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What are detention charges in international shipping?
Detention charges apply for extended use of shipping containers after offloading from a vessel. Learn more about their calculation in the blog.
Despite technological advancements and improved logistics systems, delays remain a persistent challenge in international shipping. Delays can occur due to various reasons, from port congestion and customs clearance bottlenecks to unforeseen circumstances like bad weather. This can lead to additional costs for businesses, such as detention charges. In this blog post, we discuss what detention charges are, its causes, how it is calculated, and more.
What are detention charges?
Detention charges are fees imposed on consignees for extended use of shipping containers after they have been offloaded from a vessel. Once a container leaves the port, consignees are given a certain number of “free days” to transport, unload, and return it. If the container is not returned within this timeframe, daily detention fees are applied.
Understanding and mitigating detention charges is crucial for companies in international trade, as these fees can quickly escalate, impacting profitability and overall supply chain efficiency. These charges encourage the timely return of containers, ensuring their availability for future shipments and preventing disruptions that could lead to higher shipping costs.1
Understanding and mitigating detention charges is crucial for companies in international trade, as these fees can quickly escalate, impacting profitability and overall supply chain efficiency. These charges encourage the timely return of containers, ensuring their availability for future shipments and preventing disruptions that could lead to higher shipping costs.1
Causes of detention charges
Detention charges accrue daily. Even small delays can lead to significant costs. Identifying common causes and taking proactive steps can help minimize or avoid these fees. Some common causes are as follows:
Lack of coordination between stakeholders like port staff, warehouse operators, and customs brokers can delay container pickup, unloading, and return, leading to detention charges.
Issues such as port congestion, labor strikes, equipment malfunctions, or severe weather can hinder timely container returns.
Errors or incomplete documentation can slow down customs procedures, prolonging the time containers remain in use.
Poor communication among shippers, consignees, freight forwarders, and carriers can lead to delayed decisions and extended container detention periods.
How to calculate detention charges
Detention charges are calculated based on the total time a container is held beyond the allowed free period. Here’s an overview of how detention charges are typically calculated:
• Find the total number of days by calculating when the container was picked up from the port or terminal to when it was returned.
• Subtract the free days granted by the shipping company.
• Multiply the remaining days by the daily detention fee, known as the “per diem” rate.
(Total days – free days) x per diem rate = detention charges
For example, if a container was held for 10 days, with 5 free days, and the per diem rate is INR 100, the detention charges would be INR 500.
(10 days - 5 free days) × ₹100 = ₹500 detention charges
• Find the total number of days by calculating when the container was picked up from the port or terminal to when it was returned.
• Subtract the free days granted by the shipping company.
• Multiply the remaining days by the daily detention fee, known as the “per diem” rate.
(Total days – free days) x per diem rate = detention charges
For example, if a container was held for 10 days, with 5 free days, and the per diem rate is INR 100, the detention charges would be INR 500.
(10 days - 5 free days) × ₹100 = ₹500 detention charges
Tips to avoid detention charges
The following are some tips that can help you minimize detention fees and enhance the efficiency of your logistics process:
• Negotiate free time terms:
Before finalizing contracts, negotiate for extended free time periods. This provides more flexibility to return containers without incurring detention fees.
• Prepare documentation early:
Ensure all required customs and shipping documents are complete and accurate to prevent delays at the port.
• Optimize scheduling:
Build buffer time into your shipping and unloading schedules to account for potential delays caused by weather, congestion, or other unforeseen issues.
• Use supply chain visibility tools:
Implement technology to track shipments in real time, allowing you to better plan for container returns and avoid unnecessary detention.
• Explore off-port storage options:
If your facility is not ready to unload containers immediately, consider moving them to an off-port storage location to reduce overall costs.4
Difference between detention charges and demurrage charges
While both charges aim to optimize container turnover and minimize delays in the shipping process, some key differences between these are as follows:
Aspect
Detention charges
Demurrage charges
Definition
Charge for keeping a container outside the port/terminal after the "free time" has expired.
Charge for keeping a container inside the port/terminal after the "free time" has expired.
Cause for charge
Charged when empty container is not returned to the depot on time.
Charge for keeping a container inside the port/terminal after the "free time" has expired.
Fee variability
Fee is determined by container owner, typically at a flat daily rate.
Fee varies by port and terminal, often increases with the length of the demurrage period.5
Conclusion
Container detention charges can significantly impact a company’s logistics costs. By understanding and proactively addressing these charges, businesses can streamline operations and improve profitability. For assistance with other aspects of international shipping, Indian exporters can leverage the tools and services offered by e-commerce export programs like Amazon Global Selling.
Amazon Global Selling: Easy e-commerce exports and hassle-free shipping
If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for fulfilment by Amazon (FBA) and outsource order fulfilment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for fulfilment by Amazon (FBA) and outsource order fulfilment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Frequently Asked Questions
1. Who pays detention charges?
The party responsible for delaying the return of the container pays detention charges.
2. What is the reason for detention?
Detention happens when a container is kept beyond the allowed free time for unloading or return.
3. What is the rule of detention?
Detention charges apply based on the carrier’s terms if containers are not returned within the agreed timeframe.
4. What is “14 days free detention at destination”?
This refers to a grace period of up to 14 days, during which no detention fees are charged after the container reaches its destination, also known as free time. The free time period is determined by the carrier or owner of the shipping container and can vary.
Published on February 5, 2025.
Sources:
1. https://windward.ai/glossary/what-are-detention-fees/
2. https://windward.ai/glossary/what-are-detention-fees
3. https://www.vizionapi.com/blog/the-basics-of-d-d-how-to-calculate-budget-and-mitigate-demurrage-and-detention-charges
4. https://www.expedock.com/blog/10-tips-to-reduce-container-detention-and-demurrage-charges
5. https://www.hapag-lloyd.com/en/online-business/digital-insights-dock/insights/2024/06/detention-and-demurrage--what-is-the-d-d-charge-in-shipping---.html.
Sources:
1. https://windward.ai/glossary/what-are-detention-fees/
2. https://windward.ai/glossary/what-are-detention-fees
3. https://www.vizionapi.com/blog/the-basics-of-d-d-how-to-calculate-budget-and-mitigate-demurrage-and-detention-charges
4. https://www.expedock.com/blog/10-tips-to-reduce-container-detention-and-demurrage-charges
5. https://www.hapag-lloyd.com/en/online-business/digital-insights-dock/insights/2024/06/detention-and-demurrage--what-is-the-d-d-charge-in-shipping---.html.
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
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