can lead to the container staying for an extended period at the container terminal. 
  4. Request for extended free days – Building good trade relations with shipping partners is essential as it helps negotiate better terms and conditions in a shipping contract. 3PL and 4PL service providers also help in this process. If you have prior information that cargo unloading may be delayed, you can discuss an extension of the allotted free days with the shipping company. 
  5. Having alternate storage options – For importers with a large fleet of incoming shipments, storing them in their warehouses is better than keeping them at container terminals. Freight forwarders also offer their warehouses to temporarily store the shipping containers. 
  6. Tracking the shipment – Communication is essential in trade and logistics. Shippers, consignees and other shipping parties must track the shipment effectively to collaborate and prevent delays in container retrieval. The equipment must also be returned within time to avoid per diem charges in shipping. 

Difference between detention fee and per diem charges. 

Ocean carriers and port authorities interchange the terms detention fee and per diem charges. Detention and demurrage charges are the late fees charged by the shipping line or ocean carrier and apply to imports and exports in trade. Several importers or exporters need to borrow port equipment and containers for shipping. It facilitates the loading and unloading of containers. If the equipment and containers are not returned within the agreed time, it impacts other customers. Per diem or detention fee is to suffice the loss of fee due to delays in providing containers, equipment or chassis to other customers due to delays from initial customers. 

How do you calculate per diem charges in shipping? 

Per diem charges are additional fees incurred by ocean carriers against individual shippers or other carriers if they fail to return the containers, chassis, equipment, and trailers if they are taken from the shipping company. Suppose the responsible individual or service provider fails to retrieve the container quickly. In that case, a per diem fee is charged as an incentive to penalise the inconvenience caused to the ocean carrier due to the delay. Every shipping carrier sets its own per diem fee, which can be negotiated when signing shipping contracts. Once the number of free days is exceeded and if the shipping carrier has not agreed to extend it, a fee is charged daily from the day the free period ends to the day the consignee takes away or relieves the container. 

 Per diem fee = The daily rate of an additional fee set by the shipping line + the number of days before retrieval or return of the container. 

Consignees and service providers can avoid paying per diem charges in shipping by following the tips mentioned above. 

LOTUS Containers is a global shipping container service provider that has partnered with more than 300 container depots to lease and sell shipping containers worldwide.

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