Why does the shipping line charge demurrage and detention?
In a container shipping line operation, the cost of the container, repair, maintenance, leasing etc works out to around 20% of the shipping line’s cost.. A container, like a ship, will make money for its owner only when it is in circulation and not when it is idle..
In the above case, the container stayed for an extra 11 days with the consignee.. This means for those 11 days the container was out of the control of the shipping line which meant that this particular container did not yield any revenue for the shipping line for these 11 days..
The charging of the demurrage and detention by the shipping line is their way of getting some compensation for the period that this container was out of the revenue generating cycle..
Who pays for it..??
Well in the case of imports, the consignee would be liable for the same and in the case of exports, the shipper would be liable for the same.. There could however be cases where the consignee could not clear the container because they didn’t receive the relevant documents from the shipper in time.. In such cases, the consignee would look to the shipper for compensation, but for the shipping line, this is revenue lost and they need someone to pay for it..
So in summary,
- Shipping line offers X days as free for the full to be picked up and empty returned in the case of imports and vice versa for exports
- This means the client has X days to pick up the full container and return the empty to the nominated depot and vice versa for exports
- If the time frame exceeds X days, then the shipping line will bill the client for those many days that the container was in the custody of either the consignee or the shipper
- Demurrage relates to cargo (while the cargo is in the container)
- Detention relates to equipment (while the container is empty after unpacking or before packing)