White Paper on Demurrage Charges for ULD Equipment in Air Cargo

 

Increasing operational efficiency by deterring the late return of ULD

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TABLE OF CONTENTS

Demurrage and Why Is It Important

Demurrage is the term used to describe the late-charge or levy placed by the owner of a piece of cargo equipment when the user fails to return it on or before the agreed date. The term also applies to vacating cargo from terminals on time, but for the purposes of this paper, it will refer to the previous definition. 

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Background and Role of ULD CARE and IULDUG

The origins of ULD CARE go back to the 1970s with the arrival of wide-bodied aircraft and the containerization of cargo into Unit Load Devices, which lead to the formation of the ULD user group within IATA.

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ULD and Technology

For decades, ULD operations seemed to miss out on technological advancements. However, recent advances in technology are making tracking air cargo equipment more possible and easier. There are number of new developments showing the potential to automate tracking and hand-off of air cargo assets.

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The Role of Trade Associations

Trade associations, particularly IATA, play an integral role in balancing the requirements of industry-wide changes to key operating practices. 

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The Solution

ULD CARE is taking the initiative to propose the necessary solutions to rectify this long-standing situation. But the association can’t do it alone. 

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Conclusion

The long-standing practice under which ULDs are released off-airport for build-up or breakdown works effectively from a physical perspective. But in the absence of any kind of penalty for overdue return of the equipment to its rightful owner, airlines suffer significant operational disruption and lost efficiency as a result of ULD shortages. 

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Appendices
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Executive Summary

Speed and efficiency form the backbone of air cargo operations. With a significant number of shippers now building up and breaking down of Unit Load Devices (ULDs) off-airport, there is one factor that dramatically reduces the ability of air cargo to deliver – the lack of a deterrent for the late return of empty ULDs back to its owner. 

Today’s logistics operations rely on releasing unitization equipment, such as shipping containers, rail cars and road transport equipment, to shippers, consignees and freight forwarders. ULDs enable this function in air cargo.

There is near universal use of late charges in other segments of the logistics industry. These charges are an incentive to return equipment on time within a defined “free-days” time frame, also called ‘demurrage or detention.’ However, when it comes to ULDs, nearly all airlines allow third-parties to return equipment at their leisure with no penalty.

This practice runs contrary to the International Air Transport Association’s (IATA) documentation that sets the industry standards for aviation. IATA’s Air Cargo Tariff and Rules Manual (TACT) under Section 4.8 – Unit Load Device Charges states: “Demurrage charges may be levied, subject to provisions in applicable tariffs of the airline or ULD owner, against a party that retains a ULD for an excessive period of time. The charge is designed to encourage prompt return of ULDs rather than generate revenue.” 

“This practice runs contrary to the IATA documentation”

In spite of this statement, there remains an industry practice of not charging non-airline, off-airport third parties demurrage fees. This practice is even in contrast with other segments of the air cargo industry:

  1. Cargo terminals charge demurrage for the late pick up of import cargo;
  2. Providers of special purpose ULDs, such as temperature-controlled or animal transport, charge demurrage for late returns; and
  3. When airlines exchange their ULDs with another airline in the course of interlining, they charge each other demurrage for late returns through the Interline ULD User Group IT system (IULDUG).

As the representative of most of the world’s ULD owning airlines and operator of the IULDUG system for over 50 years, ULD CARE has now carried out research into this industry anomaly.

We asked those involved in the ULD management process why not charging demurrage for off-airport build-up and breakdown is acceptable. The responses indicated that there were several prevailing points of view, which included: airlines’ fears of losing their customer to someone who doesn’t levy such charges; a lack of an efficient system to track the transfers and times, and therefore fees; and a questionable legal justification for charging demurrage. 

details of these and other reasons given by respondents in research carried out in Q4 2021 by ULD CARE can be found in Appendix 3 – Why are airlines reluctant to charge demurrage for their ULD?

This white paper describes how the practice of off-airport buildup and break down has evolved, compares these practices with those of other logistics industries, and proposes a road map to rectify the situation, to ensure that ULD are returned in the specified time frame.

Anecdotal evidence notes that up to 10% of an airline’s ULD inventory may not be available for day to day flight operations due to the equipment being off-airport. In spite of the fact that the IATA’s TACT and ULD Control Receipt (UCR) both contain wording regarding the obligation to pay demurrage for overdue return, the practice still does not occur in the vast majority of late ULD transfers.

The pandemic has highlighted how important our supply chains are – those supply chains include the equipment necessary to deliver goods from one part of the world to another. ULDs are critical to ensuring a smooth and efficient flow of air cargo and the goods carried. The inefficiency and lack of consequences associated with the late return of ULD can no longer be ignored.

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