"Demurrage" in vessel chartering is the amount of liquidated damages owed by a charterer to a shipowner when the charterer remained in possession of the vessel for the purpose of loading and unloading (laytime) beyond the time allowed by contract. That is, demurrage describes the charges that the charterer pays to the ship owner for its delayed operations of loading or unloading. Officially, demurrage is a form of liquidated damages for breaching the laytime as it is stated in the governing contract (the charterparty). The demurrage sometimes causes a loss to the seller as it increases cost of the total freight.

At the end of the stay in port, the port agent draws up a Statement of Facts, setting out a log of events during the ship's stay in port. The Statement of Facts enables a time sheet to be drawn up and signed by the master and the shipper or receiver of the cargo. The time sheet enables laytime and therefore demurrage or despatch to be calculated.

The demurrage fee is often a daily amount agreed between charterers and ship owners. Ideally, the demurrage fee (per day in US dollars) covers the daily time charter rate, daily voyage costs, and the ship owner's risk premium.

Container haulage

Because the supply of a shipping container to a merchant has a similar nature to the contract of a supply of a vessel to a voyage charter, the industry refers to this container usage beyond the time allowed as Container Demurrage. This extra usage usually entitles the container supplier (usually the shipping carrier) to require a payment from the merchant.

In principle, it can be considered that the similarity between vessel demurrage and container demurrage is correct since both refer to the same concept, which is the late return of equipment supplied by one party to another for the purpose of carrying a cargo. However, the actual regime of container demurrage is still to be determined precisely.

In container haulage, customers are given a set period in their contract to tip (unload) their container delivery. Acceptable times for tipping are usually between 3 and 4 hours; time spent on site after that is considered "demurrage". Haulers will usually charge an hourly rate for each hour after the allowed time.

Demurrage can also refer to the cost levied by shipping lines to cover redecoration of the container after use by the merchant, but it could also be the charges by the shipping line to customers for not returning the container in a reasonable time.

Railway transport

On railways, it is the charge on detention of trucks

References

  • Haugen Consulting LLC – What is demurrage?
  • Demurrage-Calculation.com – How to calculate Demurrage?
  • Variety of demurrage information & strategies
  • Transaction Net – A "Green" Convertible Currency, Bernard A. Lietaer