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Demurrage versus Detention versus Per Diem

Posted on Friday, October 2nd by Pallet2ship logo

Although very similar in meaning, the general term of storage and the specialised ones of demurrage, detention and per diem must not be mistaken for one another. Storage fees are paid for the use of space and equipment while containers are being kept in warehouses, ports, rail yards, at airline terminals or inland rail ramps beyond the time frame priorly established by these providers.

It should be noted that both the time frames and the amounts vary from one provider to another. Moreover, customers can benefit from various discounts depending on a number of factors, which include the cargo volume, among others. Unfortunately, it often happens that in congested situations, importers are charged demurrage fees absolutely gratuitously.

Let us take a closer look at these three types of charges for a better understanding of what they involve. For starters, the term of demurrage is associated with airlines and steamship lines which put their own shipping containers at the customers' disposal, demurrage charges being meant to discourage the use of their space and equipment. Demurrage is free for a specific number of days which will vary depending on the location and carrier. Also, it should be noted that the pickup of a container is conditioned by the full payment of the demurrage charges.

The term of detention, on the other hand, is mainly associated with truckers, detention charges being retained for excessively time-consuming cargo loading and unloading operations. They can be retained as fixed amounts or calculated per hour. Normally, the time frame allotted for such operations is 1-2 hours, depending on whether the shipment is domestic or international. They can also be retained upon waiting for an import container to be picked up, as well as upon the delivery of an export one to the port, usually in congested situations. However, detention charges may also describe what are actually per diem charges retained for the use of terminal space beyond a pre-established time frame.

This brings about the concept of per diem charges, also associated with airlines and steamship lines which put their equipment at their customers' disposal. These fees are charged in the event that the equipment it to be used beyond a specific number of days as pre-established by the provider and covers the time frame between the cargo being loaded from either the arriving terminal or the departing one, depending on the type of shipment, and its return to the terminal.

Demurrage, detention and per diem charges can be avoided and very easily so. For instance, prior inquiries into the number of free days provided to the freight forwarder, cargo pre-clearance proceedings, requests to be provided extended free time for cargo volumes exceeding 1000 containers per year or precautions to ensure timely pickups all provide solutions to avoiding the payment of demurrage charges. Detention and per diem charges, on the other hand, can be avoided by making the necessary preparations for cargo loading and unloading and scheduling the deliveries to be made well in advance upon consulting with the freight forwarder or the trucker.

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