Don’t Just Pay Detention and Demurrage Charges

May 30, 2023 10 min read

Demurrage and detention processes and charges can significantly impact the efficiency and costs of international shipping operations. In this blog post, Windward will explore effective strategies to prevent, validate, and dispute detention and demurrage charges. By employing these practices, businesses can cut costs and save valuable time, while ensuring accurate invoicing.

The Basics: Detention vs. Demurrage

Detention and demurrage charges are fees associated with the use of shipping containers beyond the agreed-upon free time allowed by carriers and terminals. These charges are incurred when the containers are held at the port, terminal, or other designated locations for longer than the allotted time.

Detention charges are applied when containers are retained by the consignee, importer, or other parties beyond the specified free time provided for loading or unloading cargo. The purpose of detention charges is to encourage prompt cargo retrieval and efficient use of containers. These charges are typically levied on a daily or hourly basis after the free time expires.

Demurrage charges are imposed when containers are held at the port or terminal for a period longer than the allotted free time for cargo pickup or return. Demurrage charges are usually associated with the time spent at the port before the container is loaded onto a vessel (import demurrage), or after the container is discharged from the vessel and awaiting pickup (export demurrage). Similar to detention charges, demurrage charges are calculated on a daily, or hourly basis.

Don’t Just Pay Detention and Demurrage Charges – Validate Them First

When receiving an invoice with detention or demurrage charges, organizations without effective visibility solutions must scrutinize the fees thoroughly. Late fees can be inaccurately applied, leading to unnecessary expenses. Review the invoice meticulously, verifying the dates and duration of detention or demurrage.

With a Maritime AI™ solution, you can cross-reference the charges with the actual time your containers were in possession to validate the fees accurately. Accuracy in documenting Actual Time of Arrival (ATA) and Actual Time of Departure (ATD) is crucial – this ensures that these timestamps are correctly recorded to establish the exact duration of container storage at ports or terminals. By having precise ATA and ATD information, you can dispute unjustified detention or demurrage charges. When the container is in transit, you can predict delays at least 10 days in advance, providing plenty of time to mitigate potential issues.

The Importance of Shipment Visibility

As mentioned in a previous Windward blog post, achieving complete visibility in container tracking and logistics operations poses a significant challenge for many shippers and freight forwarders. The absence of crucial milestones, such as the ATA and the ATD, adds complexity to the process. Most carriers do not consistently provide updates for all ocean freight shipments, leaving shippers and freight forwarders in a state of uncertainty, unsure whether they will receive milestone updates or not.

Carrier updates often suffer delays ranging from hours to days, creating numerous blindspots and uncertainties throughout the shipment process. These large latency gaps, representing the time between the occurrence of a milestone and its update, can result in substantial costs. For instance, if a container arrives at a port on Monday but the update is received only on Wednesday, it leads to a two-day delay, potentially resulting in detention and demurrage charges.

Exception Management – a Preventative Measure

Preventing detention and demurrage charges begins with effective exception management. By utilizing advanced container tracking and monitoring systems, you can identify containers that are likely to be delayed well in advance. This knowledge allows you to take proactive action, such as rescheduling or rerouting shipments, to avoid unnecessary charges.

A few other benefits of exception management, explained in one of our blog posts, include:

Prioritization – operators can prioritize and address shipments that require immediate attention, ensuring efficient handling.
Personalized alerts – define what constitutes a late shipment and receive notifications only for specific shipment exceptions, enabling personalized alerts based on individual preferences.
Streamlined workflow – by filtering shipments based on expected arrival, users can focus on those that require urgent attention, streamlining workflow and task management.
Know when something isn’t going to plan – if a shipment is expected to depart on a certain day, but no notification is received by the end of that day, users are alerted to potential issues, allowing them to investigate and take prompt action.
Seamless workflow integration – users can tailor the API alerts to align with their specific requirements, integrating them seamlessly into existing workflows and processes for managing exceptional cases.
Improved customer satisfaction – by identifying and addressing critical delays, users can keep customers informed, fostering trust and loyalty. This leads to an enhanced customer experience and overall better business performance.

Reasons for Delay and Fault Determination

Understanding the reasons for delays is crucial in determining who should bear the responsibility for detention and demurrage charges. By keeping track of the reasons for delay, you can prove whether the carrier or the port was at fault. This information not only helps in disputing charges, but also aids in avoiding them altogether by addressing the underlying issues.

Leveraging a Maritime AI™ solution, and understanding the reasons for your delayed shipments, in real-time, is essential. Reasons include:

Rollover – the container failed to be loaded onto the vessel that was scheduled to transport it out of the transshipment port (TSP) or POL.
Transshipment delay – the transshipment will occur later than scheduled.
Late departure – the vessel left the POL later than scheduled.
Short transshipment buffer – transshipment has a high risk of not being completed as scheduled, due to the TS window being too small.
No vessel allocation – no vessel has been allocated to load your container(s) at the POL or TSP.
Unfeasible journey – the expected transit times provided by the carrier are too short, based on Windward data and estimations.

Maritime AI™ Can Help

Windward Ocean Freight Visibility makes it easy to validate invoices, as it allows you to go back and double-check any information. Even if you get invoiced two months after your shipment arrives, those important dates stay in the system for as long as needed. By this late stage, the information may no longer be available from carriers or port, and terminal websites, leaving many shippers and freight forwarders in a position of just paying because they have no way of checking.

Navigating the complexities of detention and demurrage charges requires careful attention, proactive measures, and a reliable solution. By implementing effective strategies for preventing, validating, and disputing these charges, you can mitigate unnecessary costs and streamline your shipping operations. Leveraging advanced solutions and container tracking systems empowers companies to validate invoices, maintain shipment visibility, identify delays, and customize exception management.