What is Demurrage?
Demurrage is compensation payable to the shipowner when a charterer keeps the vessel at berth or anchorage longer than the laytime allowed in the charter party. It is agreed in advance as a daily rate and accrues until the vessel is free.
At a glance
| Term | Demurrage |
|---|---|
| Definition | Charge paid to the shipowner if loading/discharge takes longer than agreed laytime. |
| Category | Logistics & delivery |
| Related terms | Incoterms, EXW (Ex Works), FOB, CIF, DDP, B/L (Bill of Lading), Laycan |
What it is used for
Because a vessel earns nothing while waiting, demurrage prices that delay. It gives the owner certainty and gives the charterer a clear financial incentive to load or discharge promptly.
Key points
- Charged at a stated rate per day, usually pro rata for part days.
- Starts once the allowed laytime is exhausted, following a valid notice of readiness and any agreed turn time.
- Despatch is the mirror image: some charters pay the charterer for finishing early, commonly at half the demurrage rate.
- Claims are supported by the statement of facts and time sheets signed at the port.
What to watch for
- Once on demurrage, always on demurrage: exceptions that would have interrupted laytime often no longer apply.
- Who bears demurrage between buyer and seller depends on the sales contract, not the Incoterms rule.
- Claims are usually time-barred by the charter party — commonly 90 days — so document and submit promptly.
Frequently asked questions
How is demurrage calculated?
Time used beyond the allowed laytime, multiplied by the agreed daily rate, evidenced by the statement of facts signed at the port.
What is despatch?
A payment from owner to charterer for completing cargo operations faster than the laytime allowed. It is not automatic and only applies if the charter provides for it.
Who pays demurrage, the buyer or the seller?
Whoever the sales contract says. It commonly follows who controls the port operation — the seller at load port under FOB, the buyer at discharge.
Related terms
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