As an exporter or importer, you might have come across the word Demurrage and Detention in shipping. Well, demurrage and detention refer to fees incurred by the exporter and importer alike when the containers are not ether picked up or dropped off within the free time. This is regardless of whether the containers are empty or full, or whether the containers are being stored in the seaport, outside the seaport, terminal or deport.
Container Demurrage
Container demurrage fees can be charged for both import and export containers respectively.
For Import containers, demurrage fees are charged when the import containers remain full and are still under the control of the shipping company. These fees are applicable as a result of the container not being picked up by their consignee within the free time for pickup. Every shipping company defines the length of the free time for pick and once this free time has elapsed, demurrage fees are then applied until the end of the day when the container is picked up and removed from the seaport, terminal or deport.
In the case of export containers, Demurrage fees are applied once a loaded export container has been returned to the shipping company if for some reasons, the container cannot be shipped due to non-carrier related error. If the error is resolved within the free time, the container can be shipped out and no demurrage cost incurred. If after the free period, the container problem has not been resolved, demurrage fees will be applied.
Container Detention
Just like container demurrage, container detention can be charged for both import and export containers.
For imports, if the consignee holds on to the container beyond the free time allowed by the shipping company and the said container is physically located outside the terminal, the deport, of the seaport, the container faces detention.
In simple words, if the shipping company has allotted 7 days as the free time to hold on to their container, and the consignee held the container for 10 days, the consignee will be charged for 3 days of detention
For export containers, detention fee is applicable when the exporter picks up a container for loading and is did not return the container within the allotted free time. For example, if the shipping company has given 5 free days for the container to be loaded and returned by the consignee, and the consignee returns the container on the 7th day, detention fee will be charged for the additional 2 days.
In summary, the difference between the demurrage and detention is the location of the container. If the container is within a location where it initially reached land, it is subject to demurrage fees. If it physically outside the location where it initially reached land, it is subject to detention fees. And for demurrage and detention fees to be applied, the free time would have expired.