Demurrage and detention in a landed cost: what a day actually costs

Three charges, three clocks

Most importers use “demurrage” loosely, for any charge that accrues while a container sits somewhere. For costing purposes the distinctions matter, because the clocks start at different moments, stop on different events, and are billed by different parties.

Now the part that catches people, and the reason to be careful before you argue with an invoice: the labels are not universal. Carriers write their own tariffs, and some invert the conventional naming — iContainers notes a Maersk arrangement in Spain where the period before the container leaves the gate is billed as detention and the terminal storage as demurrage, the reverse of the table above. Some carriers also run a single combined allowance covering both periods.

So do not cost from the word. Cost from the tariff: what event starts the clock, how many free days, what rate applies to which days, and what event stops it. Two charges with the same name at two carriers can behave completely differently.

The free-time definitions that decide everything

Free time is the allowance before any time-based charge begins, and the last free day is the final charge-free day. That sounds simple and is not, because four details move the answer and none of them is obvious:

• What starts the clock. Vessel arrival, discharge, or availability for pickup are different dates, sometimes by days.
• Calendar days or working days. This single distinction can change the bill by half.
• Whether the pickup and return days count. Tariffs differ, and both ends are chargeable days.
• How weekends, public holidays and port closures are treated. In many tariffs they count in full even though nothing can physically move.

Demurrage and detention frequently carry different allowances from the same carrier, so you may have more free days on one clock than the other. Get the numbers in writing before the vessel arrives, not after the invoice.

Why tiered rates make the loss accelerate

Time-based charges generally escalate: a first band of days at one rate, a second band higher, a third higher again, and at some ports a punitive band beyond. A survey of US port and carrier tariffs shows the structure clearly, with later bands running at several times the first, and terminal demurrage set independently by each terminal so the same carrier faces different charges at different ports.

The arithmetic point matters more than any particular rate: you must compute each band separately and add them. Applying the top rate to every day overstates the bill; applying the first rate to every day understates it badly, which is the more common and more dangerous error in a cost estimate. Unless a tariff explicitly says otherwise, a delay is a sum of bands, not a single multiplication.

This is why demurrage behaves unlike anything else in your costing. A duty rate is linear in value. A per-litre excise is linear in volume — the guide on ad valorem versus specific excise covers how those behave. Demurrage is convex in time: it gets worse faster the longer it runs.

What a day actually costs: a worked example

All figures below are illustrative, including the free time and the band rates. Substitute the terms in your own tariff.

One container, 1,200 sellable units, landed cost US$18,000 before any time-based charge, so US$15.00 per unit. You sell at US$18.50 with US$0.50 per unit of selling cost. Free time is 5 days; days 1–4 past it run at US$120 per day, days 5–10 at US$250, and day 11 onward at US$400.

Before any delay
  Revenue            1,200 x 18.50  =  22,200.00
  Landed cost                          18,000.00
  Selling costs      1,200 x  0.50  =     600.00
  Profit                                3,600.00   (3.00 per unit, 16.22% margin)

Demurrage past free time, computed band by band
   4 days   4x120                    =     480.00   ->  0.40/unit
  10 days   4x120 + 6x250            =   1,980.00   ->  1.65/unit
  14 days   4x120 + 6x250 + 4x400    =   3,580.00   ->  2.98/unit
  15 days   4x120 + 6x250 + 5x400    =   3,980.00   ->  3.32/unit

What is left of the profit
   4 days   3,600 -   480  =  3,120.00   margin 14.05%
  10 days   3,600 - 1,980  =  1,620.00   margin  7.30%
  14 days   3,600 - 3,580  =     20.00   margin  0.09%
  15 days   3,600 - 3,980  =   -380.00   margin -1.71%

Fourteen days past free time consumes the entire profit on this shipment. Not the margin on the delay — the whole profit, all of it, on goods that were bought well and sold at the price you intended.

Look also at how unevenly the damage lands. The first four days cost US$480. Days eleven to fifteen cost US$2,000 — over four times as much money for roughly the same number of days. An importer who has absorbed a short delay before, and reasons from that experience that a longer one will cost proportionally more, is badly wrong. It costs disproportionately more.

The same delay on a different container

Here is the structural point that makes demurrage worth modelling rather than merely dreading. The charge is fixed per day. It does not know or care what is inside the box. So the per-unit consequence is governed entirely by your unit count.

That same fifteen-day delay costs US$3,980 whether the container holds 1,200 units or 12,000. Spread over 1,200 units it is US$3.32 each and the shipment is under water. Spread over 12,000 units it is US$0.33 each — noticeable, survivable, probably absorbed without anyone noticing.

Which tells you where the real risk sits, and it is not where most people assume. High value, low unit count, thin margin is the dangerous combination. If you import small quantities of expensive goods, time-based charges are a far bigger threat to you than to the trader bringing in a container of fast-moving consumables — even though the consumables trader is the one who worries about them more. The note on landed cost per unit and break-even price works through why the denominator deserves this much attention.

Pricing the exposure before the vessel arrives

You cannot forecast a delay. You can do something more useful, which is to know in advance what one would cost you and at what point the shipment stops being worth doing.

• Get the terms in writing first. Free days on both clocks, the band rates, what starts and stops each clock, and how non-working days are treated. Before the vessel sails, not after it berths.
• Compute your break-even day count. Work out how many days past free time consume the whole profit — fourteen, in the example above. That single number is the most useful thing you can know about a shipment’s time risk, and it takes five minutes.
• Carry a provision on routes that have bitten you. If a lane or a port has historically run two or three days over, cost it in as a line rather than hoping. An estimate that is quietly optimistic every time is not an estimate.
• Model the band structure, not an average. A single blended daily rate will understate a long delay and overstate a short one, which is the worst of both.
• Know what a clearance day is worth. Once you can price a day, spending money to save days — express document handling, pre-paying duty, a better broker — becomes an arithmetic decision instead of a judgement call.

Establishing whose days they were

Time-based charges are also the hardest line on a clearing invoice to attribute, because days run for many reasons and they do not all belong to the same person. Documents can arrive late from the supplier. Funds can be slow. An inspection can be ordered. The broker can sit on a file. The port can close.

The only way to tell afterwards is a dated timeline of the whole clearance — vessel arrival, documents complete, declaration lodged, assessment raised, payment cleared, container released and returned. Ask for it with every invoice, not only the painful ones. The note on how to read a clearing agent’s invoice sets out where these charges sit among the four categories on a clearing bill and what supporting documents to require for each.

Keep those timelines and a pattern emerges within a handful of shipments. If the delay is consistently at the same step, that is a process you can fix. If it is consistently the same counterparty, that is a conversation. Either way it stops being bad luck and becomes something you manage. The note on why import profit disappears between the quote and the warehouse covers the other costs that routinely go missing from an estimate.

Where TrueCost fits

TrueCost does not publish demurrage tariffs, free-time allowances or port storage rates, and it cannot tell you whether a charge you were billed was correctly applied. Those come from your carrier’s tariff and the terminal’s schedule.

What it does is let you enter a time-based charge as its own cost line rather than burying it in a lump, so a delay shows up in landed cost per unit, break-even price and margin immediately — which is how you find the break-even day count. Run the shipment once clean and once with a provision in the free landed cost calculator and the difference is your exposure. The sample report shows how charge lines are presented, and TrueCost Pro keeps the estimate beside the actual invoice so the days you did not plan for are recorded rather than absorbed.

The takeaway

Demurrage is usually discussed as an operational failure to be avoided. It is also a priced risk, and the importers who handle it well are not the ones who never incur it — they are the ones who knew what a day cost before the vessel arrived. Read the tariff rather than the label, compute the bands separately, find the day at which the profit is gone, and write it down next to the shipment. A cost you have measured is one you can decide about.

All figures, free-time periods and rates in this note are illustrative estimates. We do not publish demurrage, detention or port storage tariffs, and nothing here states the terms in force with any carrier, terminal or port. Tariffs differ by carrier, terminal, equipment type and trade lane, and the naming of these charges is not standardised. Confirm the allowances, rates and clock-start and clock-stop events in your own carrier tariff and terminal schedule before you rely on them. This is not customs, tax, accounting or legal advice. Our calculation methodology and editorial policy explains how we produce and review these figures, and how to tell us about a correction.