What is Demurrage?
Demurrage is a charge applied by shipping lines or terminals when a container stays inside the port or terminal longer than the free time allowed. Free time is given so importers can clear customs, arrange transport, and pick up their cargo.
Once this period expires, daily fees start accumulating until the container is removed. Demurrage helps control congestion, improves container availability, and encourages faster cargo movement in global supply chains.
Key Points
Charged by the shipping line for keeping containers inside the port beyond the allowed free days.
Usually starts after 3–7 free days, depending on port rules and contracts.
Different from detention, which applies when the container has left the port but is returned late.
Can escalate daily, often increasing after certain thresholds.
Common in busy ports with high cargo traffic.
Benefits & Challenges
Demurrage encourages faster cargo pickup, prevents terminals from being overcrowded, and ensures shipping lines have containers available for export. It also promotes better planning, improved documentation, and stronger coordination between freight forwarders, transporters, and customs brokers.
However, demurrage can become expensive very quickly if there are customs delays, missing paperwork, or scheduling issues. Beginners often confuse demurrage with detention, leading to unnecessary costs.
Example Scenario
An importer brings a 40-foot container of electronics into a port. The shipping line allows 5 free days. Because the importer fails to provide proper customs documentation on time, the clearance process lasts 9 days. After day 5, demurrage fees are applied daily until the cargo is released and moved out of the terminal. This could easily add hundreds or thousands of dollars to the shipment cost.
Conclusion
Demurrage plays an important role in freight management by reducing congestion and promoting efficiency. For freight forwarders, avoiding demurrage requires coordination, compliance, accurate paperwork, and visibility.
Frequently Asked Questions (FAQs)
1. How is demurrage different from detention?
Demurrage is charged inside the port; detention applies when a container is out of the port and returned late.
2. Who pays demurrage charges?
Typically, the importer/consignee, unless agreed otherwise in the commercial terms.
3. Can demurrage be negotiated?
Sometimes, especially with contracted volume or long-term partnerships.
4. Does customs clearance delay cause demurrage?
Yes. Missing or incorrect documents are a common trigger.