Demurrage Fee Definition 

Transportation companies or terminal operators charge demurrage fee when cargo is not picked up or returned within the agreed-upon free time for the shipment. Demurrage fees are meant to pay the carrier or operator for the extra time and resources they had to use to handle the cargo after the free time had ended. 

Demurrage fees are usually based on a daily rate per unit of cargo or per container, and they are charged for each day or part of a day that the cargo stays in the carrier’s possession after the free time has ended. Demurrage fees can be avoided by carefully planning logistics and picking up or returning cargo within the agreed-upon free time.

demurrage fee

What is Demurrage Fee For?

If it takes longer than the allotted free time to load or unload cargo, the shipping company or port operator may assess a demurrage fee. The fee is intended to cover the cost of continuing to process the shipment after the agreed-upon deadline has expired.

Shipping, rail, and trucking are only some of the modes of transportation that can incur demurrage fees. When cargo isn’t picked up from the port within the free time permitted or when containers aren’t returned to the shipping line within the free time allowed, demurrage fees are commonly paid. Fees called “demurrage” are assessed when train carriages aren’t returned after being unloaded.

The demurrage price and free storage period are both subject to change based on the discretion of the carrier or terminal operator and the terms of the shipment contract. Demurrage costs can be a significant expense for companies that rely on shipping to move their goods. These penalties can be avoided through meticulous planning of logistics and timely pickup and delivery of cargo.

How Are Demurrage Fees Calculated?

Demurrage fees are usually based on a daily rate per unit of cargo or per container, and they are charged for each day or part of a day that the cargo stays in the carrier’s possession past the agreed-upon free time. The carrier or terminal operator, as well as the terms of the shipment contract, can change the daily rate and the amount of free time.

For example, a shipping company might give customers five free days to pick up their goods from the port before demurrage fees start to be charged. After the free time is up, the shipping line might charge a daily demurrage rate of $100 per container, with a maximum charge of $1,000 per container. If a container stays at the port for six days past the free time, the demurrage fee would be $100 per day, or $600 for that container.

If the cargo stays in the carrier’s possession for a long time, demurrage fees may be subject to additional charges or penalties. For example, a shipping line might charge a detention fee if a container is not returned to the line within a certain number of days after the agreed-upon free time has ended.

To avoid demurrage fees and other charges, it’s important to carefully read the terms of any shipping contract and plan the logistics. Demurrage fees can be avoided by keeping track of the amount of free time and making sure that cargo is picked up or returned quickly.

Who Pays For The Demurrage Fee?

The party that is liable for paying demurrage costs is often the one that signed the shipping contract between the customer and seller or the carrier and shipper.

If the cargo is not picked up within the agreed-upon grace period, the buyer or consignee may be required to pay demurrage fees. When the buyer arranges for shipping and is responsible for having the shipment picked up, this is possible.

If the cargo is not picked up or returned within the agreed-upon time frame, the shipper or seller may be responsible for paying demurrage fees. This may occur if the items are being stored in a carrier-operated terminal or if the seller arranges for the shipping.

The parties to a contract may divide the cost of demurrage between themselves, or between the shipper and the carrier.

It is crucial that all parties engaged in a shipment read the contract thoroughly and understand who is accountable for demurrage fees in the event of late delivery. If demurrage payments are not paid, additional fees and penalties may apply, such as the seizure of your goods or the inability to retrieve it until the fees are paid.

How to Avoid Paying Demurrage Fees

Demurrage fees can be avoided by carefully planning logistics and picking up or returning cargo within the agreed-upon free time. Here are some strategies that may be useful:

Make a plan

Careful planning and coordination can aid in the timely pickup or return of cargo. This means making plans for transportation ahead of time, leaving extra time in case of delays, and talking with everyone involved in the shipment.

Monitor your cargo closely

Regular cargo monitoring can help find problems or delays early on so that they can be fixed quickly and demurrage fees can be avoided. This can include using tracking systems to find out where the shipment is and keeping in regular contact with carriers, shippers, and consignees.

Negotiate terms

It may be possible to negotiate more favorable terms for free time and demurrage fees when negotiating shipment contracts. Negotiating longer free time periods, lower demurrage rates, or penalties for carriers who fail to provide adequate service are all examples of this.

Optimize cargo flow

Improving the flow of cargo makes sure that cargo moves quickly through the transportation system. This reduces the chance of delays and fees for keeping cargo there longer than it should. This includes getting the most out of each container, spending less time in ports or at terminals, and working with carriers to make sure pickups and deliveries happen on time.

By using these strategies, businesses will be less likely to have to pay demurrage fees and other transportation and logistics fees. To make sure that shipments are handled quickly and well, it is important to carefully read the terms of any shipping contract and to talk with everyone involved on a regular basis.

demurrage fee

What Are The Differences Between Demurrage Fee and Storage Fee?

When you store cargo, you have to pay both demurrage fees and storage fees, but they are calculated and used in different ways.

Demurrage fees are charged when cargo isn’t picked up or brought back within the agreed-upon free time given by the carrier or terminal operator. Demurrage fees are meant to pay the carrier or operator for the extra time and resources they had to use to handle the cargo after the free time had ended. 

Demurrage fees are usually based on a daily rate per unit of cargo or per container, and they are charged for each day or part of a day that the cargo stays in the carrier’s possession after the free time has ended.

Storage fees, on the other hand, are charged for the storage of cargo after the carrier’s or terminal operator’s free time has expired, regardless of whether the cargo has been picked up or returned. The purpose of storage fees is to cover the cost of storing cargo at the facility of the carrier or operator. Storage fees are typically calculated on a daily rate per unit of cargo or per container and are charged for each day or portion of a day that the cargo is in storage.

The main difference between demurrage fees and storage fees is that demurrage fees are charged when it takes longer than expected to pick up or return cargo, while storage fees are charged for the cargo itself, no matter how long it takes to pick it up or return it. In some cases, demurrage and storage fees are charged at the same time, but they are calculated and paid for separately.