Archives



Forwarding, Freight News, Sea


Unravelling the mysteries of General Average

[ November 30, 2022   //   ]

The latest issue of freight transport insurer TT Club’s StopLoss newsletter unravels the mysteries of General Average.

Produced in collaboration with forwarder’s association, FIATA and the Global Shippers Forum (GSF), the publication provides a straightforward summary of the topic, along with essential good practice advice. 

While General Average is widely used and is as old as maritime transport itself, it is commonly misunderstood, say the authors and its application as a result of a maritime accident often takes shippers and sometimes forwarders by surprise, particularly those without adequate cargo insurance. 

GA is a globally applicable legal principle of maritime law by which extraordinary additional expenditure incurred during a voyage because of a defined incident can be recovered from all parties involved in the voyage on a pro rata basis against the ‘arrived’ value of goods and other property aboard.

With the volume and variety of cargo onboard modern-day large container ships, its complexities can be baffling while the additional financial burden and extended delays in cargo delivery are also frustrating. 

TT Club managing director of loss prevention, Mike Yarwood, said: “Experience shows that the system is an effective means of dealing with large and complex casualties.  However with container ships now capable of carrying in excess of 23,000 TEU, GA adjustment is likely to be an extremely complex calculation and the administrative burden placed on the interested parties is significant.”

He added: “The concept of ‘maritime adventure’ sounds quaint, but GA is the system whereby the ship owner can recover the extraordinary expenses that are necessarily incurred following some maritime incident, in protecting the cargo and/or preserving the ship. The costs are apportioned between the ship, its bunkers (sometimes owned by a charterer of the ship) and stores, and the cargo (including the containers) in proportion to their value.”

The StopLoss publication is explains the circumstances in which GA can be declared and who declares it, as well as the process of declaration and the appointment of a GA adjuster.  It goes on to outline the role of the adjuster including how bonds and guarantees are assessed and lodged, and how uninsured and LCL (less than container load) cargo is dealt with.

“It is essential that all freight forwarders understand GA to efficiently manage matters and set realistic expectations for their clients and represent their interests effectively.  Equally, cargo owners need to understand their obligations, particularly where they have chosen not to purchase cargo insurance.

StopLoss | Demystifying General Average (ttclub.com)

Tags: