As the on-again, off-again U.S.-China trade war continues and the Chinese New Year approaches, U.S. ports have witnessed hectic schedules, with drayage trucks lining up for many hours at a stretch. In such a scenario, shippers and carriers bear the brunt of demurrage and detention, as unpredictable situations lead to penalties that run into thousands of dollars in per diem charges.
In general, demurrage and detention are the costs that arise due to poor planning, unforeseen circumstances and/or bad communication at the port. Simply put, these are the costs that kick in when the number of allowed days for a shipper to use a container for free lapses. Once the free days are exceeded, the user is subject to a demurrage and detention fee, which is usually calculated per day.
The difference between demurrage and detention is that the former always relates to the cargo and translates to the time the cargo remains loaded in the container, while detention refers to the time an empty container is retained without being handed over to the vessel. And it is these charges that shippers need to be wary of, as they can vary from port to port and carrier to carrier, causing them to quickly run into several hundred dollars per day per container.
“Demurrage and detention are in most cases out of your hands and hard to control. However, there are multiple ways to mitigate the risk of these unpleasant additional charges,” said Florian Frese, marketing manager at Container xChange. “For starters, try to negotiate instead of accepting a quote as it is. Negotiate with port officials or carriers, for instance, and request a few more free days for your cargo and thereby save demurrage and detention.”
This can help, because it will “buy” a shipper some more time to develop a strategy to avoid unexpected charges. Often, port officials yield and grant shippers additional time over large cargo volumes. “If everything goes wrong with the initial plan, it is a good idea to have a plan B to avoid the large costs of demurrage and detention. This could imply assessing alternative truck rates, other truck services, or even looking around for availability in nearby terminals in case the cargo needs rerouting,” said Frese.
Efficient time management is key, especially in volatile times like the trade tariff wars, that may lead to unanticipated port delays. Frese insisted that it is critical to dispatch cargo as far in advance as possible, as even a short time buffer would give shippers greater flexibility to handle such challenges.
Platforms like Container xChange offer an alternative – shipper-owned containers (SOC) can be borrowed by shippers for one-way use, saving on demurrage and detention charges as SOC per-diem fees are less than $5 per container – making it much more cost-effective than conventional methods.
The fate for a drayage carrier caught up in the middle of an uncharacteristically long port delay is not good either. In such a situation, drayage carriers face many issues, such as deadheads, long waiting times and unpredictable truck turn times. “Terminal gate queuing is a regular occurrence during such delays, and so are gate processing times that extend much beyond the usual. Such delays can result in carriers undertaking extra drayage trips, running empty equipment moves, with all of this leading to congestion on the highways leading to and from the ports,” said Frese.
In the U.S., drayage carriers can borrow specialized chassis from ocean container lines to haul their loads over the roads. Carriers that rent chassis would incur a negative impact due to port delays, as they would have to pay penalties for lengthened rent time. Then again, the practice of container lines owning and renting out chassis is a dying trend, with many major shipping lines announcing their decision to stop the service.
“After the free days have expired, the longer it takes you to return a container the more expensive it is going to get. Optimizing drayage is definitely a good thing in regard to low demurrage and detention charges,” said Frese. “To have almost no demurrage and detention costs, it makes sense to consider SOC. Bringing your own box would make you independent from the whims of shippers, and gives you a lot more time to return the box to a specific location, while paying just around $5 per day as penalty.”