What Is The Difference Between Demurrage, Detention and Per Diem?

There are different types of additional charges when it comes to international trades. Among them, demurrage, detention and pier diem deserve a special mention.

There are a lot of confusing terms in the business of freight. The ones most popular include demurrage, detention, and per diem. All carriers and warehouses offer different amounts of free days and storing charges. This depends on the carrier or warehouse and the volume of your cargo you opt to store with them. Most of the times, especially during congestion when pulling out import containers becomes difficult, importers have to pay demurrage charges even if it is out of their hands. This is quite an unfortunate and frustrating part of international trade. This is why it is a good idea to understand the terms properly and avoid misconception with the freight partners.

Demurrage

Demurrage is generally charged by steamship lines and airlines when you use their shipping containers. A limited number of free days are offered, which can vary depending on the carrier and the location where the cargo has to be sent. The demurrage charges will be incurred for each additional day. This fee is intended to discourage the use of the carrier’s equipment for storage purposes and to compensate the carrier for the use of their equipment. As soon as the free days end, freight services start charging demurrage and it may increase per day.

Detention

a) Detention is charged in domestic trucking for excess use of time for loading or unloading cargo. The charge is billed on an hourly basis by the trucker or sometimes by the service provider. In general cases, normal detention free time is 1 to 2 hours for loading or unloading a container. However this depends on whether it’s a domestic, import or export shipment.

b) When you store the container at the terminal beyond the set amount of free time, carriers can call charge for detention.

Per Diem

Per Diem is charged for use of ocean and air freight’s equipment, whether it is ocean containers, chassis or air unit load devices. Any export agent grants certain amount of free days with the equipment before charging per diem. Per diem applies to cargo that leaves the arriving terminal (on an import) or leaves the departing terminal (on an export) for loading and is charged until the equipment is returned to the terminal (whether it is a port, rail yard or airline).

Thoroughly understand these three theories to properly grasp the features of additional rates in a freight system.