What Is Demurrage and How Does It Differ From Detention?

Demurrage is a charge in the logistics and transportation sector, incurred when equipment (e.g., containers, railcars) is held beyond an agreed free period. These charges incentivize efficient cargo and equipment management. Understanding demurrage is important for businesses in global trade and domestic transportation, impacting supply chain costs and maintaining smooth goods flow through ports and terminals.

Defining Demurrage

Demurrage is a fee levied by carriers or terminal operators for extended equipment use (e.g., shipping containers) beyond a specified “free time” period. Free time is the duration equipment can be used without additional charges. Free time periods vary, typically ranging from three to five days depending on the carrier, location, and cargo type. Its purpose is to incentivize prompt equipment return and efficient flow, preventing congestion at logistics hubs.

Charges apply to equipment that has arrived but not been picked up, or equipment returned but not yet loaded. Carriers and terminals impose demurrage to recover costs from tied-up equipment and ensure assets are available. This system encourages swift action once cargo arrives, maintaining operational efficiency and reducing transportation bottlenecks.

How Demurrage Charges Arise

Demurrage charges arise from delays preventing timely equipment pickup or return at a port or terminal. Delays stem from incomplete or incorrect customs documentation. Customs inspections or regulatory holds extend container time at a facility. Port or terminal congestion, lacking space or resources to process cargo quickly, is another frequent cause.

Lack of available labor or equipment (e.g., chassis, cranes) for unloading or loading can lead to extended dwell times. The consignee’s inability to arrange prompt transportation or operational readiness to receive goods also contributes to delays. The responsible party, often the consignee or importer, bears the financial burden. Fees are tied to the equipment’s delayed use while occupying terminal space.

Calculating Demurrage

Demurrage charges are calculated per-container or per-unit, per-day, after free time expires. For example, if a shipment has three days of free time and remains at the terminal for seven days, demurrage would be charged for four days. Daily rates vary widely, influenced by the carrier, port location, equipment type, and delay duration. Some carriers implement escalating rates, increasing the daily charge for longer delays to incentivize prompt action.

Standard daily rates range from $75 to $200 per container, escalating to several hundred dollars per day for longer periods. Total charge is determined by multiplying days exceeding free time by the daily rate. Businesses receive invoices detailing equipment number, arrival date, free time expiration, and total days subject to demurrage. Tracking cargo movement and free time expiration is essential for managing these costs.

Demurrage Compared to Detention

Both demurrage and detention are charges for extended equipment use, applying at distinct shipping process stages for different reasons. Demurrage pertains to equipment (e.g., containers) spending time at the port or terminal facility. These charges are levied when a container remains at the terminal beyond its free time, either before pickup or after return while awaiting loading. The terminal or carrier assesses demurrage to compensate for occupied space and delayed equipment turnaround.

In contrast, detention relates to equipment spending time away from the port or terminal. This occurs when a truck chassis or railcar, with its container, is held by the consignee or shipper for loading or unloading at their facility beyond the agreed free time. The carrier charges detention because their transportation equipment (truck, chassis, or railcar) is held up and unavailable for other shipments. Demurrage addresses equipment idling at the carrier’s or terminal’s property, while detention addresses the carrier’s transportation assets held by the customer off-site.