Needless to say, the transportation industry has experienced its share of strain over the past two years. Everything from China trade tariff impacts, trucking hours-of-service changes, equipment and chassis allocation, carrier agreements, mega-vessel deliveries, and even weather has had a significant impact on America’s ports.
Chassis shortages and mega-vessel deliveries are two quick examples of changes that have gridlocked basic pick-up, delivery, and equipment return at most major U.S. ports. When a mega-vessel delivers twice as many containers as port infrastructure is able to handle, regular container flows are dramatically disrupted. In New York and Los Angeles, port delays have contributed to historic levels of backlog in a system that discourages union job-loss automation. When unforeseen circumstances arise, international shippers can find themselves on the receiving end of charges, typically completely outside of their (or their forwarder’s) control.
Did you know 80-100% of vessels need to be discharged and reloaded at every port?
DETENTION VS. DEMURRAGE
In general, demurrage and detention are costs that arise due to poor planning, unforeseen circumstances, and bad communication. Simply put, these are the charges account for time and space in a container and in a port.
Terminal operators are responsible for charges associate with use of port space and infrastructure, while ocean carriers charge fees for the use of their equipment, the cargo container. While the bill(s) can come combined together, or independently, depending on the port, the charges are issued by the terminal and/or carrier directly. Industry backlash against these fees has called the charges “predatory,” given the great degree of variation in pricing. Last year, the Federal Maritime Commission (FMC) was tasked with reviewing unfair port practices, including demurrage and detention, and whether these fees serve as revenue-generating buckets for terminals and carriers.
Demurrage is a penalty for delaying the carrier’s equipment or vessel by not removing the to/from the port within the set number of “free time” days.
Detention is charged by the steamship line for keeping their equipment past the contracted free time. Because containers are required for use to the next shipper, carriers must ensure they receive the equipment back quickly, so as not to delay vessel departures.
4 STEPS TO AVOIDING DEMURRAGE & DETENTION PENALTIES:
1. DISPATCH IN ADVANCE
As freight moves, so does trucker availability and equipment. Dispatch to your designated trucker in advance to ensure they can access the required equipment. Make sure to find a carrier familiar with the up and downs of the local port, and who can advise if they anticipate delays.
2. NEGOTIATE INCOTERMS
At the end of the day, what you pay all comes down to the contract. Shippers can define who is responsible for certain charges based on their negotiated terms of sale, also known as incoterms.
Need help? Access Green’s Incoterms Resource Guide.
3. WATCH THE CLOCK
Shippers should pay attention to delivery and unloading times to optimize their workflow. Consider incorporating automated stop-clocks for door moves that notify the trucker to pick up as soon as the cargo is unloaded. For demurrage, make sure freight and Customs releases are processed in advance, so nothing holds up your container from moving our of the port.
4. PORT B
For terminals that are consistently adding penalty charges to your supply chain, consider alternative, less congested port options for import and export cargoes. With mega-vessel deliveries, cargo can take longer to work. Using a forwarder allows for quick flexible adjustments and testing to your logistics program.
With so many uncertainties, it’s always recommended to partner with a company that understands your pain in this area and actively works on mitigating strategies. From our Customs brokerage serves, to exceptional final-mile delivery, discover how Green Worldwide Shipping defines performance expectations up front to deliver exceptional shipping experiences…
FOR EVERY CUSTOMER
Supply chain SOS? Contact Green Worldwide Shipping and start moving freight forward.