Shipowners propose solutions to rising demurrage

Shipping lines have asked for stronger collaboration with importers to help address the challenges that lead to delays in cargo clearance at the ports.

They mentioned better understanding of the clearance process, the inclusion of brokers to help reduce paper work and proper sharing of documents on cargo and shipment delivery instructions with all parties as some of the strategies that are needed to help address the challenge.

A solution to delays at the ports is needed to shield companies from the brunt of rising demurrages, which have so far risen from US$40 million in 2010 to US$100 million last year.

Timely clearance of cargo will also ensure that the turnaround times of shipowners and shipping lines are reduced and that could help improve their earning abilities.

While dismissing concerns from sections of the public that shipping lines were part of the problem of demurrage charges in the country, the Vice-President of the Shipowners and Agents Association of Ghana (SOAAG), Mr Adam Imoru Ayarna, told the Graphic Business that the shipping lines rather lost more in terms of revenue than they gained when containers delay.

“For us as shipping lines, we are not interested in collecting demurrages but prefer putting our shipping containers on the sea to work in order to generate revenue for us,” he said.

As a result, he said his outfit was surprised about recent discussions that impugn wrongdoing in the grounding and detention of containers after the mandatory free period.

He explained that such commentary could impede government’s drive to bring foreign investment into the country.

“Let’s assume I operate a shipping line with about 10 shipping containers and six of the containers have been grounded for 20 days or beyond at Tema, can you imagine the kind of losses I will incur?” he asked.

“I will lose client or market, and so we are not happy charging demurrage, as has been thrown out in the public,” he emphasised.

Mr Ayarna said it was not the doing of the shipowners or their agents to impose demurrage on consignees but rather due to the delays in the clearing process at the country’s sea ports.

He cited lack of planning on the side of shippers, fraudulent activities of agents and the usage of the shipping container as a warehouse as some of the reasons that cause delays in the clearing process.

Fruits of cordial relations

Although all imports are supposed to enjoy seven days free period, Mr Ayarna said about 50 to 60 per cent of imports enjoy 14 to 60 days free period due to the cordial relations shipping lines have with the importers.

Additionally, Mr Ayarna said some of the agents and importers call for renegotiation and get between 10 and 80 per cent as rebate.

Currently, shipping lines charge from US$22 to US$48 and US$44 to US$96 per day as demurrage for 20-foot and 40-foot containers respectively.

Data from the Ghana Shippers Authority (GSA) indicates that shippers paid in total an amount of US$40 million in demurrages in 2010, US$85 million in 2013 and US$100 million in 2016.

Avoiding demurrage

Mr Ayarna observed that careful planning and monitoring of loading or unloading operations and the drayage process could help shippers avoid demurrage fees.

“To avoid paying demurrages, shippers must share cargo and shipment delivery instructions with all parties (carrier, vendor, third party provider) in advance to plan smooth loading or unloading process and avoid delays.

“They should also understand all required documents and perhaps, hire an experienced broker or agent that will help eliminate paperwork-related problems,” he said.

He indicated that advanced planning and streamlining of trading processes were significant to minimising the risk of demurrage.