Demurrage Fees: What They Are, How They Are Calculated, And How To Avoid Them

Demurrage is the penalty you pay when cargo stays too long under a carrier or terminal’s control. In containers it applies while the box sits inside the port or terminal after free time runs out. In bulk and tanker shipping it applies when a vessel exceeds agreed laytime for loading or discharge. Demurrage burns margin fast because rates compound daily and often stack with other charges like detention or port storage. This guide breaks down the rules, the math, and the prevention tactics that actually work. No em dashes are used in this document.

Table Of Contents

1. What Is Demurrage
2. Demurrage vs Detention vs Port Storage
3. How Demurrage Is Calculated
4. Container Shipping: Rules And Triggers
5. Bulk And Tanker: Laytime, Demurrage, Despatch
6. Who Pays Under Incoterms
7. Common Causes And How To Prevent Them
8. Operational Playbook That Cuts Fees
9. Finance, Documents, And Compliance Links
10. KPIs, Benchmarks, And Alerts
11. Worked Examples: Container And Bulk
12. FAQ

What Is Demurrage

Demurrage is a liquidated damages charge. It compensates the carrier or terminal for using their space or time beyond what the contract allows. In containers it applies to a specific box within the terminal. In bulk and tanker trades it applies to the ship itself when laytime is exceeded. The intent is simple. Keep cargo moving. If you do not, you pay for the delay.

Demurrage vs Detention vs Port Storage

You can owe demurrage and port storage at the same time in certain ports. You can also stack demurrage at origin and detention at destination on the same shipment if planning fails. Treat these as separate risk buckets that require separate controls.

How Demurrage Is Calculated

For containers the formula is direct. Demurrage equals daily rate times number of chargeable days. Free days are excluded. Some carriers use tiered rates that escalate after a set number of days. For bulk and tanker trades demurrage equals the agreed daily rate in the charter party multiplied by the time on demurrage. Time is measured from the expiry of laytime to completion, subject to allowed exceptions such as weather or strikes if the charter party grants them.

Container Shipping: Rules And Triggers

Demurrage applies to full containers inside the terminal. The usual triggers are late document release, customs holds, missing duty payments, or no trucking slot. Free time differs by port and carrier. Carriers may allow separate free time at origin and destination. Tiered rates often start modest and rise sharply after the first bracket. Importers also face detention once the box leaves the terminal and is kept beyond free time. Plan both clocks.

Bulk And Tanker: Laytime, Demurrage, Despatch

Bulk and tanker trades use laytime to define the time allowed to load or discharge. If operations exceed laytime, you pay demurrage at the agreed daily rate. If operations finish early, owners may pay despatch at usually half the demurrage rate, depending on the charter party. Accurate statements of facts and time sheets decide the final balance. Weather and other exceptions count only if the charter party says so. The wording of NOR, berth status, and shifting can change the outcome by whole days. Precision matters.

Who Pays Under Incoterms

Incoterms do not list demurrage line by line, but they define delivery points and risk transfer. That framework guides who pays typical demurrage and detention. Always state specific free time and who pays in the contract. Use the table as a practical guide for full container loads.

This grid shows tendencies. Contracts should state exactly who pays demurrage and detention and the free time at each end. Clarity avoids finger pointing and stalled cargo.

Common Causes And How To Prevent Them

Most demurrage comes from paperwork delays, customs flags, missing duties, congestion at terminals, no truck appointment, or warehouse space not ready. Prevention starts with timelines. Lock document release dates. Pre file customs. Pre book trucking with slack. Share cut offs across all parties. Hold a single source of truth for ETA, free days, and gate hours. Train sales that free time is not a cushion. It is a fuse.

Operational Playbook That Cuts Fees

Before Arrival

Verify AMS and ENS filings. Confirm manifest accuracy. Collect original bills of lading or secure telex release. Pre clear customs with complete HS codes and licenses. Book trucking slots that match ETA plus a realistic buffer. Share crane requirements and yard moves with the terminal if allowed.

At Terminal Or Berth

Monitor discharge completion times and yard location updates. If a hold appears, escalate within one hour. Pay duties and fees the same day. If a split delivery is needed, ask for it early. Keep the terminal’s calendar and your carrier’s free time visible to all teams.

Post Release

For containers outside the gate, detention risk replaces demurrage risk. Turn the box quickly. If the warehouse is full, transload and return the empty. For bulk, confirm final statements of facts before signing. Challenge incorrect time counts immediately in writing.

Finance, Documents, And Compliance Links

Letters of credit and documentary collections can delay release if the presentation has discrepancies. Solve this by matching shipment terms to the LC word for word, using pre checks, and keeping a clean discrepancy tolerance agreed with the bank. For import finance, align facility covenants with free time so funding lands before storage clocks start. Sanctions and dual use controls can stop cargo cold. Run screening on buyers and vessels before you ship, not after the ship arrives.

KPIs, Benchmarks, And Alerts

Track containers incurring demurrage as a percentage of total boxes, average demurrage days per box, total fees per TEU, and free time used at both ends. For bulk, track laytime used as a percentage of allowed time, average daily discharge or loading rate, and demurrage per voyage. Push alerts when a box reaches fifty percent of free time or when laytime consumption crosses eighty percent before completion. A simple alert saves thousands.

Worked Examples: Container And Bulk

Container Example

Facts. Free time at destination is five days. The container is available on the first of the month. It exits the terminal on the tenth. The carrier uses tiered demurrage at 75 per day for days 6 to 8 and 125 per day from day 9 onward. Chargeable days equal the days after free time until gate out, so days 6 to 10 are five days total. The invoice is three days at 75 plus two days at 125 for a total of 475. Port storage may also apply if the terminal charges separately.

Bulk Charter Example

Facts. Laytime allowed is five weather working days. Demurrage rate is 20,000 per day. The vessel takes six weather working days to discharge. No exceptions apply. Demurrage equals one day at 20,000. If discharge finished in four days, and the charter party grants despatch at half demurrage, owners would owe 10,000 to charterers.

FAQ

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