Senior Cat About Difference between Free Time, Demurrage and Detention
Explained Free Time, Demurrage, Detention by Video
Senior Seagull This is 5:40 video.
This time, let’s take look at the terms “Free Time” and “Detention”.
What is Free Time and Detention?
When transporting by FCL, we often care about “Free Time”. This term refers to the length of the time, a container can be stored free of charge at the port.
You can store a container for an agreed length of “Free Time”, for example 7days to 14days. There are additional terms to remember in combination with “Free Time”.These are “Demurrage” and “Detention”.
Let’s take a closer look after we explain “Free Time”.
About Free Time
“Free Time” refers to the length of time, a container can be stored free of charge at the port. It is generally a period of 7-14 days for dry container.
The length of the time can be extended upon request from a freight forwarder. Our company can extend for period of up to 21 days of “Free Time”, for Japanese main ports.
The length of “Free Time” varies depending on the Shipping Lines. You need to confirm the length of “Free Time” available to you, when booking your cargo.
The length of “Free Time” is shorter- usually less than 7 days for reefer container, open top container, and flat rack container. Please remember to check this in advance.
You might think you should collect a container as soon as it arrives at the port.
However, “Free Time” is used for the following situations;
Time taken to clear customs.
When there is no space available to store the cargo at the factory.
The time taken to arrange drayage.
The port is not a warehouse. therefore cargo should be collected immediately, when there is no issue.
However, in general, “Free Time” is used when there is an issue.
About Demurrage
Now, let’s take a look at the term “Demurrage”. “Demurrage” is a storage fee, that occurs after the length of “Free Time” has been exceeded.
As previously mentioned, the port is not a warehouse, and the container yard has limited space. “Demurrage” is used to prevent containers being stored at the port for a long time.
Actually, “Demurrage” is not cheap.
Here is an example of how “Demurrage” cost can increase in Japan.
Day 1 to day 3 – 13,000 yen for one 40’ft container daily.
Day 4 to day 6 – increased to 25,000 yen per container daily.
From day 7 – cost increases to 40,000 yen per container daily.
The longer the containers are stored at the port after free time, the higher the Demurrage cost will be. Understandably, a shipment of 10 containers will cost you a lot of money.
About Detention
Now, let’s take a look at the term “Detention”. “Detention” is a length of the time allocated for collecting a container from a port, unloading the cargo and returning the empty container to the port.
You will incur additional cost if you exceed this time. Containers belong to Shipping Lines. This system requires all containers to be returned correctly, once finished delivering the cargo.
Here is an example of “Free Time” and “Detention” calculation method. “Free Time” is 14 days and “Detention” is 7 days.
Estimated time of arrival (ETA) for the vessel to arrive at the port is May 1st.
Container is lift off from the vessel and loaded into the container yard on May 3rd.
In this case, “Free Time” covers until May 17th.
Some countries count “Free Time” based on ETA, whilst others start after the vessel arrival, which you should confirm in advance.
If you collect the container on May 17th, the last day of “Free Time”, “Detention” is counted the day you collect the container, meaning May 24th is the last day.
We usually do not have the case that the customer use full “Detention” period, but I hope the description enable you to understand.
Common Free Time Problem
Finally, let’s take a look at some of the common problems with “Free Time”. Customs may be unable to complete their checks during “Free Time”.
Especially, when importing new products of which you do not have past import experience, there is a potential for essential documentation to be missed.
Certain food and chemical products cannot be imported without a specific import permission or license. This can take time to register.
Also, if there are any mistakes on the B/L, it can take time to amend and “Demurrage” costs may occur.
Before exporting a new product, you need to discuss and make arrangements with a freight forwarder to avoid these problems. Don’t forget to pay attention to document mistakes such as B/L.
Summary
By now you understand the terms “Free Time”, “Detention”, and “Demurrage”. The most important thing is to utilize “Free Time” and prevent “Demurrage” occuring.
I have been working as a freight forwarder for a long time, and I have seen cases which incurred “Demurrage”.
Because of problems on product register and documentation. Payment issues between a buyer and a seller.
Congestion at a port after a long holiday season. “Free Time” is very important factor within international logistics. Please ensure you check details in advance and are prepared.
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