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The Ever Given stranded across the Suez Canal


Policy & Compliance


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a first class, interest-earning bank account – no disbursements can be made from the account without the written consent of the average adjuster. This serves as a reminder of the importance from a shipper’s perspective of ensuring adequate cargo insurance is in place to cover any given shipment. In the event of delay at the port of refuge, or if the original


ship is unable to continue, a ‘non-separation agreement’ is incorporated within the GA documentation. This provides for cargo owners to have their cargo forwarded to the original port of destination, whilst the original ship remains in the port of refuge, in return for payment of their contribution as if the cargo had remained onboard. Upon arrival at the destination port, only cargo and


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threatening the ‘maritime adventure’. In such circumstances it is the owners who therefore will appoint an average adjuster, who thereafter operates independently and in the interests of all parties. The adjuster will compile the total value of the sacrifice and expenditure that is allowable and establish the total value of the assets of all the interested parties that have been rescued or saved. Contributory values are calculated against the net value of all these assets at the termination of the voyage. The GA contributions from each stakeholder will together provide sufficient funds to cover the total value of the sacrifice or expenditure. This process, inevitably, takes a long time – typically several years. To ensure that payment will be received, the adjuster will


require each party interested in the voyage to provide a GA Bond, which is effectively a promise to pay the correct contribution as security. Since this is done at the outset, before the full value of the sacrifice and expenditure is known, the adjuster will estimate the amounts. All GA Bonds are supported by a GA guarantee from a bank or insurance company. Additionally, the adjuster will request landed values of carrying equipment, bills of lading and commercial invoices detailing CIF values for cargo in order to work out the contributions for all interested parties.


To ensure that payment will be received, the adjuster will require each party interested in the voyage to provide a GA Bond, which is effectively a promise to pay the correct contribution as security


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Bond and guarantee documentation The adjuster will distribute GA Bond and guarantee documentation to all known interested parties. If the freight forwarder is identified on the ocean bill of lading, it is not uncommon that such documentation, effectively intended for several cargo interests, will be received. Such documentation should be forwarded to the cargo interests at the earliest opportunity. It is recommended a proof of postage/email receipt is secured. Commercially, it can prove beneficial to follow up with the cargo


interests to ensure they have understood the requirements and completed and returned the necessary documentation. The freight forwarder’s client may no longer be the cargo owner and therefore the documents will need passing on to his customer – the buyer or consignee. Where the cargo is insured, standard marine policies cover the costs of GA contributions and the insurer will take over dealing with the adjuster. If a consignment is uninsured, or the adjuster is uncertain


about the security of the insurance company, a contributory cash deposit will be requested. Such cash deposits are held in


equipment for which GA Bonds and guarantees have been received will be released. Bills of lading will contain General Average and lien clauses. Where bonds and guarantees have not been submitted, the shipowner will continue to hold a lien and thus can withhold the cargoes release.


Potential issues A potential issue for the freight forwarder or NVOCC may arise in connection with LCL shipments, where several cargo interests are required to submit documentation. Until all have been submitted, the container and cargo will not be released. To prevent delays, it is recommended that the freight forwarder follows up with all cargo interests to ensure they have fulfilled their obligations. The adjuster can be contacted to identify outstanding guarantees. Some NVOCC insurers may be willing to provide guarantees in these circumstances, on an undertaking by the NVOCC that such cargo is similarly held under lien within the terms of the NVOCC bill of lading, facilitating the movement of the remaining LCL cargo. If during the General Average adjustment, it is identified that


a sacrificed cargo has been undeclared or wrongly declared, its value will not be allowed. Conversely, if saved, such cargo will remain subject to the prescribed contributions. This further highlights the importance of accurate declaration of cargo. Time bar provisions can exist in relation to GA and are


prescribed in the YAR. It should be highlighted, however, that the actual time bar in any given incident will be determined by which set of YAR apply to the voyage (1994, 2004 or 2016). The adjuster will conclude its calculations issuing the


General Average statement to all interested parties against their respective GA Bonds and guarantees. All parties are obliged under the GA Bond to pay the GA adjustment accordingly, thus concluding the process. General Average is the mechanism by which extraordinary


additional expenditure incurred during a voyage can be recovered from everyone involved on a pro-rata basis against the ‘landed’ value of goods and other property. Nowadays, where cargo ships are capable of carrying in excess of 21,000 teu, General Average can be an extremely complex and time-consuming process. All freight forwarders should have an understanding of General Average in order that they may efficiently manage matters and set realistic expectations for their clients following such an event.


BIFA would like to thank the TT Club for its assistance in preparing this article.


May 2021


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