USA Port Congestion = Demurrage and Detention
USA Port Congestion = Demurrage and Detention"
There is rising frustration over the mounting volume of demurrage and detention bills that many importers are receiving due to port and terminal congestion in USA ports. As mentioned in our Monday update, the ports of Los Angeles and New York/New Jersey are currently the hardest hit, but there are delays in almost all USA ports that ebb and flow.
As the terminology can get confusing, please note the key distinctions:
Demurrage is the charge that accumulates while the container is still within the terminal beyond the designated “free time." Free time varies slightly by carrier and contract but is generally 4-5 days and can be assessed based on calendar day or working day. For refrigerated containers, the free time is generally limited to 2 days.
Detention is the charge that accumulates for use of the container outside the terminal beyond the designated “free time." Again, free time can vary, but is generally in the same range as demurrage.
Carriers have tariffs for demurrage and detention, and these tariffs can vary by port or terminal. It is extremely complex, and there is no set fee across the board, nor is there transparency on these fees.
As a quick example on demurrage, if you are not able to retrieve your container until 2 days after the free time is up, you could pay approximately $200-$300 per day for demurrage. If you are not able to pick up until 10 days after the free time is up, this charge can double per day. Detention is generally a lower rate, but can average around $75.00 per day.
When ports and terminals are congested, truck power also becomes an issue as truckers are waiting in long lines to get into a terminal, and can lose an entire day waiting in line. When terminals are not congested, that same truck driver could potentially make 3 round trips from the port to a warehouse. Furthermore, with the terminals completely buried in cargo, the appointment system to pick up containers breaks down, and they often have to close areas of the terminal when off loading a ship or when trying to clear out another area. Thus, truckers may have an appointment, and arrive at the terminal to pick up a container after waiting 6 or 7 hours in line, only to be told the container is now in a "closed" area. In this situation, you may get charged for a "dry-run," and your container may go into demurrage.
Truckers also have to manage the return of the empty containers, again trying to achieve this within the “detention” free time. However, in some ports, such as Los Angeles, it is taking up to three weeks to get an appointment to return the empty container—and unfortunately, the importer who had cargo in this container is the responsible party for the detention that accrues. While these issues can be part of the risks of importing, along with the category of customs exams or sudden changes of duty or tax, WSSA is working with the FMC and other associations to push carriers and terminals for flexibility and reasonable action during times like these.
Rebecca Dye, Federal Maritime Commissioner, led an investigation and report on recommendations for carriers and terminals to address what we would suggest are abusive practices when excessive congestion, labor issues, weather incidents or other problems outside the control of shippers are present. WSSA reports incidents that are clearly out of line to the FMC as well as discussing specific issues with our contracted carriers. Unfortunately, there are no easy solutions and the FMC currently does not have an enforcement arm to put true teeth into their recommendations. We are happy to provide the FMC guidelines to anyone interested.
As bad as it is, the majority of the beverage alcohol trade lanes are still paying “reasonable” freight rates, and not paying the $9000+ cost to bring a container in from Asia. Please be prepared for continued congestion and delays, and the potential for accumulation of additional costs.
http://www.wssa.com/ Wine & Spirit Shippers Association, Inc.
As the terminology can get confusing, please note the key distinctions:
Demurrage is the charge that accumulates while the container is still within the terminal beyond the designated “free time." Free time varies slightly by carrier and contract but is generally 4-5 days and can be assessed based on calendar day or working day. For refrigerated containers, the free time is generally limited to 2 days.
Detention is the charge that accumulates for use of the container outside the terminal beyond the designated “free time." Again, free time can vary, but is generally in the same range as demurrage.
Carriers have tariffs for demurrage and detention, and these tariffs can vary by port or terminal. It is extremely complex, and there is no set fee across the board, nor is there transparency on these fees.
As a quick example on demurrage, if you are not able to retrieve your container until 2 days after the free time is up, you could pay approximately $200-$300 per day for demurrage. If you are not able to pick up until 10 days after the free time is up, this charge can double per day. Detention is generally a lower rate, but can average around $75.00 per day.
When ports and terminals are congested, truck power also becomes an issue as truckers are waiting in long lines to get into a terminal, and can lose an entire day waiting in line. When terminals are not congested, that same truck driver could potentially make 3 round trips from the port to a warehouse. Furthermore, with the terminals completely buried in cargo, the appointment system to pick up containers breaks down, and they often have to close areas of the terminal when off loading a ship or when trying to clear out another area. Thus, truckers may have an appointment, and arrive at the terminal to pick up a container after waiting 6 or 7 hours in line, only to be told the container is now in a "closed" area. In this situation, you may get charged for a "dry-run," and your container may go into demurrage.
Truckers also have to manage the return of the empty containers, again trying to achieve this within the “detention” free time. However, in some ports, such as Los Angeles, it is taking up to three weeks to get an appointment to return the empty container—and unfortunately, the importer who had cargo in this container is the responsible party for the detention that accrues. While these issues can be part of the risks of importing, along with the category of customs exams or sudden changes of duty or tax, WSSA is working with the FMC and other associations to push carriers and terminals for flexibility and reasonable action during times like these.
Rebecca Dye, Federal Maritime Commissioner, led an investigation and report on recommendations for carriers and terminals to address what we would suggest are abusive practices when excessive congestion, labor issues, weather incidents or other problems outside the control of shippers are present. WSSA reports incidents that are clearly out of line to the FMC as well as discussing specific issues with our contracted carriers. Unfortunately, there are no easy solutions and the FMC currently does not have an enforcement arm to put true teeth into their recommendations. We are happy to provide the FMC guidelines to anyone interested.
As bad as it is, the majority of the beverage alcohol trade lanes are still paying “reasonable” freight rates, and not paying the $9000+ cost to bring a container in from Asia. Please be prepared for continued congestion and delays, and the potential for accumulation of additional costs.
http://www.wssa.com/ Wine & Spirit Shippers Association, Inc.
