Difference between Storage and Demurrage in container shipping
Storage and Demurrage may have different or same meaning (country dependent)
Quick clearance of containers is essential to avoid hefty storage fees
Delays can lead to Storage AND Demurrage AND Detention charges
Storage and Demurrage are two such terms..
Container operations in port
When a container is discharged off a ship at a container terminal, it is moved to the CY area within the port/terminal..
When the customer is ready to take delivery of the container after completion of all formalities like customs clearance etc, they will move the container directly from the CY..
So whether it is Shanghai, Long Beach, or any other port in the world, no port has the storage capacity to store so many containers in its container yard..
So it is essential that the importers clear the cargo within the “free period” offered by the port as otherwise these containers will be stuck in the port affecting the yard space, and port productivity, causing berth and port congestion etc..
This charge is called Port Storage or Storage..
When the customer exceeds the free period offered by the port/terminal as per their tariff, port storage will occur..
This may be billed by the port/terminal to the shipping line which will then bill the customer or in some countries, it is billed directly to the customer by the port as that charge/rate has nothing to do with the shipping line..
These port free days are different from, let’s call them “line free days”, which is the number of days allowed by the shipping line for the customer to pick up the full container for unpacking, take it to their warehouse, unpack it, and return the empty to the container depot nominated by the shipping line..
When the customer exceeds the free period offered by the shipping line as per their published tariff, demurrage and/or detention and/or combined demurrage/detention will occur..
So why does the shipping line charge demurrage and detention
In a container shipping line operation, the cost of the container, repair, maintenance, leasing, etc works out to around 20% of the shipping line’s cost (as per my last discussion with a shipping line)..
A container, like a ship, will make money for its owner only when it is in circulation and not when it is idle..
The charging of the demurrage and detention by the shipping line is their way of getting some compensation for the period that this container was out of the revenue-generating cycle..
Who pays for demurrage, detention, storage..??
In such cases, the consignee would look to the shipper for compensation, but for the shipping line, this is revenue lost and they need someone to pay for it..
Conclusion
So in summary, there are several charges associated with a shipment.. Demurrage, detention, and storage can be considered as “unexpected, non-budgeted, uncosted, unforeseen and avoidable” charges because no one in their right mind wants to incur these charges..