What is Demurrage?

Tanker vessel demurrage, an ancillary cost that represents liquidated damages for delays, occurs when the vessel is prevented from the loading or discharging of cargo within the stipulated laytime. Demurrage constitutes an extension of freight that lies unconditionally with the Charterer. As stated in M/T “Raphael”, SMA No. 3739, “…this rule of absolute liability for payments of demurrage is subject to three exceptions: 1) specific exonerating clauses in the charter party; 2) delay attributable to owners’ fault; and, 3) a vis major (a sudden or unforeseen interruption or prevention of the act of loading not occurring through the connivance or fault of the charterers).”

Under a voyage charter, time counting is assessed per the charter party terms and conditions of the governing boilerplate and rider clauses. Examples of popular tanker voyage boilerplates include ASBATANKVOY, SHELLVOY 6, EXXONMOBILVOY 2012, and BPVOY 4. Conversely, under commodity contracts of sale, demurrage is assessed basis the agreed delivery terms (very often demurrage terms are either not included in the Sales Contract or they are not clearly defined leading to disputes as to the allocation of liability between the commercial trading partners).

What does the maxim “once on demurrage, always on demurrage” mean?

Literally speaking, the maxim “once on demurrage, always on demurrage” means that when laytime allowance is exhausted the vessel goes “on demurrage” rendering the clauses that provide “exceptions to laytime” no longer applicable i.e. how can one deduct something that no longer exists? Over time, however, both English law and U.S. law have liberalized their previous strict adherence to this maxim. Every situation is distinguishable by the unique circumstances surrounding each event.

What is detention?

Detention, as opposed to demurrage, applies for delays occurring through fault of the Charterer wherein the damages are not governed contractually by the laytime and demurrage terms. Depending on the length of the delay, damages may be assessed at the Vessel’s demurrage rate or at a higher rate for the opportunity cost for lost freight revenue plus operating costs.

Manage demurrage with Haugen Voyager