How To Avoid Demurrage Fees (and Save Your Customers Money)

As container rates fall from their peak, shippers are finally getting a respite from inflated shipping costs over the past couple of years. However, many are still dealing with the added expenses of demurrage and detention fees.

While any unexpected charge can be frustrating, many are often avoidable. Let’s talk about the issue of demurrage fees and how you can help eliminate it for your shippers.

What are demurrage fees?

Demurrage fees, not to be confused with detention fees, are charges levied by the shipping line for leaving your container at the port past the allowed time period. This free period, known as free time, typically spans 4-5 days, depending on the terminal and the level of port congestion in a given season.

Demurrage fees generally total around $75-150 per container per day. However, this rate may rise as the number of days left at the port increases. For instance, you may be charged a rate of $100 for each of the first five days, followed by a rate of $200 for each day past that. In other words, the longer your container is left at the terminal, the more expensive it becomes.

Since any significant delay can potentially lead to demurrage, there’s a wide variety of causes. Some are out of your control, such as port congestion or bad weather conditions. However, many are the result of inefficient systems or insufficient planning, such as incorrect documentation, getting held up by US Customs and Border Protection, or incorrect tariff classification codes.

How to eliminate demurrage fees (most of the time)

While you can’t always bypass fees completely, there are plenty of ways to reduce overall charges by planning ahead. With the right preparation and execution, you can set your shipments up for a smooth journey.

Get your documentation in order

Missing/incorrect documentation is a common culprit of delays at a terminal. With the number of documents required per shipment, it’s no wonder they’re easy to misplace. However, that doesn’t make it any easier. Losing an original bill of lading (BOL) is especially frustrating, requiring several documents and approvals to resolve, including a written statement of loss, a packing list, shipper’s approval, a bank guarantee, and more.

Going paperless is the first step in eliminating document loss and errors. With a digital document management system, you can keep track of your files more easily.

Look for a solution that allows your team to access all of the documents attached to a shipment from one portal. That way, you don’t have to worry about editing the wrong file version or letting a shipment arrive with incomplete documentation. Want to make it easier for your team to work from anywhere? Set out to find a system that enables easy mobile access to your documents.

Another way to improve your documentation is by setting up workflows to standardize the process. By creating workflow templates, you can define the necessary steps for each order in your TMS. Then, you can set up alerts to automatically notify stakeholders about incomplete tasks, and to contact shippers to remind them to submit required documents.

Preclear your cargo

Getting your cargo checked by customs can be a time-consuming step in the shipping process. Fortunately, in many countries, you can bypass this by pre-clearing your cargo up to five days before your shipping vessel arrives at the terminal.

According to the World Trade Organization’s issuance of the Trade Facilitation Agreement (TFA), agreeing members must set a pre-arrival procedure and enable electronic document submission. The exact preclearance process may vary. However, it typically requires submission of documents to the customs office, as well as attaching a barcode to your bill of lading or commercial invoice to be scanned at the port. By getting your documentation set and approved ahead of time, you can make sure your cargo goes through without a hitch.

Request extended free time

Sometimes, you have an inkling that a particular shipment is going to take longer than the allotted free time. That doesn’t mean you need to resign yourself to paying a demurrage fee. Many carriers offer an option to request extra free time at booking for qualifying shippers who anticipate a lengthier transition at the port. While this comes at an additional cost, the daily charge is much lower than the equivalent fees.

However, keep in mind that to be eligible for extended free time, you need to be transporting 800 or more containers per year. Therefore, this option is typically only available to larger shippers.

Keep an eye on your cargo

With frequent changes and potential hiccups throughout the shipping process, it’s not uncommon for your cargo to diverge from the estimated timeline. When this happens, relying on a notification when your container makes it to the port is often unreliable. The notification may arrive late, and even if it doesn’t, it still may not give you enough time to communicate with stakeholders and adjust your plan.

Getting real-time visibility into your shipment enables you to follow your cargo while it’s on the move. That way, you’ll be able to adjust for any bumps in the transit process while you still can. For instance, even if weather conditions are causing your ship to move slower than expected, you’ll be able to see where it is on the route in real time. From there, you can access an updated ETA and reschedule other stages of the process if necessary.

Maintain clear communication with stakeholders

A shipment’s journey from point A to B involves many different stakeholders, from customs officials to logistics partners. Communicating early and often is key to keeping the system of moving parts running smoothly.

Make sure to give stakeholders all the necessary details from the start, including timelines, precise locations, and contract terms. Additionally, set up open lines of communication in case any issues or questions arise.

Messages can get lost, so use a system that works for you and your team. Consider cutting back on the variety of communication forms you use, or even implement a centralized messaging platform to keep everyone on the same page. After all, getting visibility into your shipment status doesn’t help much if it doesn’t reach the right people on the field.

Final thoughts

The cargo transport process involves a lot of moving parts and dependencies, and sometimes issues are inevitable. While you can’t always avoid demurrage fees, you help your shippers minimize them by thoroughly planning out the journey and keeping track of any changes along the way.

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