When 'Demurrage' Meets 'Customs Valuation': Things Foreign Traders Must Know

As a 20-year veteran in foreign trade, I've seen too many companies stumble due to demurrage declaration issues. I remember in 2018 when a steel company importing iron ore failed to declare $3 million demurrage, resulting in customs investigation, tax supplements, fines, and damage to corporate credit rating. Today, let's discuss this professional topic that gives many traders headaches in the simplest terms.

Demurrage: More Than Just 'Overtime Parking Fees'

Many clients ask me: 'Isn't demurrage just a penalty for ships overtime parking?' This understanding is only half correct. To be precise, demurrage isa risk transfer mechanism in voyage charter partiesJust like the "time relay race" you play with the shipowner:

• Voyage phase: The shipowner controls the entire process and bears the time risk themselves
• Loading/unloading phase: If the agreement states "Free in and out," the baton is passed to the charterer.

I once handled a typical case: A grain and oil company importing soybeans incurred 12 days of vessel detention due to port congestion. With the contract clearly stipulating a demurrage rate of $20,000 per day, the resulting high costs caught the company off guard.

Demurrage in Customs' Eyes: The Key Lies in the 'Before Discharge' Time Point

According to the "Valuation Measures," whether demurrage fees are taxable depends entirely on this "life-or-death line"—Cargo discharge commencement time. This is like the red and green channels at customs:

• Green channel (should be taxed)All demurrage charges incurred before discharge
• Red channel (non-taxable)Purely expenses incurred after discharge

Three common scenarios in practice:

1. Vessel delayed for 3 days due to quarantine inspection after arrival before discharge → These 3 days charges are taxable
2. Discharge operation interrupted for 2 days due to heavy rain → These 2 days charges are non-taxable
3. Mixed demurrage (partly before + after discharge) → Requires precise breakdown with SOF records

'Pitfall Avoidance Guide' for Smart Enterprises: These Situations Qualify for Tax Exemption

When conducting compliance review for a chemical company last year, we identified three typical tax-exempt scenarios:

• Unclear time recordsMissing discharge fact records, unable to distinguish between pre/post discharge
• Demurrage fees incurred only after all cargo was unloaded
• Written proof that the fees were ultimately not actually paid

Special reminder: If the shipowner issues awaiver letter(Waiver Letter), remember to retain it as tax exemption documentation.

Declaration Practice: A Veteran Customs Broker's 'Three-Step' Secret

Based on years of experience, Ive summarized the golden rule for demurrage fee declaration:

1. Prepare an "evidence package" in advance: NOR (Notice of Readiness) + SOF (Statement of Facts) + demurrage calculation sheet
2. Dynamic declaration strategy: For confirmed fees, fill in the miscellaneous charges column; for uncertain fees, make notes first and supplement the declaration later
3. Prepare the Time Sheet for laytime calculation as evidence in disputes

Recently assisted an auto parts importer in handling a demurrage dispute, where we successfully reduced the taxable amount by 40% through minute-by-minute loading/unloading records.

Thoughtful Advice for Fellow Foreign Trade Professionals

Lessons learned from this case:

• Consider customs valuation impact when signing charter parties
• Maintain a demurrage tracking ledger to record vessel movements
• Hold regular "demurrage fee prediction meetings" with the customs clearance team

Remember, customs is not "nitpicking" but ensuringfair taxation. As long as you grasp the key points of the rules, demurrage fees can become another focal point for corporate cost control. Next time you encounter a demurrage fee issue, ask yourself: Did this fee occur "before unloading" or "after unloading"? The answer often lies in this simple question.