What is the law of "General Average" in shipping and why does it matter?

DGX the law of General Average

The law of “General Average" is a shipping term that matters when dealing with cargo insurance, bills of lading, and the legal issues of international freight shipping.

  • The law of general average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.
    ~Wikipedia
It’s the shipping principle of maritime law. General Average occurs when a voluntary sacrifice is made to safeguard the vessel, cargo or crew from a common peril, for example, a fire. If the sacrifice is at issue, all parties shipping on the vessel contribute to the loss based on their cargo’s value whether their shipment was damaged or not. Appointed adjusters will assess the value of each shipment on board and apply a formula that determines the financial contribution of each cargo owner.

If you’re a cargo owner with shipments onboard a declared “general average” vessel, the likelihood of having your cargo released timely is dependent on how soon you can post a security. The security must be in the form of a cash deposit, bank guarantee or bond. If the cargo owner has cargo insurance, the “average guarantee” is posted by the insurance company. Having cargo insurance is beneficial to cargo owners as it not only provides coverage for damaged goods but it facilitates the release of their cargo.

The General Average and Salvage Adjusters will appoint collecting agents to prepare and collect securities from each of the parties concerned in the cargo on board. Cargo will only be released upon receipt of the required security.

 The following forms will be required:
  • A copy of the cargo commercial invoice
  • An Average Bond form to be completed and signed by the owners of the cargo. 
  • An Average Guarantee form to be completed, signed or stamped by the insurance company (when insured). 
The Average Bond and the Average Guarantee form should be sent to the cargo insurer along with the bill of lading and commercial invoice for any insured shipment.

If you are the NVOCC or international freight forwarder (freight shipping company) like DGX-Dependable Global Express, you should pass along any General Average paperwork to the cargo owners and advise them to contact their cargo insurers to arrange the guarantee. Unfortunately, for uninsured shipments, a cash deposit will be required in place of an insurers’ Average Guarantee. Adjusters will advise the amount of the cash deposit required.

If you need international container shipping, please contact your local DGX representative with questions or if you need additional information. Our global express shipping team will be glad to further explain the benefits of securing international cargo shipping insurance.

At DGX we offer a unique package of shipping services. If you need assistance, please reach out to your local office or call toll free 1-800-488-4888 and we can help you. We specialize in international ocean/sea and air freight shipping.

Popular posts from this blog

Comprehensive glossary of international shipping terms

Image
For your convenience, DGX-Dependable Global Express has compiled an extensive, easy-to-use Glossary of International Shipping Terms . With 300+ commercial transportation terms, our is one of the largest, most comprehensive glossaries available online. Glossary of International Shipping Terms Why learn Shipping Industry terminology? Every industry has a special language with terms, acronyms, abbreviations, jargon, etc. that are uniquely theirs. The shipping industry is no exception. Through our 40+ years in the business we’ve found that if we help customers understand commercial shipping language—including for air freight, ocean freight, trucking, rail, import/export, warehousing & distribution, logistics—the shipping process from Pickup to Delivery goes faster and smoother, saving time and money. We invite you to visit, bookmark and come back often when there’s shipping industry jargon being slung around! And, if you have suggestions for additional terms, please let us know ...
Read more

How will the Chinese & Japanese New Years Affect My Shipments?

Image
There are many schedule variables for commercial shippers with the upcoming Chinese and Japanese New Years holidays. With pandemic-related port congestion in the transpacific markets, increased consumer and industrial demand for products, and the recent Omicron variant outbreak; end of year and early ’22 shipping will be especially challenging even without the celebrations. China: New Year’s Eve is January 31, 2022 DGX’s Shanghai office will be closed Feb 1-7 for the Chinese New Year (Spring Festival) Please be aware most companies in China start closing 10 days prior to the official New Year’s closure dates as the great migration of workers heading back home for family celebrations begins. Drayage and trucking will be especially challenging during this time as drivers are difficult to find. All trucking and drayage will be on spot rates during this time. We urge shippers to place bookings and shipping of products as far in advance as possible to improve the likelihood of goods ...
Read more

Why is my Drayage invoice higher than expected?

Image
Without a good understanding of the steps involved in the complex international shipping process, you might be scratching your head as to why your ocean container drayage costs are higher than anticipated. The good news is, if you set your expectations appropriately, you can more fully understand how drayage fees are assessed. Important: Drayage should never be quoted as an “all-in” fixed cost because of the many unforeseen changes that can occur with a round trip container move. To begin, let’s look at the primary steps involved with round-trip container shipping. As you’ll see, it’s an involved process with many opportunities along the way that might change your originally estimated drayage costs. If you’re new to it, here’s a high-level overview of how drayage works: Exporting Empty the pick-up container that will carry your shipment Take the container to the loading location Return your Full Container Load (FCL) to port Importing Pi...
Read more