Most maritime carriers don’t mention general average as a part of their marketing. Other than us cargo insurance nerds, people don’t even talk about general average. Consequently most shippers don’t know exactly what ‘general average’ is and what the possible risks are to those who are international ocean shippers.
Even though forms of general average code can be traced all the way back to around 800 BC, the recognized modern version came along in 1890 and was enacted as the ‘York Antwerp Rules’. Throughout history there was good reason for general average type of maritime code. Ocean transport is safer today than at any time in in the past. Although looking back in time ocean transport was a much riskier way to transport people and goods. If you consider what mariners of days gone by had to work with, it’s surprising many sailings made it to their destination at all. The vessels were wooden. There were no technology laden giant steel behemoths that we know today. Yesterday’s sailing ships had no GPS, no engine propulsion, no advanced weather forecasting, no electricity, and no kidding. Mishaps at sea were more likely and more deadly than our modern times.
The principle of general average maritime law was, and still is, the legal principle that all parties in a sea venture share by proportion in any losses resulting from a voluntary sacrifice of the ship or cargo to save the whole in an emergency. The driving logic behind general average was, and is, during an emergency actions had to be taken quickly without regard of what the value was of, or who owned, anything that had to be sacrificed to save the whole of the ship, the crew, and the cargo. Time spent trying to choose the ‘lesser valued’ items to sacrifice was time that could have doomed the ship, cargo, and its crew. To ensure this time would never be wasted, general average takes the worry away through spreading some of the cost over all of the shippers. Not to mention maritime losses could be enormous and too much for an ocean carrier to burden themselves.
Fast forward to modern day and things are different, right? Ocean transits are much safer and modern market principles dictate providers take inherent risk for doing business…. Not so much. General average is alive and well and still used today. An occurrence of general average charges looming is the very reason I wrote this article. One of my newer customers contacted me looking for options to avoid general average charges from an at sea collision between two vessels. It seems in May 08, 2016 one ocean wasn’t big enough for Safemarine’s Meru and the Norddeutshe’s Northern Jasper who where 120 nautical miles east of Ningbo, China. The ships collided and caused heavy damages to the vessels and cargo. Luckily the crew of both vessels were unharmed. Although it was a nasty collision and the Meru and its cargo were heavily damaged by the collision and resulting fire. The 22-man crew was forced to abandon ship.
My customer was uninsured, as he was not my customer yet, and had to pay a cash deposit to eventually receive his undamaged container. Moreover Safemarine is stating in no uncertain terms they will try to receive some compensation for damages from the Norther Jasper’s ownership, although my customer and his fellow shippers with shipments on board will be getting bills for their share of the general average losses. Like many low value commodity shippers, he never saw the risk coming. It pained me to be the bearer of bad news to my new customer. I informed him in many cases like this, the ocean carrier is well within their right to proportionality spread the costs to the shippers through general average and not take all the loss themselves.
I know this seems like a taxi company charging a passenger for damages to a taxicab damaged during the transport of the passenger through no fault of the passenger. Well, it doesn’t seem like it. It is exactly like it. One thing ocean shippers should keep in mind is maritime laws are tilted to the advantage of the ocean carrier. The advantage to the ocean carriers won’t be going away anytime soon. Even if Safemarine didn’t want to levy the general average charges to my customer and the other shippers, they are forced into doing so. As you would suspect, ocean carriers have insurance too. You can rest assured their insurers are well aware of general average. Ocean carrier’s insurers will force ocean carriers to mitigate the risk exposure to the insurer by all possible measures including general average.
As a shipper your only general average risk mitigation tool is cargo insurance whether obtained directly by you or by others on your behalf. Marine cargo insurance generally includes cover for general average with both Clause A ‘all risks’ and Clause C ‘limited cover’ cargo insurance. Most insurers deem the covered shipment insured up to the full amount of the shippers contributory value. Ask your insurance provider to confirm if your current cover includes general average if you are not certain. If you are my (TJO Cargo’s) customer save the effort of asking, the answer is yes.
This article is not intended, nor claimed to be, a complete historical or modern practical guide to general average or cargo insurance related to it. There are maritime law professionals, maritime historians, and underwriters that make a fine living knowing more than I do. If you wish to research more on maritime law on your own, a great place to start is http://www.admiraltylawguide.com/ for more information. There was also an excellent article published in ‘My Seatime’ on the subject in October 2016 that can be found at http://www.myseatime.com/blog/detail/york-antwerp-rules-and-general-average-everything-you-need-to-know which even has cool graphics. You didn’t know about general average? So now you know.