Demurrage and detention fees are one of the top concerns shippers must cope with amid the wide-ranging obstacles in today’s environment—from driver shortages to extreme weather. In the aftermath of Covid-19, these fees for using cargo containers beyond the designated free period rose with port congestion—and they still haven’t normalized.
By 2021, the average global demurrage and detention charges had climbed from $586 to $868 for standard containers. While per-container rates decreased to $664 in 2022, the average remains far above pre-pandemic standards. The problem is especially apparent in the US, where demurrage and detention charges top those of the world’s 60 largest ports, according to a study by Container xChange.
These elevated rates have become the source of shipper unease around the world. When shipments suffer unexpected delays, businesses can face whopping charges. Shippers can avoid surprise demurrage and detention costs by gaining global visibility into shipment statuses and harnessing the power of logistics technology, automation, and centralized supply chain data.
Demurrage and detention fees
Inflated demurrage and detention fees can throw transportation spending off target and further delay supply chains. But what causes these persistent high charges? The answer is simple yet difficult to avoid: supply chain disruptions. When disruptions cause container build-ups in terminals, ports, or warehouses, demurrage and detention charges accumulate to compensate for the use of containers and space.
Driver shortages, port bottlenecks, and inefficient logistics slow the movement of containers in and out of ports and increase the time containers are in use. As supply chain delays have persisted through 2022, elevated demurrage and detention fees have also continued, prompting hundreds of shipper complaints.
Future transportation costs
The US recently took action to ease shipper concerns about high demurrage and detention fees, passing the Ocean Shipping Reform Act of 2022 (OSRA 2022) in June. Under OSRA 2022, Vessel Operating Common Carriers (VOCCs) must justify all demurrage and detention charges. The new legislation reduces fees by requiring VOCCs to include specific shipping details within invoices and providing refunds for unreasonable fees. Invoices must now specify the date the container becomes available, the discharge port, the length of the free period, the start date and end date of the free days, and more.
But federal regulators aren’t the only industry players who can mitigate demurrage and detention charges. Shippers can equip themselves with updated supply chain data through a transportation management system (TMS) to better understand and prevent fees before they occur.
From artificial intelligence to cloud-based innovations, technology is already transforming supply chain management. The FMC recently began a data initiative to help ease port congestion and facilitate the flow of goods. Likewise, a TMS consolidates shipping data so businesses can monitor real-time shipping statuses and see when they risk facing demurrage and detention charges.
With a TMS, shippers can see greater efficiencies across front-to-back supply chains and discover numerous ways to monitor costs and minimize spending.
- Automate carrier selection to accelerate container shipping.
- Store carrier contracts for easy reference to demurrage and detention fees.
- Optimize container usage by consolidating shipments by size or weight.
Digital expense monitoring
A decade ago, demurrage and detention fees were an unusual occurrence. Today, they have become an industry standard—and all signs indicate they are not going away anytime soon. As with any market shock, it will likely take a long time for conditions to normalize.
Shippers can access a digital logistics platform to avoid the surprise of high demurrage and detention charges and simplify overall supply chain management. CTSI-Global’s logistics software, Honeybee TMS™, makes it easy for supply chain managers to monitor carrier expenses and identify cost-saving efficiencies—for around-the-clock shipping oversight.
Contact CTSI-Global today to optimize your supply chain spending.