The dreaded detention and demurrage have been hot topics for years but even more so over the last couple with pandemic-induced supply and demand issues, rising port congestion and labor shortage compounding increased fees.
A quick lesson for those new here on demurrage versus detention (or, as we’ll refer to it throughout this post, D&D): Simply put, demurrage fees are applied to cargo that has overstayed its time at a terminal, whereas detention fees are applied to cargo outside terminals that have used a carrier’s equipment too long. So, demurrage on containers inside the port; detention on containers outside the port.
Unless you’re living under a rock, you’re likely aware that D&D charges, specifically for exporters, have hit record levels. Last May marked their highest point at $2,692 per container in the U.S., while the global average increased from $586 to $664 from 2020 to 2022 (that’s 12% for those doing the math). What’s more, “nine of the largest carriers serving U.S. liner trades individually charged a total of approximately $8.9 billion” in D&D over this two-year period, and, currently, the top five most expensive ports for D&D are all in the United States.
With extremes came change. On June 16 of 2022, President Biden’s Ocean Shipping Reform Act (OSRA) sought to amend D&D billing practices, among other things, which seemed to have grown tilted against shippers. The act also gave the Federal Maritime Commission (FMC) more control over D&D structure and practices.
Some of the proposed changes included:
Bills for D&D only are only issued to parties with contractual relationships
Requirements around minimum information included in invoices (see more on that below)
Bills must be issued within 30 days after charges stop accruing
Providing 30 days to dispute changes
The impact of these changes affect all parties and with more structure around D&D fees and more data requirements around invoices, it’s thought that there will be a reduction in charges.
However, equipment fluidity is still super critical. Carriers do have a reason for these charges after all. They should be compensated for container use, and surcharges are an effective way of reducing delays. So how do we encourage merchants to return containers in a timely manner and keep turnarounds tight?
Glad you asked. But first, let’s get to the root of why this is all so hard.
Getting to the Root of Detention and Demurrage
The causes for delays, according to Container xChange, include any or all of the below:
Discrepancy or error in documentation
Late receipt or loss of documentation
Issues in custom clearance or cargo inspection
Congestion at the port
Labor strike or labor shortage at the port
Delay or abandoning of cargo by the consignee
Failure to pay freight charges in full
Some reasons are obviously not controllable, such as bad weather or labor strikes, but many of these situations are avoidable with better data. Seems simple, right? Wrong. Access to accurate, timely, aggregated data is anything but. Why? Because so much of the export process is manual. A rundown:
Booking confirmations and updates are often sent via email.
The data comes in different formats, including attachments to emails.
A person(s) is then required to read and organize these emails and aggregate and input all the data within them.
Oh, and stay on top of all these updates in real time.
So it looks like data is at the root of the problem for the causes of D&D. Let’s go from start to finish to look at data when it comes to billings.
OSRA’s new invoicing requirements
Adding to the data situation are OSRA’s new invoicing requirements. With good motivation, these requirements were created to help create a better burden of proof. Charges must comply with federal regulations, and carries must include, at minimum, the following on D&D invoices:
Date the container is made available
The port of discharge
The container number(s)
For exported shipments, the earliest return date (ERD)
The allowed free time in days
The start date of free time
The end date of free time
The applicable D&D rule on which the daily rate is based
The applicable rate(s) per the applicable rule
The total amount due
The email, phone number or other contact information for questions
A statement that the charges are consistent with Federal Maritime Commission rules
A statement that the common carrier’s performance did not cause or contribute to the underlying invoiced charges
If any of the following are not included on the invoice, then there is no obligation on the billed party to pay. Exporters are off the hook … unless they need the same data to refute the charges.
How Exporters Can Get a Handle On Event Tracking Data
So if the root cause of many of the issues is data, getting a handle on logistics data is essential to minimizing detention and demurrage. This is why we built Splice Exports. Splice Exports offers a few ways to make the detention and demurrage management process more efficient.
Automated data inputs and clean inboxes
With Splice Exports, important export updates don’t get lost in email. Users only need to forward email confirmations and updates, and Splice takes care of the rest, separating PDFs from other communications, pulling necessary (and once manual) data out, and saving an image of the booking document for your records.
Track ERD and cut-off changes with data reading and reconciliation
Splice collects ERD data from terminals on all coasts and Canada to automate the flow of data. No need to keep drilling into websites each morning for updates. And it parses data from booking confirmations and updates, and either creates a new booking record or adds new data to an existing record to automate ERD and cut-off dates. This saves time spent aggregating and reconciling export receiving windows.
Refute charges with a true history record
Splice Exports builds a history of every booking so you have the records you want. You are working off a single source version of truth, which is visible to everyone using the tool. Plus, downloadable reporting is available to help align invoice data against history so you can quickly validate or refute D&D charges.
So maybe it is that simple, when leveraging the right technology. If detention and demurrage fees continue to be an issue for you as an exporter, contact Splice for a demo, and we’ll show you how Splice Exports can help you:
Track ever-shifting ERDs and cut-off schedule changes
Manage email and PDF booking confirmations to keep inboxes tidy
Retain change histories to refute detention and demurrage invoices
Benefit from a single database to control updates from carriers and terminals.