The Complete Guide to Detention Charges in Shipping and How to Avoid Them

Every year, detention charges are increasing on a global level. According to OOIDA (The Owner-Operator Independent Drivers Association), 78% of truckload carriers reported losing one load per month due to detention delays.

Result? Serious financial losses.

The good news is – it is possible to minimize detention charges and regain control over your shipping costs.

In this article, we’ll shed light on the basics of detention charges and share strategies to optimize your logistics process.

Plus, you’ll learn some effective strategies to avoid detention charges.

Ready to take control of your shipping expenses? Let’s begin!

What are Detention Charges?

When you ship cargo internationally, you’re not just using a shipping service, you’re also renting the containers for a set number of days.

Usually, shipping lines provide a certain number of free days for container use.

But, once this free time period is over, an additional charge is applied, known as Detention Charges. Think of it as late fees or a penalty.

And because every shipping situation is unique, detention rates also vary depending on the type of container or equipment used.

So, let’s first take a look at the main types of detention charges.

Four Types of Detention Charges

1. Container Detention Charges

Container detention charges apply when you keep the container outside the port longer than the permitted period.

Typically, daily charges for such containers usually range between $50 to $100, the moment containers leave the port.

And, each container must be returned within 3-7 free days.

Detention for containers applies in two ways:

• Import Detention: When you pick up a full container from the port but don’t return it after unloading within the allocated free days.
• Export Detention: When you receive an empty container, but don’t load and return it within the free time period, you’ll pay added fees.

2. Equipment Detention

Some shipments require specialized containers—like refrigerated containers (Reefers), flat racks, open tops, and tank containers.

These types of containers often come with higher detention fees due to their cost and limited availability.

3. Driver Detention

Driver detention is the rate charged when a driver is kept waiting beyond the standard free time, which is usually 2 hours.

If the truck driver waits more than 2 hours, additional fees of $50 to $75 per hour apply.

These rates are charged by carriers to compensate their drivers for the downtime when they’re unable to make other deliveries.

4. Peak Season Detention

Carriers often charge double the normal rates during peak shipping seasons, and the free days drop from 7 to just 3-4 days.

So, if you are moving a container during peak shipping seasons, make sure to return it within the set timeframe.

Why do Shipping Lines Impose Detention Charges?

Contrary to popular belief, shipping lines don’t charge high detention rates to boost their profits.

Instead, they impose these charges to keep the containers moving and avoid any equipment shortages.

When a container is delayed, it disrupts the next shipment and impacts other customers.

Quick container returns allow shipping lines to operate smoothly. That’s the reason why they follow strict detention rules and charge penalties on a daily basis.

Now that we’ve covered the basics, let’s explore and understand how detention charges can impact your day-to-day shipping operations.

Impacts of Detention Charges

Detention charges can have two major impacts. They are:

1. Financial Impact

Detention charges can eat into profits, and instantly lead to financial stress. Here are some common ways detention hits your finances:

• Direct Costs: With each delayed container, the daily fees multiply into costly storage and shipping expenses. You will have to pay extra for additional storage and handling fees.
• Sales Impact: Unexpected delayed shipments also delay sales and payments, causing late deliveries, especially for time-sensitive products.
• Long-Term Impact: Persistent cash flow problems can hurt the credit score of a business, making borrowing harder. In extreme cases, high detention fees can lead to financial difficulties or even bankruptcy.
• Legal fees: Disputes over detention charges may require legal assistance, leading to lawyer fees or settlement costs.
• Extra Fees: Delays can lead to re-routing shipments or paying extra for expedited transport, raising total shipping costs.
• Increased Storage Costs: Longer delays mean holding onto stock longer than planned, increasing storage or warehouse costs. In extreme cases, goods may become obsolete or lose value, leading to financial losses.
• Currency Risks: If the detention fees are in foreign currencies, businesses may face extra charges for currency conversion or international payments.

2. Operational Impact

A single delayed container can trigger a chain of operational disruptions across multiple departments. These operational challenges often go far beyond the port and require immediate attention. They are:

• Rescheduling Costs: Missed schedule means extra fees for rescheduling or arranging new transport.
• Reallocating Resources: Resolving detention issues takes extra time and resources, increasing operational costs.
• Extra Staff time: Your staff may need to focus more on handling detention issues, which pulls them away from their regular duties and reduces their overall efficiency.
• Damaged Relationships: Ongoing detention issues can damage relationships with suppliers, customers, or shipping companies. As a result, if your customers face repeated delays, they may look for more reliable alternatives, leading to lost business and future sales opportunities.

While detention changes are detrimental to your business, here is another harsh reality. The causes of detention charges depend on many different factors. Let’s find out what they are.

Eight Common Causes of Detention Charges

Detention charges are applied on the basis of the shipping line reported delay, type of equipment used, and implementation of the handling procedure.

Some common causes of detention charges include:

1. Delayed Pickup or Delivery

If the consignee or consignee’s agent fails to take the freight on time from the port or if the consignee delays the delivery of the goods, a detention charge may arise.

2. Customs Clearance Delays

When containers stay in the terminal longer than expected due to delays in the Customs clearance process such as documentation issues, inspection, or regulatory blockading.

3. Port Congestion

Sometimes ports could become blocked or overcrowded, slowing the flow of containers, and resulting in higher detention fees.

4. Unavailability of Transport

If there is a shortage of transport or equipment like trucks to move the cargo within the free timeframe window, detention charges may apply.

5. Incorrect or Missing Documentation

Sometimes, missing or incorrect documentation can also cause a delay in the collection or dispatch processing of cargo, resulting in detention charges.

6. Improper Cargo Handling or Packaging

If the goods are not properly labeled, it may lead to delays in loading or unloading, leading to detention charges.

7. Refusal to Accept Cargo

If the consignee refuses the cargo upon arrival or requests changes in delivery instructions, this can also apply to detention charges.

8. Weather Delays

Bad weather conditions can delay port operations, leading to detention charges.

Knowing the common causes of detention charges is key to preventing or solving it when the situation arises. So how do you turn these challenges into opportunities? What preventive strategies can you use to keep your shipments moving and costs under control?

That’s what we are going to talk about next.

Eight Effective Preventive Strategies to Avoid Detention Charges

Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.”

This timeless wisdom is especially true when managing detention charges in shipping.
Because preventing detention charges is probably the best way to save you potential losses.

Here are eight key strategies to prevent detention charges:

1. Plan for Timely Pickup and Delivery

Ensure that the consignee is ready to pick up the cargo as soon as it arrives at the port or terminal. You want to ascertain that the delivery dates and locations are confirmed well in advance. Open and clear communication about timelines with all parties involved is crucial to keeping things on track.

2. Ensure Efficient Customs Clearance

Prepare and submit all customs documentation including invoices, bills of lading, and certificates of origin before the shipment arrives at customs. You also want to periodically check for any changes in customs requirements, tariffs, or regulations to avoid delays due to non-compliance. The best way is to partner with experienced customs brokers who can speed up the clearance process.

3. Use Technology for Monitoring and Notifications

Use GPS tracking and shipment monitoring tools like SeaRates ERP to track the progress of containers. That way, you can identify potential delays, and plan accordingly. Set up automated alerts for any delays in transit, ensuring all parties are aware of upcoming pickup and delivery times.

4. Maintain Proper Documentation and Labeling

Someone once told me “God is in the details.” I can’t agree more. Always double-check all paperwork such as invoices, packing lists, certificates, and permits is correct and complete.
You also want to ascertain that goods are properly labeled and meet both local and international shipping standards at departure and arrival points. The level of detailing will prevent any potential delays (and headaches too!).

5. Schedule Equipment in Advance

Smart shippers know that planning for resources in advance is no longer a luxury, it’s a necessity. You want to arrange all necessary equipment, including containers and trucks, ahead of time, especially during peak seasons.

6. Establish Clear Communication Channels

This is another biggie. Stay in communication with all relevant parties throughout the shipping process. That way, when the need arises, you can resolve any issues without wasting time.

7. Negotiate Free Time Extensions

This is where your negotiating skills come into play. You want to negotiate for longer free days with carriers. This will give you a buffer time in case of delays. Another smart move is to include buffer time in your shipment schedules to account for any unexpected delays.

8. Optimize Transit Routes

You always want to plan and choose shipping routes with minimal port congestion. In case you are facing recurring issues on certain shipping routes, consider exploring alternative routes that are more reliable.

Last but not least, let’s go over a few best practices to manage detention charges so you can manage your shipping business smoothly.

Best Practices to Manage Detention Charges

Here are some important shipping best practices to manage expensive detention charges:

• Free-time policies: It’s important to understand free-time policies as different carriers and ports have varying free-time limits for containers and equipment. Ensure that your shipment is scheduled to be collected or delivered within this agreed timeframe.
• Use Digital solutions: Invest in digital tools such as Transportation Management Systems (TMS) or other logistics software to streamline the shipment process and improve coordination between all stakeholders.
• Streamline information flow: You can also use Electronic Data Interchange (EDI) systems for seamless communication between your company, freight forwarders, carriers, and customs authorities. This ensures that critical information is exchanged faster and more accurately.
• Staff Training: Train your logistics and operations teams on best practices for avoiding detention charges, including documentation management, customs clearance, and communication protocols.
• Create Awareness: Educate and create awareness among all stakeholders about the financial impacts of detention charges and why they need to prevent such costs.

By adopting these best practices, you can significantly reduce the risk of detention charges.

Conclusion

Detention charges are important for maintaining the efficiency of global supply chains. While detention charges are often viewed as penalties, they are a necessary mechanism to handle the costs associated with delays and the extended use of containers.

Remember, with smart planning, clear communication, and the right technology, you can avoid or minimize detention charges without too much fuss.

Frequently Asked Questions

1. What are detention charges and when do they apply?

Detention charges are fees imposed when containers or equipment are held beyond the allowed free time.

These apply in the following situations:

• Containers are held beyond the free timeframe.
• Equipment is kept outside the port or terminal.
• Charged by shipping lines or container owners, until the container is returned empty.

Key points to remember:

• The detention fees are charged typically $50-$100 per container per day.
• Calculation starts after the free-time limit expires.
• The charges may increase over time if delays persist.

2. How are detention charges calculated?

Detention charges start right after your free time ends.

Shipping lines typically calculate the fees per container, per day. Think of it like a daily parking charge for your cargo.

Here’s how detention charges are calculated:

• Every container gets 3-7 free days at port. After this, detention charges will be applicable.
• The longer your container stays, the higher the daily fees:
  • Days 1-7: $75-150 per container
  • Days 8-14: $150-250 per container
  • 15+ days: $200-300+ per container
• Different types of containers mean different rates:
  • Standard containers cost less.
  • Refrigerated containers cost more.
  • Special equipment has premium rates.

3. What’s the difference between detention, demurrage, and per diem charges?

Each of these charges serves a different purpose:

Detention: Applies to containers waiting outside the port or terminal beyond the allowed free time.

• Starts after pickup from the port
• Paid to the shipping line

Demurrage: Applies inside the port or terminal when containers are not picked up within the free time.

• Starts when the vessel arrives
• Paid to terminal operator

Per Diem: Often used interchangeably with detention, this is a daily equipment usage charge.

• Can apply to both in and out of terminal time
• Typically used at US ports.

4. How is free time calculated and what affects it?

The standard free time for detention is typically between 3-5 days, starting from the day the container is picked.

Weekends and holidays are not included in the free time calculation.

Several factors influence the calculation of free time, such as:

• Contract Terms
• Shipping Line Policies
• Port Location
• Cargo Type
• Volume Commitments
• Season Peak Periods