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What is Demurrage

Image showing what demurrage can be like

Demurrage is one of many accessorials (fees) in the drayage industry, adding more than $1bn in fines to shippers importing goods into the US. 

 

What is Demurrage? 

 

Generally speaking, the containers on a steamship are owned by that steamship line, and the shipper has an agreement in place for how long the containers can be used. But instead of a window of time, the SSL adopts specific milestones for the container’s journey. 

 

For instance, once a container is taken off a vessel, the shipper has a set amount of time to get the container out of the port and onto the road. If the shipper (or the trucker selected by the shipper) fails to remove the container from the port, in the allotted time, the container will accrue a demurrage fee. 

 

Who Pays Demurrage?

 

This can be more complicated than you’d expect. If a shipper has done everything correctly, and the trucker fails to pick up the container on time, that is the trucker’s fault, but the bill will be sent to the shipper (at which point the shipper may ask the trucker to reimburse them, or to pay the SSL directly). 

 

But sometimes, it isn’t the trucker’s fault, in which case the shipper may be responsible for the cost (and may, or may not, try to pass the fee along to the trucker). Sometimes, it looks a lot like this: 

 

(insert Spiderman meme with the 3 spideys pointing at each other)

 

How are demurrage fees calculated?

 

Demurrage fees accrue on a daily basis, once the grace period for picking up a container has expired. This can be a bit confusing, since some larger shipper will negotiate extra “free days” for their containers, while smaller companies are generally allowed to wait 4-5 days (depending on agreement, SSL, and other variables). 

 

Demurrage fees typically increase over time, so a container that’s two days late might cost $100 per day, but that fee might increase to >$500 if it stays stuck for longer than a week. 

 

Is Demurrage Fair?

 

Fairness can be difficult to achieve when it comes to demurrage. A shipper or trucker doesn’t want to spend extra money on a container, so they often feel as though these fees are an unfair penalty. 

 

However, the SSLs can’t move goods (their source of income) when all of their containers are being used on land. These fees are meant to keep containers available for crossing the sea.

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