You may have heard enough people say, "D & D" but do not understand the true meaning. Demurrage and detention is one of the most common terms that regular importers, exporters and expeditions do. In some cases, there is confusion in understanding the differences between these two terms. In many cases, these costs can be detrimental to the extent that customers leave their cargo to avoid paying large fees.
Demurrage and detention mostly occur among cases of imports even though they also occur for exports, at a much lower level.
This article will provide an understanding of the definition of demurrage and detention, why it is billed, who charged it and who should be responsible for it. Demurrage and detention seem inseparable, but the truth is, there are striking differences between the two.
What is Demurrage?
Demurrage is a fee collected by shipping lines to importers in the case when full container shipments from ports / terminals (for dismantling, opening, etc.) have not been carried out in the permitted free period. The term demurrage is used when the cargo is still in the container. It might be because it has not been unloaded (Import). Or because it hasn't been loaded (Export).
One example of demurrage is as follows:
A container was lowered from the ship on June 1 and the recipient of the goods took the container on June 11. Assuming the standard free day offered by the shipping line (different from the free day of the port) is 7 days from the date of release, the free day must end on June 7.
11 days - 7 days = 4 days overstay.
So, the shipping line will charge consignee demurrage for 4 days (June 7 to 11) at a pre-fixed rate.
What is Detention?
Detention is the cost collected by the shipping line to the importer in the case that a full container has been taken for disassembly (assuming in a free period) but the empty container has not been returned before the expiration of the free time given. The term detention is used when the container is empty. Both after dismantling or before loading.
Request a Free Day
The company can negotiate and request an additional day free of charge from the shipping line. They will usually ask whether it is for demurrage or detention because they want to ascertain whether the company will store containers before or after moving from the port or terminal.
However, the definition of demurrage and detention varies from one port to another, so the shipping line needs to clarify precisely about the information. Shipping lines usually offer a combined free period of detention and seldom offer only for demurrage or detention.
Why Shipping Companies Charge Demurrage and Detention Fees
It is said that the cost of containers, maintenance, leasing and repairs constitutes around 20% of the shipping operating costs. Containers, such as fleet or ships, only generate income while in circulation, not in unemployment.
For example, from the example above, having a container overstayed for 11 days means that the container will not generate revenue during that period.Giving costs at demurrage and detention is the way the shipping company gives compensation fees to ships that do not go to sea because they still hold goods.