What is Demurrage?

 

The word “demurrage” originated from the French word “demeurer” which means, “to stay”.

 

It is used to describe the time a ships, barges, rail cars, road tankers etc. exceeds the time allowed for loading or discharge operations. By extension, it is an allowance that is applied for delaying the ships over and above the time in the contract. It is not a real penalty, in legal perspective as that infers some wrong doings it is an agreed remedy to compensate the owner when cargo operations take longer than contractually agreed and so the basis of its calculation must be stipulated.

 

 

Why is it important for a trading organization to monitor demurrage?

 

It is typically the third largest exposure on a trading book, the primary being the market price for theproduct followed by the freight cost and then the cost for delaying the vessel.

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Let's look at some specific areas:

• Charterparty Demurrage

• Contract Demurrage

• Laytime, Allowances and Exclusions

• Detention and Dispatch

• Reversible

• Demurrage Rates

• Time bars