What is the difference between Storage and Demurrage..??
This is another area where some confusion exists and I will explain the reason why..
When a container is discharged off a ship, it is moved to the CY area within the port.. When the customer has done the clearance with customs and is ready to take delivery of the container, he/she will move the container directly from the CY..
As per Port of New York and New Jersey, in 2016, they handled around 3,2 million TEUs.. As you can imagine no port in the world has the storage capacity to store so many containers in the port CY area.. So it is essential that the importers clear the cargo within the “free period” offered by the port..
All ports offer a certain free period (may be 3-7 days) to allow the customers time to process import requirements and take delivery of the containers from the port.. However, there are cases where the consignee may be unable to take delivery from the port due to documentary, financial or contractual problems etc..
In such cases, the containers will be stuck in the port affecting the yard space, port productivity, causing berth and port congestion etc.. In order to discourage this practice and encourage the importers to be pro-active and take care of the cargo clearance issues, port will levy a charge on any container that has not been moved out of the port within the specified free time..
That charge is called Port Storage or Storage..
In some countries, due to this issue of lack of space inside the port/terminal the storage charges are quite exorbitant.. To alleviate this problem the shipping line may move the container to a private depot so that the storage charges are not so high for the customer..
The container may be moved out of the port area into the private storage depot within the port free storage days and then stored at the private depot till such time the customer is able to take delivery.. However, the private depot has to be customs bonded because the full container has still not been cleared with customs..
Depending on the country, whether it is the port storage or private depot storage, the shipping line may charge this to the customer.. And that is where the confusion arises..
Because when there is delayed clearance, the shipping line also charges Demurrage and/or Detention..
Demurrage and/or Detention is the charge levied by the shipping line on the consignee if the container is not cleared and returned to the nominated empty depot within the specified free days offered by the line.. The free days and charges might vary depending on the country and shipping line..
It is possible that a container can incur both Demurrage and Storage on the same shipment..
So when the shipping line charges storage, customers naturally assume that this is the shipping lines cost.. But storage generally is the cost of the port/terminal or depot which is collected from the customer via the shipping line..
However, there are some countries like Saudi Arabia and Japan, where the term demurrage seems to be used to denote storage in the port/lines terminal..
The best option would be to check with the shipping line in your country how these terms are defined..
Are you aware of any other countries where storage and demurrage have the same meaning..??