What is demurrage and detention?

What does demurrage mean?
Demurrage is the English name for demurrage and is used in ocean freight. This is the compensation paid to the shipping company for a delay for which it is not responsible and which lasts longer than the agreed laytime. Either the container sits longer at a shipping company's terminal because it cannot yet be loaded for export or, in the case of imports, has not yet been picked up from the terminal.

With a charter, a laytime is agreed for loading and unloading, for example, x number of days in the port of Rotterdam. In case this period is exceeded beyond the responsibility of the shipowner it is called demurrage. Depending on the agreement between shipowner and client, the shipowner is entitled to compensation for costs in the form of demurrage.

The difference between demurrage and detention
The terms demurrage and detention are often used interchangeably. Detention refers to compensation resulting from longer than agreed use of equipment such as a shipping container. In other words, the container is made available later than the agreed period (free time). The free time, which is often negotiable, is usually longer for detention than for demurrage since space at the terminals is limited and expensive. Shipping companies therefore have an interest in getting containers off the terminal as quickly as possible. Therefore, demurrage costs also tend to be higher than detention costs.

The costs for demurrage and detention are determined by the shipping company itself. The one who books the sea freight is, as contractual counterparty, liable to the shipping company for demurrage and detention.

Main causes of demurrage and detention
The causes of the occurrence of costs for demurrage and detention are various. The most common causes are:

1) Delay due to incorrect documents

2) Delay due to late receipt of documents

3) Delay due to loss of documents

4) Delay due to customs clearance or inspection of cargo

5) Delay due to release of transport at destination

6) Delay due to inaccessibility of consignee

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