Demurrage

Demurrage Shipping Logistics Consignor Consignee Aquate Transportation Supply Chain Management
Demurrage is a charge levied on shipping vehicles when they are held by the consignor or consignee for an excessive amount of time beyond agreed laytime.
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Definition

Demurrage refers to a fee charged to the charterer of a shipping vehicle if that vehicle is detained by either the consignor or the consignee for longer than the agreed laytime. The term is commonly used in maritime shipping but can also apply to rail, truck, and air transportation. The primary purpose of this charge is to incentivize the timely use of the transport vehicle and offset costs incurred from delays.

Examples

  1. Maritime Shipping: A cargo vessel is chartered to transport goods from Shanghai to Los Angeles with an agreed laytime of 5 days for loading and unloading. If the consignee in Los Angeles takes an additional 3 days to unload the cargo, demurrage fees will apply for these extra 3 days.

  2. Rail Transport: A railcar is scheduled for unloading goods at a factory within 24 hours. Due to unforeseen circumstances, the factory delays unloading by an additional 12 hours. The rail company charges the consignee demurrage fees for these 12 extra hours.

  3. Trucking: A truck arrives at a warehouse to deliver goods, and the loading dock delays unloading due to operational inefficiencies. The consignee is then required to pay demurrage fees for the additional time the truck was detained.

Frequently Asked Questions (FAQs)

Q1: Who is responsible for paying demurrage charges?

  • A1: Typically, the consignee is responsible for paying demurrage charges, although it can also fall on the consignor depending on the terms of the shipping agreement.

Q2: How are demurrage charges calculated?

  • A2: Demurrage charges are usually calculated based on a daily or hourly rate agreed upon in the contract, and they apply for each day or part thereof beyond the agreed laytime.

Q3: Can demurrage charges be disputed?

  • A3: Yes, if the charges are believed to be incorrect or there were unavoidable circumstances causing the delay, the charges can be disputed with the carrier.

Q4: Are demurrage and detention the same?

  • A4: No, while similar, demurrage refers to charges incurred while the cargo is still in the port or location of the transportation vehicle, whereas detention refers to charges incurred once the cargo has been picked up but the container is not returned within the agreed time frame.
  • Laytime: The specific period agreed upon for loading and unloading cargo without incurring demurrage charges.
  • Detention: Fees incurred for keeping shipping containers beyond the allowed free time after they have been picked up from the port or terminal.
  • Consignor: The person or company that dispatches goods to the consignee.
  • Consignee: The person or company entitled to receive the goods being shipped.

Online Resources

  1. Investopedia: Demurrage
  2. Wikipedia: Demurrage
  3. Logistics Management: What is Demurrage?
  4. Freightos: Understanding Demurrage and Detention Charges

Suggested Books for Further Studies

  1. “Marine Cargo Operations: A Guide to Stowage” by Robert J. Meurn
  2. “The Shipping Law Review” by James Gosling
  3. “Principles of Supply Chain Management: A Balanced Approach” by Joel D. Wisner, Keah-Choon Tan, G. Keong Leong
  4. “The Yellow Book: The Laytime & Demurrage Desk Book” by John Schofield

Fundamentals of Demurrage: Transportation Basics Quiz

### Demurrage charges are applied when which of the following conditions are met? - [ ] The cargo is delivered ahead of the schedule. - [ ] The transportation vehicle is destroyed during transit. - [x] The transportation vehicle is detained beyond the agreed laytime. - [ ] The cargo contract is terminated. > **Explanation:** Demurrage charges are specifically imposed when the transportation vehicle (e.g., ship, truck, railcar) is detained beyond the agreed laytime. ### Who typically bears the cost of demurrage charges? - [ ] The transport vehicle owner - [x] The consignee - [ ] The middleman/broker - [ ] The insurance company > **Explanation:** Typically, the consignee is responsible for paying demurrage charges, though it can also be the consignor depending on the contractual terms. ### Demurrage is designed to discourage what type of behavior? - [ ] Early delivery of cargo - [ ] Excessive fuel consumption - [ ] Quick unloading - [x] Delays in loading or unloading cargo > **Explanation:** Demurrage charges are designed to discourage delays in loading or unloading cargo, thereby ensuring the timely use of transportation vehicles. ### Which of the following best describes "laytime"? - [ ] The time required to manufacture transportation vehicles - [x] The agreed period for loading and unloading cargo without incurring additional charges - [ ] The time in transit between the consignor and consignee - [ ] The duration of the cargo's free storage period > **Explanation:** Laytime refers to the specific period agreed upon for loading and unloading the cargo during which no demurrage charges will be applied. ### How is demurrage different from detention? - [ ] Demurrage applies only to other employees. - [ ] Demurrage applies to early delivery. - [ ] Demurrage applies only to underwater transportation. - [x] Demurrage refers to delays before picking up the cargo; detention refers to delays in returning empty containers post-delivery. > **Explanation:** Demurrage charges are incurred due to delays while the cargo is still with the transport vehicle (e.g., a ship in port), whereas detention charges apply when the container is not returned on time after delivery. ### What is one main advantage of demurrage? - [ ] It allows for custom upgrades on transport vehicles. - [ ] It eliminates the need for shipping contracts. - [x] It incentivizes timely cargo handling and turnaround time. - [ ] It guarantees the complete safety of cargo. > **Explanation:** One primary advantage of demurrage is that it incentivizes the consignor or consignee to handle cargo promptly, ensuring quick turnaround times for transport vehicles. ### When are demurrage charges typically calculated? - [ ] At the time of booking a transport vehicle - [ ] After the cargo has been delivered successfully - [ ] As soon as the vessel departs from the origin port - [x] Once the agreed laytime has been exceeded > **Explanation:** Demurrage charges are typically calculated once the agreed laytime has been exceeded and the transport vehicle remains detained. ### Which of the following is a common cause for demurrage? - [ ] Quick cargo inspection - [x] Labor strikes at the port - [ ] Shorter laytime agreements - [ ] Enhanced communication between consignor and consignee > **Explanation:** A common cause of demurrage includes labor strikes at the port, which delay the unloading or loading process. ### Can demurrage charges be foregone in case of unavoidable circumstances like bad weather? - [x] Yes, depending on the contractual terms - [ ] No, they are non-negotiable - [ ] Only if the consignee is a government entity - [ ] Only if there is a significant value of goods being shipped > **Explanation:** Demurrage charges can potentially be waived or adjusted in cases of unavoidable circumstances such as bad weather, contingent on the terms of the contract. ### What factor majorly influences the rate of demurrage charges? - [ ] The age of the transport vehicle - [ ] The number of stops in transit - [x] The type of cargo being transported - [ ] The color of the transport vehicle > **Explanation:** The rate of demurrage charges can be heavily influenced by the type of cargo being transported. For example, more valuable cargo might incur higher demurrage fees.

Thank you for delving into the concept of demurrage with these fundamental quiz questions. Keep striving to master the intricacies of transportation logistics!

Wednesday, August 7, 2024
Demurrer
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Consignee January 1, 1
Consignment Note January 1, 1
Pier to House Shipping January 1, 1
Air Freight January 1, 1
Back Haul January 1, 1
Bill of Lading (B/L) January 1, 1
Cargo January 1, 1
Cash on Delivery (COD) January 1, 1
Common Carrier January 1, 1
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