General average
Before we start this off, there’s a separate reference on this topic contributed by Mr Yim, of Puncak Jupiter - view it here.
The law of general average is a legal principle of maritime law
according to which all parties in a sea venture proportionally share
any losses resulting from a voluntary sacrifice of part of the ship or
cargo to save the whole in an emergency. In the exigencies of hazards
faced at sea, crewmembers often have precious little time in which to
determine precisely whose cargo they are jettisoning. Thus, to avoid
quarrelling that could waste valuable time, there arose the equitable
practice whereby all the merchants whose cargo was on board would be
called on to contribute a portion, based upon a share or percentage, to
the merchant or merchants whose goods had been tossed overboard to
avert imminent peril. While general average traces its origins in
ancient maritime law, still it remains part of the admiralty law of
most countries.
The first codification of general average was the York Antwerp Rules
of 1890. American companies accepted it in 1949. General average
requires three elements which are clearly stated by Mr. Justice Grier
in Barnard v. Adams:
“1st. A common danger: a danger in which vessel, cargo and crew all
participate; a danger imminent and apparently ‘inevitable,’ except by
voluntarily incurring the loss of a portion of the whole to save the
remainder.”
“2nd. There must be a voluntary jettison, jactus, or casting away,
of some portion of the joint concern for the purpose of avoiding this
imminent peril, periculi imminentis evitandi causa, or, in other words,
a transfer of the peril from the whole to a particular portion of the
whole.”
“3rd. This attempt to avoid the imminent common peril must be successful”.
Source: Wikipedia, the free encyclopedia
In wordings which ordinary people like you and me can understand, losses, damages and expenses which is incurred as a result of actions taken to save a vessel/voyage in genuine time of danger are general average losses.
Following excerpts from Export Help:
“Cargo, which was not damaged or lost as a direct result of the danger
and the consequential action, will be covered by the normal terms of
the marine insurance policy. Cargo, which was lost or damaged as a
result of voluntary action taken by the ship’s crew will be covered by
general average and will result in what is know as ‘General Average
Sacrifice’.
Those general average expenses and/or sacrifices must be
made good to the person/s who incurred such losses, by a contribution
levied upon all the parties who have an interest in the saving of the
voyage. The calculation of a general average claim may take many months
and therefore cargo owners must at the port of discharge, complete a
general average bond, valuation certificate or pay a cash deposit
before the vessel owner’s will release the cargo to them. These amounts
are usually expressed as a percentage of the value of the goods being
released.”
Fortunately, general average is not something you’ll encounter every other month, years or perhaps even in a lifetime career of shipping. Since it’s not something common, decided to put in some notes here. Would suggest, from a shipping agency perspective, that the following be done in order to minimise the agony of going through the process - that could well take months to complete!!
1) brief all staff of the situation and meaning of General Average.
2) identify and appoint 1 contact points per office (port) and 1 senior (managerial recommended) to for “all ports within the same country” to handle the case throughout - depending on the number of bill of lading (and amount of containers) involved for a port, may want to involve another person. Recommended that this person have at least 3 years experience in shipping and is well versed with shipping terminologies etc
3) the team handling this case must be fully aware of the reason behind and briefed how to speak to clients accordingly. the senior person should be a point of reference to the respective contact points.
4) a list of the clients affected is to be created with details of BL number, shipper name, consignee, cargo, number of containers (total volume / weight if in conventional), POL / Final destination, owner of the goods at that point in time, INCOTERM of sales contract between shipper and consignee.
5) advise local clients involved via formal “notice” / “advice” issued by the line (shipowner). suggest minimal (if possible, nil) correspondence be done on this matter without consultation to line’s legal department as “wordings” of the correspondence related to this matter is critical.
6) all notice MUST be promptly forwarded to affected clients.
7) regular follow up with clients affected
things that may/will complicate your life:
a) where shipment is not covered by insurance
b) “misdeclared” cargo
c) where there’s no confirmed buyer at time of General Average - i.e. cargo was shipped without a buyer “yet”. Normally happens to commodities such as coffee.
d) where cargo value is very low
e) prices of cargo which is sliding downwards at time of General Average - if calculated based on value of cargo upon leaving loading port / sales contract between buyer and seller.
note: i couldn’t find any notes on (c) and (d) though, however, logic is this would be especially true if the General Average loss is substantial and value of cargo is very low to begin with.
Knowledge and experience of this subject is not exactly abundant across the industry in Malaysia, thus any comments, contribution or notes to this topic is greatly appreciated.
