Difference between Demurrage, Detention and Despatch

Demurrage and Detention seems to be one of the most popular topics in this blog.. If you haven’t read about these terms yet, this would be a good time to do so.. Just click on this link..

Image for vesselA lot of the times however these terms have been confused with a similar sounding combination Demurrage and Despatch.. I have received several questions from readers about the differences in these terms..

These two sets are two totally different terms which I will explain here..

While it sounds similar, the terms Demurrage and Despatch are used in bulk cargo shipments covered and governed by Charter Parties and is completely different from the terms Demurrage and Detention which is used in  containerised shipments..

In bulk shipments, a lot of the cargoes are fixed on FIO terms (Free In and Out) which in simple terms means that the charterer (a person who hires a ship from a ship owner for a particular voyage or for a period of time) is responsible for the loading and discharging operations at the ports and the speed at which these operations are carried out..

Before a fixture (agreement to take a ship on charter) is made, a charterer is required to advise the load/discharge rates – which is the time (in number of hours or days) it will take to load or discharge the cargo, to the ship owner.. This information is required by the shipowner to assess how long his ship will have to be chartered..

Based on these calculations, the shipowner will quote a freight rate for the voyage, which if the charterer agrees, will result in a fixture..

image for moneyOnce the fixture has been made, if the charterer fails to load or discharge as per the load/discharge rates they have given and allowed in the contract, the shipowner will hold them liable for “Demurrage” @ a rate which is pre-agreed between the owners and the charterers..

In this case the term Demurrage refers to the time that the shipowner has lost because the charterer could not complete the required cargo operations within the stipulated/agreed time frame..

image for moneyAt the other end of the spectrum, if the charterer completes the load/discharge operations before the time frame indicated, they can claim “Despatch” from the owners @ a rate which is pre-agreed between the owners and the charterers..

Despatch refers to the time that the shipowner has been able to save since the charterer completed the cargo operations  quicker than anticipated/agreed and was able to despatch (sail) the ship quicker than expected which is to the benefit of the ship owner..

Have you had any experiences with Demurrage/Despatch..??


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3 comments on “Difference between Demurrage, Detention and Despatch”

  1. By anishkar Reply

    Hi, We had a small discussion in our office about demurrage, despatch and detention in our office and its still confusing as your above post states that demurrage and detention is only for containerized, where we had a clause in our bulk shipment voyage c/p about detention(Pls see the quote). We are wondering if this clause if bad or good for us(we are ship owners/operators).

    “CHARTERER GUARANTEE THAT CARGO AND THE DOCUMENTS MUST BE READY FOR LOADING BEFORE VESSEL’S ARRIVAL AND COMMENCE LOADING 72 HOURS WITHIN VESSEL ARRIVAL LOADING PORT,
    IF NOT COMMENCE LOADING WITHIN 72 HOURS OF VESSEL ARRIVAL, OR LDG TB INTERUPTED MORE THAN 72 HOURS, FOR A REASON OF CGO SHORTAGE A/O GRAB SHORTAGE A/O BARGE SHORTAGE A/O WAITING FOR READINESS OF SHPRS’/CHTRS’
    CUSTOMES/PORT/GOVERNMENTAL DOCUMENTATION FORMALITIES, CHARTERER SHOULD PAY DETENTION USD 7000 DAY EVERY 3 DAYS(USD24,000) IN ADVANCE, OTHERWISE OWNER HAS RIGHT TO WITHDRAW THE VESSEL/LEAVE THE PORT WITH THE CGO ALREADY ONBOARD WITH AN NOTICE BY TELEX OF FAX, DEPOSIT DEEMS AS EARNED, AND OWR HAVE FURTHER RIGHTS TO CLAIM ALL THE LOSS ARISED THERE FROM.
    OWR GIVE MAX 6HRS FOR CHTR/SHIPPER TO DO PORT CLEARANCE ACOL AT LOADING PORT, IF OVER USED TO BE COUNTED AS DETENTION.”

    • By Hariesh Manaadiar

      Hello Anishkar, I have not mentioned Demurrage and Detention is only for containerized shipments.. What I have mentioned is “While it sounds similar, the terms Demurrage and Despatch are used in bulk cargo shipments covered and governed by Charter Parties and is completely different from the terms Demurrage and Detention which is used in containerised shipments..”

      Detention is applicable when there are any undue delays to the ship caused due to incorrect documentation for example or any other factors and it can happen alongwith Demurrage or Despatch..

      For any ship owner delay of any nature is not good, but if you have the luxury of letting your ship wait while receiving detention then it maybe a good thing..

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