An aerial view of big rigs is seen at Port Jersey in Jersey City, New Jersey, United States on January 19, 2022.
Tayfun Coskun | Anadolu Agency | Getty Images
Late container charges known as detention and demurrage (D&D) in the US are the highest in the world, according to a recent report by Container xChange, and are out of sync with D&D charges that have fallen across the globe.
Detention is the fee paid by the merchant to keep a seagoing vessel’s container outside the port, terminal or depot beyond the agreed time off. In this part of the contract, an ocean liner determines how long a merchant can hold the container before charges are imposed.
Demurrage is the charge related to a merchant’s use of the container while in port. The buyer is granted a certain “free time” to have the container in the port before charges are incurred. The merchant pays the shipping company a fee if the merchant goes beyond the amount of “free time” agreed upon. This tax should motivate traders to move their containers out of the port.
Port congestion has been a major factor in hampering the rapid movement of containers out of the port. Recently, the Ports of New York and New Jersey announced that they would levy new fees on ocean liners to encourage them to move empty containers out of port and free up space to process containers more efficiently.
The delay in picking up and delivering containers increases detention and demurrage charges. According to Container xChange, the port of New York and New Jersey is number 1 in the world in terms of duties.
The high rates and delays at the ports come as no surprise to the Federal Maritime Commission (FMC), which has been investigating reports of carriers charging container fees even when the shipper or carrier cannot return the container due to terminal congestion.
“I would request that this investigation be expanded and intensified to cover cases where shippers and carriers are forced to store containers or move them without adequate compensation,” said FMC Chairman Daniel Maffei. “The commission will ask the carriers who have fallen behind the most in getting their lumber what their plan is to remedy the situation. Whatever their answer may be, I will do everything in my power to ensure , that carriers do not receive involuntarily subsidized storage for empty containers belonging to them.”
Pervinder Johar, managing director of supply chain optimization firm Blume Global, said traders need to be more nimble and cast a wider net in choosing an import port for their cargo.
“Technology can offer you a real-time analysis of a port,” Johar said. “You can see the overall port performance. You have data about the ships, at berth, anchorage or soon to berth. Then you have how long the containers are waiting. There is also dwell time on rails and truck pickups. All this enables a merchant to to make an informed decision. Unfortunately, we find that some shippers are rigid in their port selection. Being flexible allows you to avoid paying D&D.”
Johar said data can also help traders keep track of the status of a container. “You can have multiple companies involved in moving your container. You have to be able to keep track of all the parties involved,” he said.
CNBC Supply Chain Heat M-onep data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider Olympic USA; supply chain intelligence platform; FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; sea transport data company MDS Transmodal UK; sea and air freight rates benchmarking and market analysis platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics supplier Seko Logistics; and the planet, supplier of global, daily satellite images and geospatial solutions.