How to Negotiate Demurrage Agreements

Demurrage agreement govern shipment storage.

The operator of a business that receives products or goods through ships, trucks or railway companies must pay close attention to the contents of demurrage agreements. "Demurrage" is the technical term for the fee assessed by trucking companies, railway companies and ocean carriers for containers containing goods that are not removed from the terminal, final destination or port by what is known as the "last free date." Demurrage agreements govern the length of time a container is permitted to remain at a terminal, final destination or port with no fee assessed and the manner in which fees are incurred after that point in time. Negotiating a favorable demurrage agreement involves a number of factors.

Things You'll Need

• Written demurrage agreement

Instructions

1. Negotiate as many free days as possible in the demurrage agreement. The standard in the transportation industry is seven days. In other words, a container remains at a terminal, final destination or port for no charge beyond shipping fees. Needless to say, as a person using a shipping provider, you want to ensure that you obtain at least the industry standard in the way of free days. Attempt to expand the number of free days to cover any unforeseen delays on your end.

2. Seek a lower daily fee after the free days expire. The amount charged per container varies somewhat throughout the shipping industry. A typical fee is $100 per day/per container. Work to obtain a lower daily charge for a container left beyond the free days period.

3. Request a gradual increase in the daily fee if the shipper does not agree with a consistently reduced daily fee. In other words, request that the shipper agree to a daily assessment that starts below the $100 mark and increases over a period of time as the container is left at the terminal, final destination or port.

Tips & Warnings

• Due to the importance of a demurrage agreement, consider hiring an attorney experienced with shipping laws, rules and regulations to draft the contract for you. Although these organizations cannot make specific recommendations of legal counsel, the state and local bar associations maintain directories of attorneys. Contact information for these organizations is available from the American Bar Association.

• Many shippers do not keep containers at their terminals or ports beyond 10 days. At that juncture, they send the containers to what is called a "government order warehouse" or "G.O. warehouse." This process increases the fees charged to you. Additionally, at a G.O. warehouse the container is unpacked, increasing the chances that the goods are damaged, lost or even stolen.

References

• Demurrage.org: What is a Demurrage Agreement
• "The Law Relating to Demurrage"; J. E. R. Stephens; 2008

Resources

• CSX: Railroad Dictionary--Demurrage
• American Bar Association: Directory of State and Local Bar Associations