U.S ports most expensive on D&D charges: Container xChange
Despite increased regulatory scrutiny, New York, Long Beach, Los Angeles, Oakland and Savannah had high D&D charges
Demurrage and Detention (D&D) charges imposed on U.S. shippers by container lines continue to be the most expensive in the world, and have increased this year even as global average fees have fallen from the record highs of 2021, according to the latest report from Container xChange.
New York leads the way in first place followed by the ports of Long Beach, Los Angeles, Oakland and Savannah, says Container xChange's Demurrage & Detention Benchmark 2022 report.
"All five ports are more than 2-3 times more expensive than Hong Kong in the seventh spot, and at least 20 times more expensive than leading Asian container hubs such as Dalian in China and Busan in Korea," says the report.
Container xChange ranked the 60 most expensive global ports for D&D charges levied by eight container lines on customers two weeks after cargo arrives at the port or is discharged from the vessel.
Demurrage: "Charge paid for the use of containers within the terminal beyond the free time period. For import cargo, the demurrage time is the period from container discharge from the vessel until gate-out of the full container from the terminal. For export cargo, the demurrage time is the period from gate-in of the full container into the terminal until the full container is loaded on board a vessel."
Detention: "Charge paid for the use of containers outside of the terminal or depot, beyond the free time period. For import cargo, the detention time is the period from gate-out of the full container until gate-in of the empty container into the restoration point. For export cargo, the detention time is the period from the pick-up of the empty container from the terminal or depot until gate-in of the full container in the terminal."
Spotlight on D&D
Under heavy pressure from shipper lobbyists, U.S. President Joe Biden signed the Ocean Shipping Reform Act (OSRA) into law on June 16, 2022. OSRA gives the Federal Maritime Commission the power to act more assertively on D&D charges and shifts the burden of proof for the reasonableness of fees to ocean carriers instead of shippers, says the report.
"Throughout the pandemic, as shipping costs have soared and inflation has become a threat to the U.S. economy, the focus on container line behaviour by politicians and regulators has magnified," says Christian Roeloffs, Co-Founder, Container xChange.
"U.S. agricultural shippers have been particularly outspoken about their inability to find affordable empty containers for exports. But importers have been equally outraged by what many believe has been profiteering on D&D charges by container lines. Some have started legal actions against carriers. This really came into the cross hairs of President Biden this year when he has been highly critical of container lines. His administration addressed D&D in the Ocean Shipping Reform Act and we're now waiting to see how this will be implemented and whether it will change shipper or carrier behaviour significantly."
Global average D&D declines; US hubs see increase
The Demurrage & Detention Benchmark 2022 report finds that the global average D&D charges increased by 38 percent for standard-sized containers from $586 in 2020 to $868 in 2021.
"So far in 2022, average D&D charges at the major ports have declined to an average of $664 per container or by 26 percent, although fees remain far higher than pre-pandemic by around 12 percent."
U.S. shippers, however, are not benefitting from these global declines, says the report. "For example, in May 2022, the average charges levied by container lines on customers two weeks after a box was discharged from the vessel at the port of Long Beach was $2,730 per container, up from $2,638 a year earlier. At the port of Los Angeles, in May 2022, the average D&D fees increased from $2,594 per container in 2021 to $2,672 per container."
Fees vary by port and carrier
Of the leading container lines across ports, COSCO currently has the lowest D&D charges while HMM's D&D fees are the highest.
By region, D&D charges in May in the U.S. were the highest at $2,692 per container. This compared to $549 in Europe, $482 in India, $453 in China and $366 in the Rest of Asia, the report said.
Reducing D&D costs
Dr. Johannes Schlingmeier, CEO & Founder, Container xChange, says using shipper-owned containers (SOCs) instead of shipping line/carrier-owned containers (COCs) could help reduce shipper supply chain costs.
"Taking the SOC option means you're not leasing a container from the shipping line," he said. "So, if your container gets held up inside or outside of the terminal, you won't have to pay late fees to them. "
Better planning by supply chain partners and better communication between logistics partners and stakeholders can help reduce liability and exposure, Schlingmeier added.