demurrage

This article is largely based on an article in the out-of-copyright 11th edition of the Encyclopædia Britannica, which was produced in 1911. It should be brought up to date to reflect subsequent history or scholarship (including the references, if any). When you have completed the review, replace this notice with a simple note on this article's talk page. Thanks!

Look up demurrage in Wiktionary, the free dictionary.

For usage in relation to currency, see Demurrage (currency).

The term Demurrage comes from the field of vessel chartering (notably voyage chartering) and refers to the period during which the charterer remains in possession of the vessel after the period of time normally given to him to charge and discharge the cargo (lay time). By extension Demurrage refers to the amount of money that the charterer will have to pay to the shipowner for its extra use of the vessel.

Because the supply of a shipping container to a merchant has a very similar nature to the contract of a supply of a vessel to a voyage charter, the industry refers to this container usage beyond the time allowed as Container Demurrage. This extra usage usually entitles the container supplier (usually the shipping carrier) to claim a certain amount of money from the merchant.

In principle it can be considered that the assimilation between vessel demurrage and container demurrage is correct given that both refer to the same concept, which is the late return of a piece of equipment supplied by one party to another for the purpose of carrying a cargo. However, the actual regime of container demurrage is still to be determined precisely.

Shipping

In commercial shipping, demurrage is an ancillary cost that represents liquidated damages for delays. It occurs when the vessel is prevented from loading or discharging cargo within the stipulated laytime (see Affreightment: under Charter-parties).

In container haulage, customers are given a set period of time in their contract to tip (unload) their container delivery. Acceptable times for tipping are usually between 3 and 4 hours; time spent on site after that is considered "demurrage". Hauliers will usually charge an hourly rate for each hour after the agreed allowed time.

Demurrage can also refer to the cost levied by shipping lines to cover redecoration of the container after use by the merchant, but it could also be the charge made by the shipping line to customer for not returning their container in a reasonable time.

Railway transport

In railway law, it is the charge on detention of trucks (or rolling stock), either to the shipper for holding the car (laden or not), or to the connecting railroad(s) while the car is empty and returning to the home road (in either case, as a way to encourage speedy unloading and return of empties to improve utilization of rolling stock).

Business and banking

In business, demurrage is a delay in delivery of a product via delivery truck. When a delay occurs with product delivery, the delivery party can elect to claim a no fault delay by submitting a demurrage charge. Criteria for allowable demurrage, payment conditions, and payment terms for demurrage are typically prenegotiated and accepted by the vendor via contract prior to conduct of business. Some vendors allow free no-cost time for limited hour(s) when demurrage occurs, others do not allow free time for delays. The demurrage charge is normally an hourly rate. Unforeseeable until delivery, costs of delays are sometimes separately invoiced from the cost of deliverable.

In banking, demurrage is the charge per ounce made by the Bank of England in exchanging coin or notes for bullion.

Currency

In complementary currencies' field, demurrage is a cost associated with owning or holding currency. It is sometimes referred to as a carrying cost of money. The term was used by Silvio Gesell. It is regarded by some as having a number of advantages over interest: while interest on deposits lead to discount the future and to place immediate gains ahead of long-term concerns, demurrage does the opposite, creating an incentive to invest in assets which lead to longer-term sustainable growth. Furthermore, demurrage acts like inflation, stimulating the circulation of the currency, encouraging economic activity, and increasing employment.

Gas cylinders

The rental fee for a gas cylinder assessed by the vendor until the tank is returned.

References

• Haugen Consulting LLC What is demurrage?
• Transaction Net A "Green" Convertible Currency, Bernard A. Lietaer

This article incorporates text from the Encyclopædia Britannica, Eleventh Edition, a publication now in the public domain.

External links

• Laytime-Calculation.com (Shipping)
• Variety of demurrage information & strategies