Following a dynamic few years in the ocean transportation industry, shippers and ocean logistics professionals are paying increased attention to demurrage and detention. For shippers, demurrage and detention has long been a bothersome, costly inevitability in the world of ocean shipping, while for others in the transportation industry, demurrage and detention represents a means of increasing revenues in an increasingly competitive port and carrier ecosystem.
Much of the anxiety around demurrage and detention comes from a lack of insight into what, exactly, is behind these costly fees. Opaque rules surrounding these charges can quickly result in huge bills for shippers, and a complicated regulatory landscape can leave shippers uncertain of their rights as shipping companies and ports attempt to levy increasingly high fees.
On behalf of nervous shippers, we’re digging into the recent history of demurrage and detention, how recent trends in 2023 may affect these fees, and three strategies shippers can use to navigate the changing tides of demurrage and detention in an increasingly competitive ocean freight market.
Changing Tides: The Recent History of Demurrage and Detention
The pandemic changed life for everyone in the transportation industry. Skyrocketing volumes, led by a 43% increase in the e-commerce market in 2020, forced shippers and logistics professionals to make last-minute, high-stakes decisions about volume allocation, routing, and carrier partners. While these decisions helped many shippers navigate the fraught pandemic era supply chain, for many shippers, they also led to problems with shipments stuck at ports without capacity or personnel to move them onto the next stage of transportation.
In a 2021 interview with Supply Chain Dive, Weston Labarr, now of Cargomatic, criticized demurrage and detention practices meant to incentivize freight movement during industry-wide capacity crunches: “Detention and demurrage is well intentioned, [...] However, currently the supply-chain is so backed up there is no need to incentivize the movement of cargo. Each element of the supply-chain is struggling with capacity and wants to move the freight, but it just isn’t moving.” The lingering effects of COVID-induced demurrage and detention practices remain, with charges in 2022 remaining at a 12% high despite a fall in 2022, according to Global Trade Magazine.
In response to what shippers and regulators alike saw as predatory practices by carriers and ports, the U.S. Federal Government stepped in with the Ocean Shipping Reform Act, or OSRA, which expanded the powers granted to the Federal Maritime Commission (FMC), a regulatory agency that had been largely defanged in the midst of the 1980s anti-regulatory zeal. Under new FMC regulations, now in effect, carriers could be subject to significant fines and civil penalties if they’re found to engage in predatory practices around detention and demurrage or fail to report information to the FMC, including the number of allowed free days, the date that the container is made available, and the contact information for requests or mitigation of fees.
Under the OSRA, if carriers are found to be guilty of not providing required information, providing faulty information, or engaging in predatory demurrage and detention practices, they could be responsible for customer refunds, according to FreightWaves: “Customer refunds are also included in a new provision enacted by OSRA 2022 — section 4130 — that addresses the issue of charge complaints, such as inappropriately charging or overcharging for demurrage and detention.”
Despite FMC’s Intentions, U.S. Demurrage and Detention Rates Remain Sky-High
Despite the changes implemented by a newly empowered FMC, many ocean logistics professionals feel that the regulations don’t go far enough to disincentivize overzealous demurrage and detention practices on the part of ever-more-powerful ocean carriers. “Just ordering a refund creates no disincentive to bad behavior,” Peter Friedman, the executive director of the Agriculture Transportation Coalition, told FreightWaves, “A carrier can just charge the fee, and the worst that happens is they have to give it back. A refund is the obvious basic requirement, and then the Commission should impose a penalty. Without the penalty, there is little or rather, no disincentive for the carrier to cease imposing those charges.”
While industry professionals like Freidman call for the FMC to take further action against sky-high detention and demurrage charges, the data shows that U.S. charges stand out even amongst rising global fees. TradeWinds, reporting on data published by container marketplace ContainerXChange, reported last year that “Liner operators are charging the highest demurrage and detention fees in the world at five key US ports,” reporting that, “the Port Authority of New York and New Jersey has the highest average charge of $3,182 per day two weeks after cargo arrives at a port or is discharged from the vessel.”
As the struggle against skyrocketing demurrage and detention charges continues into the new year, shippers are on the lookout for innovative strategies to avoid port fees. As fees rise, shippers are turning to recent advancements in ocean container technology to mitigate fees at every step of the transportation process.
Three Ways Smart Shippers Use Tech to Navigate Demurrage and Detention Charges
With demurrage and detention charges on the rise and a newly empowered FMC struggling to find adequate means of disincentivizing carrier fee assessment, shippers are using technology to navigate the turbulent waters of demurrage and detention in 2023. By focusing on three key areas, innovative ocean container software platforms are offering shippers a helping hand in a high-stakes detention and demurrage environment.
Ocean Container Visibility
Often, container detention and demurrage is charged as a result of a lack of coordination within the supply chain. Shipments arrive at port without reliable means of drayage waiting to shepherd them to the next stage of transportation, leaving them stranded and subject to port fees. Inaccurate carrier ETAs and unreported exceptions make coordination difficult, meaning that logistics partners are caught off guard by late or early arrivals. Without real-time container tracking, the fate of high-stakes ocean container shipments is often left to chance.
With real-time ocean container visibility, shippers can take back control of their high-stakes ocean freight. On-demand real-time container tracking offers shippers a birds-eye view of their operations, letting them provide timely status updates to logistics partners throughout the supply chain, thus ensuring that shipments aren’t left waiting days for drayage service after the last free day. Automated notifications, integrated into cloud-based real-time ocean container tracking platforms, mean that shippers are notified when exceptions occur, allowing them to react to unexpected ocean freight crises with unprecedented speed.
While ocean container visibility helps shippers gain reflexivity in a high-stakes ocean freight ecosystem as a means of avoiding demurrage and detention charges, data is what allows shippers to restructure operations to minimize demurrage and detention in the long term. However, raw data can be a burden for busy shippers. On-time-and-in-full, or OTIF, data can be unwieldy, making it difficult for shippers to translate performance metrics into useful insights.
For shippers wary of investing in specialized staff and data processes, recent innovations in ocean container software use the power of API to seamlessly transform raw data into actionable analytics, allowing shippers to make the most of collected data without the overhead associated with traditional data processing. Armed with actionable analytics, shippers can build demurrage and detention resilient supply chains through smarter carrier decisions, route optimization, and improved efficiency metrics. In the fight against container detention and demurrage, actionable analytics are a vital ally for today’s shippers.
While real-time ocean container visibility and actionable analytics are an invaluable component of any demurrage and detention mitigation strategy, they’re only as useful as the platform through which they’re accessed. For years, shippers have had to rely on siloed software programs to mitigate demurrage and detention. While these tools have been useful in helping shippers avoid port fees, siloed software makes it nearly impossible to create cohesive and effective demurrage and detention avoidance processes.
APIs take disparate software solutions and compile them into a single ocean container tracking tech-stack, ensuring that shippers can gain the full advantage of groundbreaking software without sacrificing streamlined supply chain collaboration strategies. With API, shippers can put actionable insights and real-time visibility into practice to avoid skyrocketing demurrage and detention costs.
Navigate the Shifting Tides of Demurrage and Detention with OpenTrack
Today’s shippers face a challenging transportation landscape. Don’t let demurrage and detention add to your list of worries. With OpenTrack, shippers can access a vital toolkit of resources to mitigate the effects of rising demurrage and detention charges.
- Ocean Container Tracking provides shippers with a birds eye view of their ocean freight operations.
- Actionable Analytics ensures that shippers can build stronger supply chains to avoid demurrage and detention.
- API & TMS Integration helps shippers build cohesive software ecosystems to bolster resilience and optimize operations.
Book a demo with OpenTrack today, and see how Ocean Freight Visibility Made Simple can help your business navigate the changing tides of demurrage and detention in 2023.