Maybe you have heard the term demurrage, but you are not familiar with its meaning and concept, but you have been curious about what demurrage is and how it occurs? In this article, we will provide you with the definition of demurrage and everything you need to know about it. Stay with us.
Importing and exporting goods is one of the ways of generating income for countries. One of the ways of generating income that is very important for governments is the export and import of goods. To export and import legally in different countries, it must be done through customs. Therefore, import and export have special rules and regulations that commercial companies must follow.
What is demurrage?
Demurrage is one of the expenses in sea transportation, in fact, demurrage is a penalty for late return of the container, which must be paid by the owner of the goods Or in other words, demurrage is the cost of the right to stop the container, the longer the container stops at the customs, the cost of demurrage increases. In demurrage, all costs are mentioned in the contracts and are calculated by the number of days.
Demurrage fees in each country and shipping company have different prices with other countries and their shipping companies. Also, the costs vary according to the size of the containers.
How demurrage occurs
After the foreign goods are purchased, if the goods are transported by sea, a container is needed. This container is rented to the buyer and he must return it as soon as the goods are unloaded.
According to the contracts written between the carrier company and the buyer of the goods, a period of time called free time is specified for the return of the container. After receiving the warehouse bill, if the specified time period (FREE TIME) is over, the demurrage will start in days.
Factors that cause demurrage
In international trade, the possibility of additional costs is unavoidable, so merchants must be aware of the conditions and rules of international trade to minimize additional costs or demurrage.
One of the additional costs for the goods owners is the demurrage cost, which is caused by many factors.
Among the most important reasons for the occurrence of demurrage, the following can be mentioned:
- Dispute between the shipping company and the owner of the goods
- The problem of the owner of the goods due to customs clearance
- Increasing the clearance time more than the time specified in the contract
- Costs of delays in clearance and lack of knowledge of the goods owner
- Excessive stoppage of the carrier due to the inspection of the container by different persons
- Failure to receive relevant clearance documents by the owner of the goods at the specified time
Some solutions to prevent demurrage
- Choose the right route and port.
- Clearance companies should be used.
- Strip method should be used during unloading.
- Receive a product sample before ordering the product.
- Before the cargo reaches its destination, the goods clearance procedures should be carried out.
- More time should be allocated in the contract to prepare the clearance documents.
- Use transport companies that have a longer free time.
- Professional transportation companies should be used for timely delivery of goods and unloading.
Conclusion
In this article, we have given you explanations about “what is demurrage”. Demurrage is one of the expenses in sea transportation, in fact, demurrage is a penalty for late return of the container. We also talked about the factors that cause demurrage, solutions to prevent demurrage, what is demurrage, etc. Click to see other articles in the field of transportation.
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