Demurrage charge refers to the failure to unload all the goods within the specified time, resulting in the ship to continue to berth in the port so that the shipowner to increase the cost of expenditure in the port and suffer the loss of ship time, by the charterer to the shipowner to pay the agreed amount.
For example, a contract stipulates that loading will take 2 days and unloading will take 4 days, and the demurrage charge will be USD4000/day.
The loading is completed before the expiration date, and no demurrage is incurred; the unloading is completed 4 days after the expiration date, and the demurrage charge of USD 4000/day*4 days is incurred, totaling USD 16000.
Do I need to declare demurrage charge to the Customs?
According to “Measures of the Customs of the People’s Republic of China for Determining the Duty-Paid Price of Imported and Exported Goods”, “the duty-paid price of imported goods shall be determined by the Customs on the basis of the transacted price of the goods, and shall include the transportation and its related expenses and insurance premiums before the goods arrive at the place of importation and unloading in the People’s Republic of China.”
Demurrage charge belongs to transportation and its related expenses, and if it meets the above provisions, it should be declared to the Customs truthfully.
U.S. Customs
China Customs
What demurrage charges need to be included in the customs duty-paid price?
- All demurrage charges incurred at the port of loading shall be included in the duty-paid price.
- Demurrage charge is generated only after the goods are unloaded, i.e., if demurrage has not been generated at the time of actual unloading, it shall not be included in the duty-paid price.
- Demurrage arises before the goods are unloaded, if there are objective quantitative data to determine the proportion before and after unloading, then the demurrage generated before unloading should be included in the duty-paid price.
If you don’t want to just read these text interpretations, you can click on the video below to help you understand more quickly about the demurrage charges：
If you want to know what other surcharges there are for ocean transportation, you can click to read this article:
What should I do if the demurrage charges are not recognized until after the declaration?
If the demurrage charge has not been determined when the enterprise declares to the Customs, it should declare the elements such as “with/without demurrage” and “demurrage not determined” in the column of “specification model”, and then confirm the amount of demurrage.
After confirming the amount of demurrage, the following methods should be adopted to supplement the declaration and pay the tax.
Supplemental declaration
Due to the lag in the settlement of some transportation-related expenses, enterprises need to submit information to the Customs and make supplementary declaration in a timely manner after settling the demurrage charges with the shipping company, so as to avoid underreporting and omission of freight charges and the risk of assuming the corresponding legal liability.
Supplementary declaration needs to submit information mainly include: transportation contract, transportation invoice, ready notice, loading and unloading factual record sheet and other information, to be approved by the Customs to modify the customs declaration.
Active disclosure
Enterprises found by self-check that there is an omission of demurrage charges, they should take the initiative to disclose to the Customs at an early date to apply for the payment of back taxes:
- On-site Processing: Import and export enterprises and units that make proactive disclosure to the Customs are required to fill in the Proactive Disclosure Report Form and report to the Customs at the place of declaration, the actual place of import and export or the place of registration along with the books of accounts, documents and other materials.
- Online application: You can apply online through the “Enterprise Management and Audit” module on the “Internet + Customs” platform.
What materials need to be prepared for proactive disclosure: proactive disclosure report (can be accompanied by a detailed description of the situation), customs declaration, contract, customs tax payment, demurrage invoices, bank payment vouchers and so on.
Notice of Readiness for Loading and Unloading (NOR), Record of Loading and Unloading Time Facts (SOF), Demurrage Accounting Sheet, etc.
It is sufficient to submit photocopies of the above materials, but all of them must be stamped with the official seal of the enterprise and be responsible for their authenticity, accuracy and completeness.
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