What Are Detention and Demurrage in Logistics?

Detention and demurrage are charges associated with the use of transportation equipment such as containers beyond the allotted free time. These charges are common in the logistics and shipping industry and are incurred when certain time-related conditions are not met.

What Are Detention Charges?

Definition: Detention charges are fees imposed when transportation equipment is detained at a location beyond the agreed-upon free time.

Free Time: Most shipping lines or carriers provide a certain period of free time during which the container can be used without incurring additional charges. This free time varies and is specified in the terms of the shipping contract.

Purpose: Detention charges are meant to incentivize the timely loading or unloading of cargo. If the container is held for an extended period, it ties up equipment that could be used for other shipments.

What Are Demurrage Charges?

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Definition: Demurrage charges are incurred when transportation equipment is held at the port or terminal beyond the allotted free time for loading or unloading.

Free Time: Similar to detention charges, demurrage charges occur after the expiration of the free time provided by the shipping line or carrier. This free time may be specific to the port or terminal where the container is held.

Purpose: Demurrage charges aim to encourage the prompt movement of cargo in and out of the port or terminal. It helps maintain the efficient use of terminal resources and prevents congestion.

What Are Demurrage Charges?

Logistics software can help reduce detention and demurrage fees by improving efficiency, visibility, and coordination in the movement of goods. Here are ways in which logistics software can help minimize detention and demurrage charges:

Real-Time Visibility: World-class logistics software provides real-time tracking and monitoring of shipments, allowing stakeholders to have visibility into the location of containers at key milestones such as in-gating and out-gating. This visibility helps in better planning for the timely arrival and departure of equipment, reducing the likelihood of demurrage and detention charges.

Alerts and Notifications: Logistics software can be configured to send automated alerts and notifications about the arrival and departure of shipments, approaching free time limits, as well as impending detention and demurrage charges. This proactive communication allows time for prompt action to avoid fees before they occur.

Effective Collaboration: Best-in-class logistics software should feature collaborative platforms that facilitate communication and coordination among different parties including shippers, carriers, and consignees. Improved collaboration helps to streamline processes, avoid bottlenecks, and ensure that equipment is returned on time.

Electronic Documentation: Utilizing logistics software for the automated creation, storage, and retrieval of documents provides a record of the movement of freight and containers. Should a logistics service provider (LSP) incur a demurrage or detention charge, electronic documentation enables LSPs to dispute such fees with time-stamped fact-based information about the container.

Rich Data Set: A solution that standardizes, digitizes, and automates data collection with a broad data set can help to reduce detention and demurrage fees across a large range of carriers even further. The right solution should seamlessly gather information from carriers, ports, terminals, ramps, and co-loaders into one centralized location without the need to set up connectivity to each party.

How Can Descartes Help to Reduce Detention & Demurrage Charges?

Descartes can help to extend and automate connectivity to and from stakeholders across the supply chain. Our solution enables you to minimize demurrage fees by providing greater control, transparency, and proactive decision-making capabilities before detention and demurrage charges occur. In addition, the technology can help LSPs dispute fees since the solution provides a clear record of when and where a container was returned.

We can do this by collecting a comprehensive data set of shipment status information from 70+ ocean carriers, 500+ ports/terminals/ramps as well as the top co-loaders. With U.S. Automated Manifest System (AMS) security filing status information also available as part of our data set, the technology offers one of the most complete and accurate sources of actionable status information available from one technology provider. Data can seamlessly integrate with back-office systems to power smart workflow-driven automations and alerting before a detention or demurrage fee occurs.