Charges Additional to Freight and Detention vs Demurrage

Sometimes, we face the issue while checking the sea way bill or bills of lading (usually a bills of lading including MMTD, CPBL and NNSWB) to determine if the given charges are additional to freight or not!

If letter of credit indicates, charges additional to freight not acceptable, we must need to understand what all are the charges additional to freight :

Below are the charges which are considered additional to freight-

Free In: If a transport document (usually bills of lading) indicate "Free In" or FI, it means charges for the loading of the goods are not included in main carriage.

Free Out : Same concepts apply on  "Free Out" or FO as FI, though, it is used for unloading of goods which are not included in main carriage.  

Free In and Out : In this case, both the above charges are not included in main carriage it is also referred in trade term as "FIO".

Free In and Out Stowed : Stowage is method by which different types of container vessels are loaded on board with specific standard sizes, this is used to maximize the shipping and safety on board,  "FIOS" includes loading, unloading and stowing charges and this also comes under charges additional to freight.

We have learnt above what all are charges additional to freight, let's discuss which charges are not considered additional to freight:

1. Detention : Shipping company provides a few free number of days to empty the container at outside of destination port and return to it's owner, this term is detention period.

2. Demurrage : There are a free period allowed by shipping company at port of discharge to take the delivery of goods in given number of days. Demurrage is the charges when delivery of consignment is not taken or released at destination port or customs within those given free period by port authority.

Points To Be Noted

If a letter of credit indicates charges additional to freight not allowed, it means that any charges indicated on the transport documents other than detention and demurrage, we must examine the document while considering the above points. 

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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