If you’re in import and export business, probably, you have come across this freight term – detention.
So, if you have any question about detention.
Or you would like to learn more about detention, read this guide.
- What is Detention in Shipping?
- What is the Purpose of Detention Charges?
- What causes Detention?
- What is the Difference between Detention and Demurrage?
- Is Detention applicable in Both FCL and LCL Shipping?
- What is Detention Free Time?
- When does Free Time start and how long does it last?
- How is Free Time Calculated?
- When should I pay Special Attention to Free Time?
- Who is responsible for Detention Charges?
- Is Detention Charge the same as Storage Charge in Shipping?
- What is Detention Charges Calculation?
- Relatively, how much can Detention Cost me?
- Can I avoid Detention Charges during Shipping?
- Which Factors Influence Detention Costs?
- Is Detention in Shipping Negotiable?
- What is Detention Container?
- How does Detention work in Trucking?
- How can I reduce Trucking Detention Charges and Time in Shipping?
- In what ways does Detention Affect Shipping?
- Does Detention apply to Shipper’s Own Containers (SOC)?
What is Detention in Shipping?
This is a fine levied to buyers for delaying to return container to the port or yard at the agreed time. It is charged per container, per day and varies with location, container type and shipping line.
Normally, the shipping line offer free days to the buyers, which they can empty or fill the container without charges.
What is the Purpose of Detention Charges?
Detention charges are there as a reward to the equipment owners for use of their equipment.
Just like demurrage and storage, detention is meant to encourage buyers to utilize the equipment effectively and return on time.
A quick turnaround of containers will ensure availability to other buyers and release waiting vessels on time.
What causes Detention?
Bill of lading must be endorsed by the shipping company and have proper shipment details for it to be valid.
Any mistake may lead to customs holding the cargo thus delaying clearance process and eventually eat into free time.
Loss of Documentation
Customs clearance cannot happen without full documentation of the cargo.
Your goods will therefore lie at the port un-cleared till the day you provide all documents.
Lack of Storage Space
When you do not have enough space at your warehouse, you may be forced to hold the goods in the container.
This will lead to delay in unloading hence incur detention charges.
Lack of Finances
Shippers may be cash strapped especially when they did not plan well or unforeseen freight costs arise.
This will slow down crucial process thus leading to more penalties such as detention.
What is the Difference between Detention and Demurrage?
Detention is the penalty relating to usage of the container beyond the allocated free days.
Demurrage is failure to collect cargo from the terminal after the free days expire.
While detention is chargeable for container usage outside the terminal, demurrage cost applies within the port.
When importing goods the buyer will collect the full container for unpacking at the destination warehouse.
Shipping lines offer between 3-7 free days depending on the type of goods and the shipping line.
When the importer fails to return empty container to the port after the agreed period, detention charges start clocking.
They will only end after the empty container is returned to the port or container yard.
During export, shipping lines offer free days for collecting, filling and returning the full container to the port.
Delaying to return the full container to the port will lead to detention until the day it reaches the port.
Demurrage on the other hand operates differently.
When the importer does not collect the cargo from the port within the free days, demurrage starts applying till collection day.
When exporting goods, the full container is expected at the port on a certain day prior to export day. Bringing it back early leads to demurrage as well as failure to export it on the scheduled date for whatever reasons.
Both detention and demurrage are charged a fixed rate per, per container.
The fixed rate is dependent on the shipping line, port and the container type.
Detention and demurrages may be charged separately or combined in some countries.
It is therefore important to understand the carrier’s detention and demurrage terms before using their services.
Is Detention applicable in Both FCL and LCL Shipping?
Full container load (FCL) is shipment of cargo by a single customer using a whole container.
Less container load (LCL) on the other hand is the consolidation of cargos for different customers into one container for shipping.
Detention is the cost of utilizing a container outside the terminal beyond the expiration of free days. This applies to the FCL consignees since they need to transport the container to their destination warehouse to unpack.
LCL shipment are deconsolidated upon arrival and stored at the terminal warehouse till they are picked or transported to the consignee.
Detention charges do not apply here, however, the consignee might be charged for storage space beyond a certain period.
What is Detention Free Time?
Detention free time.
Detention free time is the period within which shippers are allowed to use the container outside the terminal free of charge.
Beyond the free time, detention charges come to effect.
When does Free Time start and how long does it last?
The period of free time offered to shippers is affected by the location, shipping line and the container type.
The numbers of days offered should be reasonable enough for the shipper to pick up container unload or load and return it.
Usually it is between 7 to 14 days depending on the mentioned factors.
Detention start when empty or loaded container is not returned to the depot after the last free day.
This charge continues per day per container and only stops when the containers reach the terminal.
How is Free Time Calculated?
Free time is calculated from the time the cargo arrives at the port.
For instance, if the free time is 10 days, the clock starts from 0’ hours after cargo arrives.
At the elapse of the 10 free days, the charges start to apply.
When should I pay Special Attention to Free Time?
Here everything you must pay attention to:
First Time Shipping
When you are shipping your cargo for the first time, chances are you have no experience with the customs clearance process.
It is therefore important to request for adequate free time to buffer you in case of longer customs clearance experience.
Mismatched B/L Details
Before cargo is dispatched it is important to counter check details on the bill of lading against the shipping company manifest.
Any mismatching in details in both documents will lead to delayed customs clearance.
When you have longer free time, you are likely to avoid demurrage and detention.
This is because you will be able to request for document correction within the allowed time.
After Long Holiday
Holidays lead to congestion since some staff may not be working while the vessels are continuously arriving at the port.
This will therefore lead to congestion when the holiday ends.
You are likely to loose on the free time during the holiday period.
Check with you shipping company on arrival schedule and free time offered.
Longer free time will come in handy in such situation.
Lack of Storage Facility at the Terminal
At times destination port does not have adequate storage space to keep your cargo upon arrival.
It is important to have the cargo collected as soon as possible.
Who is responsible for Detention Charges?
Figure 3 Detention charges
Cargo owners or shippers take sole responsibilities of the detention charges.
The fee is purposefully levied to the cargo owners in order to compensate vessel owners for their equipment use.
It is also meant to discourage cargo owners from long use of containers.
Is Detention Charge the same as Storage Charge in Shipping?
No, it is not.
Storage charge is the cost of occupying storage space at the port terminal, container yard, or warehouse.
The charge starts when the container is placed in the storage facility during import or export and ends when removed.
Detention on the other hand is the cost of not returning the container to the port or container yard on time.
It is calculated per day and per container.
During import, it starts when the container is picked for unloading by the buyer and extends beyond the allowed free time.
While in export, it starts when the exporter fails to return the filled container to the terminal on the agreed date.
The detention only ends upon returning of the container to the yard or port.
What is Detention Charges Calculation?
Detention charges calculations
Detention charge is calculated per container per day for the number of days that you fail to return the container.
The rates change with the increasing number of days such that the charge on day 1 is different from day 4.
Detention days: 5
Detention rate: USD 70
Container type and quantity 20ft: 2
Detention charge will be: 5 days x USD 70 x 2containers = USD 700
Relatively, how much can Detention Cost me?
The detention rate can be between USD 50 to USD 300 per day per container.
While the rates seem cheaper at a glance, they can be hefty if accumulated for a number of days.
Can I avoid Detention Charges during Shipping?
Yes. However certain circumstances such as bad weather, labor strike or port congestion are beyond your control thus leads to detention charges.
Use SOC Containers
Since detention is mainly influenced by container turnaround time, using a shippers’ owned container can save you this cost.
SOC do not charge per diem hence you do not have to worry about running out of free time.
Prepare for your Cargo in Advance
Ensure that your storage space and the unloading or loading team is ready to receive the cargo.
This enables you to pick up the cargo, transport to your warehouse destination and unload within the free time.
When exporting, pick up the empty container from the depot when the cargo is ready for loading.
That way, you will ensure timely container turnaround thus avoiding detention charges.
This is very vital if you want to avoid detention and other related freight terminal fines.
All the involved parties, carrier line, freight forwarder and cargo owner should continuously update each other on the cargo whereabouts.
This will enable you to initiate cargo clearance and pick up upon cargo arrival without delay.
As a result, you will be able to pick and return the container within the free time.
Request for Quotation Breakdown
Having a clearly stated detention charges on the quotation makes you prepare psychologically for the charges.
Besides, you are able to compare different rates from different service providers before committing to one.
Use Customs Pre-clearance Option
Some goods can be pre-cleared before their arrival at the port provided all the necessary documentations are provided.
Working with experienced freight forwarder or customs broker can help facilitate the customs clearance process.
Standard documents required include; bill of lading, commercial invoice, packing list and arrival notice.
Which Factors Influence Detention Costs?
Detention charges are fixed rates that are charged per container per day but vary according to factors such as:
Location of the terminal also plays a significant role in the detention charges.
A port in China will have different detention from a port in Japan.
For example, detention charges in China can be USD 80 for a 20ft container per day.
The same container can attract detention charge of USD 100 per day.
Therefore, it is advisable to inquire about the detention charges of the terminal port from your freight forwarder.
There are dry and special container types used by carriers and consignees to ship their cargo.
These containers have different rates charged per day for failing to return them on time.
Dry containers; 20ft and 40ft per day per container
Day 1-3 USD 50 for 20ft and 100 for 40ft
Day 4-6 USD 100 for 20ft and USD 200 for 40ft
Day 7 USD 150 for 20ft and USD 300 for 40ft.
Special containers; flat rack, open top & tank container per day, per container
Day 1-3 USD 100 for 20ft and 200 for 40ft
Day 4-6 USD 200 for 20ft and USD 400 for 40ft
Day 7 USD 300 for 20ft and USD 600 for 40ft.
You can find out the detention rates from the carrier before shipping to help you plan your finances accordingly.
Different shipping lines have different detention rates levied per day to its clients.
The carriers charge this cost to compensate the container owners for the use of their equipment and to facilitate quick turnaround.
Before settling for a particular shipping carrier, request for quotations from different carriers and evaluate their rates.
Furthermore, plan your shipment well in advance in order to utilize the free days and avoid detention charges.
Is Detention in Shipping Negotiable?
Carrier companies offer between 7-14 free days to collect and return the containers either empty or full to the depot.
These numbers of days can be confirmed when booking a cargo for shipment by the freight forwarders.
You can negotiate for up to 21 free days through the carrier company if you foresee a delay in container turnaround.
In some cases negotiation for extended free days may happen upon cargo arrival for situations beyond your control.
For instance, port congestion, labor strike or extreme weather conditions may lead to delay in container pick and return.
Detention charges may lead to more shipping cost for consignees, you can request for a revised rate with your freight forwarder.
Carriers are likely to consider clients with more cargo volumes in their negotiations.
Above all, plan for your shipment to arrive early enough so that you are able to utilize the free time effectively.
What is Detention Container?
This is a container empty or loaded that has not been returned to the depot on time by the shipper.
How does Detention work in Trucking?
Keeping truck driver waiting longer for cargo loading or unloading when the driver arrived on time leads to trucker detention.
Truck drivers are allowed to wait for cargo for up to 2 hours beyond which hourly detention charges start applying.
The charges are between USD 50 –USD 100 per hour depending on the carrier.
Truck detention leads to lost opportunity for other shippers’ cargos as well as lost earning time for drivers.
How can I reduce Trucking Detention Charges and Time in Shipping?
Here is everything you should do:
Having Dedicated Dock Doors
Dedicating particular doors for pick up or drop offs will reduce congestions of using same door for both operations.
This will speeding up the processes thus reducing drive congestion.
Extend Working Hours
This reduces on congestion due to backlog of cargos to be prepped for pick up by the truck drivers.
You can have staff working in shifts thus improving output and efficiency.
Pick up and drop off times can be scheduled during evening or morning hours thus reducing detention of drivers.
Increase Number of Staff
Having more staff at the warehouse will help reduce instance of unready freight whenever truck driver come for cargo collection.
Also, more labor means fast loading and unloading process hence improved turnaround time.
Having an organized warehouse management system ensure smooth flow of tasks end-to-end.
Both carrier and shipper will have visibility of cargo thus avoiding delay in pick up or drop offs.
Having well trained and adequate equipment will help achieve improved operations.
In what ways does Detention Affect Shipping?
Detention is charged per day per container depending on the location, carrier and container type.
This cost increases your shipping cost thus affecting your business profitability.
Delayed empty container turnaround may lead to missed opportunity to load another cargo. Consequently, delaying to return loaded container may lead to missing shipping schedule thus leading to demurrages and storage charges, among others.
Detention leads to lost opportunity to vessel owners as well as profitability from the fines.
In some instances, when detention takes so long, the accrued charges maybe too much for the cargo owner leading to non-payment.
Does Detention apply to Shipper’s Own Containers (SOC)?
Unlike carrier owned containers, (COC), detention charges do not apply to shipper’s owned containers (SOC).
This is because the shipper does not need to return the empty or filled container to the port.
What happens with SOC is that the shipper borrows the container from the owner to use it for import or export.
Once the shipper is through with the container, they return it to the owner.
Most container owners do not charge per-diem, they quote a fixed rate that the shipper and are flexible with time.
Owners are not interested in quick turnaround, but repositioning of their containers.
This way, they are able to get more shippers using their equipment at a cost.
A win-win for both parties.
COC containers charge per day for the period of delaying to return the container to the depot.
This cost adds up to many others such as demurrages, storage, etc. eventually leading to high shipping costs.
Shippers can explore the options of using SOC to avoid detention charges.
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