General Average

General average is a centuries-old principle of maritime law: if part of a voyage is deliberately sacrificed, or extra money is spent, to save the ship and cargo from a common danger, everyone with property on the voyage shares that loss in proportion to the value that was saved. Jettisoning cargo to save a ship, or paying salvors to refloat a grounded vessel, are classic examples. The word "average" is an old term for loss.

The York-Antwerp Rules

Most bills of lading say that general average will be adjusted under the York-Antwerp Rules. The current version was adopted by the Comité Maritime International (CMI) in New York in May 2016, with a technical change to the interest rule made in Antwerp in October 2022. Older contracts may still refer to the 1994 or 2004 rules. Key points of the 2016 rules:

• Rule A: there is a general average act only when an extraordinary sacrifice or expenditure is intentionally and reasonably made for the common safety, to preserve the property in a common maritime adventure from peril
• Rule C: only direct consequences count. Losses from delay, demurrage and loss of market are not allowed
• Rule D: cargo still contributes even if one party's fault caused the emergency; claims about that fault are pursued separately
• Rule XVII: cargo contributes on its value at discharge, normally taken from the commercial invoice to the receiver

What happens when general average is declared

• The shipowner declares general average and appoints an average adjuster
• Cargo interests receive a notice from the adjuster setting out the security required
• Because the final figures take a long time to work out, most countries' maritime law gives the shipowner a lien on the cargo: it can withhold delivery until security is given
• The usual security is a signed general average bond (an undertaking to pay the contribution properly due) plus either an insurer's general average guarantee or a cash deposit set by the adjuster, usually as a percentage of the cargo's invoice value
• Once the adjustment is final, each party pays its share; any excess deposit is refunded

Where salvors were involved, they may ask for separate salvage security as well.

Why cargo insurance matters

If your cargo is insured, you pass the adjuster's notice to the insurer, which signs the guarantee and handles the claim through its normal process, and the cargo is released. All three grades of the Institute Cargo Clauses cover general average and salvage charges. Without insurance, the cargo owner has to put up the cash deposit before taking delivery and then wait for the final adjustment, even if its own goods arrived undamaged. Airlift's cargo insurance service can arrange cover before the goods sail.

A recent example

After the container ship Dali struck Baltimore's Francis Scott Key Bridge on March 26, 2024, its owners declared general average in April 2024, appointing Richards Hogg Lindley as adjusters, and cargo owners were told their containers would be held until security was arranged for both general average and salvage.

Undamaged cargo still contributes, and it stays held until security is in place, so answer the notice and send the invoice promptly.