The perfect storm is brewing again. Much as it did throughout 2020 and into the early stages of this year, the global pandemic with its many variants is threatening to throw the shipping world into utter chaos. Container capacity is scarce. There is a shortage of equipment. Ports are clogged. And the volume of freight being moved is reaching unprecedented levels as shippers and retailers play a calculated game of "beat the clock" to get stock in place before peak season arrives. All of which churns the waters surrounding the contentious issue of container detention and demurrage charges.
From 2020 to 2021, the average detention and demurrage charge imposed at the world's 20 largest ports increased by a whopping +104%, according to a report from Container xChange. In 2021, on average, demurrage charges and detention fees reached $1,219 per container across container types after two weeks.
Ocean carriers and port authorities say container detention and demurrage are necessary to incentivize the efficient movement of cargo; others say it is unfair to charge fees when factors beyond their control result in bottlenecks of loading/unloading or returning equipment. The debate has captured the attention of President Biden, who in July signed an executive order mandating that the chairman of the Federal Maritime Commission spearhead efforts to "vigorously enforce the prohibition of unjust and unreasonable practices in the context of detention and demurrage, request from the National Shipper Advisory Committee recommendations for improving detention and demurrage practices, and consider further rulemaking to improve detention and demurrage practices."
However, detention and demurrage fees are controllable and even avoidable with the right technology in place. Application programming interfaces (APIs) drive greater transparency and visibility, data-driven predictability, and real-time communication among all stakeholders in a unified solution that is a win-win for each side.
Demurrage vs. Detention Defined
Though often discussed as though they are one and the same, demurrage charges and detention fees are distinctly different. There is a set timeframe ("free time") in which a full container can occupy space at a terminal and a window in which a container and other equipment must be returned. Each shipping line and port has specific definitions of these terms and may differ slightly, but generally the windows are 3-7 days. Demurrage is charged while the container is still at the port. Detention is assessed for any container that remains outside the port, regardless if it is full or empty.
Why Container Detention and Demurrage are on the Rise
There are many factors that contribute to escalating container detention and demurrage, not the least of which is location. Simply put, some locations are more expensive than others.
Terminal congestion is another driver. Paul Berger of the Wall Street Journal reported during the week of August 18 that nearly 40 ships were anchored near the United States' two busiest ports (Los Angeles and Long Beach), waiting their turn to bring in goods ahead of the upcoming peak season rush. Customs clearance issues, bad weather conditions, labor shortages, a lack of drayage capacity, delays and miscommunications also significantly impact container detention and demurrage charges.
Collectively, these challenges make it difficult for shippers, consignees and freight forwarders to meet the timeframes established by port authorities and ocean lines. Planning shipments, accurately estimating times of arrival and coordinating returns quickly turns into a nightmarish proposition that often results in having to pay detention and demurrage.
Tips to Reduce Container Detention and Demurrage
Detention and demurrage charges can quickly escalate to hundreds of dollars per container per day. This, in turn, cuts into the margins and impacts the cash flow and profitability of shippers, consignees, and freight forwarders. Here are some ways these stakeholders can minimize or even eliminate D&D:
- Leverage transparency - Knowing more about what drives the costs associated with detention and demurrage will help stakeholders make better decisions and provide the leverage needed to negotiate per diems.
- Negotiate terms - As stated earlier, detention and demurrage charges can vary by location and even by oceanline. The amount of free days can be negotiated (again, 3-7 days is typical), but negotiating power depends on the volume you are moving as a shipper.
- Plan and execute efficiently - Dispatch cargo in advance, as early as possible in fact. Any extra time that can be built into the plan will help mitigate unforeseen risks such as bad weather, labor strife, or excess congestion at ports.
- Handle customs like a boss - Have all paperwork ready, complete and accurate. It is also important to have a general understanding of the customs clearance processes and port regulations involved.
- Get the right technology - No one can afford idle time, inside or outside a port. Having quality, standardized data is the key to being able to provide ultra-accurate ETAs and identify potential detention and demurrage fees. The transparency of real-time visibility helps shippers align dray schedules with a vessel's arrival in port, preventing full containers from sitting idle and empty containers from being returned to the port. APIs communicate much quicker than traditional EDI connections, which are batch processed and could be delayed by days -- and all the while the clock and meter for detention fees and demurrage charges are running.
Reduce Detention and Demurrage Charges with VIZION's Container Tracking API
Many organizations spend operational resources on the manual, by-hand collection of shipment event data. This involves visiting carrier websites, collecting recent events and ETAs, and entering that data into a TMS or other systems. VIZION's container tracking API automates this manual process, which eliminates human error, provides quality standardized data, and helps eliminate container detention and demurrage charges.
To learn more, schedule a demo today.
