Tuesday, June 29, 2021

Annual Report Evidences the Confusion and Random Nature of Detention and Demurrage Charges

Astronomical Rise in Container Rates Needs Proper Explanation Say Freight Forwarders
Shipping News Feature

UK – WORLDWIDE – Some six months ago Robert Keen, Director General of the British International Freight Association (BIFA)expressed his ire at the seemingly random application of demurrage and detention charges being applied by the box lines for containers in their care.

The BIFA boss was supporting a view held by freight forwarders globally and also expressed by the International Federation of Freight Forwarders Associations (FIATA). Now the annual ‘Demurrage & Detention Benchmark’ published by Container xChange brings the evidence of just how much the hike to these charges has actually been.

The full 18 page report can be downloaded HERE but in summary the conclusions are that these charges are being calculated with no visible indication of how the wildly differing assessments are arrived at. The rates imposed on shippers by containers lines have soared at unprecedented rates globally over the last twelve months, seemingly with no rhyme or reason and the hikes are hugely inconsistent, with large differences apparent in those from both ports and carriers.

Across the world’s 20 largest container ports, the report found that average Demurrage and Detention (D&D) fees levied by container lines on customers two weeks after a box was discharged from the vessel more than doubled across ports and shipping lines between March 2020 and March 2021, climbing 104% or the equivalent of $666 per container across all container types. None of the world’s top 20 ports by throughput saw a decrease in D&D fees over the period.

On average, D&D charges in March this year were $720 per box across standard container types two weeks after the box discharge from the vessel. The ten leading Chinese ports experienced a +126% increase in average D&D charges from March 2020 to March 2021. Qingdao saw the biggest rise in D&D rates, up 194% year-on-year, followed by Dalian where shippers suffered an average increase of +187%.

However, D&D charges in China remain far lower than in many other leading ports with seven of the top 10 cheapest ports located in the country. By contrast, average D&D fees two weeks after discharge at the Port of Long Beach in March were $2638, the most expensive in the world. In second place was neighbouring Los Angeles at $2593.

Rotterdam had an average D&D rate in March of $756, Singapore was $615, and Antwerp was $709. At the bottom of the spectrum was Busan (South Korea) with average D&D charges of only $132 in March this year. Next cheapest after the South Korean port were the Chinese ports of Dalian and Tianjin both with averages of $201.

D&D charges do not just vary by port, they also vary by shipping line within each port. At the port of Los Angeles, which has been central to the chaos evident on the trans-Pacific container trade over the past year, average D&D charges increased by +142,7% from March 2020 to March 2021. CMA CGM’s D&D rates increased the most, up 167% over the period. Maersk was a close second, with its customers seeing a 161% increase in D&D charges.

By contrast, COSCO, unlike the other carriers in the Port of Los Angeles, lowered its average D&D fees by 15% over the period from $1417 in March last year to 2020 to $1213 in March 2021. In Hamburg, meanwhile, the cheapest carrier in March this year was CMA CGM, which charged $258 in D&D after two weeks. Yang Ming was the most expensive line with rates of $1612.

Everyone in the industry knows why the shipping lines are imposing such charges as they bid to free up containers as quickly as possible. Long Covid it seems is not just a human disease, it applies equally to the supply chain with drastic cuts in production leading to a surfeit of empty boxes in the right places as sailing schedules were cut.

The question is of course whether excessive D&D charges are a fair way to approach the problem and it is seen by shippers simply as profiteering at a time when shipping rates themselves are rising fast.

Globally, the report shows the cheapest combination of carrier and port was COSCO and the Port of Busan in South Korea. The most expensive combination was CMA CGM at the ports of Long Beach and Los Angeles. Co-founder of Container xChange Christian Roeloffs observed:

“Demurrage and detention prices have always been an area of conflict between shippers and carriers and that tension has reached a new level this year as costs have spiralled. The key to minimising D&D is to create transparency around the fees. With shippers informed about the costs associated with D&D, they’ll be able to make business decisions and enter negotiations informed of the accurate costs and per diems. We hope this report gives all parties increased transparency.”

To compile the report Container xChange collected more than 20,000 data points from publicly available sources. These were used to compare D&D rates imposed on customers by the world’s ten largest shipping lines across the world’s top-20 container ports. The data was then compared against data collected by Container xChange in March 2020. There may be a glimmer of hope for shippers as Dr Johannes Schlingmeier, CEO & Founder of the container leasing and trading platform concluded:

“In the US, the Federal Maritime Commission is now looking into the practices of the container shipping industry and searching for ways to ensure that container users, many of whom feel they have been charged unfairly by carriers for D&D, can be refunded. Certainly, D&D rates have been accelerating, adding to the burden on shippers and industry on top of record container rates and global container shortages.”

Should such a move lead the way to compensation in the US it may not be too much of a stretch to envisage the possibility of a class action elsewhere instigated by some of the largest shippers. After all, cartel and anti-trust actions are hardly a rare occurrence in any sector of the shipping industry.