In fact, these equipments are the basis of the work of freight companies that rent them to merchants. Considering this penalty, the work of transportation and unloading is done faster. To reduce these costs and avoid demurrage, it is better to always consult with the expert team and expert advisors of Ghasil Kalai Shargh site.
Types of demurrage
Demurrage plays the most important role in the transportation industry and can be used in various fields with the aim of speeding up the process of transportation and loading and unloading. This fine is considered in the form of riyals and dollars for individuals. Here we refer to the types of demurrage in the transportation industry and international trade:
Container demurrage
If the container is not delivered to the shipping company in the specified time, this type of penalty will be imposed on it. If the container is damaged for any reason, its cost must be paid; Because this issue can affect the availability of the container for other customers.
These supplies play a significant role in transportation, so their failure to deliver on time can disrupt the system. Traders and businessmen rent these containers from the freight and export of goods company and if they do not deliver them earlier than the specified time, they are subject to demurrage payment.
· Ship demurrage
If the ship is delayed at the port for more than the specified time, the demurrage fee will be charged to it. The longer the delay is, the heavier the fine will be and it can affect the performance of the shipping company.
This penalty is given to the merchant whose ship arrives at the port late and unloads the cargo. The owner of the consignment can take delivery of his goods after paying the delay fine. If the merchant does not have the ability to pay the demurrage, it will not be possible to clear the goods from customs.
Terminal demurrage
Terminal demurrage occurs when the cargo does not leave the terminal as scheduled. This fine is significant; Because it can affect the ability of the operator and the terminal management system. When you delay and occupy the terminal more than the free time, the shipping company will suffer.
In these conditions, other cargoes that are on the way to the terminal get confused. The owner of the goods is obliged to unload and take delivery of his cargo within the specified time. In the import of gold bars, the cost of delay is much higher; Because imported goods have a high value and their transportation is done with high sensitivity.
· Rail demurrage
By renting out its trains and wagons, the railway transportation company helps traders and merchants to export and import by land. If the merchants do not unload the freight rail wagons at the agreed time, demurrage will be assigned to them and they will have to pay the cost of this delay. These equipments are rented for a certain time and if the time is longer, they are subject to heavy fines.
These costs are significant for the rail transport company; Because they affect the performance of the organization and the capabilities of the company. The smallest delay in importing trucks can result in heavy fines for traders and merchants, which can be minimized with effective management.
Factors that cause demurrage:
Various factors are involved in the occurrence of demurrage and late fines in the transportation industry, and these factors can also affect costs. In international trade, it is very important to understand these factors in order to reduce costs. Key and influential factors include the following:
- Entering unclear and incorrect information
If the information about the cargo, including the date of arrival and departure, is not recorded correctly, the customs clearance will be difficult. Delays in transportation and unloading bring heavy demurrage costs; Therefore, it is recommended that traders enter the information correctly.
- Delayed receipt of the document
Another factor that plays a major role in the occurrence of demurrage is the delay in receiving the documents required for clearance. If you are unable to provide the required documents, the clearance of the goods will be disrupted and a penalty for delay or demurrage will be considered for the shipment.
- Financial limitations
Other factors influencing the occurrence of demurrage include the lack of sufficient capital for transportation and unloading. If the consignee cannot unload the cargo within the specified period of time due to financial constraints, demurrage or delay fine will be assigned to it. People must have the necessary preparation and sufficient capital for business.
- Discrepancy in received loads
Demurrage occurs when the shipment received is different from what was ordered. For this reason, the recipient does not want to receive and unload the cargo. You have to take a lot of time to fix this discrepancy, and this issue causes the delay fine to increase day by day.
- Receiver and carrier disputes
The most important factor that can delay the transportation and unloading of cargo is the difference between the recipient and the shipment. If these two do not work together efficiently, delays will cause heavy fines for the recipient.
- Lengthening the inspection process
If the stop of container, ship and train for inspection is determined too much, the unloading of cargo will be delayed and this can bring heavy costs for traders. By reducing the time of inspection and its management, it can also reduce the cost of demurrage.
Demurrage fee
The cost of demurrage depends on various factors, and the longer the delay, the higher the cost. If the cargo ship is rented by time and journey, the cost of delay will be different. The size of the equipment that is rented affects their fine.
If a merchant has rented a large ship from a shipping company to transport cargo and delivers it to the company late, the penalty for the delay is higher than for small ships. Large size refrigerated containers are always rented at a higher price, and the delay in their delivery is associated with a higher demurrage fee.
Among the factors affecting this fine, we can mention the nature of the goods and cargo, the dimensions of the container, its amount and volume. This cost is often calculated by the number of days, that is, a penalty is calculated for each day of delay. The more facilities and options available in these equipments, the higher their rental and demurrage costs.
Reasons for increasing demurrage costs
Various factors influence the increase of demurrage costs, which we will introduce here:
- The first factor that increases the cost of demurrage is the increase in the number of days of delay. If the fine is calculated on a daily basis, the recipient may not be able to pay it.
- With the increase in cargo volume, unloading will take time, and the receiver may not be able to deliver the goods to the shipping company on time, in which case she will be subject to a fine.
- Another reason for the increase in the cost of demurrage is the climatic conditions. If the weather conditions are not favorable, the transportation and unloading will be difficult, and the delay in this work will result in a fine for the receiver.
- The nature of the product and its material value is another factor that affects the cost of demurrage. High-value cargoes are always handled more sensitively, and their transportation and unloading may be delayed, which is costly.
- If the port, railway, and terminal go on strike, the workforce for unloading will be reduced and the receiver will not be able to deliver the equipment to the company within the specified time. For this reason, the demurrage fee will be higher.
- Financial problems and disputes between sender, receiver and carrier play the biggest role in increasing the cost of demurrage. This prevents timely unloading of cargo and makes the fine heavier.
How to calculate ship demurrage
The ship’s demurrage or penalty is calculated in a special way and important criteria play a role in determining it. If the ship does not deliver the cargo on time at the wharf, he will be fined for the number of days of delay. For larger ships with more options and facilities, heavier fines are always considered.
If there is any damage to the ship in the process of transportation and unloading, more demurrage will be charged for it. The method of calculating demurrage is a bit complicated and has its own rules. The most important factor for determining this cost is the type of ship and its cargo. Loads with material value are associated with a higher fine.
The demurrage is basically calculated on a daily basis and the freight company considers an amount for each day of delay. The policies of each transport company have caused the tariffs to be different. Calculating this tariff on a daily basis helps the ships to carry out the transportation and unloading process faster and have less delay.
Demurrage costs for equipped and refrigerated ships are higher than simple and normal ships. The exact tariff cannot be determined in advance; Because the time and place of the delay and the distance traveled can also have an effect on it. These companies consider a special tariff to determine the limit of fines and free time.
Calculate the arrival time of the ship at demurrage
The time of the ship’s arrival and unloading at the demurrage is determined according to the principles and policies of the shipping company. The captain of the ship is obliged to announce his arrival to the receivers of the goods within a certain period of time. In this situation, they can carry out customs and clearance work so that the cargo is not delayed for unloading.
The ship’s arrival time depends on various factors such as the type of cargo, the distance traveled, the origin and destination of the cargo, and weather conditions. If the weather conditions are unfavorable, the ship cannot stop at the dock at the appointed time. If the receiver of the goods is informed of the exact time of the ship’s arrival, he can make the necessary arrangements with the port authorities for clearance and unloading.
Most of the ships inform their status 4 days before arriving at their destination in different intervals, so it is possible to predict their arrival time. Some companies consider free time from the time the ship arrives.
When the ship reaches its destination, it has entered the port area. In this situation, the captain is allowed to announce his arrival. To calculate the ship’s arrival time at demurrage, the readiness of the ship to unload cargo is well evaluated.
When is demurrage not calculated?
Demurrage is not calculated when the delay is short. When the transport company signs the contract to rent the equipment, the demurrage conditions and duration are recorded in it. There is no need to pay demurrage in the cases we mention:
- If the weather is not suitable at the time of unloading the cargo so that the receiver cannot unload the cargo at the designated time, the demurrage fee will not be charged.
- Demurrage is not calculated on holidays; Therefore, if you unload the cargo on a holiday, there is no need to pay a fine.
- Another condition that exempts you from paying demurrage is using the container on holidays. In this situation, only hours of the fine day will be counted for you.
How to prevent demurrage and damages?
To avoid demurrage and huge damages caused by delays, you can use the following solutions:
- Selection of long-term equipment
To reduce the demurrage tariff, you should rent a container, ship, train for a long time from the company. If the free time is long, you can clear the goods from customs at any time and have a flexible schedule.
- Full review of the bill of lading
To avoid demurrage, the bill of lading must be checked completely so that no special tariff is included in it. At this time, you can have better financial planning.
- Preparation of clearance documents
To avoid demurrage, you need to prepare the goods clearance documents in advance. With this early start, the clearance process will be accelerated and the transport and evacuation equipment will be delivered faster.
- Develop alternative plans
By anticipating the upcoming challenges and planning carefully for cargo transfer and unloading, the demurrage tariff will be greatly reduced and the owner of the goods will not suffer any loss.
- Knowledge of transportation rules
Before renting cargo transportation means, you need to know the related laws; Because each company has its own policies.
- Choosing the best way to transfer goods
To reduce demurrage costs, you need to choose the best route for shipping. This can greatly reduce the risk of delays and fines.
- Check product details before shipping
The best way to prevent demurrage is to check the shipment and make sure that it is correct and non-contradictory. In such a situation, evacuation takes place without delay.
What does strip mean in demorage?
Sometimes the demurrage tariff is higher than the purchased item; So that the owner of the cargo is unable to pay for it and is forced to abandon the clearance and abandon the goods. In this situation, people try to use the strip method to remove this fine.
In this unloading method, the goods are loaded by trucks and transferred to the warehouse the moment they leave the customs and container. By increasing the speed of cargo unloading, machines will no longer be delayed; In this way, the demurrage tariff is removed.
The unloading of the container and the ship and its train wagons in the shortest time has made them not to be fined. Unloading in the strip is done under the supervision of the representative of the goods owner, or work clearance. In this situation, the owner of the goods should pay only a small fee to the warehouse.
What is Dispatch?
Dispatch is the exact opposite of demurrage. In dispatch, the goods are unloaded ahead of schedule; In this way, time and costs are saved and the loading and unloading speed increases. The freight company considers a reward for the dispatch.
Shipments that are unloaded earlier than the free time and duration recorded in the contract and the equipment is delivered to the company include good rewards. To use this privilege, the owner of the goods needs to sign a contract with the company. In this contract, the owner of the container or ship is obliged to pay an amount of rent as a reward to the lessor.
What is the difference between demurrage and dispatch?
Demurrage and dispatch have many differences. In demurrage, the renter must pay a penalty for the delay in returning the equipment, so that in dispatch, a bonus is paid to the renter for the early delivery of the equipment. It is very important in both times.
If the transportation equipment is delivered later than the scheduled date, demurrage or fine will be assigned to them, and if they are delivered earlier than the scheduled date according to the contract, they will be subject to dispatch. The owner of the cargo will be exempted from paying the fine in this situation. The freight company has been able to speed up the transportation system by providing this incentive and discount plan.
Incoterms rule in demurrage and dispatch
In demurrage and dispatch, there is an Incoterms rule in which the buyer and seller must agree. This rule specifies whether the responsibility of carrying the cargo is the responsibility of the buyer or the seller. In this case, if there is a delay in the transportation and unloading of cargo, one of the parties is responsible to pay the demurrage tariff and there will be no disputes.
In this contract, the details related to demurrage and dispatch are mentioned; Because it is very important. Basically, these 2 Incoterms rules are used to transport bulk goods:
- FOB Incoterms rule: In this rule, the buyer is responsible for transportation, and if the cargo is subject to heavy fines, the buyer must pay it in full so that the cargo is cleared.
- CFR Incoterms rule: This rule assigns the responsibility of freight to the seller. The contract based on this rule is available to both parties.
FREE TIME
Free time is a period of time that is determined at the time of signing the rental contract. In free time, the importer and exporter can use the rented equipment without paying a fine. With the increase of free time, the demurrage tariff decreases. Transport companies consider two types of free time:
- Free time of origin: This free time is related to the time when an empty container or ship is received and delivered full.
- Destination Free Time: It is the time when the owner of the goods receives the container full and after emptying it, delivers it empty to the shipping company.
The difference between demurrage and detention
Demurrage and detention have many differences. In demurrage, the owner of the goods must pay additional costs and fines for the delay in unloading and transportation to the shipping company; But detention includes the costs that are considered for stopping and keeping the container after unloading.
In demurrage, the unloading period is mentioned in the contract, and if the owner of the goods does not unload within the stipulated time, he will be fined. The right to stop is written in the contract and the owner of the goods must deliver the rented equipment to the company after unloading. If the goods are not delivered after unloading the cargo, the owner of the goods must pay the detention fee or stoppage fee.
final word
Demurrage has helped the transportation industry a lot and made the goods move in the shortest time and without delay. Freight companies play a significant role in this process. Goods owners try to always choose reputable companies to reduce the demurrage tariff. The experts of Ghasil Kala Sharq site are always available to you so that you can rent the best equipment for transportation at the lowest cost. The use of these experts has caused the costs to decrease drastically.
