It is known that there are certain rules established to regulate container traffic. Failure to comply with these rules results in penalties for both importers and exporters. The answer to the question “What is demurrage?” emerges here because demurrage is among the penalties that can lead to significant costs.
Demurrage refers to the fee paid to the shipowner when loading and unloading operations are completed within the agreed time frame for the chartered vessel. There is a designated free time for the logistics processes involved in the entry and exit of goods at ports. When this period is exceeded, additional charges apply. In addition to increasing freight costs, some extra fees make trade less advantageous. Therefore, understanding what demurrage means is essential to maintain profitability in commercial transactions.
For importers, demurrage is known as the time during which containers remain at the port terminal after being unloaded from the vessel. The demurrage fee applies if the container stays at the port beyond the free days. For exporters, demurrage refers to the time from when the container arrives at the port for export until it is loaded onto the vessel. The fee is charged if the container remains at the terminal after the free days. These charges encourage importers to move goods earlier and exporters not to deliver goods too early. Keeping goods inside containers prevents the shipping company from using them, which means lost potential income for carriers. It is important to note that most of the carrier’s revenue comes from the cargo transported, not from these fees.
Demurrage Calculation
Demurrage costs vary depending on the container type, size, port, and carrier. It is not possible to say there is a single standard cost for every country. Calculations are usually done manually. During the calculation process, factors such as free time, container type, number of containers, and waiting time must be known. Once these factors are determined, the carrier’s demurrage rates are checked, and the fee is calculated accordingly.
Carriers often provide demurrage calculation tables on their websites to inform customers in advance. The first thing to consider in container demurrage calculations is the number of delay days. The calculation starts on the day the vessel is discharged and ends when the empty container is returned to the terminal. Carriers generally apply weekly rates, and more days mean higher costs.
How Much is the Demurrage Fee?
The fee paid by traders for using the container at the terminal after the free time is called demurrage. Time is a critical factor in demurrage charges. Costs vary depending on terminals, carriers, and contractual agreements. Additionally, daily container usage fees range between $75 and $300. Costs increase significantly after a few days. For example, if you ship ten containers and delay delivery by ten days, the calculation is done per container per day. At $75 per container per day, the delay fee would be $7,500. Therefore, demurrage can pose a serious threat to profitability.
Demurrage is considered a payment outside of freight charges. It is defined as an additional delay fee when delivery occurs beyond the agreed timeframe in international trade. The demurrage period starts after a special declaration is made. According to the Turkish Commercial Code, the buyer and seller must determine the loading and unloading times at the beginning of the agreement. The reason for specifying demurrage in the transport contract is based on this requirement.
Common causes of demurrage costs include incomplete shipping documents, which prevent customs clearance. If the transit time between loading and unloading ports is short, the vessel may arrive before the documents, causing demurrage. Delays in unloading goods from containers, lost export documents, or delays in receiving documents from banks also lead to demurrage. Costs are determined by ocean carriers based on container type and location.
Who Pays Demurrage?
Demurrage, a key concept in e-export, is highly significant in international trade. If the designated time is exceeded during the transportation of goods, additional payments are required. Demurrage, known as an extra delay fee, is paid to the container owner. The party responsible for paying demurrage is the customer who fails to return the container on time.
The free time varies depending on container type and agreements, but standard containers typically have seven free days, while refrigerated containers may have only five. To avoid demurrage costs, importers are expected to unload containers within the free time. Completing customs procedures, removing goods from containers, and placing them in the port are essential steps.