Demurrage
What is demurrage?
Demurrage refers to the additional charges imposed on the owner or operator of a vessel, freight car, or truck for delaying the use of equipment or facilities beyond the agreed-upon time. In the context of maritime shipping, demurrage applies to the time that cargo remains at the port or terminal beyond the allotted free time for loading or unloading. These charges compensate the carrier or terminal operator for the costs incurred due to the extended use of their equipment or facilities. In essence, demurrage charges serve as a financial incentive for prompt cargo handling and transportation, encouraging efficient use of port facilities and equipment.
How are demurrage charges calculated?
Demurrage charges are typically calculated based on a daily rate and accrue for each day that the cargo remains at the port or terminal beyond the free time allowed. The calculation of free time considers factors such as the type of cargo, the size of the vessel, and the port's operating schedule.
Who is responsible for demurrage charges?
The party responsible for demurrage charges varies depending on the terms outlined in the transportation contract. In most cases, the consignee or the party taking delivery of the cargo is responsible for demurrage charges incurred after the free time expires. However, contractual agreements may assign responsibility differently, depending on the terms negotiated between the parties involved.
Demurrage vs. detention
The terms detention and demurrage are frequently confused. While demurrage relates to delays in port or terminal operations, detention refers to delays in returning equipment, such as containers, to the carrier's designated location. Demurrage charges apply to delays at the port, while detention charges apply to delays in returning equipment to the carrier's possession.
Related terms