Govt to intervene as brokers face US$25,000 daily demurrage fees at local ports

The government will seek to address a growing issue at local ports, where brokers are facing demurrage fees of up to US$25,000 per day.

Demurrage is a penalty charge imposed by shipping lines on cargo owners when containers are not picked up from port terminals within the allotted “free time.”

At ports in Guyana, that free time is currently three days.

During a consultation session with industry stakeholders on Monday, brokers highlighted the growing financial burden, noting that demurrage is a steep cost, a cost ultimately passed on to consumers.

Legal officer attached to the Maritime Administration Department (MARAD), Tiffany Hohenkirk, acknowledged the concerns raised and indicated that authorities will review the current three-day free period and possibly extend it to 21 days.

“When we assess the proposed measures, they can be summariaed as follows: one, for demurrage to commence only after 21 days of the vessel being alongside; two, for the mandatory use of berth chart spatiotemporal systems, including provisions to effectively pause lead time; and three, the elimination of advance demurrage,” she explained.

She noted that the proposed policy carries both positive and negative implications.

“The proposed policy has mixed implications. On the positive side, there will be reduced upfront demurrage expenses, increased flexibility for local consignments, and more practicable, predictable cost structures. On the negative side, we may incur higher freight rates, there is the potential for declining investor traffic, and increased exposure to supply chain inefficiencies,” she said.

She added that there is also the likelihood of reduced competitiveness of Guyana’s ports. According to her, in the global shipping market, which is highly competitive and efficiency-driven, even small deviations from international norms and standards can have significant impacts.

She underscored that if the objective is to substantially reduce costs, the focus must be on aligning with international best practices and standards. She noted that Guyana is a part of the International Maritime Organization and is therefore bound by its conventions and decisions. As such, any legislation or policy implemented must be consistent with the organization’s principles. She added that improving port efficiency is another critical factor that must be considered.

Who is to blame for that?

Meanwhile, tensions heightened during the consultation as a representative from a major shipping line noted that, globally, demurrage charges can begin in as little as three days, whereas in Guyana some companies only apply such fees after as many as 15 days—an extended grace period he described as unusually long by international standards.

“Historically, some shipping lines have been left on the short end of the stick because people have exceeded the free time. Let’s say, for example, Costco Shipping has 15 days’ free time. If you collect your container on the 16th day and hold it for seven days after, you owe money. There are a number of reasons people give for not clearing cargo within 15 days, and let’s be realistic—15 days is a very long time,” the shipping line representative stated.

“You have some brokers and you have some jokers. And if you have a joker clearing your cargo and they submit an entry with the wrong tariff heading numbers, you as the consignee have to bear the brunt of that,” he said.

“These things happen. Now you have instances where people only provide an email address, and their excuse is, ‘Oh, my emails were not seen or not responded to.’ Now, who is to blame for that? On your bill of landing, you have provided the information,” he added.

The representative’s comments were met with a stern advisory from GCCI President Kathy Singh, who urged him not to refer to brokers in a derogatory manner and instead to seek constructive solutions to the issues under discussion.

Amid these concerns, Public Utilities and Aviation Minister, Deodat Indar signaled that authorities will take action against shipping lines imposing excessively high demurrage charges.

“On advance demurrage, we know who the parties are that are doing it, and we have to eliminate it. The government’s position is clear—we want to remove this practice. It has crept into the system, and it must be addressed. Just imagine having to employ a separate person to track every advance demurrage payment on containers and reconcile them when they are cleared,” he said.

“It’s like a value-added tax return—that is what it sounds like, an administrative nightmare. The amount of money businesses must pay upfront creates a serious cash flow constraint. There is no benefit in this situation—no good news at all,” the minister added.