05 Jun What Are Demurrage and Storage Charges? Who Is Responsible for Demurrage and Storage?
İçindekiler
The theory of Comparative Advantages, first introduced in the work “Principles of Political Economy and Taxation” by English political economist David Ricardo and rooted in the studies of his mentor, Scottish economist and political theorist James Mill, explains why export and import are indispensable for a country's economy. This theory can be summarized in its simplest form as follows: it is more efficient for two countries that can produce two different products at relatively lower costs to trade these products with each other rather than trying to produce them independently. Indeed, except for a small number of countries isolated from the outside world due to certain embargoes or ideologies, almost the entire world is now woven into a trade network. When examining closed economies like North Korea, which are shut off from international trade due to both their own policies and imposed sanctions, the negative impacts of the absence of international trade on such societies become clearly evident.
However, today it is almost unnecessary to discuss the importance of international trade. We are all aware—especially with regard to our own countries—that in 2025, no country can develop without international trade. The effects of the economic sanctions initiated by U.S. President Trump against China during his first term, and which continue into his second term, have been felt in geographic and economic markets since 2018. In fact, we are still not fully recovered from the disruptions experienced in the markets during the Covid-19 pandemic. On the other hand, the recent lifting of economic sanctions imposed by the EU and the U.S. on Syria since 2011 is noteworthy in showing that international trade can serve as a positive means of normalization.
The backbone of international trade is transportation—particularly maritime transport. According to the Review of Maritime Transport 2024 published by the United Nations Conference on Trade and Development (UNCTAD), more than 80% of global trade is carried out by sea. At Pier Law, while providing legal consultancy to companies engaged in global logistics operations, one of the most frequently encountered issues in the realm of maritime trade is related to demurrage and storage (detention) costs. So, what exactly do these terms mean? And which party to the transaction is responsible for these costs?
What is Demurrage and Storage?
In maritime transport, all vessels docking at a port are granted a Free Time period without incurring additional fees. If a ship, container, or transport vehicle is held at the port or loading/unloading point beyond this designated free time, the penalty fee to be paid is called Demurrage. Under the Turkish Commercial Code No. 6102, demurrage is referred to as “Sürastarya.” Demurrage is paid to the party whose container or vessel has been occupied due to the delay. Therefore, these fees may vary from business to business.
The term Storage is often confused with demurrage. While demurrage arises from unforeseen delays during transportation and is penal in nature, storage is a fee that the importing company normally has to pay during customs procedures. The literal meaning of “Ardiye” (storage) is warehouse or to warehouse. It is the fee paid to the port in exchange for storage services provided during transportation and customs processes. Within this framework, each port may determine its own storage fees.
Who Is Responsible for Demurrage?
Parties and Roles in Trade
To determine which party is responsible for payments such as demurrage during transport, the first step is to identify the parties involved in the trade. We note that in this article, we are focusing solely on demurrage fees. Issues like damages, losses, or insurance payments that may arise at different stages of trade will vary depending on the INCOTERMS conditions adopted in the underlying contract. We will provide information on this in future articles.
Now, let's return to the question: who is liable for demurrage costs? First, we must identify the roles of the parties. In maritime transport, there are basically four groups: (i) the consignor, (ii) the consignee, (iii) the shipper, and (iv) the carrier. Although these terms are fairly self-explanatory, the roles of the parties can vary depending on the relationship between them and the specifics of the case. In the most common practice: (i) the consignor is the seller or exporter, (ii) the consignee is the buyer or importer, (iii) the shipper is the freight forwarder, and (iv) the carrier is the actual transport company or the shipowner. In this scenario, the forwarding company also undertakes the role of the shipper. In a scenario where the consignor directly undertakes the shipping, the consignor will also hold the title of shipper toward the carrier.
In practice, the primary party responsible for demurrage fees is the carrier. As mentioned above, the carrier can be either the freight forwarder or the actual transport company. If the carrier is a freight forwarder, the first party held responsible by the container owner for the damages caused by delays is naturally the forwarder, since there is a direct contractual relationship between them.
If the carrier is a transport company, the transport company uses either its own containers or containers rented from another entity to deliver the shipper’s cargo to the delivery point. In both scenarios, the transport company is the one bearing the incurred loss. Indeed, (i) if the containers are owned by the carrier, the failure to unload them prevents their use for other cargo, causing the carrier to miss potential jobs and profits; (ii) if the containers are rented from another entity, the carrier—like the forwarder—has to pay rental fees for the extended duration.
In any case, the carrier suffers losses due to delays. Under Articles 1155/4 and 1171/4 of the Turkish Commercial Code, it is regulated that the shipper is responsible for the demurrage (sürastarya). In practice, it is generally observed that the forwarder pays the demurrage fee and then recourses the amount to the exporter.
Notification Obligations
In trade, delays can occur for various reasons. However, when such delays occur, complying with legally determined timeframes and notification requirements is crucial for identifying which party is liable for the resulting losses and demurrage expenses.
Article 1152/1 of the Turkish Commercial Code is as follows:
“If it is not agreed that loading will begin on a specific day, the carrier or its authorized representative shall notify the shipper of the preparation in accordance with the provisions of paragraphs two to five.”
Then, Article 1153/1 reads:
“The loading period begins on the first calendar day following the receipt of the notice of readiness by the addressee, or, if loading has actually begun, from that moment. If loading cannot actually begin when the period starts, Article 1156 shall apply.”
The provisions regarding unloading are similarly regulated. Articles 1168/1 and 1169/1 read:
“If it is not agreed that unloading will begin on a specific day, the carrier or its authorized representative shall notify the consignee of the preparation in accordance with the provisions of paragraphs two to five.”
“The unloading period begins on the first calendar day following the receipt of the notice of readiness by the addressee, or, if unloading has actually begun, from that moment. If unloading cannot actually begin when the period starts, Article 1172 shall apply.”
As can be seen, the determining factor for the demurrage period is the conclusion of loading and unloading durations. The law imposes notification obligations on the parties when determining when these periods start. Indeed, legal precedent also shows that evaluations regarding liability for delay costs and demurrage fees are shaped around whether the contractual provisions and statutory notification periods were observed. These notification obligations are of vital importance for proving that each party has fulfilled its responsibilities in a timely and proper manner in the event of a dispute.
In this context, the following criteria were fundamental in the decision of the 11th Civil Chamber of the Court of Cassation dated 17.05.2023 and numbered 2021/8720 E., 2023/3045 K., which upheld the ruling of the Istanbul 17th Commercial Court of First Instance:
“In the precedent ruling of the 11th Civil Chamber of the Court of Cassation dated 05.03.2014, numbered 2013/12326 E. and 2014/4189 K., it was observed that the conflict in Libya began on 15.02.2011 and was considered a force majeure. It was stated by the plaintiff that the goods had been loaded into 25 containers on 07.02.2011. Therefore, the conflict and war began during the free time. The plaintiff failed to submit a notice of arrival despite being granted a final deadline. It could not be proven that the goods were discharged or ready for delivery. No evidence regarding the fate of the goods or containers was submitted from 2011 until the filing of the case. The court concluded that the defendant had no demurrage liability after the end of the force majeure, and dismissed the case.”
Similarly, in the ruling dated 06.09.2020 and numbered 2019/1689 E., 2020/561 K. of the 15th Civil Chamber of the Istanbul Regional Court of Justice, which upheld the lower court’s decision, the following issues were evaluated:
“Based on the collected evidence, the provisions of the contract between the parties, the notifications made to the defendant by the plaintiff after the goods arrived at customs, and the expert reports obtained from experts open to scrutiny and sufficient for rendering a decision, it was understood that the defendant was liable for the storage and demurrage fees paid by the plaintiff due to the goods waiting at customs as a result of the defendant’s failure to pay on time. Therefore, the court’s decision to uphold the claim was appropriate.”
In line with the legal provisions and precedents cited above, the primary factor in determining liability for delays during transport is whether the parties fulfilled their notification obligations. The starting points for the delay durations depend on such notices.
It should be noted that although loading and unloading periods commence upon notifications from the parties, the start of the demurrage period is not subject to any notice. Indeed, Articles 1154/3 and 1170/3, which regulate demurrage periods resulting from delays in loading and unloading operations, are as follows:
“The demurrage period begins when the loading period ends, without the need for any notice.” and
“The demurrage period begins when the unloading period ends, without the need for any notice.”
Therefore, unexpected and high demurrage fees may arise due to negligence by the parties. Unfortunately, in practice, even minor disruptions or oversights frequently lead to demurrage fee disputes.
Contractual Provisions Between the Parties
In light of the above information, we understand that: (i) the carrier is the first party to pay the demurrage charge, (ii) this cost is then recouped under certain conditions from other parties in the transport chain, and (iii) one of the key factors in determining from whom it is recouped is whether the parties have fulfilled their notification obligations. Another decisive factor is the provisions in the contract between the parties. Indeed, the following Articles 1153 to 1170 of the Turkish Commercial Code, which regulate the demurrage period arising during loading and unloading, are relevant:
“1153/1: The loading period starts on the first calendar day after the notice of readiness reaches the recipient or, if loading has actually started, from that moment. If loading cannot actually begin when the period starts, Article 1156 applies.”
“1153/2: If the loading period is not specified in the contract, the period required for loading based on continuous twenty-four-hour operation shall be deemed the loading period. When calculating this period, the port of loading, the vessel, loading facilities and equipment, the nature of the cargo, and local customs and port regulations shall be considered.”
“1170/1: If agreed in the contract, the carrier must wait beyond the unloading period. This extra waiting time is called the 'demurrage period'.”
“1170/2: If demurrage or demurrage fees are mentioned in the contract but no duration is specified, the period shall be ten days.”
All of the above provisions begin by referencing the contracts signed between the parties. Thus, in a dispute regarding demurrage, after assessing whether notification obligations have been fulfilled, it is necessary to examine the parties’ agreements regarding demurrage periods and fees. It should be noted that although the relevant provisions of the law fall under the section titled Freight Contracts, in practice, all written documents related to the transport are taken into consideration for such evaluations. The case law examples provided above support this interpretation.
Within the scope of international trade activities, when determining who bears the responsibilities and costs of transportation; all written and legally compliant documents between the parties, including but not limited to (i) International Trade Agreements drawn up under the United Nations Convention on Contracts for the International Sale of Goods (“CISG”), (ii) the Freight Contract, (iii) the Bill of Lading, and (iv) the Insurance Policy, are taken into consideration.
Among these documents, the most decisive factor is generally the International Trade Agreements. One of the fundamental elements of International Trade Agreements is the use of International Commercial Terms (“INCOTERMS”). INCOTERMS are a standardized set of rules published by the International Chamber of Commerce (“ICC”) that define the responsibilities of buyers and sellers in relation to the transportation and delivery of goods in international sales contracts. These rules clarify certain critical issues such as (i) Delivery Obligations, (ii) Transfer of Risk, and (iii) Allocation of Costs. INCOTERMS help companies avoid confusion and potential disputes. By incorporating the INCOTERMS rules appropriate to them into international trade agreements, companies reduce potential risks and streamline the logistics processes in their global operations. We will provide detailed information regarding INCOTERMS in our upcoming articles.
Conclusion
Demurrage and storage charges arising in the maritime transportation process, which is an integral part of international trade, are important items that may have both legal and economic consequences for the parties. Both the provisions of the Turkish Commercial Code and case law focus primarily on the contractual provisions between the parties and whether notification obligations have been fulfilled when determining which party is to bear such costs. The fact that critical processes such as the commencement of the demurrage period come into effect without the need for any notification requires the parties to act with care. Therefore, in order to minimize the risks in terms of delays and related expenses that may arise during transportation processes, it is of great importance that contract texts are prepared clearly, in detail, and in accordance with international standards. At Pier Law, we provide contract management, consultancy, and dispute resolution services to all our clients operating in the field of maritime transportation so that they can strengthen the legal infrastructure of their commercial processes and proactively prevent potential disputes.
