Understanding Laycan: How to Avoid Demurrage Charges at Port
The High Cost of Poor Timing
In bulk commodity trading, timing is money—literally. A common failure mode for intermediaries is securing the sugar and the ship, but misaligning their schedules. If the vessel arrives and the sugar isn’t ready, or vice versa, the financial penalties begin immediately. In the fast-paced 2026 trade environment, logistics precision is what separates the elite traders from the amateurs.
These penalties, known as Demurrage, can run anywhere from $15,000 to $40,000 per day. A three-day delay due to a paperwork error or a missed Understanding Laycan window can wipe out the entire commission of a multi-million dollar deal. This guide delivers the tactical knowledge required to protect your capital from port inefficiencies.
Laycan (Laydays and Cancelling) is the agreed time window during which a vessel must arrive at the port to begin loading. If the vessel arrives outside this window, or if loading exceeds the allotted Laytime, the party responsible for the delay incurs Demurrage—a daily penalty intended to compensate the shipowner for lost time.
1. What is Laycan?
Laycan is an abbreviation for Laydays and Cancelling. It refers to the specific time window in which the vessel must arrive at the loading port to present the Notice of Readiness (NOR). In 2026, with port congestion increasing globally, mastering this window is critical.
The Components:
- Laydays (Start): The earliest date the ship can arrive and expect to load. If the ship arrives early, the seller is not obligated to start loading until this date.
- Cancelling Date (End): The deadline. If the ship arrives after this date, the charterer (buyer) has the legal right to cancel the vessel contract without penalty.
Manager’s Takeaway: A tight Laycan (e.g., May 1–5) is efficient but risky. A wide Laycan (e.g., May 1–15) is safer but requires flexible storage and silo planning at the refinery.
2. The Mechanics of Demurrage
Demurrage is effectively a “Parking Ticket” for a ship. When you charter a vessel for 12,500 MT of ICUMSA 45, you are allotted a specific amount of time to load the cargo, known as Laytime.
Visual Data Snapshot: Time Concepts
- Laytime: The “Free Time” agreed in the charter party for loading/unloading. It is usually defined by a rate, such as “2,500 MT per weather working day.”
- Demurrage: The penalty triggered once Laytime is exceeded. It is charged per day (pro-rata).
- Despatch: The inverse of demurrage. If you load faster than the laytime allows, the shipowner may pay the charterer a “bonus.”
While “Despatch” sounds attractive, “Joker Brokers” often use it to distract buyers from astronomical Demurrage Rates hidden in the fine print. Always prioritize the daily penalty rate over potential speed bonuses.
3. Financial Impact: Who Pays?
Liability for demurrage depends on the Incoterm 2020 used and the source of the delay. Understanding Laycan responsibilities is key to drafting the Sale and Purchase Agreement (SPA).
Scenario A: FOB Contract (Free On Board)
The Buyer charters the ship; the Seller loads the goods. If the Seller’s sugar is delayed in transit to the port and the ship waits, the Seller is liable to reimburse the Buyer for the demurrage charges.
Scenario B: CIF Contract (Cost, Insurance, Freight)
The Seller charters the ship. If the ship arrives at the destination and the Buyer’s port is congested or the Buyer fails to provide import documents, the Buyer pays the demurrage. This is common in high-congestion ports like Lagos or Chittagong.
4. Prevention Strategies for 2026 Logistics
To avoid bleeding capital at the port, implement these three professional protocols:
1. Match the Discharge Rate
Verify the Daily Discharge Rate of your destination port. If your contract requires unloading 3,000 MT/day, but the port crane infrastructure can only handle 1,500 MT/day, you are mathematically guaranteed to pay demurrage from the moment you dock.
2. The “WWD” Clause
Ensure your contract defines Laytime as “Weather Working Days” (WWD). This stops the clock during rain. Since ICUMSA 45 sugar cannot be loaded in the rain without clumping, this clause is mandatory for your protection in tropical origins like Brazil or Thailand.
3. Pre-Clearance of Documents
Work with a local port agent to pre-clear all import documentation while the vessel is still at sea. In 2026, digital “Single Window” systems at ports allow for pre-arrival clearance that can save 48–72 hours of laytime.
5. The Verity Deal Logistics Protocol
At Verity Deal, we mitigate shipping risks by vetting the logistical chain:
- Vessel Tracking: We utilize real-time AIS data to monitor vessel ETA against the Laycan window.
- Port Terminal Audit: We check current waiting times at the Port of Santos or Paranaguá before the ship is even chartered.
- SGS Coordination: We ensure the inspection team is ready at the exact moment the ship presents NOR to minimize “dead time.”
6. Frequently Asked Questions
What is the difference between Demurrage and Detention?
Demurrage applies to the delay of the vessel or the cargo inside the port. Detention applies to the delay in returning the equipment (like containers) to the shipping line after they have left the port.
How long is a typical Laycan window in the sugar trade?
A 10–15 day window is the industry standard (e.g., “July 1-15”). This provides the necessary buffer for ocean currents, weather, and previous port delays.
Can I declare Force Majeure to avoid Demurrage?
Generally, no. Commercial delays, such as port strikes or general congestion, are usually excluded from Force Majeure clauses. Only extreme “Acts of God” typically stop the demurrage clock.
