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How to Avoid Demurrage Charges: 5 Proven Strategies

Unanticipated demurrage charges can be a shipper’s worst nightmare. Find out what strategies you can utilize to avoid costly demurrage charges.

By

Josh Kimble
November 17, 2021
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How to Avoid Demurrage Charges

Unanticipated demurrage charges can be a shipper’s worst nightmare. On top of shipping fees, warehousing, and everything else, the last thing a shipper wants is to pay additional fees because their cargo wasn’t picked up in time. Thankfully, demurrage charges can be avoided by following a few simple steps.

Potential ways to avoid demurrage charges include working with a reliable drayage carrier, understanding your charter agreement, and more. Pre-clearing your cargo with a Licensed Customs Broker is also an effective solution. An experienced and reputable 3PL can analyze your situation to determine the best course of action.

Our helpful guide below details how to avoid demurrage charges, how to negotiate them, and how to get help. 

How Do You Avoid Demurrage Charges?

No shipper wants to pay extra just because their cargo wasn’t picked up from the terminal in time. Fortunately, we’ve got some tips on how you can avoid demurrage charges.

1. Work with a Reliable Drayage Carrier 

Once goods arrive at a port or rail terminal, it’s the job of the drayage carrier you hire to pick up the cargo and transport it to another location, whether it be a warehouse, transloading facility, or some other destination. Finding a reliable carrier to get your cargo out of the port on time, every time is key to avoiding demurrage charges. 

To give you a good indication of their reliability, you can even ask a prospective carrier to give you the percentage of their containers that have incurred demurrage charges over a chosen time period. Their understanding and explanation will give you a good idea of the quality of their drayage service

2. Become Familiar with Your Charter Agreement

This tip may seem obvious, but it’s important to understand that signing a charter agreement isn’t the same as simply choosing whether or not to read the terms and conditions on a new software download. Read the agreement carefully and become familiar with all facets of the process, like the number of free days allotted, the demurrage rate, and any other circumstances that may impact additional fees.

3. Pre-Clear Your Cargo

By pre-clearing the cargo you’re importing, you can avoid miscommunication and make sure the pickup and delivery of the goods are coordinated before they arrive at the port. Communication with everyone from customs clearance, to dockworkers, to your carrier is vital.

4. Negotiate for More Free Days

This tip won’t work for everyone, but it usually doesn’t hurt to try. If you know ahead of time that it’s going to take longer to pick up your freight than the quoted amount of free time, it’s possible to negotiate for added days before signing the agreement.

Oftentimes, the amount you’re shipping will have an impact on how much leverage you have in negotiations. However, if there’s a chance you can add additional free time to either reduce or eliminate additional demurrage charges, it’s worth checking.

5. Have a Backup Plan 

Port congestion is a major issue in 2021, and a large part of that problem is a shortage of drivers and equipment. Make sure that you have a backup carrier on standby in case your original plans don’t work out. 

You don’t need to be an expert on which of these solutions will work for your business. Our drayage experts have the answers for you. When you request a drayage quote from our team, we get to work and find the best and most efficient way to get your freight moving. 

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Can You Negotiate Demurrage Charges?

If you want to negotiate, you must do it before you sign an agreement with the port or shipping line. While you likely can’t negotiate the demurrage rate, you may be able to negotiate how many free days you’re allowed.

This is particularly useful if you know ahead of time that it’s going to take longer for your goods to be picked up than the allotted number of free days you’re quoted. While you may not be able to negotiate for every additional day that you need, you might at least be able to limit the number of days that you would be required to pay demurrage.

It’s worth noting that while it doesn’t hurt to try negotiating, you’re by no means entitled to, or even likely to a successful negotiation. Often, the more containers that you intend to ship, the more leverage you’ll have in the negotiation process.

Why is Demurrage Charged?

Why is Demurrage Charged?

Demurrage fees are necessary to keep the supply chain moving. They act as an incentive to make sure that containers are picked up in a timely manner and that shippers aren’t using the yard as free storage space.

No time has this been more important than in 2021 when port congestion and container shortages are both issues devastating the global supply chain. While on one hand, it makes sense: Unattended containers take up precious yard space and equipment, both of which impact port productivity and the ability to keep new containers moving through the port.

However, in light of our current situation, this concept has been flipped on its head. In many cases, there aren’t enough truck drivers or warehouse space to handle bringing the containers inland after the cargo arrives. This means that containers are forced to sit at the port unattended, due to no fault of the shipper. 

Still, many shippers continue to be charged ridiculous amounts of demurrage as their containers are forced to sit at the port until an opportunity arises to pick them up.

How Much Does Demurrage Cost?

Demurrage will vary by port or terminal and, in some cases, depend on the container being used (dry container, refrigerated container, etc.). Typically, you can expect to pay between $75 and $300 per container, per day. Those prices will often increase after a certain amount of time as well. For example, if your initial demurrage rate was $150 (per container, per day), it may rise to $250 after five days, and $400 after 10 days.

Depending on how many containers you plan to ship and how many days the containers may potentially be subject to demurrage, those fees can add up quickly. In the end, demurrage alone may end up costing more than the cargo itself.

How are Demurrage Fees Calculated?

Demurrage is calculated per container, per day (or part-day), and often increases after a certain amount of time. For example, if a shipper shipped five containers that exceeded laytime by seven days at a demurrage rate of $250 per day, the shipper would owe $8,750 (5 containers x $250 per day x 7 days). 

Who is Responsible for Paying Demurrage Fees?

Typically the consignee listed on the original bill of lading is responsible for paying demurrage fees when the cargo is picked up. These charges are typically assessed by the port authority for the use of their containers or equipment.

What are Reasons Demurrage Might be Charged?

There’s no one reason that demurrage charges can be applied. Instead, there’s a variety of reasons that they can occur. 

Below are the various reasons that demurrage can be charged:

  1. Delays: In this industry, freight shipping delays are unavoidable. Your truck driver may get delayed, paperwork might go missing, your cargo may not get cleared in time. The list goes on. The point is, any one of these reasons could cause delays that end with you being charged demurrage.
  2. Poor Planning: While delays are often something you can’t control, there is a lot about the shipping process that you can control. Make sure that you communicate well, pre-clear your cargo and make sure everything is planned out ahead of time. That will give you the best chance at avoiding demurrage fees.
  3. Customs: Often the most complicated part of the import process is getting your goods through customs clearance. Missing documents and difficulty clearing certain goods are reasons why going through customs may delay your shipment. Try to pre-clear your items ahead of time so you’re not wasting valuable free days waiting for your cargo to be allowed entry.
  4. Port Congestion: Unfortunately for many shippers, recent port congestion has resulted in unprecedented levels of demurrage. Neither the ports nor the warehouses and transloading facilities inland have the space or the manpower to handle the current volume of shipments coming into the country. 

This has resulted in container yards filling up due to the fact that truck drivers aren’t able to pick them up. The shippers are then being left paying demurrage, in some cases, for weeks on end, while they wait for an opportunity for the container drayage carrier to move their cargo out of port.

What is the Difference Between Demurrage and Detention Charges?

What is the Difference Between Demurrage and Detention Charges?

As mentioned above, demurrage refers to holding equipment (like containers and chassis) within the terminal for longer than the agreed-upon free time. Detention, on the other hand, refers to the use of equipment outside of the terminal for longer than an allotted amount of time.

Ports and shipping lines need their equipment returned in a timely manner in order to put them back into rotation and allow other shippers to use them. As opposed to demurrage, which is focused on freeing up space and discouraging shippers from using the container yard as storage, detention is focused on getting those containers back in the yard or on the ship where they belong.

It doesn’t matter whether the container is still full or empty when time expires. If the equipment is not back in port by the LFD, detention charges will be assessed.

Another difference between demurrage and detention fees is that demurrage is paid to the port authority, while detention is paid to the shipping line or truck driver.

Work with a Reliable Drayage Carrier and Avoid Demurrage Charges

As a full-service 3PL partner, USA Truckload Shipping, powered by R+L Global Logistics, can help you book a carrier for each mile of the journey, including drayage. We can help you find a reliable drayage carrier that you can work with to get your cargo out of the port quickly and avoid costly demurrage fees.

USA Truckload Shipping can help you find a variety of freight services. Look to us when you need any of the following:

  • FTL and LTL shipping
  • Heavy-haul trucking
  • Expedited freight
  • White-glove delivery services
  • Customs clearance
  • Order fulfillment
  • And more

Reach out now for a hassle-free drayage quote and we can help you get started finding a freight shipping solution today.

Ready to Get Your Containers Out of the Port?

We've got trucks fully equipped and ready to haul your containers out of any port. Request a drayage quote today and get your freight moving.

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