Detention vs Demurrage
Detention and Demurrage are words commonly used in the context of the shipping industry. These are also words that are often clubbed together as if being synonymous. However, it is erroneous, and despite similarities, there are differences that are important for freighters and also for people who use the services of cargo vessels to transport goods from one place to another. This article tries to highlight the differences between demurrage and detention.
People often charter vessels for voyages and keep the vessels for the time period mentioned in the agreement. However, when they fail to give possession of the vessel to the company on time and are in possession of the vessel, this period is called demurrage. In common usage, demurrage refers to the penalty that is applied on the charterer for using the vessel for a period that is more than that mentioned in the agreement.
These days, the term is being used for delays in unloading the cargo from the vessel by the consignee as he has to pay a fine or a penalty for not picking up his consignment on time. Suppose a person books a container from one port to another and the ship reaches its destination, but the person fails to pick up the container even after 7 days of arrival of the cargo on the port, he is asked to pay demurrage charges to the vessel for keeping the cargo safely for extra days.
After the container has been picked up by the consignee, he has to return the empty container to the vessel within allotted time period. If he fails to do so within a specified time period, he has to pay another fine that is known as detention charges as he has caused delay for the company by not returning the empty container on time.
What is the difference between Detention and Demurrage?
• The word demurrage was coined when charterers failed to return the chartered vessel on time and had to pay for the delays. This delay was earlier called demurrage but later got applied to the penalty or fine that was imposed upon the charterer for causing the delay.
• In modern times, demurrage has come to mean the penalty that is imposed by a vessel on a consignee if he fails to pick up his container on time and the demurrage is calculated on a daily basis after the vessel has arrived at the port.
• Detention is another penalty that is charged from a consignee when he fails to return the empty container on time.
• Thus, demurrage is a charge or penalty before the cargo is unpacked whereas detention is a penalty that is charged after the cargo has been unpacked.