Demurrage

Supply Chain Delay

Customs hold-ups or lack of trucking capacity frequently lead to these additional expenses. When a shipment of fabric arrives at a port, the importer usually has a few days to move it to their warehouse. If the customs office requires an extra inspection or if the paperwork is missing a signature, the container stays on the dock.

Once the free time expires, the shipping line starts charging a fee for every day the equipment is out of circulation. This charge can increase over time, with the daily rate becoming higher the longer the container stays at the port. For a factory waiting for raw materials, these delays cause production stoppages and increase the total cost of the order.

Efficient documentation and early communication with the freight forwarder are the only ways to minimize these risks.

Financial Risk

In high-volume garment shipping, these costs quickly erode the profit margins of an order. A single day of demurrage for a dozen containers can cost thousands of dollars, which was not factored into the original price of the garments. The financial impact is even greater when the delay causes the shipment to miss the retail launch date.

In some cases, the buyer may even cancel the order because the goods are no longer needed for the current season. This leaves the supplier with a large inventory of unsold goods and a massive bill from the shipping line. To manage this risk, many companies set aside a contingency fund in their logistics budget.

However, the best strategy is to ensure that all parties in the supply chain are working together to move the goods as quickly as possible. Clear responsibilities for each stage of the process must be defined in the shipping contract.

Contractual Responsibility

Incoterms determine whether the factory or the buyer is liable for these payments. Under a cost, insurance and freight agreement, the seller is responsible for the goods until they reach the destination port, but the buyer is responsible for the unloading. If the delay happens because the buyer was slow to clear customs, they must pay the demurrage.

If the delay was caused by the seller sending the wrong documents, the seller may be held liable. These rules are part of the international commercial terms used in global trade to prevent confusion. When a dispute arises, the shipping line will hold the container until the fees are paid, regardless of who is at fault.

This gives the carrier significant leverage in the negotiation. Resolving these issues quickly is necessary to keep the goods moving and to avoid further costs.