5 Ways to Reduce Detention & Demurrage Fees
Detention and demurrage fees can range from a few hundred to several thousand dollars per day on each container. Here are some strategies for reducing them.
Detention & Demurrage fees - also often referred to as 'Per Diem' - are additional charges that occur when cargo is not moved in the allotted time given by an ocean carrier that owns the container in which goods are shipped.
Demurrage refers to charges accrued for when a container is not moved off the terminal or dock within the designated free time allotted by the ocean carrier that owns the container.
Detention refers to charges incurred when an empty container is not returned in time to the marine terminal accepting that particular type of empty.
Terminals are often contracted with Ocean Carriers so certain containers, like an OOCL container for example, can only be dropped off or picked up from select terminals.
In sum, containers are leased equipment owned by an ocean carrier and they have time restriction on the dock by which they need to be picked up within (i.e. detention), or returned by as an empty or an export (i.e. demurrage). It is often the burden of the dray carrier to bear the cost of these fees, but the circumstances around pick up and delivery are often out of their control.
Depending on the terms of the contract from the ocean carrier and the extent of the delay, these fees can range from a few hundred to several thousand dollars per day on each individual container.
What's Difficult About Reducing Detention & Demurrage Fees?
Reducing Per Diem fees is not always a straightforward endeavor. Challenges include:
- Late or Missing Documentation
Inadequate or late preparation of shipping documents like proof of delivery, terminal interchange receipts, bills of lading, etc. can cause unnecessary delays once a container is slated to be unloaded at a consignee, which may lead to demurrage charges incurred on the container.
Document management features can help users overcome this problem by reminding drivers to collect, sign, and process documentation or by pulling this information for the operators or dispatchers from the myriad of public websites or through API integrations.
Bargaining with shipping lines for more free time can be challenging without solid industry relationships and knowledge. Documentation and historical records can be critical for fighting unfair charges. If you can provide historical reports for when a container reached its last free day, but no terminal was accepting that type of empty, you will likely have an easier time fighting the unfair charges.
- Unforeseen Circumstances
Unpredictable factors such as weather conditions, port congestion, and customs delays can also lead to demurrage fees. Tracking, measuring, and monitoring for these kinds of delays is important for reporting purposes when fighting per diem charges.
How to Reduce Detention & Demurrage Fees
Here are five methods PortPro recommends for minimizing demurrage fees:
Prepare Documents in Advance using technology.
Negotiate additional Terms and Free Days based on market conditions, like empty shut outs.
Implement Automation for reminders (Last Free Day, Container Emptied, etc.)
Anticipate the Challenges for when the container reaches last free day in advance
Understand Exceptions Management
Method #1: Prepare Documents in Advance
Preparation is key to avoiding any delays at the port. Ensure that all required shipping documents are completed and accurate well before the cargo arrives at the port. PortPro's document management features and vessel tracking components can help streamline this process. If a carrier knows exactly when a ship is slated to arrive, when exactly the container is unloaded, and then manage the process from there in terms of documentation, they can minimize delays and thus per diem charges.
Method #2: Negotiate Terms and Free Days
Successful negotiation with shippers or ocean carriers for more free time can significantly reduce the risk of incurring per diem, detention, and demurrage fees. Understanding the intricacies of such negotiations can make a huge difference. Lean on a network or association like the Harbor Trucking Association to learn about best practices and how industry veterans tackle this issue.
Method #3: Implement Automation
Implementing automation in the documentation and tracking process can reduce human errors and inefficiencies. PortPro's automated features make it easier to manage and track shipments, reducing the likelihood of delays.
Method #4: Anticipate the Challenges
By anticipating potential challenges such as port congestion, holidays, and customs checks, you can plan accordingly and mitigate the risk of demurrage, demurrage, and Per Diem charges. If a terminal is going to 'shut out' the return of specific empty containers, knowing in advance - or having a historical record of when a terminal stopped accepting empty returns are critical for fighting unfair charges.
Method #5: Understand Exceptions Management
Being familiar with the rules and exceptions of different carriers and ports can also help avoid unnecessary fees. Always stay updated with the latest changes in regulations and rules. Associations, as mentioned above, can provide this information. Becoming a member of the HTA, CTA, Bi-State Motor Carriers Association of NY/NJ, etc. gives a leg up on these sort of challenges.
Common Causes of Detention & Demurrage Fees
Detention & Demurrage fees are typically charged after the expiry of the agreed free time, which varies between shippers and ocean carriers but is generally between 3-5 days. The importer or the shipper is usually responsible for these fees, but more often than not, these fees are passed along to the dray carrier.
Common causes of detention or demurrage include late documentation, customs delays, and port congestion. If a terminal decides to stop accepting empty returns on a specific type of container, dray carriers are often forced to haul the empty back to their yard. While the carrier has no control over this, they are often left with the bill.
Can You Avoid Detention & Demurrage Fees?
With proper planning and the use of appropriate tools like drayOS from PortPro, it is indeed possible to avoid or at least reduce unfair detention & demurrage fees.
Following the best practices described above, understanding your responsibilities and obligations, and employing the right software can all contribute to minimizing these costs.
How Drayage Software Can Help
Drayage software plays a pivotal role in transportation management. It allows carriers to monitor information from shippers, ocean carriers, ports, terminals, and importers to track their cargo, manage documents, and automate various processes like figuring out which containers are approaching last free day, automated reminders for which container have been emptied, and automated queries to see where empties can be returned, all of which can help to reduce or even avoid demurrage fees.
At PortPro, we offer a comprehensive drayage management solution that helps our clients to anticipate potential challenges, manage documents, automate processes, and make informed decisions that minimize costs - like detention, demurrage, and/or per diem. What sets us apart is our commitment to usability and customer success.
If you're interested in understanding how software can help reduce expenses in drayage, take the next step with PortPro. Our suite of tools not only helps you avoid demurrage fees but also optimize your entire shipping process for maximum efficiency and cost-effectiveness.