Are you wondering why detention or demurrage was charged to your container due to a delay in shipping or returning it? Whether you’re importing or exporting, international shipping rates are high enough already without having to deal with additional fees. The good news is: there are plenty of smart measures your organisation can take to reduce demurrage and detention fees, or even avoid them altogether.
If you've read our article on "What is demurrage? What is detention?" then you already know what the difference is between detention vs demurrage. And how shipping lines define demurrage and detention in their contracts. In this article, we show you 6 tips for lowering your total shipping fees.
Why is it important to avoid demurrage and detention fees?
With international shipping rates already on the rise, keeping freight costs under control is crucial for your business. You determine the retail price for your products based on the expense that it takes for you to get them to the market. Any extra expenses on top of the shipping fee you pay will take a bite out of your margin.
It’s also important to remember that detention and demurrage charges are often the result of production delays, paperwork errors or staffing shortages. That means these extra fees are often a sign that something is going wrong behind the scenes.
This isn’t always the case though. In some cases, detention or demurrage is charged to the shipment, even if the container is not yet physically available to be picked up, or if the terminal is not accessible for the container to be returned. In cases like these, it may be unclear who is actually responsible for paying the additional costs.
How to reduce or prevent demurrage and detention fees
With proper planning for your equipment, labour, transport and paperwork, you can reduce your demurrage and detention fees or even prevent them altogether. Here are 6 tips for keeping your demurrage and detention fees to a minimum:
1. Negotiate on contractual terms and conditions
Demurrage and detention fees, as well as your number of free days, are all laid out in black and white, in your transport contract. And while it is not necessarily standard practice, it can still never hurt to try negotiating for lower fees or additional free days when you compare international shipping rates before signing a contract. Depending on how often or how much your organisation ships, you may be able to leverage more free days at the terminal from your shipping line.
2. Carefully plan and track your containers
Plan on shipping and returning your containers as soon as possible. That gives you more flexibility and a longer timeline in case any unexpected challenges arise, such as severe weather or backlogs at the terminal. The same goes for loading times: little time buffers can make a big difference.
It’s also important to track your container throughout the entire transit and be well prepared for its arrival. To make this possible, work with a digital forwarder that uses the latest technologies. This is essential for keeping demurrage and detention fees to a minimum.
3. Always have a backup plan
A good forwarder checks for alternative freight rates and services and even looks for available terminals nearby if your freight is redirected. If anything goes wrong with your original transport plan, it is important to have other options in mind so you can avoid excessive fees.
4. Understand local shipping practices
To avoid demurrage and detention fees, you need to keep up to date on customs clearance procedures and policies in place at the terminal. It is also important to remember that even geographic location can play a major role, because different countries enforce different customs rules. Do your research to find out whether you are shipping to a destination where long clearance times might pose a risk.
5. Choose a reliable forwarder
An experienced forwarder understands local practices and knows how to negotiate with shipping lines so that you get more free days for your container. They are also very familiar with customs procedures and know how to choose the right partners at the destination port. They work with a global network of independent agents who have the local expertise to deliver your freight as quickly as possible. Shipping lines may also grant more time to forwarders, which reduces the risk of demurrage and detention fees.
6. Use shipper-owned containers
Using shipper-owned containers enables you to avoid demurrage and detention altogether, because it is in the forwarder’s interest to prevent their containers from piling up in one location and to get them to other locations where they are needed. That’s why forwarders usually offer 30 to 45 free days and, depending on your location, only charge a few dollars a day for demurrage and detention on their containers.
Ready to reduce your demurrage and detention fees?
With container shortages, the ongoing COVID pandemic, a flooded market and high freight costs, additional demurrage and detention fees are a major burden for companies. But it’s important to remember that these fees are not always necessary and you can take smart steps to avoid them.
Try negotiating for better contractual conditions with shipping lines. Make a fail-safe plan and closely track your container during transit. Also have a backup plan in place in case anything goes wrong. Be sure that you understand local practices and work with a forwarder that you can trust. You might even consider using shipper-owned containers to avoid unnecessary fees charged by the shipping line.
A little additional planning can greatly lower your organisation’s total freight costs. Do you need some advice on where to begin? Please feel free to contact us!