General Average Declared & Explained

According to The Loadstar this week, steamship line Hapag Lloyd have declared ‘General Average’ on their vessel Yantian Express.

The 7,500 TEU container ship was en-route to the port of Halifax this month, when a fire broke out onboard that forced the crew to abandon ship. The vessel has subsequently been towed to Freeport, Bahamas.

So what do we know about general average?

General average is a legal principle of Maritime Law, whereby all parties involved in a particular voyage, are required to proportionally share the losses resulting from a major loss or sacrifice of cargo.

This includes the cargo owners, which means exporters and importers may be liable to pay towards the losses of a major incident on the vessel, such as:

• a fire on board
• the ship gets stranded or grounded
• a container stack collapse

Under extreme circumstances, the entire cargo, or ship, or crew may be at risk. The captain, or shipowners, may take the extraordinary decision to preserve the safety of the ship, cargo or crew, which could also include jettisoning (discharging cargo overboard) to save the rest of the ship’s load.

Where the ship owners suffered loss to preserve the voyage, it MAY be possible for them to declare general average. 

The first rule of general average states ‘There is a general average act when, and only when, any extraordinary sacrifice or 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’.

In the case of the Yantian Express, it is reported that the crew attempted to control the fire, while also fighting adverse weather conditions, but had to abandon ship for their own safety. 

The declaration of general average had previously been very rare, but in these days of fluctuating rates and sometimes struggling steamship lines, it is seemingly becoming more frequent. Since 2006, the Hyundai Fortune, MSC Sabrina, Hanjin Osaka and Maersk Honam have all reportedly been the subject of a general average declaration.

Marine or Cargo insurance policies that cover general average are a means of offsetting the risk. We strongly recommend that supply chain customers check their insurance policies and ensure they are aware of where the responsibility of risk passes according to their INCO shipping terms.

Marine or Cargo insurance is very much the responsibility of the exporter and/or importer and not the carrier itself.