News & Press

May 22nd 2024

Rogers & Brown 

Written By: Lori Mullins, Director of Operations at Rogers & Brown 

In an efficient supply chain, cargo moves fluidly through the process. However, sometimes delays occur, causing a kink in that chain. Demurrage and detention are words most in the cargo industry prefer not to hear. The terms are generally synonymous with wasted time and money, but what causes them, and how can they be argued or avoided? Let’s take a look at the details and define a few terms to help us better understand.

Terms: Free Time, Demurrage, and Detention

Free Time: The amount of time containers are allowed to sit within the terminal (full) with no additional fees for sitting. This time is based on the contractual agreement between the carrier and the shipper/consignee on the bill of lading. This period typically ranges from 2 to 5 days free. Free time begins once containers are offloaded for imports or ingated for exports.

Demurrage:  The amount of time that filled containers or bulk cargo spends inside the terminal beyond the free period. This is measured from the date the free time ends until containers are out-gated. These fees are used to incentivize the timely movement of equipment and discourage the use of port terminals to store goods.

Detention: is the time containers spend outside the terminal. Detention is charged whether the equipment is full or empty. These charges incentivize prompt return of equipment and generally begin after a period of free time allotted off port for equipment. Per diem is a form of detention.

What are some reasons that demurrage and detention may be incurred and who is responsible for them?

A few reasons that delays causing demurrage and detention can be incurred:

• Port Congestion
• Weather Events
• Inland Carrier Capacity Constraints
• Government Holds
• Late Release

That being said, how do you avoid demurrage costs? Since the bill of lading is the written contract for the movement of all ocean cargo, the shipper or consignee is fully responsible for all payments of demurrage and detention. The FMC has issued guidance on the required details that should be provided with the invoice for demurrage and detention costs and who can be billed for these costs. More information on the final rule can be found on the FMC website.

How to Avoid Demurrage and Detention Fees:

• Hire a professional. Hire a professional to help you navigate the complexities of the process.
• Plan ahead. Be clear on the arrival date of your goods and the free time period, and keep communication with all parties open so that nothing is pending upon arrival.
• Gather shipping documents early and be sure you have collected all the information required for timely handling before arrival.
  • IMPORT—Be sure the ISF was filed prior to loading. If it is late, the CBP AT-CET team may hold it for additional time, and potential exams and delays may occur.
  • IMPORT—For a list of the documents required for Import of goods, see our previous blog post on Import Documentation here
  • EXPORT—Be sure the VGM (Verified Gross Mass) certificates are present with the shipment. Containers will not be placed on the vessel for export without the VGM.
• Pre-dispatch the shipment to the inland carrier as early as possible to avoid delays. In some ports, that means prepaying terminal fees and pre-scheduling pick-up times. Each US port handles shipments differently, but preplanning and early dispatch ensure a more timely spot to ingate/ outgate, assuming all holds are removed upon arrival.
• Ensure all holds are removed prior to arrival. Imports require a freight release and a CBP (and other participating government agency release). Ensure that the original bill of lading and charges are paid in full to the carrier before the arrival of the goods. The Customs and Border Protection release can be transmitted up to 5 days before vessel arrival, assuming the Customs Broker has all of the required documents to make the filing early. USDA/APHIS, USDA AMS, EPA Pesticides, and some Food & Drug products will not be allowed to move off the port terminal to anywhere other than an approved exam site prior to release, so keep in mind additional delays for certain classes of products may prevent movement until fully released should there be delays with release from those agencies. The Customs Broker filing the CBP entry will handle those the participating government agency holds with the ACE CBP message set and can confirm if a may proceed or release has been issued.
• Receive and unload quickly. Provide the correct contact details for delivery/pick up to the inland carrier so pickup and delivery can be coordinated quickly with the shipper or consignee. Once you have taken possession of the equipment, load or offload the goods and return the empty for import/full for export to the terminal quickly to avoid detention. Prompt chassis return will also mitigate additional costs with the chassis and per diem for the equipment.

Filing a Charge Complaint:

Government holds or exams are outside of your control, so if delays occur, the government will not cover the demurrage or detention incurred.

Suppose you have issues within the terminal with availability due to port closures, strikes or location access. In these cases, you may be able to dispute any demurrage or detention costs with the carrier in those cases. Each carrier would address those on a case-by-case basis. Some carriers will require payment of all demurrage and detention in full for the movement of the cargo, and dispute resolution will occur after that time through a secondary dispute resolution process. It is extremely important to keep all terminal screenshots, emails, tracking, or communications related to those delays on hand in case the dispute resolution is denied and further action is required.

As a freight forwarder and Customs Broker, Rogers & Brown does not markup fees for demurrage or detention assessed by the carrier. If our import or export clients wish us to pay demurrage and bill them, it is our policy to bill all charges per the carrier tariff and provide a copy of the carrier invoice covering all the data elements required by the FMC in their demurrage and detention regulations. Any dispute over those charges must be made by the sipper/ consignee and the carrier directly.

The FMC allows for charge complaints to be filed where a carrier has violated the Ocean Shipping Reform Act, also known as OSRA, in their billing of demurrage and detention charges. Their website provides a webinar on Charge Complaints, and the link for more information on the procedure for filing charge complaints can be found here. From the FMC website, below is how the charge-compliant procedure works to file a complaint regarding unfair billing practices by the carrier for demurrage and detention.

What will the Charge Complaint procedure look like? How will this operate?

1. A party interested in filing a Charge Complaint should collect and be prepared to submit the following required information:
   • Identification of the common carrier.
   • Description or statement on how the charge or fee violated 46 U.S.C. §§ 41104(a) or 41102.
   • Supporting documentation including Invoices, Bills of Lading, proof of payment for the charges or fees demanded. Screen captures of denied booking appointments for return of equipment, gate closures, or relevant emails also can be provided.
2. A Charge Complaint and supporting information should be submitted by email to [email protected].
3. Commission staff will acknowledge the submission and, when it receives sufficient information, will promptly investigate the complaint. If Commission staff have questions about your submission, you will be contacted to obtain clarification or to provide missing information.
4. The common carrier will be contacted by Commission staff and asked to respond/justify the charge or fee being investigated.
5. Upon completion of the investigation, Commission staff will notify both parties. If the investigation supports a finding that the common carrier’s charge is not in compliance, the parties will be informed that the matter will be referred to the Commission’s Office of Enforcement.
6. For matters where the investigation supports a finding of a violation, the Office of Enforcement will recommend the Commission issue an Order to Show Cause under 46 C.F.R. § 502.91 to formally adjudicate the Charge Complaint. Investigations that do not support a violation are closed and the parties are notified.
7. Upon approval of staff’s recommendation, the Commission will issue an Order to Show Cause naming the specific common carrier and actions alleged to violate 46 U.S.C. §§ 41104(a) and/or 41102, and directing that common carrier to “show cause” why it should not be ordered to refund the fees or charges paid or waive such fees.
8. If the Commission orders a refund by the common carrier, a separate penalty proceeding may be initiated and referred to the Commission’s Administrative Law Judge for consideration of penalties under 46 U.S.C. §§ 41107 and 41109.