Demurrage fees are unexpected charges that result when cargo stays beyond the allotted time in the shipping terminal. They act as a storage fee. This can lead to extensive charges if not handled quickly. Shipping cargo around the world is complex. Running into delays due to awaiting clearing customs, delays in cargo transportation from the terminal, or even due to natural disasters. How can you avoid these unnecessary charges?
First, what are Demurrage Fees?
When your cargo arrives at the terminal it is given a specific amount of time in which it can stay there for free before it needs to be moved out. If your cargo remains there beyond that “free time”, you will be charged a demurrage fee or a daily storage fee. Demurrage amounts can differ from terminal to terminal, but typically range from $75 to $150 for each container per day for the first 5 days. From there, charges increase the longer the cargo is delayed at the terminal.
Once demurrage fees start, the terminal will expect you to settle the costs as soon as possible. Most require payment by credit card, as checks and guarantee letters are no longer accepted, and the payment must be paid in full before the terminal will release your cargo. Costs can mount quickly to the point that the demurrage fees could equal the value of the merchandise within the shipping container as some have reported. This could be a real issue for some businesses. That is why it is important to consider these 8 ways to avoid demurrage fees in the first place.
8 Ways to Avoid Demurrage Fees
- Plan ahead – Being prepared may require a lot of work up front, but could save you a lot of money in the end. Know your cargo, the port and the inland routes your cargo will travel to its final destination. For instance, if you know that your cargo will take a long time to load or unload, be sure to communicate that with your driver so they can plan in advance for any time delays.
- Request extra free time – You can try negotiating additional free time into your contract. This could be tricky if you are not shipping large quantities of shipping containers a year (800+), but it could be worth a shot.
- Pre-clear your cargo – If you have your commercial invoice with the PO info, terms of sale and country of origin, your packing list has details of the cargo, and all other documents are in order, you can pre-clear your cargo five days before the vessel arrives if shipping via ocean or at “wheels up” for airfreight. This will give you a head start with the customs clearance process in case any unexpected delays arise that could push your timeline past the free time at the terminal.
- Deliver instructions to delivery drivers ahead of time – Communicate pickup and delivery details to your trucker ahead of time. You may have cargo that takes extra time to load or unload or they may be picking up from a particularly congested port or driving a particularly busy route. Allowing them to be prepared could save you precious time, money and stress.
- Have a back-up plan for your truck driver – If you are shipping to a particularly congested port, you may want to have a contingency plan. You may want to communicate with your inland truck driver on alternate trucking routes or you may want to have an alternative truck driver on hand if needed. Additionally, you may need to reroute cargo to a less congested terminal altogether. Know what your options are so you can make necessary last minute decisions to avoid costly delays.
- Communicate – Be sure your maintain communication with your logistics partners, customs and terminal officials throughout the process. This insures that everyone has the information they need when they need it to prevent any unnecessary delays.
- Be well informed – Read your contracts, know the port regulations and customs process. Demurrage fees are outlined in your individual contract and the terms can be different depending on which country you are doing business in. Some may leave more room for negotiation, so be sure to read your contracts thoroughly.
- Use a freight forwarder – Working with an experienced and trusted freight forwarder is a great way to avoid demurrage fees and make sure your cargo is shipped as timely as possible. They are knowledgeable in international customs and border regulations, can handle paperwork and communications on your behalf. Using a freight forwarding service is a great way to make shipping cargo as stress free as possible.
If you do incur demurrage fees, track them and analyze them to prevent making the same mistakes in the future. With importing and exporting cargo, a lot can go wrong so being able to refine your system will help to increase your bottom line. Mach 1 Global Services can help you avoid demurrage fees using their extensive knowledge and experience. Call (800) 553-7774 or get a shipping quote by clicking HERE.
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