Per diem charges help control and simplify expenses. In this article, we’ll introduce you to everything you need to know about this fee, how it’s set, and how to avoid unnecessary costs. If you are involved in logistics and shipping, you need to know this to save money and stay organized.
What Are Per Diem Charges and Why Do They Matter?
In general, per diem charges are fees that someone pays or receives to cover services or expenses for each day. The word “per diem” comes from Latin, which means “per day.” This term is often used in business, government, and shipping industries in real-life situations.
In the shipping world, per diem fees are also called detention, which incurs if a container is used beyond the allowed free time. Because you are leasing a container from the shipping line to transport your cargo, you also have to return the container back within the time agreed upon. The shipping company typically gives you a couple of “free days” on which to unload and return the container when you import or export goods. But if the time limit is exceeded, per diem charges will need to be paid.
This fee is often a range of $100 to $300 per day in the U.S. ports per container. When a shipping container isn’t returned on time, the late fees can quickly pile up.
In addition, late returns disrupt container availability for other shipments, especially during peak seasons. Prolonged container use may delay the next vessel schedule or disrupt inland transport.
Per Diem vs. Demurrage
You may also have heard of demurrage fees, but they are not the same as per diem fees. Demurrage applies when containers stay too long at the port itself, which may cause port congestion.
For businesses that generate revenues from international trade, understanding and managing the shipping process and fees are very important. Failure to handle them well can add costs and decrease profits.
Common Causes of Per Diem Charges in Freight Logistics
In freight logistics, there are several common factors that contribute to extra costs. Knowing about them may help businesses avoid unnecessary charges.
For the shipper, the per diem charge is usually incurred in these cases:
Slow Customs Clearance. Cargo may be released late if there are mistakes in the paperwork or if it’s held for customs inspection.
Port congestion is another very regular issue. If many vessels come in at one time, terminals get backed up, which slows down unloading, pickup, and returning containers. Labor shortages or strikes at ports or warehouses can also slow container handling further and result in a delayed return date.
Delays can also be caused by poor coordination between shippers, carriers, and consignees. Containers stay longer than they should at the receivers if they don’t have enough space to unload the goods, or they refuse to unload.
To avoid the extra costs, it’s important to plan in advance and to communicate in time.
How to Avoid or Minimize Per Diem Fees?
This fee can be avoided or reduced smartly. Here are some simple tips:
Keep Track of Containers: Use software or systems to see when containers are picked up and when they are to be brought back. So you can make arrangements accordingly.
Use Warehousing Services: If your goods can not be shipped in time, move them into a warehouse and return the empty container to the shipping line on time. It may cost warehousing and storage fees, but it’s often less than per diem costs.
FIFO Method: In logistics, the First In, First Out (FIFO) method ensures that containers received first are also the first to be shipped out, minimizing the risk of long dwell times and associated fees.
Strategies for Shippers and Carriers to Handle Per Diem Disputes
Issues with per diem charge disputes can arise from miscommunication or unwanted delays. In case a dispute continues, it calls for the existence of a neutral third party who will help the two sides agree to a fair settlement. But there are ways to avoid or work through them without much difficulty:
-
Keeping accurate records.
-
Container tracking systems provide real-time visibility, and this allows you to identify delays before they occur.
-
A shipping agreement is also important because it shows you the terms of free time and rates with which you must comply.
-
Build strong relationships with carriers and terminal operators. A history of timely performance and good communication can make carriers more flexible when occasional delays happen.
-
Conclude buffer time in the planning to account for potential hold-ups.
Under the proper preparation and transparency, you can handle per diem disputes better and not strain a relationship.
Conclusion
To manage your logistics well, watch out for unexpected freight charges like per diem charges. Finding a reliable and experienced freight forwarder is also important. With affordable cost, a freight forwarder like Foresmart can help you ship your cargo globally as smoothly as possible.
