Container Detention Charges in Shipping

There is a famous term in shipping which every exporter and importer wants to avoid, that is "Detention charges".

These charges Also known as "per diem fees".

When an exporter is failed to send containers into the terminal or an importer can't return the empty containers to the yard of the nominated CFS within permitted timeline, detention charges incur.

Detention charges are calculated per container, per day basis and these charges depends upon liners and the origin/destination country.

All liners allow few days to the exporters and importers to return the containers to the terminal/depot; this is called as "Detention free time". The detention free time is negotiable which is negotiated with the liner at the time of container booking. Usually shipping lines allows 5-7 days detention free time, however they can allow 10-14 days and sometimes 21 days (very rare case) based on number of containers booked under that booking. If any exporter or
importer failed to return the containers within the free days, they have to a certain amount (pre decided by shipping line) per container per day, which is known as detention charge.

It is very important for all the parties as for exporter and Importers detention charges are unwanted extra costs, which affect their profitability, where it is an extra source of income for the shipping lines.

 

Examples:

In case of Export:

Let's assume an exporter has booked 10 containers at Visakhapatnam, India. Containers are booked for Cotonou, Benin for rice shipment and container pick up point is Gateway CFS, Visakhapatnam. Liner has given standard detention free time which is 7 days, that means all 10 containers has to be stuffed, cleared from customs and sent inside the port or co trainer terminal within 7 days to avoid detention.

The exporter or shipper shares the booking copy to their CHA and asked them to coordinate with freight forwarder or liner and the CFS empty yard and pick up the containers. Containers are picked up from Gateway CFS yard and sent to the stuffing area. But due to some technical issues miller could not send the rice on time and they delayed the dispatch by 3 days, because of this and the congestion in the highway the rice arrived at CFS 4 days behind the schedule. Re packing and custom clearance took 2 days (containers are ready for movement on 6th day of pick up), by that time port's gate cut off for current vessel is over, but containers were picked up 6 days ago. 

In this case, containers cannot be sent to the port within detention free time (7 days). Shipper does not have control over this so they cannot do anything rather than waiting for next vessel which is scheduled to arrive next week, for that gate will be opened after 5 days.

In this case, shipper has to pay 4 days detention for 10 containers.

Calculation:

Detention charges: 100$ per 20' container per day.

4 days detention for 1x 20': 100$x4 = 400$

4 days detention for 10x 20': 400$x10 = 4000$

 

In case of Import:

Let us assume an importer imported 5 containers of green peas from Canada. 14 free days provided by liner at destination.

Vessel arrived and containers are offloaded and sent to the nominated CFS. However, importer has not received original documents and the documents are stuck at origin country due to some issues with exporter. Finally, importer receives original documents after 7 days. 

Once documents are received importer's CHA starts the clearance process, they file Bill of entry and submits all documents at custom for clearance, they also apply for plant quarantine clearance (without plant quarantine clearance custom will not clear the cargo).

All these process took 2 days, so total 9 days already over. Plant quarantine officer visits CFS and draw samples, the same sample sent for testing in laboratory, which takes minimum 5 days, report received on 13th day. Plant quarantine clearance and custom process took another 3 days, which means out of charge received on 15th day, which is outside detention free time. Now containers D.O. (delivery order) validity is over and containers are under detention. 

Importer does not have any option here, they have to pay detention and get the delivery of the goods, so they talk to their CHA and the CFS supervisor on how fast containers can be de stuffed or offloaded and they get to know that it will take one more day to offload the containers are return to empty yard. In this case, importer request liner to extend D.O. validity for 2 days, which means D.O. needs to be extended till 16th day.

Liner issues invoice for 2 days DO extension.

Calculation:

Detention charges: 100$ per 20' container per day.

2 days detention for 1x 20': 100$x2 = 200$

2 days detention for 5x 20': 200$x5 = 1000$

So importer/buyer will to pay to shipping line 1000$ as detention charge against shipping line's invoice for detention charges, and the shipping line will revalidate the Delivery order (DO) till 16th day. Once revalidated DO received, containers will be opened and de stuffed, goods will be handed over to importer and the importer will arrange vehicles and take the goods to their premises. Once goods are offloaded from containers, empty containers needs to be sent to the empty yard of nominated CFS on or before 12 AM (midnight) of 16th day. 

In any case, containers not reached at the nominated CFS on or before 12 AM, detention charges will be applicable for one more day, another detention invoice will be issued by shipping line and the whole process will be repeated again.