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General Average, Shipping, Imports, Exports, maritime insurance, forwarding

A container carrier recently declared General Average following an incident that occurred on board one of their vessels on the high seas.  An online newsletter advised that In conjunction with declaring General Average, the owners will appoint Average Adjusters, who will be responsible for coordinating the collection of securities and all documentation required from parties with interest in cargo, containers, vessel and fuel.

Cape Town had a General Average event back in 2004 with the grounding of the Sealand Express at Milnerton Beach…  I’m sure you will remember the peculiar sight of the vessel on your drive to or from work or the beach, not to mention the traffic jams because of the ‘spectator value’…  

Textbooks guide us that “General Average is based on an equitable principle of natural justice as it has also been said, that where there is property of several which is equally in peril, those who had property that has been saved by sacrificing the property of others, must share the loss in proportion to the share of each in the maritime adventure

In layman’s terms, everyone who has a common interest in the vessel, whether you’re the vessel owner, the vessel operator, the container operator or the cargo owner – all will need to contribute towards the salvage costs.  

Where there is a General Average loss the parties who have suffered the loss are entitled to a contribution from the other involved parties.”  This could be a percentage of the insured value of the cargo.

There is a general average act when, and only  when, an extraordinary sacrifice of 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”.  

The 7 essential features are;

  1. It applies only to a common adventure of a maritime nature (does not arise in a non-maritime situation)
  2. There must be peril (serious and immediate danger).  The peril does not need to be imminent, but it must be real and substantial
  3. There must be a community of interest to subsist at the time of peril (at least two interests actually exposed to the danger of damage)
  4. The act must be intentional or voluntary and not inevitable
  5. The act must be reasonable
  6. The sacrifice or expenditure must be extraordinary
  7. The action must be for the common safety and not merely for the safety of part of the property involved.

Once a vessel-owner has declared general average, they will set in motion a series of activities at the ship’s discharging port.  Usually, the carrier claiming a general average contribution can assert a lien. The lien is normally released in return of the cargo owner providing an average bond, whereby he undertakes to pay the contribution due and to provide particulars of the value of his cargo and security in the form of either a cash deposit or a ‘guarantee’ from his insurers.

The Sealand Express incident caught many clients by surprise and, unfortunately, they were not adequately prepared to absorb the financial loss of having to settle the guarantees and deposits.  

This is where Marine Insurance is critical and something that we, as Pioneer Freight, will always advise our clients to rather pay the little extra to have peace of mind.