Detention & Demurrage in FDI Manufacturing: The Largest Hidden Supply Chain Cost That Logistics Teams Often Overlook

In most cases, the answer is not about how fast each shipment is processed. The real issue is that the company’s internal process has not been designed to prevent D&D from occurring in the first place. This article takes a closer look at how D&D charges are calculated, practical negotiation points with shipping lines, and how companies can establish an effective D&D control system as a genuine operational KPI.

Within the logistics cost structure of many FDI manufacturers, detention and demurrage (D&D) are among the most frequently recorded “unplanned logistics expenses”—yet they are also among the least analyzed in terms of root causes.

Many companies simply pay the shipping line’s invoice and move on to the next shipment without establishing any monitoring or prevention mechanism. As a result, the same mistakes occur repeatedly, and accumulated D&D expenses can easily reach tens of thousands of US dollars each year without anyone taking ownership of the problem.

1. Understanding the Difference Between Detention and Demurrage

Before analyzing the risks, it is important to distinguish these two concepts, as many companies use them interchangeably, resulting in disputes with shipping lines that target the wrong issue.

These two charges are completely independent. They may occur separately or simultaneously, and both are calculated on a daily basis using escalating tariffs—the longer the delay, the higher the daily charge.

For a standard 40HC container, demurrage or detention commonly ranges from USD 30–80 per day during the first week, increasing to approximately USD 150–300 per day by the third week, depending on the shipping line.

2. Four Most Common Root Causes at FDI Manufacturing Plants

Delayed or Incorrect Customs Documentation

This is the number one cause of D&D.

When discrepancies exist in the invoice, packing list or bill of lading—such as incorrect product descriptions, quantities, weights or HS codes—the import-export team must contact the supplier to obtain corrected documents or request a Letter of Correction.

Meanwhile, the container remains at the port, and the free time countdown has already started from the vessel’s arrival.

For suppliers located in different time zones (Japan, Korea or Taiwan), waiting for email responses and internal approvals can easily consume two or three days.

Warehouse Not Ready to Receive Cargo

This situation is common among rapidly expanding FDI factories.

Although cargo arrives on schedule, warehouse space may still be occupied by previous shipments, while forklifts and manpower are insufficient for immediate unloading.

As a result, containers remain parked at the factory yard for two to four additional days before unloading, with the entire period counted as detention.

Lengthy Internal Approval Process

Some multinational corporations require multiple approval levels before cargo release is authorized, or they require confirmation from the Quality Department that inspection documents are complete before goods may enter the warehouse.

Although these controls are reasonable from a governance perspective, the absence of clearly defined internal SLAs often results in containers remaining idle over weekends or public holidays.

Unexpected Specialized Inspection

As discussed in previous articles, when a shipment is selected for specialized inspection, processing time may extend to 7–15 working days, whereas demurrage free time is typically only 3–5 days.

Consequently, the entire inspection period generates demurrage charges, and companies generally have limited grounds to request waivers because specialized inspection is a mandatory government requirement rather than a shipping line error.

3. Why D&D Is More Difficult to Control Than Other Logistics Costs

One unique characteristic of D&D is that the cost is incurred long before the company actually becomes aware of it.

Businesses often receive D&D invoices two to four weeks after returning the container, by which time the incident has already passed and there is no opportunity to intervene.

If companies have a real-time free time monitoring system, however, they can take corrective action while the shipment is still within the free period and avoid unnecessary costs.

Another common challenge is that responsibility for D&D often falls into a grey area shared by the import-export team, warehouse operations and the freight forwarder.

The import-export team believes its responsibility ends after customs clearance, while the warehouse claims it cannot receive the cargo due to incomplete documentation. Meanwhile, the forwarder simply follows customer instructions.

As a result, no one actively monitors the free time countdown, and everyone is surprised when the D&D invoice eventually arrives.

4. A Systematic Approach to Controlling D&D

Companies that successfully control D&D are not necessarily luckier—they simply manage free time as a genuine logistics KPI rather than reacting to individual incidents.

Achieving this requires three essential elements:

Regarding visibility, a capable freight forwarder should automatically notify customers before free time expires instead of waiting for inquiries.

If the current forwarder does not provide such a system, companies should establish a simple tracking file containing:

Updating this file daily is usually sufficient to identify potential D&D risks before charges occur.

Regarding negotiations with shipping lines, companies may request D&D waivers or reductions when charges result from force majeure events, mandatory specialized inspections, natural disasters, or shipping line errors such as rollovers or misrouting.

The likelihood of success depends largely on whether the company can provide sufficient supporting documentation and whether it has experience negotiating with the respective shipping line.