Demurrage

How Demurrage Works

When a container vessel arrives at the port of destination and containers are discharged from the ship, the ocean carrier grants the consignee a set number of "free days" to arrange pickup. This free time period typically begins when the container is unloaded from the vessel and made available for retrieval, though the exact start date varies by carrier and terminal.

If the container is not picked up before the free time expires, demurrage charges begin to accrue on a per-day basis. These charges continue until the container gates out of the terminal (is physically removed by a drayage truck).

Free Time and Last Free Day

Free time is the number of calendar days the carrier allows for container pickup at no additional charge. The standard free time for import containers in the United States is typically between 3 and 7 days, depending on the carrier, the port, and the terms negotiated in the freight contract.

The Last Free Day (LFD) is the final date on which the container can be picked up without incurring demurrage. This is one of the most important dates in inbound logistics because missing it can add hundreds of dollars per container per day to the total shipment cost.

Some carriers offer extended free time as part of service contracts or volume commitments. Importers who ship large volumes with a particular carrier can often negotiate additional free days, which provides a buffer against port congestion and scheduling delays.

Demurrage Rate Structures

Demurrage rates are set by the carrier and published in their tariffs. Rates are typically structured in tiers, with costs escalating the longer a container sits at the terminal.

• Tier 1 (Days 1-4 after LFD): Initial demurrage rates are often in the range of $75 to $200 per container per day for standard equipment. Rates vary by port, carrier, and container size (20-foot vs. 40-foot).
• Tier 2 (Days 5-9): Rates typically increase to $200 to $350 per container per day as the carrier applies escalating pressure for pickup.
• Tier 3 (Day 10+): Extended demurrage can exceed $400 per container per day. At this level, demurrage can quickly surpass the cost of the ocean freight itself.

Common Causes of Demurrage

• Customs Holds: Containers flagged for examination by U.S. Customs and Border Protection cannot be released until the inspection is complete. FDA, USDA, and other agency holds can also delay pickup.
• Documentation Delays: Missing or incorrect customs entry paperwork, commercial invoices, or original bills of lading can prevent customs clearance and container release.
• Warehouse Capacity: If the receiving warehouse is full or unable to schedule a receiving appointment in time, the container stays at the port.
• Drayage Scheduling: Trucker availability, chassis shortages, or port appointment system constraints can delay physical pickup even when the container is available.
• Lack of Visibility: When logistics teams do not know when containers arrive or when free time expires, they cannot prioritize pickups and miss deadlines.

How to Reduce Demurrage Costs

The most effective way to reduce demurrage is to ensure that every container is tracked from vessel arrival through terminal discharge, with the last free day visible to everyone involved in the pickup process. Proactive coordination between the customs broker, drayage provider, and receiving warehouse is essential.

InboundShipments tracks last free day dates on every container record and provides visibility into container availability status. By surfacing this information automatically, teams can prioritize containers approaching their LFD and schedule pickups before charges begin.