Demurrage has a reputation for bad luck: a congested port, an inspection that drags on, a buyer who does not turn up. Sometimes it is. But in physical trading most demurrage invoices have a far duller and far more avoidable cause: a document or a payment that did not arrive in time. The container is at destination and nobody can collect it, because the original B/L is still in an envelope, the health certificate has a typo, or the bank has not yet received the payment the papers are released against.
The good news is that you can see it coming. Watch three dates — the vessel’s arrival, the last free day in your contract, and when the original documents will be in the hands of whoever collects the cargo — and avoidable demurrage lands on your desk two weeks early, not on the forwarder’s invoice a month late. This article explains how it is calculated, why you end up paying it even when the Incoterm says otherwise, and what to check, and when.
Demurrage, detention and storage are not the same thing
All three turn up on the same invoice, and many spreadsheets lump them into a single “other” line. It pays to separate them, because each one arises in a different place and is avoided in a different way. Exact definitions vary between carriers and terminals, so your provider’s tariff is what counts, but the general split is this:
| Charge | What it pays for | Where the clock runs | Usually billed by |
|---|---|---|---|
| Demurrage | Use of the full container beyond the free days | Inside the terminal | The carrier |
| Detention | Use of the container outside the terminal beyond the free days | From leaving full to returning empty | The carrier |
| Storage | The space the container takes up in the port | Inside the terminal | The terminal |
The distinction matters for a practical reason: demurrage stops when the container is collected, detention stops when it is returned empty. A buyer who collects on time but is slow to unload at their warehouse does not cause demurrage; they cause detention. If both carry the same name in your P&L, you will never know which one to tackle.
How it adds up: free days and tiers
Every demurrage tariff has two parts. First, a number of free days during which the container can sit in the terminal at no cost. Then a rate per container per day that is not flat: it rises in tiers, so day fifteen costs a good deal more than day six. That is why a two-week delay costs much more than twice a one-week delay.
| Tier | Days | Rate per container per day |
|---|---|---|
| Free | 1 to 5 | €0 |
| Tier 1 | 6 to 10 | €60 |
| Tier 2 | 11 to 15 | €120 |
| Tier 3 | 16 onwards | €180 |
At that tariff, three containers collected on day 14 pay five days of tier 1 and four of tier 2: €780 per container, €2,340 in total. If the same shipment is collected on day 20, one more day of tier 2 and five of tier 3 are added: €1,800 per container, €5,400. Six more days of waiting have more than doubled the bill. On a container of nuts with a margin of a few thousand euros, the second figure takes a very visible share of the shipment’s profit.
Last free day = Discharge date + Free days - 1
Chargeable days = MAX(0, Collection date - Last free day)
Assumes the discharge day counts as day 1. Some contracts
start counting the following day: check yours.Why you end up paying even when the Incoterm says otherwise
In a CFR or CIF sale, destination costs after discharge usually fall on the buyer, and it is easy to conclude that demurrage is not your problem. But Incoterms allocate the costs and risks of the goods; they do not say who pays for a delay caused by the documents. If the buyer could not collect because the original B/L arrived late, because the certificate of origin had an error, or because the papers were held at the bank awaiting payment, they will pass the invoice back to you. And they will have a case.
It is especially common when you sell cash against documents: you hold the B/L until the buyer pays, the buyer pays late, the container waits, and the argument about who caused the delay comes afterwards, with the invoice on the table. The sensible move is to settle it beforehand: a clause in the sales contract stating which demurrage is for the seller’s account (the kind caused by documents the seller issues late or with errors) and which is for the buyer’s (the rest). It does not remove the cost, but it removes the argument, which usually costs more than the invoice.
The three dates that give you two weeks’ warning
Avoidable demurrage is almost never decided on arrival day: it is decided ten to fourteen days earlier, while there is still time to courier a document, correct a certificate or ask for extra free days. This is the timeline worth following for every shipment:
- At booking: confirm in writing the free days at destination for that port and container type. It is the easiest moment to negotiate extra days, and almost nobody asks.
- Fourteen days before arrival: work out the last free day from the estimated arrival date and compare it with when the original documents will reach whoever clears the cargo. If the originals travel by courier, count their real transit time, not the one on the courier’s website.
- Ten days before: check that the documents the destination country requires are issued and error-free: B/L, commercial invoice, packing list, certificate of origin and any health or phytosanitary certificates. A typo caught now is an email; caught at destination it is a week.
- Seven days before, if you sell cash against documents: confirm the payment status. If the buyer has not paid and the B/L is released against payment, that container is going to wait, and it is better to know now than on arrival day.
- On discharge day: record the real date, recalculate the last free day and confirm to the buyer when it ends.
Budget for it even if you expect zero
Demurrage is a “surprise invoice” for an accounting reason: it is not in the deal’s budget, so when it arrives it has nowhere to go and eats the margin in one bite. A deal budgeted with a demurrage line at zero and a deal with no line at all do not say the same thing: the first says “I have thought about this and hope it does not happen”; the second, that nobody thought about it.
In practice, add the line to every deal with an estimated amount — zero, or a small reserve on routes and ports where it has happened before — and compare it with the actual amount at settlement. After ten or fifteen shipments you will know which routes, ports and buyers really generate demurrage, and you can raise the reserve where it belongs instead of spreading the worry evenly.
What Granel does with this, and what it does not
In Granel every container goes through six milestones: booking, gate-in, loading, B/L, arrival and release. Expected dates are worked out from the deal’s loading date and ETA, so a milestone that has not happened when it should is visible on the container without anyone opening a spreadsheet. On the Growth and Enterprise plans, a daily scan also alerts the organisation’s owners and admins when a milestone is more than three days overdue. The B/L milestone is the one that matters here: if it has not been recorded a few days after loading, the documents are running late, and that is the first warning of possible demurrage.
What Granel does not do is know your free days or calculate demurrage: it expects release around five days after the ETA, which is a general reference, not your contract’s. If your free time at a port is shorter, the last-free-day calculation in this article is still yours to do. Where it does help is the budget: the demurrage line lives on the deal with its estimated and actual amounts, and settlement shows you the difference shipment by shipment.
With or without a tool, the rule is the same: demurrage is not argued when the invoice arrives, it is avoided fourteen days before the vessel berths. Everything after that is negotiating who pays for something that has already happened.