It’s necessary for trucking companies to keep a tight schedule to ensure their deliveries arrive on time. However, there may be a time when there are delays. A detention fee is assessed when the delay is due to a client causing a bottleneck by not being able to load their shipment on schedule, or not being able to unload it at the time agreed upon.
If the shipping company has to wait for a load, there is usually a predetermined hourly detention fee assessed to the client for every hour the truck is waiting to be loaded. This is generally only for truckload operations, as LTL operators tend to be told to move on if a shipment is not available to be loaded.
How Does a Detention Fee Work?
Similar to how a car rental business has predetermined fees that are assessed if you do not return their equipment in ways that are up to standard, a trucking company has a predetermined fee in their contracts that states something along the lines of if a shipment is not ready at the agreed upon time, we will assess a fee of a certain amount of money for each hour our driver needs to wait. This is a detention fee that is then added to your final bill.
How are Detention Charges Calculated?
Some detention fees are typically already set numbers of anywhere from $50 to $100 per hour, which is the usual price range of detention fees, but these rates are based on what the operating cost of a truck is per hour. So, an idle truck isn’t making a company money, which means most companies will charge something like $75 per hour.
When Are Detention Charges Applied?
Freight detention fees are applied when a client is unprepared to load or unload a shipment at a previously agreed-upon time, causing a driver and truck to be forced into a holding pattern and delaying other deliveries.
What Is a Free Time Period
Detention fees are always discussed at the beginning of an agreement, as is a free time period. This free time period is the agreed-upon amount of time that a truck and driver can be waiting for a shipment to be loaded before assessing any detention fees. Generally this is one or two hours at both pickup and delivery destinations.
Who Enforces Detention Fees?
The shipping company is responsible for enforcing the detention fees. They are typically very clear about detention fees during their initial contacts with their clients.
Who Is Responsible for Detention Fee Charges?
This has some caveats relative to deliveries that utilize multiple carriers, but generally, the party who is responsible for another party waiting is responsible for the detention fee.
Example of a Detention Fee
Company A and Company B have an agreement that Company A will pick up goods from Company B at noon on Tuesday. When the truck for Company A arrives at Company B, the shipment is not ready and the driver and truck for company A must wait for 2 hours before the shipment is loaded.
It had been contractually agreed upon that the free time allotted for this transaction was 1 hour. So, as it took 2 hours to load the shipment, a 1-hour detention fee will be assessed to Company B, as they weren’t prepared when they said they’d be.
Detention Fees vs Demurrage: What’s the Difference?
A common fee at ports is also referred to as a detention fee, though it differs from the type of detention fees mentioned above. Another common port fee is called demurrage, and here is the difference:
A demurrage fee occurs when a shipment is delivered to port and sits on the “dock” unclaimed by the company who ordered the delivery. There is an agreed-upon number of free days the container can stay (similar to free hours regarding trucking pickups and deliveries), and if the container stays longer than that time, a daily demurrage fee will be placed on each container.
A detention fee as it relates to drayage shipping occurs when a container is taken and not returned within an agreed-upon timeframe.
In short: a regular detention fee pertains to truckers waiting to load or unload, and a drayage/port detention fee pertains to a delay in returning a container. A demurrage fee pertains to a delay in picking up the container from the drayage company.
Methods to Avoid Uncompensated Time
Detention fees can really add up, and making a conscious effort to avoid them is good business that helps all parties involved. Even delivery teams would much prefer a given delivery goes off as scheduled, rather than having to enforce detention fees. Here are a few tips on how to avoid these fees and stay in good keeping with your business partners.
Tracking/Scheduling
Scheduling is a no-brainer when it comes to avoiding these fees, but it’s still a tactic much easier said than done. Open lines of communication allow for changes to be made without any big surprises.
Try to work with a company who has modern tracking systems in place so you can follow your cargo mile by mile. This will allow you to always have a good idea of when shipments may be early or delayed, so you can adjust and be sure that forklifts and individuals are available when the delivery arrives.
Extend Your Free Time Period
The free time period for deliveries and pickups should be (and usually is) discussed at the same time as the bigger aspects of a contract are being established. If you wind up running into frequent situations where detention fees are levied, you can try to negotiate for a long free time period.
Avoid Notoriously Delayed Companies
Information on your competitors, potential clients, and everything else related to your business is available with a few clicks thanks to services like FreightWaves (and others, of course). With that in mind, be sure to give a lot of diligence to whom you do work with, if delays are going to frustrate you or even cause your business to falter.
Some companies don’t really suffer from a day delay here or there, and can do work with people who are frequently delayed without too much stress, but it depends on your business model. Be sure to do some homework!
Detention Fees: Best for Everyone if Avoided
Even though the company forced to wait will get some money for their time, the best conversation you can have about detention fees with a client is about how well you avoided them. Lapses in communication are the primary reasons that companies wind up unable to load or unload a truck, resulting in these fees.
Overcommunicate your plans, utilize helpful technology, and be prepared to make some changes on the fly. If you follow these steps, then detention fees and the stress that they cause can be readily avoided.
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