A ship catches fire, grounds or loses its engine. The crew and salvors save the ship and the cargo. Weeks later you receive a letter: general average has been declared; your cargo will not be released until you provide security. Your container may be perfectly intact. This guide explains why that happens and what to do.
What general average is
General average is a very old maritime principle: when part of a voyage's property is sacrificed, or extraordinary money is spent, to save the whole adventure, everyone whose property was saved shares the cost in proportion to the value saved. The modern rules are the York-Antwerp Rules, a private set of rules published by the Comité Maritime International (CMI). The current version is from 2016, but a contract of carriage may incorporate an earlier version (1974, 1994 or 2004 are still common). The Rules apply because your bill of lading or charter incorporates them, not because of any treaty.
The core definition is Rule A of the 2016 Rules:
"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."
Typical general average items are jettisoning cargo to refloat a ship, damage caused by fighting a fire, the cost of towing a disabled ship to a port of refuge, and port and cargo-handling costs there. The "Rule Paramount" adds that nothing is allowed unless it was reasonably made or incurred.
Why you pay even if the carrier was at fault
Rule D says rights to contribution are not affected even if the event "may have been due to the fault of one of the parties", but this "shall not prejudice any remedies or defences" against that party. In practice cargo interests must usually provide security first, and argue about fault later. If the casualty was caused by the carrier's actionable fault (for example, unseaworthiness the carrier failed to prevent with due diligence), cargo may have a defence to paying the contribution. The CMI standard bond and guarantee wordings both state that they are "without prejudice to any remedies or defences" arising under the contract of carriage, and ask parties to notify the adjuster of such defences within three months of issue.
Note the interaction with carrier defences: under Hague and Hague-Visby an ocean carrier is not liable for errors in navigation or management of the ship, or fire without its actual fault. If the casualty falls within those defences, the carrier can still claim a contribution from cargo.
Why your cargo is held
Most legal systems give the shipowner a lien over the cargo at destination for general average. Because the final calculation (the "adjustment") can take months or years, the shipowner lifts the lien when cargo interests provide acceptable security. The CMI Guidelines describe the usual requirements:
- A General Average Bond, signed by the cargo owner or receiver: an undertaking to pay the contribution legally and properly due in respect of their cargo; and
- Either a cash deposit, usually a percentage of the cargo's invoice value estimated by the adjuster, or, if the cargo is insured, a General Average Guarantee signed by a reputable insurer, accepted in place of the cash deposit.
The CMI has published standard wordings for these documents, approved by the International Union of Marine Insurance and the International Chamber of Shipping.
If a professional salvor was involved, a separate salvage security may also be required. Salvage is distinct from general average and the salvor may need to be secured directly.
The average adjuster
The average adjuster is an independent professional, usually appointed by the shipowner, who collects security and values, assesses which costs qualify as general average, and divides the total between ship, cargo and freight in proportion to their values. Every party must supply particulars of value "as soon as possible" (Rule E). Cash deposits must be paid into a special account held separately from the adjuster's own funds; payments on account or refunds need the adjuster's written certification, notified to the depositor for approval (Rule XXII).
What to do, step by step, when general average is declared
- Call your cargo insurer or broker immediately. ICC (A), (B) and (C) all cover general average and salvage charges (Clause 2), subject to the policy's exclusions. Your insurer will normally issue the General Average Guarantee so you avoid a cash deposit.
- Read the adjuster's notice carefully. It lists the documents required: usually the signed bond, a copy of the commercial invoice, and the guarantee or deposit.
- Sign the bond, but use the standard form. Check it is a recognised wording. Ask your insurer or a lawyer if it contains unusual terms.
- Provide the invoice value promptly; delays hold up release.
- Arrange collection once release is confirmed. If your cargo is damaged, follow the normal claim steps in parallel: note damage on delivery, give the carrier written notice, and preserve time limits. See how to file a cargo claim.
- Uninsured? Expect to pay a cash deposit, sometimes a large percentage of the cargo value, before release. Get the adjuster's receipt and keep track of the deposit; you are entitled to any refund when the adjustment is finalised.
How much will it cost?
It depends entirely on the casualty and the values involved. Your contribution is your cargo's share of the total general average, calculated on its value at destination. For a major fire on a large container ship, deposits demanded from uninsured cargo can be substantial. We do not publish typical percentages because they vary widely by case; any figure in a notice comes from the adjuster's estimate for that casualty.
Key points
- General average applies through your contract (the bill of lading), under the York-Antwerp Rules version it names.
- Your undamaged cargo can be held until you sign a bond and provide a guarantee or deposit.
- Insurance under ICC A, B or C covers your contribution, and the insurer usually provides the guarantee.
- Giving security on the standard CMI wordings is without prejudice to your defences, for example if the carrier was at fault.
- Carrier liability limits do nothing to protect you from general average. That is one of the clearest reasons to insure.