Easy understanding of Demurrage and Dispatch in Bulk Shipment & Demurrage and Detention in containerised shipment

Easy understanding of Demurrage and Dispatch in Bulk Shipment & Demurrage and Detention in containerised shipment

Demurrage and Dispatch in Bulk shipment:

Generally, in bulk shipments, lots of cargo is getting fixed on Free In and Out (FIO) basis. On FIO term, the charterer is responsible for loading and unloading operation at the ports in the quickest possible way. The charterer is advising the owner the loading and unloading rate and time required to complete the loading and unloading of the cargo. Basis this Fixture is getting made. This information is required by the shipowner to estimate how long his ship will have to be charted. Based on this assessment, the shipowner will quote a freight rate for the voyage, which if the Charterer agrees, will ask same in a fixture. If the charterer is very active and able to execute the loading/discharging as per the pre-agreement that case demurrage/dispatch is not applicable. However, normally loading /unloading either complete early or fail to complete as per pre-agreement.

First Scenario

Once the fixture has been made and if the charterer fails to load or unload as per the loading/unloading rate as they have given and allowed in the contract, the shipowner will hold them liable for Demurrage at a rate which is pre-agreement between owners and charterers. In this case, the term Demurrage rates occur the time that the shipowner has lost because the charterer could not complete the required cargo operations within the agreed time frame.

Second Scenario

If the charterer completes the loading/unloading operations before the time frame, they can claim “Despatch” from the owners at a rate which is pre-agreed between the owners and charterers.

Despatch refers to the time that the ship owners have been able to save because the charterer completed the cargo operation quicker than agreed time and was able to release ship for early sail which gives benefit to the shipowner.

Demurrage and Detention in containerised shipment:

Demurrage and detention are very crucial for customers and it could become a huge problem for the customers if they do not control their shipment efficiently. Importer/Exporter always come across such as Import demurrage and detention, export detention etc. Normally demurrage and detention are associated with import cargo however it may occur also in the export cargo.

First Scenario

Demurrage: It is a charge levied by the shipping line to the importer in cases where they have not taken delivery of the full container and shift it out of the terminal or port area for unpacking within the allowed free time.

 Suppose a container is offloading from a container ship on 1st March. Consignee approaches the shipping line to take delivery of the cargo around 15th March. If we consider standard free time offered by the shipping line as 7 days (differ port to port) from date of unloading. The free time will expire on the 7th of March.

As of the 15th March, the container would have been sitting in the port/terminal for a total of 15 days ( Out of 15 Days, 8 days after expiring of Free time)

15 days stay time – 7 days free time = 8 days that the box has overstayed its greets in port/terminal. So, the shipping line will be eligible to charge the consignee Demurrage for 8 days from 8th March to 15th March at a rate fixed by the shipping line.

Second Scenario

Detention: It is a charge levied by the shipping line to the importers in cases where they have taken the full containers for unloading within the free time. But have not returned the empty container to the nominated empty depot before the expiry of the free time allowed.

Suppose the customer took the full container of the port terminal on the 6th March which is within the free time. Free days expiring on 7th March but returned the empty container to the shipping line’s nominated depot only on the 21st of March. So, the shipping line will be eligible to charge detention for 14 days from the 8th March after the expiry of free time till the 21st March at the rate fixed by the shipping line.

Follow Capt.Dheeraj Kumar on Twitter: Capt_Dheeraj