Knowing freight terms is critical when shipping from China or anywhere in the world.
A reason this guide will answer all your questions on last free day.
So keep reading to learn more.
- What Is Last Free Day?
- What Does Last Free Day Mean For My Shipment?
- What Is Demurrage Charges? How Does It Relate To Last Free Day?
- How Much Does Demurrage Cost After The Last Free Day?
- What Is Detention In Relation To Last Free Day?
- Does Driver Detention Relate To Last Free Day?
- How Is Free Time Calculated In Relation To Last Free Day?
- How Many Last Free Days Do I Get?
- Do I Need To Know The Last free Day When Shipping With A Freight Forwarder?
- Which Factors Determine The Amount Of Free Time Customers Can Enjoy?
- How Do I Ensure Timely Processing Of Cargo Before Last Free Day To Avoid Demurrage, Detention, Storage And Per Diem Fees?
- What Happens If Factors Out Of My Control Prevent The Pickup Of Cargo Or Return Of Equipment Before Last Free Day?
What Is Last Free Day?
Last free day is the final day of a free storage duration when you can collect cargo from the port without incurring demurrage charges.
It also means the last free day before per diem applies on containers not been returned to the port terminal.
Offloading shipping container
What Does Last Free Day Mean For My Shipment?
After the last free day passes, your shipment will be subjected to detention, storage or demurrage fees, whichever is applicable.
Demurrage and storage rent can be charged at the same time when a laden container has not been released from the port.
Detention fee accumulates for each day that the container is not returned to the port or container yard. Detention, demurrage and storage fees are cleared before the cargo is released to customers.
All these costs add to your final destination cost of shipment and can stall your shipment.
What Is Demurrage Charges? How Does It Relate To Last Free Day?
Demurrage charges is a fee charged on a container per day at the port after the free day period lapses. This fee is charged daily until the day you will collect your container from the port.
Demurrage cost can be incurred during import and export by shippers.
When importing, demurrage applies when you fail to pick your full container from the port on time.
During export, shippers are supposed to bring the loaded container at an agreed time for loading.
When they bring the container earlier than expected, demurrage applies till the day of container loading into the vessels.
How Much Does Demurrage Cost After The Last Free Day?
Major sea ports in China
This cost varies per terminal and it also increases the longer the container stays at the port after free time ends.
For instance, a port may charge between USD 80- 160 per container per day on demurrage for the first 3 days.
The cost then goes up to USD 240 from 4 to 8 days and USD 480 for any day beyond 8 days.
If you delay to collect your container by 5 days beyond last free day, your cost will be as follows:
USD 160 X 3 = USD 480 (USD 240 X 2=USD 480) = USD 960 per container per day.
Demurrage must be paid upfront before container can be released by port authorities.
Therefore, scheduling your shipment early enough will protect you from incurring such extra costs.
What Is Detention In Relation To Last Free Day?
This is a penalty charged to customers for using containers beyond the agreed free days outside the shipping container terminal.
This applies whether the container is full or empty provided its not returned to the port or yard on time.
Detention fee can occur in two ways; per diem and driver detention, for equipment and driver waiting time respectively.
Does Driver Detention Relate To Last Free Day?
Driver detention is another type of detention which applies for keeping the driver beyond the free time. This fee is charged per hour for every extra hour of delay whether at the destination or pick up location.
Drivers have allocated time for loading and unloading the truck for customers.
Delaying at one point may lead to further delaying other customers and even lose money for those compensated per mile.
Therefore, driver detention acts to compensate drivers for delays caused by customers.
How Is Free Time Calculated In Relation To Last Free Day?
Free time is calculated according to the terminal port or shipping line’s set schedule.
It can start from the midnight when cargo is received at the port and ends at midnight of the last day.
For others, it starts when a container is offloaded from the vessel at the port and end after the allocated period.
Calculation, is then done as per the agreed tariff of the carrier ship or port terminal.
How Many Last Free Days Do I Get?
Normally, free days period last between 3-7 days however, this is dependent on factors like transportation, carrier, port, etc.
Air terminals and rail ports offer 2-3 and 2 free storage days respectively after cargo is unloaded from the vessel.
Do I Need To Know The Last free Day When Shipping With A Freight Forwarder?
Knowing the amount of free days granted to your cargo will help you prepare for cargo arrival in advance.
This will ensure truckers collect and drop off your cargo in a timely manner.
Secondly, you will aware on when the days detention and demurrage charges start to apply so as to avoid further delays.
It also gives you time to get extra funds to offset the incurred fees.
Which Factors Determine The Amount Of Free Time Customers Can Enjoy?
Free time is the grace period shippers are granted to collect, load and unload and return containers without incurring any costs.
The amount of free time awarded depends on:
Demurrage vs. detention
Port location plays a big role in determining the amount of free days it can allow as free days.
Very busy and world’s largest ports like shanghai in China and Singapore can only allow few free days, like 3 days.
This is because of the amount of cargo they handle per day from different parts of the world.
At times, they may not offer any free days thus you are charged demurrages the moment your cargo arrives.
Less busy days grant up to 7 free days because they have less cargo coming in thus less demand for space.
Shipping lines have their own amount of free days typically between 3 to 7 days or even more.
This grace period granted allows you to unload or load and return the carrier’s container free of charge.
Busy ocean carries offer less free time before charging detention fees due to high container demands.
When shipping high volume cargo, you can negotiate with your carrier for extended free time of your cargo.
Equipment And Facility Type
Different container types have different free time period same to facility occupied by the containers.
Special containers such as reefers and open top containers have shorter free time compared to dry containers.
Special containers are delicate and have high demand compared to normal containers.
Reefers have additional expenses such as electricity for their operations and maintenance, thus are costly to hold.
Warehouse facility at the port has shorter free time compared to bonded warehouses because of the number of cargoes it receives.
How Do I Ensure Timely Processing Of Cargo Before Last Free Day To Avoid Demurrage, Detention, Storage And Per Diem Fees?
While it is hard to always avoid demurrage, detention, storage and per diem fees, there are ways to significantly reduce them.
Early Proactive Planning
Knowing all the free days allowed at the port for storage, container use outside terminal, driver free waiting time.
This will enable you plan for your shipment processing before its arrival.
Also, be in constant communication with your carrier to ensure everything runs smoothly.
Additionally, ensure you have all the required shipping documents for customs clearances like bill of lading, commercial invoice, packing list, etc.
Verify them to ascertain that they are all in order to avoid clearance delays.
Use Alternative Storage Facilities
Some port terminals can be congested due to high traffic of cargo into and out of the port.
As a result, the storage facilities may be congested and slow down clearing process all together.
Use other alternative storage facilities located near the port to fasten the clearance process before free day ends.
If you are a shipper who ships high volumes such as 500-1000 containers per year, you may negotiate for extended days.
This will protect you from unforeseen circumstances during shipment that may eat into your free period.
You can also dispatch your cargo early to allow enough time to process and clear it.
Use Expert Freight Forwarders
Planning for shipment overseas can be a complex and time consuming if you do not understand the process.
Having the right freight forwarder handle your cargo can ensure smooth flow of shipment all through without delays and fines.
Check if you can preclear your cargo before arrival of the vessel at the port and notify all your agents. Shipment pre-clearance reduces the time spent at the port queueing for clearance hence ensures timely collection of cargo.
Real Time Tracking
This is having visibility of your cargo throughout the shipping process hence you can plan for, collection loading or offloading.
You are also able to see where there are delays and communicate with truck drivers in advance to avoid detention charges.
Have A Back-up Plan
In shipping there are many risks involved such as unpredictable weather conditions, system failure, route congestion etc.
These circumstances can lead to delays which can further translate to penalties.
To avoid such happenings, having an alternative carrier or using different route can help you avoid such fees.
Which Payment Methods Are Accepted For Settling Potential Demurrage And Detention Fees After Last Free Day?
Demurrage and detention fees are paid for upfront before cargo is released from the port and when container is returned.
Terminal authorities, truck companies and shipping lines are responsible for collecting demurrage and detention fees.
They accept different modes of payments such as:
- Wire transfer such as telegraphic transfer.
- Debit or credit card.
What Happens If Factors Out Of My Control Prevent The Pickup Of Cargo Or Return Of Equipment Before Last Free Day?
As a shipper, there are factors that can delay you from picking cargo or returning container at the allocated time.
Factors such as port congestion, extreme weather conditions and labor disputes are some of the reasons beyond shippers’ control.
Shippers are expected to pay detention and demurrage regardless of prevailing factors.
In such scenarios, shippers can negotiate for waiver of the fees accrued.
Shippers argue that in such events, detentions and demurrages charges should be halted until the situation is normalized.
This is yet to be considered by port terminal and shipping lines which argue that the fees ensure smooth flow of shipment.
At BanSar, we will help you in all freight forwarding needs from China to any global destination.
Contact us now for all your shipping from China.