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What is a demurrage fee in exports?

Demurrage fee is charged to exporters for delayed unloading and loading of goods from transportation. Learn more about the process in the blog.

As part of the international trade logistics process, multiple documents and licenses need to be obtained, and fees need to be paid, according to the product category, destination country and other factors. One such fee is the demurrage, which is levied by an exporter or a shipping company on the importer. In simple terms, it is a penalty fee for failing to take delivery of goods within a specified time frame. Demurrage fees can vary widely depending on the specific terms of a contract, nature of goods being shipped, and other factors. In some cases, demurrage charges can significantly impact the profitability of a transaction.

What is demurrage?

Demurrage is a fee that is charged by shipping companies, ports, and terminals for delays in loading or unloading cargo. It is imposed on the party responsible for the delay – usually an importer, and is intended to incentivize timely movement of goods. Demurrage is common in the shipping industry and can apply to both exporters and importers.

Demurrage for exporters

For exporters, demurrage fees can occur when their goods are not loaded onto a ship within a specified time frame in the early stages of the export logistics process. This can happen if the exporter is not able to provide necessary documentation or if there are issues with cargo. The demurrage charges can add up quickly, making the transaction expensive for the exporter, especially if the delay is significant.

Demurrage for importers

For importers, demurrage charges can occur when they fail to take delivery of their cargo within the specified time frame. This happens if the importer is not able to provide necessary documentation or if there are issues with customs clearance.

Why are demurrage charges imposed?

Demurrage charges are imposed to incentivize prompt cargo movement and prevent congestion at ports and other transportation hubs. This ensures that cargo is moved efficiently and timely that shipping companies, ports, and terminals are able to manage their operations effectively. Another reason why demurrage charges are imposed is to compensate shipping companies, ports, and terminals for the costs associated with delays. When cargo is delayed, it can have a ripple effect across the supply chain, causing additional costs and disruptions. The charges are also often imposed to ensure that cargo is moved in a safe and secure manner. When cargo is delayed, it might be vulnerable to theft, damage, or other security risks.

Demurrage charges vs detention charges

· Demurrage charges are fees that are imposed when cargo remains in a port or terminal beyond the agreed-upon time frame. The purpose of demurrage charges is to encourage shippers to load and unload their cargo as quickly as possible to free up valuable space at the port or terminal. Demurrage charges are typically assessed on a per-day basis and can be significant, especially if there are extended delays.
· Detention charges, on the other hand, are fees that are imposed when cargo is not picked up from the port or terminal within a specified time frame. The purpose of detention charges is to encourage shippers to take delivery of their cargo as quickly as possible, in order to free up equipment and resources at the port or terminal. Detention charges can also be assessed on a per-day basis and can be significant, especially if there are extended delays.

The key difference between the two is that demurrage charges apply to delays in the port or terminal, while detention charges apply to delays in the delivery of cargo.

How are demurrage charges calculated?

Demurrage charges are calculated based on a daily rate that is established by the shipping company or port, and are typically charged for each day that cargo remains in the port or terminal beyond the decided time frame. The cost can vary depending on specific terms of the contract, size and value of the shipment, and other factors. It is important for shippers to be aware of the demurrage charges that may apply to their shipments and to take steps to avoid these charges whenever possible. In addition to demurrage charges, shippers may also be subjected to detention charges that are imposed when cargo is not picked up within a specified time frame. There are different types of demurrage charges – container demurrage, equipment demurrage, berth demurrage, and quay demurrage.

Tips to avoid demurrage charges

Here are a few tips to help shippers avoid demurrage charges:

Plan ahead:

One of the most effective ways to avoid demurrage charges is to plan ahead and ensure that all necessary documentation and permits are in place before the shipment is sent. This can help avoid delays in customs or other bureaucratic processes that lead to demurrage charges.

Monitor shipment status:

Shippers should monitor the status of their shipments closely and stay in touch with their carriers to ensure that the cargo is moving as planned. If there are any delays, shippers should work with their carriers to find a solution immediately.

Be prepared for unexpected delays:

Despite careful planning, unexpected delays can still occur. Shippers should have a contingency plan in place to deal with these delays, such as alternative transportation options or arrangements for temporary storage.

Use reliable carriers:

Shippers should work with reliable carriers who have a track record of timely deliveries to avoid delays.

Optimize loading and unloading:

Shippers should ensure that the process of loading and unloading is optimized to minimize the time spent in the port or terminal.

By taking these steps, shippers can decrease or avoid demurrage charges and ensure that their shipments arrive on time and on budget. Understanding the meaning of such fees and planning ahead can help run an export business in a smooth manner and execute hassle-free logistics. In recent years, e-commerce exports program – Amazon Global Selling – is becoming a popular method among Indian businesses, offering support at every stage of exports.

Easy e-commerce exports and logistics with Amazon Global Selling

With increasing adoption to e-commerce exports, Indian exporters have more opportunities to expand their local businesses and take their products from India to the world. Whether you are a multi-city store, local seller, upcoming startup or a seasoned exporter, irrespective of your business size, you can export from India and establish your business on the world map by listing their products on international marketplaces. To support you for hassle-free logistics, Amazon has also launched SEND, enabling you to ship directly to international fulfillment centers at competitive prices. All you have to do is book, pay and track shipments without any hassles from India to the world.

Explore Amazon SEND

Frequently Asked Questions

Who has to pay demurrage?

Cargo owners have to pay demurrage charges.

How long does it take before demurrage charges are applied?

The time before demurrage charges vary by carrier and port.

What are laytime and demurrage?

Laytime is the time allowed for loading and unloading. Demurrage is a charge for exceeding this time.

Published on March 29, 2023.

Sources:
1. https://www.investopedia.com/terms/d/demurrage.asp
2. https://www.shippingsolutions.com/blog/demurrage-and-detention-what-exporters-and-importers-need-to-know
3. https://www.morethanshipping.com/what-is-demurrage/
4. https://www.flexport.com/help/152-what-is-demurrage
5. https://www.shipbob.com/blog/demurrage-vs-detention-charges/
6. https://www.etruckload.com/how-to-avoid-demurrage-charges/

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