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What is demurrage?
8 Jun 2016

What Does Demurrage in container shipping business mean?

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There are two(2) types of ‘demurrage’ in shipping business:

  1. Tramp shipping ( the charter).

    – is when you hire (rent) a vessel for certain cargo or group of cargoes. Demurrage in this case is a charge payable to the owner of a chartered (rented) ship on failure to load or discharge the ship within the time agreed. In other words, its agreed charge (fine) for delay of the cargo readiness to load the vessel.

    Example of demurrage in charter:

    • Your charter agreement say loading time: 01-15.06.2010. Vessel comes on time, lets say 14.06.2010, but there is no cargo and cargo owner ask to wait for 3 days so cargo will show up on 17.06.2010 only. In this case Demurrage have to be paid for 2 days. 16.06.2010 and 17.06.2010 = 2 days over.
  2. Liner shipping or container shipping

    – Is when you booked a certain spot on a certain direction from a shipping line company to transport your goods in container from A to B. Demurrage in this case can be charged both sides – Port of Origin and Port of Destination – Demuurage in this case would be a fixed (per shipping line tariffs) or agreed (with shipping line sales) charge (read as ‘fine’) for keeping FULL container in port longer time compared to free time (agreed time or as per general free time policy of the shipping line).

    Example of demurrage in container shippingline EXPORT:

    • You placed a booking on 1.06.2010 and Departure is 20.06.2010. You have stuffed the container with cargo and sent it to port on 08.06.2010. As per shipping line rules there are 10 days FREE DEMURRAGE given in this port. IT means that all days before departure minus 10 days would be considered as demurrage. In our case its 11.06 – 20.06 = 10 days Demurrage free. All time before 11.06 is Demurrage. So if we sent container to port on 08.06 it means we have to pay for 8.06., 9.06 and 10.06 as Demurrage.
    • You placed a booking on 1.06.2010 and Departure is 20.06.2010. You stuffed the container and sent it to port on 18.06. There will be no demurrage in  this case.
    • Let’s make it more complicated.
      1. You placed a booking on 1.06.2010 and Departure is 20.06.2010. You have stuffed the container with cargo and sent it to port on 17.06.2010. As per shipping line rules there are 10 days FREE DEMURRAGE given in this port. IT means that there are no demuurage for you to pay. BUT! Due to some reason, local customs has forbidden your container to be loaded and asked for additional documents to be provided in order to allow export. You made your best but all additional documents collected only after vessel departure. Shipping line promised to load your container to the next vessel on 27.06.2010 which is the first available vessel. What demurrage would be in this case? 17.06 entered the port, free time 10 days, which means 18-27.06.2010, so your demurrage is 1 DAY. If 1 Demurrage cost 50 USD – you have to pay 50 USD to the shipping line

Free Demurrage in export is counted from GATE IN FULL (When container with cargo enters the port/terminal gates) and ends after GRANTED FREE TIME expires or container is loaded to vessel before free time expiration.

Example of demurrage in container-shipping-line IMPORT:

  • Your container arrived to Destination port on 05.10.2010 and shipping line promised to you 10 days free Demurrage in port of destination. This mean you can keep container in port since 05.10 till 14.10 without any extra charges or fines. IF you pick up container on 15.10 and further.. Demurrage will be applied based on shipping line demurrage tariffs or based on your contract/agreement with Shipping line sales. If 1 day demurrage cost 50 USD., you would have to pay 50 USD to Shipping line.

Free Demurrage in import is counted from DISCHARGE (Actual time of container discharge on terminal) and ends after GRANTED FREE TIME expires or when you pick up container before free time expiration.

Important!

  • Always check Demurrage and Detention (pls see another post about Detention) terms and costs before making bookings with any shipping line.
  • Always check the possibilities to prolong Demurrage/Detention in case of need.
  • Always check Holidays! (Yes, its important!) Your container may arrive on time where there are government holidays and nobody works on those holidays.
    Holidays are usually no excuse to provide you more free time.. (some shipping lines do, especially for Global Key customers 😉 )
  • Check the tariffs online if available.
  • Always ask for discounts in case your DMR is ‘Big’.
  • Demurrage cannot be applied to SOC (Shipper’s own container). Demurrage is charged for using Shipping Line equipment only! Never pay DMR for your own container 🙂
READ  Top 8 benefits of Air freight!

Share your stories about demurrage in comments? Is there something more people need to know?

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