What is General Average ??

What is General Average..??

 

Imagine a ship full of cargo on its voyage and something untoward happens during the voyage such as

  • a fire on board (maybe due to incorrect hazardous cargo declaration) or
  • the ship gets stranded or grounded due to machinery breakdown or
  • there is a stack collapse on board a container ship (maybe due to mis-declaration of container weights) or
  • the ship gets caught in heavy weather and some cargo on board the ship has shifted due to the heavy weather jeopardizing the stability of the ship
  • or any other life threatening situation caused by natural or unnatural circumstance

In such cases when the entire voyage or cargo or ship is said to be at risk, the master of the ship and/or the shipowner has a moral obligation to take a decision with regards to preserving the safety of the ship, the cargo and most importantly the crew..

This may necessitate the master to do something extraordinary in order to save the ship, the cargo and the crew..

This extraordinary event may involve

  • jettisoning some cargo
    • could be the cargo that is affecting the stability of the ship in bad weather as mentioned above or
    • to reduce weight on board the ship to attempt to refloat a grounded ship
  • the ship making a distress call at the nearest port to salvage the situation on board the ship
  • the need to do some emergency repairs to the ship due to which some cargo maybe damaged

In such cases where the ship and/or cargo has undergone any losses to save the voyage, the shipowner may declare “General Average“..

image for general average

Image from http://www.tipic.com.tn/upload/images/Slideshow_04.jpg

General Average is a legal principle of Maritime Law under which, all parties who are involved in that voyage, shall be asked to proportionally share the losses resulting from such sacrifice..

All parties including merchants whose cargoes landed safely would also be called upon to contribute a portion (based upon a share or percentage) to the affected parties which could be the shipowner, merchant or merchants whose goods were jettisoned or damaged in the process of preserving the safety of the ship and/or crew..

Say for example the ship is a container ship and there are 100 containers on board with 100 customers.. One of the containers caught fire on board which spread to 9 other containers and all 10 containers had to be thrown overboard in order to save the balance 90 containers, the ship and the crew..

Since the ship, the cargo and the crew were saved due to this action, the whole burden of the loss will be shared among the 100 customers and not just the 10 customers whose cargo was thrown overboard..

General Average was formally codified into the York-Antwerp Rules, in 1890, but has been updated several times, with the most recent update being 2016..

Rule A1 of the York-Antwerp rule states “There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

In a lot of the cases the captain of the ship will have very less time to decide and take appropriate action to save the interests of cargo owners and the ship..

The York-Antwerp rule maybe downloaded here..

You can read all about the technical aspects and processes of General Average in a wonderful piece that Alexander Robertson from Robertson’s Cargo Consultancy (Pty.) Limited wrote for this blog..

This article gives a good introduction to General Average and salvage principles and explains the processes that needs to be followed in case you are faced with a General Average situation..

So have you come across any General Average situation..?? What were the circumstances and how was it handled..


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18 thoughts on “What is General Average ??

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  1. Facts
    A company manufactures large tanks at its production site in Germany and sells them to a customer in Switzerland. The buyer and seller have agreed “CPT Zürich Incoterms® 2010” as delivery conditions. The company employs a service provider to transport the tanks to Switzerland. During transportation the tanks are damaged and the customer refuses to accept them. He demands the delivery of new tanks.

    Is responsibility for the damage to the tanks to be borne by the buyer or seller? Can the buyer refuse to pay for the goods or is he bound to pay the sale price despite the damage? Has the seller discharged his obligation to deliver the goods? Answer this question me am challenged on the damage !

  2. Whilst this report covers GA from a Carrier’s perspective it is interesting to note roles played by other parties .From a ZA perspective we have
    SAMSA – South African Maritime Safety Authority / NSRI – National Sea Rescue Institute / TNPA – Transnet Port Authorities / Marine Salvage / Risk & Legal – Maritime Attorneys / Insurance Commercial Interest and Brokers .
    Looking at the pic can you identify the size / type of containers and stow positions . The ship PT / STB / Fore / Aft .(this is not a test)

    CA

  3. Hi !

    I have recently came across General Average which was applied on vessel CCNI ARAUCO at Hamburg port. It caught fire on one of the containers on first week of September. General average is applied on all the containers which were on board. Salvage gurantee has been demanded by which is 26% of the CIF value of the consignment.Its been a month and issues is revolving between insurance agencies . We are hoping that this issue will be resolved soon and we will have goods in our custody 🙂

    • Hi Aaditya,

      This is exactly the position I have been in with my client. See my comment below.

    • We got hit for 26% of CIF values, broken out by Lloyd’s Open Form 2011 (10%), Salvage under German Law (5%) and General Average at (11%).
      Lucky cargo was insured and insurers paid out, however cargo is still yet to be released as sufficient Salvage and General Average Securities are yet to be received. It’s a drawn out process.