How to Reduce Unnecessary Detention and Demurrage Charges

Managing supply chain costs can be paramount to maintaining a company’s profitability. Among the various expenses involved in global transportation, detention and demurrage charges can quickly add up—especially when not effectively managed. But what exactly are these charges?

Defining port fees: Detention, demurrage, and wait time

In the United States, detention charges refer to the fees incurred when containers are held outside the terminal beyond the allotted free time for unloading or loading. This can happen if the containers are delayed at your facility or warehouse.

Demurrage charges, on the other hand, are the costs associated with keeping containers at the port beyond the free period allowed for loading or unloading. This typically occurs when there are delays in clearing customs or when cargo is not picked up promptly from the terminal.

Port fees can also include wait time charges. These accrue when a container or vessel is idle and not being actively loaded or unloaded if it exceeds the free time allowed by the port. 

Why port fees exist: The key to streamlined operations

These types of charges are designed to incentivize timely operations and efficient use of containers and port space, helping avoid delays and congestion. By charging for excessive use of space and equipment, ports ensure resources are available where they’re needed to maintain a smooth flow of goods.

However, when not effectively managed, these port fees can quickly accumulate, leading to unexpected costs that eat into your profit margins. Not to mention, delays in shipping and receiving can cause a ripple effect throughout your supply chain, leading to missed deadlines, dissatisfied customers, and strained relationships with service providers.

5 strategies that can reduce added costs from detention and demurrage

These actionable steps can help reduce the potential for unnecessary detention and demurrage charges, helping you streamline your supply chain operations and maintain cost efficiency.

1. Set up both shipping and receiving locations for success

Shippers/consignees have a responsibility to own certain parts of the supply chain. Depending on how you control these parts will dictate your accessorial charges. For example, if your imported goods take more than three hours to unload or you have staffing constraints in the afternoons due to shared warehouse space on fulfillments and inbound cargo, you may see more detention, demurrage, and storage fees.

On the other hand, if you can accommodate open receiving or appointment windows, rather than harsh penalties or rescheduling if outside of 15-minute slots, you may see those charges—as well as storage fees—diminish.

Ensure your facilities are equipped to handle your cargo efficiently. This includes having the necessary equipment, trained staff, and clear procedures in place.

Best practices:

• Train staff on handling shipments swiftly and safely.
• Conduct regular facility audits to identify areas for improvement.
• Implement technology solutions, such as warehouse management systems (WMS), to track and manage inventory.

2. Bundle international services

Bundling international services may significantly reduce complexity and costs in your supply chain. By consolidating services such as freight forwarding, customs brokerage, and warehousing with a single provider, you gain better control and coordination.

Consider aligning your marine drayage, customs clearance, and ocean cargo through a single strong supply chain relationship. By working with the right freight forwarder, you can pre-clear goods, which can help ensure containers are not dwelling unnecessarily, eating into your free time on terminal.

Internal handoffs on one system can mitigate the risk of slowdowns and help control your detention and demurrage charges, not to mention add upstream visibility to your cargo while in transit.

Best practices:

• Consider negotiating bundled service packages to leverage cost savings.
• Choose a logistics provider with comprehensive international services.

3. Rely on the expertise of your supply chain provider

A quality provider, like C.H. Robinson, will have strong relationships with ocean carriers and marine drayage capacity. Using these relationships, the right provider can offer customized solutions, like expedited deliveries and tracking your last free day to help mitigate demurrage, detention, and storage fees.

Best practices:

• Select a provider with a proven track record in your industry.
• Engage in regular strategic reviews to identify and address potential issues.

4. Understand the market, daily rates, and your contract terms

Staying informed about the market conditions, daily rates, and specific contract terms is crucial. This knowledge allows you to anticipate fluctuations and negotiate better terms with carriers and service providers. Familiarize yourself with these terms to help avoid out of period costs.

C.H. Robinson even offers a detention tariff program that offers below market daily rates and proactive billing to minimize additional invoices and costs. If you have questions about charges, ask your forwarder and remember demurrage and detention rates should be per day and billed per container.

Awareness of current trends and rates can help you make informed decisions and avoid unexpected charges.

Best practices:

• Regularly review freight market updates and industry news.
• Analyze your shipping data to identify patterns and predict surge shipping times.

5. Be consistent about documentation and communication

Keep detailed records of cargo movements, communications, and billing invoices. Clear documentation is crucial in resolving disputes and ensuring fair treatment.

It’s also important to maintain open communication with carriers and terminals. If unforeseen circumstances arise that may lead to delays, advanced notice is critical to negotiating extensions or alternative arrangements.

If you have broker, carrier, driver, consignee, and forwarder touchpoints, ensure they are all communicating with one another as the container travels on its journey to/from your door.

Best practices:

• Use digital tools to manage and share documents in real-time.
• Implement a standardized documentation process across your organization.
• Establish regular communication protocols with your carriers, suppliers, and customers.

Closing insights: Proactively manage detention and demurrage

Reducing unnecessary detention and demurrage charges requires a strategic approach that encompasses efficient facility management, bundled services, expert relationships, market awareness, and consistent documentation.

By following these tips and implementing the best practices that make sense for your needs, it’s possible to streamline your supply chain operations, reduce costs, and enhance overall efficiency. Stay proactive, keep informed, and leverage the expertise of your supply chain providers to navigate the complexities of global logistics successfully.

Ready to get started? Contact our team of experts today to discuss how C.H. Robinson can help you navigate, manage, and minimize unnecessary port fees.