General Average – FAQs
I am being asked to provide General Average Security. What do I need to do?
The instructions to cargo will explain what is required for General Average and / or Salvage Security. All documents and links will be available from our casualty website.
It is important that the required security is provided promptly to enable cargo to be released for delivery.
What is General Average and why does this affect me?
The York Antwerp Rules (YAR) are incorporated into almost all bill of lading terms and conditions. Rule A of YAR 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 such situations General Average security is required, in line with the bill of lading terms and conditions. Cargo will not be released until such security has been provided.
Most cargo insurers will handle the matter entirely. Insured cargo owners need only to provide the signed Average Bond if requested, as well as the commercial invoice, and ensure that their cargo insurers are advised of the General Average requirements.
Who signs the security documents?
- Average Bond – When required, this should be completed and signed by cargo owners.
- Average Guarantee – When required, this should be completed and signed by the cargo insurance company (cargo owners should not sign this document themselves).
- Salvage Security – If required, this should be arranged by the cargo insurance company.
What if the cargo is not insured?
Most cargo owners arrange their own insurance coverage for their goods. However, if the cargo is not insured, a cash deposit will need to be provided instead of the insurers guarantees.
The deposit amount will be a percentage of the cargo CFR value (cost of the cargo, including the cost of sea freight) – the percentage will be advised by the adjusters as soon as possible.
The cash deposits will be held by the adjuster in an interest earning account. An Average Bond will also be required to be completed by cargo owners.
Cash deposit funds will be held until such time that the General Average adjustment has been issued. If the final balance due to pay in General Average is less than the cash deposit sum paid, there will be a refund of the balance back to the payees.
After we have arranged full security, how will we know that cargo will be released?
The Average Adjusters will send the shipping lines a list of cargo for which acceptable security has been provided at the end of each working day. This same list of secured cargo will also be available on our casualty website. After that, any questions about release / delivery of cargo should be addressed to the shipping lines in the usual manner.
What happens with LCL / consolidated / groupage containers?
Groupage containers cannot be released until acceptable security has been provided for the full contents. The agents responsible for groupage containers should contact us as soon as possible with a full breakdown of the contents of any groupage containers, ideally in excel spreadsheet format.
Where can I find more information about General Average?
The “Comité Maritime International.” (CMI) is a non-governmental not-for-profit international organization established in 1897, the object of which is to contribute to the unification of maritime law. Their website includes further details about General Average as well as the Average Bond and Guarantee security forms used.
Link: CMI GA Guidelines and Security Forms – Comite Maritime International – CMI