How does demurrage, detention, and port charges work.?

How does demurrage, detention,
Even though there are distinct differences between demurrage, detention and port charges, many are still oblivious to these differences and there have been several questions on this blog relating to these charges.

This article is about how demurrage, detention, and port charges work.

International Trade and CostsWhen it comes to international trade, majority of the buyers and sellers use Incoterms to decide what each other’s responsibilities and liabilities are in terms of the business, especially related to costs.

Generally, there is very little room to manoeuvre in terms of additional and unbudgeted costs incurred on the shipment and therefore in their own interest it is important that the buyers and sellers take necessary precautions to ensure that all known costs relating to the business are discussed and finalised before the shipment commences.

There are many entities involved in the process of shipping a container from Point A to Point B, each with their own cost component, all of which have to be covered either by the seller or the buyer.

Demurrage, detention and port charges are just some of these costs that may be applicable in a shipment.

While some of the port charges are valid and unavoidable, demurrage, detention and some of the port charges (like port storage, early arrival, late arrival, amendment, shifting etc) are entirely avoidable if everyone in the chain follows the process that they need to follow.


What are port charges?

Port charges, as the name suggests are a set of charges levied by the port or terminal which the container passes through.In terms of container shipments, port charges may include but not limited to below :

Terminal Handling Charge (THC)

Is quite simply the charge levied by the port for the loading and discharging of a container from the ship.. THC differs from port to port, terminal to terminal around the world and is charged both by the load port and discharge port.If the cargo is transhipped anywhere along the route, then the transhipment port also charges this THC but that is paid by the shipping line directly to the port and this quantum is usually included in the ocean freight charged by the line.


Early Arrival Charge

A charge levied by some of the ports/terminals for a container that arrives in the terminal BEFORE the stacks into which it is to be taken has been opened.. Early arrival can happen due to various reasons like a container missed the stacks for the previous vessel narrowly, but since the container is packed, it needs to be taken to the port, The acceptance of containers prior to the stacks/gate open is at the discretion of the Port/Terminal Operator and on the circumstances surrounding the operation of the vessels.


Late Arrival Charge

A late arrival charge is a charge levied by the port for a container that arrives in the terminal AFTER the stacks into which it is to be taken has been closed.. This could be due to delays in documentation, packing delays, inspection, trucking delays and many other situations.The acceptance of containers after the closing of stacks/gate is at the discretion of the Port/Terminal Operator and on the circumstances surrounding the operation of the vessels and if the containers can be accepted without disrupting the schedule of the vessel and ports.


Stuffing/Destuffing of Containers

Some ports/terminals allow the stuffing (packing)/de-stuffing (unpacking) of the containers within the port area and charge customers based on the port tariff.This activity may happen at ports that provide CFS services and allow containers to be packed or unpacked in the port or due to some mistakes when the cargo was originally packed – say incompatible hazardous cargoes packed together.Depending on the port/terminal/country, the port charges may be charged directly to the customer (importer or exporter) or to the shipping line, who in turn will charge this to the customer.

Of course, this is not the full list of port charges but these charges have been mentioned as it relates to the subject under discussion,Demurrage and DetentionWhile some of these port charges may be unavoidable, demurrage and detention charges on the other hand are avoidable charges, but in a lot of cases due to mishandling, miscommunication, misunderstandings and not following the proper protocols, these charges occur..When they do occur, these charges may create quite a financial impact on the whole business and sometimes these costs could be so prohibitive that some customers abandon their cargoes at the destination due to these costs.

Although the most common market practice is to combine demurrage and detention, there are several cases where these are charged separately, and therefore it is important to know the difference between demurrage and detention.

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