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What Causes CFS/ICD demurrage Charges on import consignment? The best effective ways to avoid it.

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The importers are burdened by paying the port/CFS/ICD demurrage charges which is impacting their costing of raw materials and also affecting Supply Chain Cost. Let’s discuss how the demurrage charges occur and remedy to avoid the same.

Demurrage/storage/ground rent occurs when an importer doesn’t customs clear shipment within stipulated free time provided by CFS/ICD’s. So most importers do their best to have all the paper work on hand and ready for customs clearance well before arrival of consignment at Port.

What are common causes of demurrage?

  1. Poor knowledge about import procedure and understanding of paper work at Customs.
  2. Lack of funds required in time.
  3. Lack of Proper scheduling of import consignments and handling.
  4. Incompetent Customs House Agents.

Now we have well understood the common cause of demurrages so now let us discuss the remedy to avoid the same.

The Import manager should have good experience of import documentation procedures and policies, flow chart of movement of goods and customs documents are necessary when we are dealing with demurrages. We should be updated with current policy matters related to your commodity, changes in customs and excise notifications, tariffs and EXIM policies. Every commodity comes across a requirement of specific documents asked by customs official which import manager to be updated with.

Importer faces problems when deals with the shipments are of less transit time which arrives first at Port before the arrival of original post shipment documents to importer routing through bank due to LC transactions. Hence we can look at options available with us for reducing documents routing time by reducing document presentation period in LC by mutual discussion between buyer and seller. Also we can follow-up with LC beneficiary for
immediate presentation of documents in Bank and beneficiary to follow-up with bank for immediate dispatch of document to applicant bank. We can explore the possibility of surrender of OBL by seller and for express B/L based on payment terms with seller. Where ever the transit time of shipment is more, then obviously we will have documents in our hand well before arrival of shipments at Port so we have nothing to worry for original documents availability for customs clearance. Now we are all ready with original post shipment documents in hand. So next is to arranging all documents in order.

The check list of documents required for import clearance of your commodity should be always handy and should ensure that all these documents are available with you well before arrival of import shipment at Port to avoid last minute rush to the exporter. Apart from the common and important documents for import clearance like invoice, packing list, bill of lading, certificate of origin etc we should also keep a tab on various other documents like inspection certificate, analysis report, Test certificate, brochure and technical write-up and other certificate based on commodity which is prerequisites for import clearance.

Now we are ready with all required documents, we will move to the next point that is requirement of funds like customs duty, port/CFS/ICD expenses, liner charges for obtaining DO , CHA Charges etc. We need a proper planning of funds flow and availability for payment to concerned authorities at the right time. Sometimes after the assessment of bill of entry the shipment is unnecessarily held up for non payments customs duties and delay in obtaining Delivery Order from shipping liner for lack of funds etc. So to avoid demurrages the planning for finance is most essential part which I have experienced. Also the shipment which importer customs clear under various licenses has to be planned cautiously.

If your imports arriving at different ports of India and you are having one license which is engaged for clearance of import shipment at one particular port then other shipment at different port will have to wait for clearance till the time original license available there. So to avoid the demurrages for that type of shipment we can think of obtaining multiple licenses (max 3 Licenses) based on segregated quantity which will in turn save huge demurrage and detention which we are incurring for want of license availability. Importer will incur additional expenses while obtaining multiple licenses from DGFT but it is a least expenses as compared to the huge demurrage and detention incurred in this scenario. But analysis study
has to be done before taking decision of obtaining multiple licenses as it becomes difficult for monitoring all the licenses.

Why scheduling and handling of import consignment is necessary for avoiding demurrages? As you all know that any of the time we come across congestion at Indian ports so proper scheduling of import shipment has effective role in avoiding demurrages. If you are having imports of your entire volume to one particular port and unfortunately the subject port is congested then that will impact the demurrages due to late delivery of cargo for nonavailability of trucks due to demand and sometime partial delivery of containers at ICD due to congestion so if you have option to divide your volume with multiple port based on your competitive costing then we can escape our shipments from the trap of congestion and avoid demurrage. This point may not be valid for the importer who is dependent on one particular port in his geographical area. Handling of import cargo has most important role in saving demurrage. Sometimes importer unable to take delivery of cargo in free time due to lack of proper co-ordination with transporter and non-availability of required type of vehicles and lack of modern equipment at CFS/ICD. So import /Logistics manager has to ensure a valid contract with transporter for movement of goods from CFS/ICD/Port to the importer factory and he has to ensure the facility of modern equipment available to handle his target commodity at specific CFS/ICD/Port. We can explore possibility of extending free time with CFS/ICD based on our volume of business with them. If we can ensure that all these are properly planned and co-ordinated then we can surely avoid demurrage on account of handling of import cargo.

The last point which causes demurrage is appointment of incompetent customs house agents. There are incidents where CHA also fail to file the documents in time. We can ask CHA for pre-filing of documents and also tracking of import arrivals at Port is necessary. Also due to lack of knowledge with custom broker they do mistakes in filing the documents properly and unable to present the documents to the customs official in a proper manner. Hence a competent CHA will have good knowledge about documentation and guide to the importer in advance which will surely help to avoid demurrages. CHA has to co-ordinate with shipping liner for the documents required by liner for obtaining Delivery Order and coordinate
with all concerned well in advance so that we can avoid delay in obtaining DO from liner which will also help in reducing demurrages.

Though we are all aware of all above points which we have discussed but I have tried to refresh it once again. These are all my personal opinion and out of my experience and this article may draw attention of import /logistics professionals.

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