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While the term demurrage may seem unfamiliar to new shippers, knowing how to avoid demurrage charges is essential when shipping. Demurrage is a fee that port officials place on cargo that overstays its time at a terminal. Also known as the last free date (LFD), this period is the final day that goods have free storage time. LFD can depend on various factors, such as a vessel’s arrival time at a port. Demurrage differs from detention charges when the importer exceeds the time for using the container outside the port terminal. This article will explain the causes of demurrage costs and how shippers can avoid these fees when moving goods internationally.
Several situations can lead to cargo getting stuck at a port. One of the most common reasons this happens is because of documentation issues. If the paperwork is incorrect or missing, the shipment must stay on hold and may collect demurrage charges. An example is a Bill of Lading (BOL) with incorrect cargo or address data. The documents must also reach the receiver on time, meaning the shipper must gather the paperwork in advance. If an original BOL is lost, a shipper must take several recovery steps, which can take several days.
Another scenario that can lead to demurrage charges is a delay due to cargo inspection. Once the shipment reaches the port of import, customs checks it before clearance. If customs notices an incorrect HS code, they will place the goods on hold. A Harmonized System (HS) code is a number that customs use to classify cargo for tariff payments. Other occurrences unrelated to the shipper, such as labor strikes and bad weather, can also cause goods to remain at ports. Importers must also pay late invoice payments to prevent more costs from racking up. While several scenarios can lead to demurrage, the shipper can avoid and avert most.
Although avoiding demurrage charges from situations like a labor strike is impossible, shippers can still prevent it from happening. Knowing the dos and don’ts of importing goods into the U.S. is essential. The importer should do the paperwork correctly, entirely, and on time. Before shipping, you should know the free days in your shipment contract and plan accordingly. Understanding the customs clearance process and what can go wrong is also essential. The regulations for importing can vary based on the port and the type of goods brought in. Drayage to a less costly off-port storage is ideal if your facility is not ready to receive the cargo.
The amount of information in this article may be confusing for first-time shippers. One of the most efficient ways to avoid demurrage charges is by having the help of a freight forwarder. A freight forwarder is an intermediary between the shipper and the final destination. They specialize in arranging cargo movement on behalf of the shipper and handle the logistics of your shipment. Along with educating you on preventing demurrage, they coordinate with the ports to ensure it doesn’t happen. Contact A1 Worldwide Logistics at 305-821-8995 to speak to one of our forwarders regarding starting your transport journey. We also have customs brokers to clear your shipment once it enters the U.S.
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