In recent times, maritime disasters seem to have been dime a dozen.. Some disasters like the infamous Ever Given which got stuck diagonally across the Suez Canal impacted global trade while other disasters like the current Ever Forward stuck in the Chesapeake Bay or the Yantian Express that caught fire did not have a direct impact on global trade, but only affected involved parties..
However, what these 3 vessels and many others that were classified as maritime disasters had in common was “General Average“..
General Average is declared when an extraordinary event occurs threatening the safety of a ship, its cargo, and its personnel, and being a seemingly popular subject of late, I thought it would be a good time to post a set of questions on General Average..
Bear in mind there are also cases where while things may seem extreme like in the case of the ONE Apus that lost around 1,816 containers including 64 hazardous containers, General Average may not be declared..
So courtesy of Barton Jennings, Professor Emeritus, Supply Chain Management, and Transportation, here are some questions relating to General Average to test your understanding and knowledge of the subject..
These are questions that Prof Jennings has been teaching in his transportation and global trade classes for several decades..
What is the basic concept of the General Average practice?
Explain the difference between an overboard loss and a jettison loss. Which would likely be covered by the General Average practice, and why?
You have cargo worth $2.8 million in several containers. The entire cargo on the ship is valued at $140 million, and the ship is valued at $120 million. The ship has been stranded due to an unusual storm, and the shipowner has spent $22 million to rescue the ship and have it hauled to port. What is your potential General Average liability from this incident? Show all of your calculations.
You can type your answers in the comments form below (no registration required)..
Answers to these questions will be published next week..
My understanding is that the vessel itself will covered under its separate insurance. The cargo interests contribute proportionately to the total value of the cargo. So $140M / $20M = 28% x $2.8M = $784K.
By the way, was General Average actually declared for the Ever Given?
Hi Bob, yes GA was declared and Richards Hogg Lindley was the Average Adjuster..
1) All cargo owners proportionally to the value of the cargo participate in saving the ship and cargo in situation where this is not possible by reasonably cheap actions of the shipowner.
2) overboard loss – accidentally lost cargo overboard; jettison – cargo throw overboard on the purpose in order to save the ship and rest of the cargo
3) Total 260mio; your share 2.8/260 = 2.8%; your share of GA 2.8% from 22mio = 621.720
1. Deliberate sacrifice to save an adventure and for all stakeholders to proportionately compensate for the loss.
2. Overboard loss – No deliberate action for cargo to be lost overboard / Jettison – Deliberate action for cargo to be lost overboard. Jettison loss more likely to be covered by general average as it is a deliberate act/sacrifice.
3. Add value of cargo and ship together = 160 m. Divide the shipowner’s loss by the total value of the cargo and the ship. 22/USD160m =14%. I would need to contribute 14% of the value of my cargo = USD 2.8m*14% = USD385 000.
1. General Average is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur as a result of the voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency.
2. Jettison is a deliberate act committed by throwing cargo overboard, whilst loss overboard could be an act of the sea. Jettison is covered by General Average because it is an act of voluntary sacrifice of the cargo to save the entire conveyance.
3. Own Cargo value is 2.8million. The total cargo value at risk is 140million. The vessel Value is 120million. The total Value at Risk is 260million. Salvage costs for vessel owner are 20million. My potential General Average Liability for this incident is 2,800,000/260,000,000 X 20,000,000 = 215,384.62
This likely falls under the clause of ” case of force majeure “