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How to calculate demurrage charges in Nigeria


Understanding Demurrage Charges in Nigeria

Demurrage charges are an important cost factor that must be properly understood by any individual or company involved in shipping and international trade in Nigeria. But what exactly are demurrage charges?

Demurrage refers to fees charged by shipping lines and port authorities when cargo remains in the port longer than the allowed free time or storage period. Once the free storage time expires, demurrage fees start accumulating on a daily basis until the cargo departs from the port. Failure to accurately calculate demurrage can result in significant unexpected costs.

Calculating Demurrage: Step-by-Step

While demurrage rates and policies vary between ports, the calculation process involves similar key steps:

Determine Free Time

The first step is identifying the free time or storage duration allotted for your cargo. The free time is specified in the shipping contract, bill of lading or tariff schedules for that port. This establishes the demurrage-free window.

Identify Demurrage Rate

The daily demurrage rate applicable to your cargo also needs to be determined. The rate charts and tariff guides for the specific port will provide this figure based on the cargo type.

Calculate Duration

Next, you will need to calculate the total number of days that the cargo stays beyond the expiration of the free time period. The duration is counted in calendar days, including weekends and holidays until the cargo departs the port.

Demurrage Rate x Duration in Days

With the rate and duration information, you can now calculate total demurrage charges using a simple formula:
Demurrage Charges = Demurrage Rate x Duration in Days

For example, if the demurrage rate is $150 per day, and your cargo stays 10 days past the free time, the calculation would be:
$150 x 10 days = $1500 in demurrage charges

Key Factors to Control Demurrage Costs

To avoid excessive and unexpected demurrage costs, keep these tips in mind:

  • Maintain accurate, up-to-date documentation like contracts and shipping manifests.
  • Communicate closely with ports, customs, agents to facilitate clearance processes.
  • Monitor any changes in free time, demurrage rates, port tariffs.
  • Expedite cargo handling and port departure within the free time window.
  • Consider negotiating with shipping lines for waivers or reduced demurrage fees.

With a strong understanding of the calculation process and proactive planning, companies can better estimate and manage demurrage expenses for their Nigeria bound cargo. Accurate calculation is key to avoiding costly errors and budget overruns.