Demurrage is one of the fastest ways a clean shipment turns into a messy dispute. The short answer is uncomfortable but true: the party invoiced by the carrier or terminal is not always the party who should bear the cost under the sales contract. If you do not allocate demurrage clearly, you get double damage. You pay the bill first, then you fight about reimbursement later.
Demurrage is a charge for keeping equipment or cargo beyond the free time allowed at a terminal or port, typically for containers sitting in the terminal. It is designed to push cargo out of the terminal and keep space moving.
Charges for cargo or containers held at the terminal beyond free time.
Charges for keeping the container outside the terminal beyond free time, often after gate-out.
Before arguing about fairness, start with mechanics. Carriers and terminals invoice whoever they can enforce against, based on their tariff, bill of lading terms, service contract, and local practice. In container trade, that is often the consignee, the notify party, or the party that requests release and picks up the container.
Practical reality: If your name is on the bill of lading as consignee, or your agent requests delivery order and release, you are often the one the carrier will chase. That remains true even if the delay was caused by the other side.
This is where Incoterms matter. Incoterms allocate delivery obligations, cost, and risk between buyer and seller, but they do not allocate every operational charge automatically. Your contract still needs a demurrage clause, especially when documents, customs, or inspection can create delays.
| Incoterm Group | Typical Delivery Control | Typical Demurrage Exposure | Where Disputes Usually Start |
|---|---|---|---|
| EXW / FCA | Buyer controls main carriage early | Buyer typically bears destination demurrage | Seller delays export docs or readiness, buyer misses vessel cutoff |
| FOB / CFR / CIF | Seller controls export leg, buyer controls import and onward | Buyer typically bears destination demurrage | Late originals, wrong consignee details, LC document mismatch, customs holds |
| DAP / DPU | Seller controls carriage to named place | Seller often bears demurrage until delivery point, then buyer | Delivery place ambiguity, unloading responsibility, import clearance delays |
| DDP | Seller controls end-to-end, including import clearance | Seller typically bears most demurrage and customs-driven delays | Seller underestimates duties, lacks importer setup, broker failures |
In serious disputes, responsibility usually tracks causation. A clean demurrage clause does the same. It assigns a default payer, then shifts cost back to the party whose breach or delay caused the charges.
If you want fewer fights, you need specificity. A good clause answers five questions: where free time starts, who pays by default, what documents must be provided and by when, what happens if one side causes delay, and how disputes are handled while charges keep accruing.
Contract drafting checklist:
1) Define the named delivery point and who controls release and pickup.
2) State the default payer for demurrage, detention, and terminal storage separately.
3) Add a causation override: the party causing delay reimburses the other.
4) Set document timelines: who provides originals, telex release, or SWB, and by what deadline.
5) Require mitigation: both sides must act to reduce charges once notified.
Use this as a starting point, then tailor to your route, commodity, and document flow.
Demurrage, Detention, and Storage. Demurrage, detention, and terminal storage charges at the port of loading shall be for Seller’s account. Demurrage, detention, and terminal storage charges at the port of discharge and destination shall be for Buyer’s account. Notwithstanding the foregoing, any such charges that arise directly from the other party’s delay, incorrect documentation, or failure to perform its contractual obligations shall be reimbursed by the party that caused the delay. Each party shall promptly notify the other upon receiving notice of accruing charges and shall take reasonable steps to mitigate further accrual.
Incoterms guide the allocation of delivery obligations and risk between buyer and seller, but carriers and terminals invoice based on their own terms. Your sales contract should allocate demurrage explicitly.
Yes. The carrier can invoice the party it has rights against under its terms. The consignee may still have to pay to release cargo, then pursue reimbursement under the sales contract.
No. Demurrage is typically for time at the terminal. Detention is typically for time outside the terminal after pickup. Many disputes happen because contracts mention one and ignore the other.
Document delay. Originals not released, inconsistent consignee details, or customs holds caused by mismatched paperwork are repeat offenders, especially when the trade runs under letters of credit.
Align document timelines, presentation rules, and release mechanics with the shipping plan. If the buyer cannot clear without originals, do not assume the bank process will move fast enough. Build a release plan into the contract.
Disclaimer: This article is for general information only and does not constitute legal advice. Demurrage, detention, and storage practices vary by carrier, terminal, and jurisdiction. Use transaction-specific counsel for contract language and disputes.
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